<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
THE SIRENA APPAREL GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
THE SIRENA APPAREL GROUP, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 4, 1997
------------------------
TO THE STOCKHOLDERS OF THE SIRENA APPAREL GROUP, INC.:
Notice is hereby given that the annual meeting (the "Meeting") of the
stockholders of The Sirena Apparel Group, Inc. (the "Company") will be held at
the Ramada Suites Hotel, 1089 Santa Anita Avenue, South El Monte, California
91733, on Tuesday, November 4, 1997, at 11:00 a.m., California time, for the
following purposes:
1. Election of Director. To elect one person to the Board of Directors of
the Company, to serve until the annual meeting of stockholders to be
held in fiscal year 2001 and until his successor has been elected and
qualified. The Board of Directors' nominee is Ellison C. Morgan.
2. Amendment of 1994 Employee Stock Incentive Plan. To approve the
amendment of the 1994 Employee Stock Incentive Plan to, among other
things, increase from 822,465 to 1,172,465 the number of shares
available for issuance under the plan.
3. Ratification of Appointment of Independent Auditors. To ratify the
appointment of Ernst & Young LLP as the Company's independent certified
public accountants for the fiscal year ending June 30, 1998.
4. Other Business. To transact such other business as properly may come
before the Meeting or any adjournment thereof.
Only persons who are stockholders of record (the "Stockholders") at the
close of business on September 15, 1997 are entitled to notice of and to vote in
person or by proxy at the Meeting or any adjournment thereof.
The Proxy Statement which accompanies this Notice of Annual Meeting
contains additional information regarding the proposals to be considered at the
Meeting, and Stockholders are encouraged to read it in its entirety.
As set forth in the enclosed Proxy Statement, proxies are being solicited
by and on behalf of the Board of Directors of the Company. All proposals set
forth above are proposals of the Company. It is expected that these materials
first will be mailed to Stockholders on or about October 8, 1997.
IT IS IMPORTANT THAT ALL STOCKHOLDERS VOTE. WE URGE YOU TO SIGN AND RETURN
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING IN PERSON. IF YOU DO ATTEND THE MEETING, YOU THEN MAY WITHDRAW YOUR
PROXY AND VOTE IN PERSON. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS
EXERCISE. IN ORDER TO FACILITATE THE PROVISION OF ADEQUATE ACCOMMODATIONS AT THE
MEETING, PLEASE INDICATE ON THE PROXY WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING.
By Order of the Board of Directors,
/s/ Douglas Arbetman
Douglas Arbetman
Chief Executive Officer
Dated: October 8, 1997
<PAGE> 3
THE SIRENA APPAREL GROUP, INC.
10333 VACCO STREET
SOUTH EL MONTE, CALIFORNIA 91733
(626) 442-6680
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 4, 1997
------------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board of Directors") of The Sirena
Apparel Group, Inc. (the "Company") for use at the annual meeting (the
"Meeting") of the stockholders of the Company to be held on Tuesday, November 4,
1997, at the Ramada Suites Hotel, 1089 Santa Anita Avenue, South El Monte,
California 91733, at 11:00 a.m., California time, and at any adjournment
thereof. Douglas Arbetman and Henry R. Mandell, the designated proxyholders (the
"Proxyholders"), are members of the Company's management. Only stockholders of
record (the "Stockholders") on September 15, 1997 (the "Record Date") are
entitled to notice of and to vote in person or by proxy at the Meeting and any
adjournment thereof. This Proxy Statement and the enclosed proxy card (the
"Proxy") will be first mailed to Stockholders on or about October 8, 1997.
MATTERS TO BE CONSIDERED
The matters to be considered and voted upon at the Meeting will be:
1. Election Of Director. To elect one person to the Board of Directors of
the Company, to serve until the annual meeting of stockholders to be
held in fiscal year 2001 and until his successor has been elected and
qualified. The Board of Directors' nominee is Ellison C. Morgan.
2. Amendment Of 1994 Employee Stock Incentive Plan. To approve the
amendment of the 1994 Employee Stock Incentive Plan (the "Stock
Incentive Plan") to, among other things, increase from 822,465 to
1,172,465 the number of shares available for issuance under the plan.
3. Ratification of Appointment of Independent Auditors. To ratify the
appointment of Ernst & Young LLP as the Company's independent certified
public accountants for the fiscal year ending June 30, 1998.
4. Other Business. To transact such other business as properly may come
before the Meeting or any adjournment thereof.
COST OF SOLICITATION OF PROXIES
This Proxy solicitation is made by the Board of Directors of the Company,
and the Company will bear the costs of this solicitation, including the expense
of preparing, assembling, printing and mailing this Proxy Statement and any
other material used in this solicitation of Proxies. The solicitation of Proxies
will be made by mail and may be supplemented by telephone or other personal
contact to be made without special compensation by directors, officers and
employees of the Company. If it should appear desirable to do so to ensure
adequate representation at the Meeting, directors, officers and employees may
communicate with Stockholders, banks, brokerage houses, custodians, nominees and
others, by telephone, facsimile transmissions, telegraph or in person to request
that Proxies be furnished. The Company will reimburse banks,
<PAGE> 4
brokerage houses and other custodians, nominees and fiduciaries for their
reasonable expenses in forwarding proxy materials to their principals. The total
estimated cost of the solicitation of Proxies is $10,000.
OUTSTANDING SECURITIES AND VOTING RIGHTS; REVOCABILITY OF PROXIES
The authorized capital of the Company consists of (i) 25,000,000 shares of
common stock, $0.01 par value ("Common Stock"), of which 4,649,230 shares were
issued and outstanding on the Record Date and (ii) 3,000,000 shares of Preferred
Stock, none of which have been issued and are outstanding. A majority of the
outstanding shares of the Common Stock constitutes a quorum for the conduct of
business at the Meeting. Abstentions and broker non-votes will be treated as
shares present and entitled to vote for purposes of determining the presence of
a quorum.
Each Stockholder is entitled to one vote, in person or by proxy, for each
share of Common Stock standing in his or her name on the books of the Company as
of the Record Date on any matter submitted to the Stockholders.
The Company's Certificate of Incorporation does not authorize cumulative
voting. In the election of directors, the candidate receiving the highest number
of votes will be elected. Each other proposal described herein requires the
affirmative vote of a majority of the outstanding shares of Common Stock present
in person or represented by proxy and entitled to vote at the Meeting. Pursuant
to Delaware law, abstentions from voting on any matter, other than the election
of directors, will have the effect of a vote "AGAINST" such matter, while broker
non-votes do not count in the determination of the voting results on any of the
matters to be presented to a vote at the Meeting.
Of the shares of Common Stock outstanding on the Record Date, 1,550,000
shares of Common Stock (or approximately 33% of the issued and outstanding
shares of Common Stock) were owned by American Industries, Inc. ("American
Industries"). American Industries has informed the Company that it will vote
"FOR" the election of the nominee to the Board of Directors identified herein,
"FOR" the amendment of the Stock Incentive Plan and "FOR" the ratification of
the appointment of Ernst & Young LLP as the Company's independent auditors for
the fiscal year ending June 30, 1998, all as described herein.
A Proxy for use at the Meeting is enclosed. The Proxy must be signed and
dated by you or your authorized representative or agent. Telegraphed or cabled
Proxies are also valid. You may revoke a Proxy at any time before it is
exercised at the Meeting by submitting a written revocation to the Secretary of
the Company or a duly executed Proxy bearing a later date or by voting in person
at the Meeting.
If you hold Common Stock in "street name" and you fail to instruct your
broker or nominee as to how to vote such Common Stock, your broker or nominee
may, in its discretion, vote such Common Stock "FOR" the election of the Board
of Directors' nominee and "FOR" the ratification of the appointment of the
Company's independent auditors. If, however, you fail to instruct your broker or
nominee as to how to vote such Common Stock, your broker or nominee may not,
pursuant to applicable stock exchange rules, vote such Common Stock with respect
to the proposal described herein to approve the amendment of the Stock Incentive
Plan.
Unless revoked, the shares of Common Stock represented by a properly
executed Proxy will be voted in accordance with the instructions given thereon.
In the absence of any instruction in the Proxy, such shares of Common Stock will
be voted by the Proxyholders "FOR" the election of the nominee for director
identified herein, "FOR" the amendment of the Stock Incentive Plan and "FOR" the
ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending June 30, 1998.
The enclosed Proxy confers discretionary authority with respect to any
other proposals which properly may be brought before the Meeting. As of the date
hereof, management is not aware of any other matters to be presented for action
at the Meeting. However, if any other matters properly come before the Meeting,
the Proxies solicited hereby will be voted by the Proxyholders in accordance
with the recommendations of the Board of Directors. Such authorization includes
authority to appoint a substitute nominee for the Board of Directors' nominee
identified herein where death, illness or other circumstance arise which prevent
such nominee from serving in such position and to vote such Proxy for such
substitute nominee.
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<PAGE> 5
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock as
of the Record Date by each person known to the Company to be the beneficial
owner of more than five percent (5%) of the outstanding shares of Common Stock
(other than depositories), by each executive officer, director and nominee for
director of the Company, and by all directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER(1) OWNERSHIP(2) CLASS(3)
---------------------------------------------- ----------------- -------------
<S> <C> <C>
American Industries, Inc...................... 1,550,000 33.34%
Douglas Arbetman(4)........................... 327,958 6.60%
Howard H. Hedinger(5)......................... 50,000 1.10%
Henry R. Mandell(6)........................... 81,317 1.72%
Ellison C. Morgan(7).......................... 50,000 1.10%
Maurice B. Newman(8).......................... 105,000 2.21%
All directors and executive officers as a
group (five persons)........................ 614,275 11.69%
</TABLE>
- ---------------
(1) The address of American Industries, Inc. ("American Industries") is 1750
N.W. Front Avenue, Suite 106, Portland, Oregon 97209. The business address
of each of the directors and executive officers of the Company is 10333
Vacco Street, South El Monte, California 91733.
(2) The named stockholder has sole voting power and investment power with
respect to the shares listed, subject to community property laws where
applicable.
(3) Shares which the person (or group) has the right to acquire within 60 days
after the Record Date are deemed to be outstanding in calculating the
percentage ownership of the person (or group) but are not deemed to be
outstanding as to any other person (or group.)
(4) Includes 320,958 shares issuable upon the exercise of stock options granted
to Mr. Arbetman, the President and Chief Executive Officer and a director of
the Company, pursuant to the Stock Incentive Plan. Certain of these options
were repriced effective July 1, 1997. See "Election of Director -- Report of
the Compensation Committee of the Board of Directors."
(5) Mr. Hedinger, a director of the Company, is President and Chairman of the
Board of Directors of American Industries. Mr. Hedinger disclaims any
interest in the shares of Common Stock held by American Industries. Consists
of 25,000 shares issuable upon the exercise of stock options granted to Mr.
Hedinger pursuant to the Stock Incentive Plan on July 1, 1997 and 25,000
shares issuable upon the exercise of stock options the Company intends to
grant to Mr. Hedinger upon stockholder approval of the increase in the
number of shares available for issuance under the Stock Incentive Plan. See
"Election of Director -- Report of the Compensation Committee of the Board
of Directors." Does not include 20,000 shares owned by Mr. Hedinger's wife,
as to which Mr. Hedinger disclaims beneficial ownership.
(6) Includes 80,317 shares issuable upon the exercise of stock options granted
to Mr. Mandell, Executive Vice President, Chief Financial Officer and a
director of the Company, pursuant to the Stock Incentive Plan.
(7) Mr. Morgan, a director of the Company, is a director of American Industries.
Mr. Morgan disclaims any interest in the shares of Common Stock held by
American Industries. Consists of 25,000 shares issuable upon the exercise of
stock options granted to Mr. Morgan pursuant to the Stock Incentive Plan on
July 1, 1997 and 25,000 shares issuable upon the exercise of stock options
the Company intends to grant to Mr. Morgan upon stockholder approval of the
increase in the number of shares available for issuance under the Stock
Incentive Plan. See "Election of Director -- Report of the Compensation
Committee of the Board of Directors."
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<PAGE> 6
(8) Consists of 25,000 shares issuable upon the exercise of stock options
granted to Mr. Newman, Chief Operating Officer and Chairman of the Board of
Directors of the Company, pursuant to the Stock Incentive Plan on July 1,
1997 and 80,000 shares issuable upon the exercise of stock options the
Company intends to grant to Mr. Newman upon stockholder approval of the
increase in the number of shares available for issuance under the Stock
Incentive Plan. See "Election of Director -- Report of the Compensation
Committee of the Board of Directors."
PROPOSAL 1
ELECTION OF DIRECTOR
DIRECTORS AND EXECUTIVE OFFICERS
The Certificate of Incorporation of the Company provides that the number of
directors of the Company shall be specified in the Bylaws, but in no event shall
there be less than three directors. The Company's Bylaws currently provide for a
Board of Directors composed of five members. The Certificate of Incorporation
further provides that the Board of Directors shall be divided into three classes
which are elected for staggered three year terms. The term of each class expires
at the annual meeting of stockholders in fiscal 1998 (Class I), 1999 (Class II)
and 2000 (Class III). Only the single member of Class I is to be elected at the
Meeting.
Ellison C. Morgan, the Board of Directors' nominee for director, has
indicated his willingness to serve and, unless otherwise instructed, Proxies
will be voted in such a way as to effect, if possible, the election of Mr.
Morgan. In the event that Mr. Morgan should be unable to serve as a director, it
is intended that the Proxies will be voted for the election of such substitute
nominee, if any, as shall be designated by the Board of Directors. Management
has no reason to believe that Mr. Morgan will be unavailable to serve.
The directors and executive officers of the Company are set forth below.
Officers serve at the discretion of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION CLASS OF DIRECTOR
----------------------------- --- --------------------------- -----------------
<S> <C> <C> <C>
Maurice B. Newman (1)(3) 64 Chairman of the Board, III
Chief Operating Officer and
Director
Douglas Arbetman 50 President, Chief Executive III
Officer and Director
Henry R. Mandell (1) 41 Executive Vice II
President,Chief Financial
Officer, Secretary and
Director
Howard H. Hedinger (1)(2)(3) 62 Director II
Ellison C. Morgan (1)(2)(3) 60 Director I
</TABLE>
- ---------------
(1) Messrs. Hedinger, Mandell, Morgan and Newman were elected to the Board of
Directors on May 22, 1997 following the resignations of Nicholas B. Binkley,
Jeffrey J. Holland, Eben S. Moulton and Arthur H. Warshaw.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
MAURICE B. NEWMAN has served as a director since May 1997, and, effective
September 29, 1997, was appointed Chairman of the Board and Chief Operating
Officer of the Company. Mr. Newman was President and Chief Executive Officer of
CaliforniaMart from May 1994 until his appointment as Chairman of the Board of
Directors of the Company. From 1987 to 1994, he was President, marketing and
licensing, of Cherokee, Inc. Mr. Newman was a management consultant to the
apparel industry from 1986 to 1987. From 1985 to 1986, Mr. Newman was President
of Calvin Klein, Inc. Mr. Newman was President of Cole of California from 1977
to 1985, and, from 1965 to 1977, he was Vice President of Sirena, Inc.
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<PAGE> 7
DOUGLAS ARBETMAN has been employed as the President and Chief Executive
Officer and has been a director of the Company since February 1990. From 1989
until joining the Company, Mr. Arbetman was the President of Cherokee Swimwear.
From 1987 to 1989, Mr. Arbetman was President of Reebok Apparel, a division of
Reebok International Ltd. From 1982 to 1987, Mr. Arbetman was Vice President of
Merchandising for Cole of California. Prior to 1982, Mr. Arbetman held various
management positions and was a women's swimwear buyer for Bloomingdales and
Robinsons Department Stores. Mr. Arbetman received a B.S. degree from Emerson
College in 1969. In 1996, Mr. Arbetman was appointed to the Board of Overseers
of Emerson College.
HENRY R. MANDELL has been employed as Chief Financial Officer and Secretary
of the Company since November 1990, and as Executive Vice President since
November 1995. From November 1990 to November 1995, Mr. Mandell was Senior Vice
President of the Company. He has been a director of the Company since May 1997.
From 1985 to November 1990, Mr. Mandell was employed in various executive
capacities by Media Home Entertainment, a manufacturer and distributor of
videocassettes, including as Senior Vice President, Finance and Administration,
and a director since 1987. From 1982 to 1985, Mr. Mandell held various financial
positions with Oak Industries, a publicly-held communications company listed on
the New York Stock Exchange. Prior to 1982, Mr. Mandell was employed by 20th
Century-Fox Film Corporation and by Arthur Young and Company where he qualified
as a Certified Public Accountant. Mr. Mandell received a B.S. degree in
management, magna cum laude, from Syracuse University in 1978.
HOWARD H. HEDINGER has served as a director since May 1997. Since 1959, Mr.
Hedinger has been an executive officer and director of American Steel, a west
coast steel service center chain based in Portland, Oregon. American Steel is a
subsidiary of American Industries, Inc. ("American Industries"), which has
interests in real estate and other investments. Since the 1970s, Mr. Hedinger
has been the President and Chairman of American Industries. American Industries
presently owns fifty percent of American Steel LLC, a steel service center
chain, also based in the Pacific Northwest, and is a joint venture partner with
Reliance Steel & Aluminum, a publicly-held company based in Los Angeles. Mr.
Hedinger is a board member of American Steel LLC.
ELLISON C. MORGAN has served as a director since May 1997. Mr. Morgan has
been Chairman and Chief Executive Officer of 2030 Investors LLC, a family
investment company since 1996. From 1986 to 1996, he was President and Chief
Executive Officer of the M Financial Group and M Life Insurance Company, a
national marketing and reinsurance organization. Prior to 1986, Mr. Morgan was
founder and Chief Executive Officer of Management Compensation Group Northwest.
Mr. Morgan is a director of American Industries.
There are no family relationships among directors or executive officers of
the Company and, except as set forth above, as of the date hereof, no
directorships are held by any director in a company which has a class of
securities registered pursuant to Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or subject to the requirements of Section
15(d) of the Exchange Act or any company registered as an investment company
under the Investment Company Act of 1940. None of the directors or executive
officers were selected pursuant to any arrangement or understanding, other than
with the directors and executive officers of the Company acting within their
capacity as such.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee and a Compensation Committee,
each of which consists of two or more directors who serve at the discretion of
the Board of Directors.
The Audit Committee is chaired by Mr. Morgan, and its members are Messrs.
Hedinger and Morgan. Messrs. Hedinger and Morgan were elected to the Board of
Directors and appointed to the Audit Committee on May 22, 1997. Prior to their
resignations from the Board, the Audit Committee consisted of Messrs. Binkley
and Holland. The primary purposes of the Audit Committee are (i) to review the
scope of the audit and all non-audit services to be performed by the Company's
independent certified public accountants and the fees incurred by the Company in
connection therewith, (ii) to review the results of such audit,
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<PAGE> 8
including the independent accountants' opinion and letter of comment to
management and management's response thereto, (iii) to review with the Company's
independent accountants the Company's internal accounting principles, policies
and practices and financial reporting, (iv) to make recommendations regarding
the selection of the Company's independent accountants and (v) to review the
Company's quarterly financial statements prior to public issuance. The Audit
Committee met twice during fiscal 1997.
The Compensation Committee is chaired by Mr. Newman, and its members are
Messrs. Hedinger, Morgan and Newman. Messrs. Hedinger, Morgan and Newman were
elected to the Board of Directors and appointed to the Compensation Committee on
May 22, 1997. Prior to their resignations from the Board, the Compensation
Committee consisted of Messrs. Holland, Moulton and Warshaw. The purposes of the
Compensation Committee are (i) to review and recommend to the Board of Directors
the salaries, bonuses and perquisites of the Company's executive officers, (ii)
to determine the individuals to whom, and the terms upon which, awards under the
Company's stock incentive plan and profit sharing plan will be granted, (iii) to
make periodic reports to the Board of Directors as to the status of such plans
and (iv) to review and recommend to the Board of Directors additional
compensation plans. The Compensation Committee met once during fiscal 1997.
MEETINGS OF DIRECTORS
The Board of Directors met six times during fiscal 1997. All of the persons
who were directors of the Company during fiscal 1997 attended at least 75% of
the total number of meetings of the Board of Directors held during the tenure of
their directorship and at least 75% of the total number of meetings held by all
committees on which they served during fiscal 1997.
PROCEDURES FOR STOCKHOLDER NOMINATIONS
The Board of Directors does not have a standing nominating committee. The
procedures for nominating directors, other than by the Board of Directors
itself, are set forth in the Bylaws. Nominations of individuals for election to
the Board of Directors at an annual meeting of stockholders may be made by any
stockholder of the Company entitled to vote for the election of directors at
that meeting who gives timely written notice to the Company. Such notice must be
received at the Company's principal executive offices not less than 90 calendar
days prior to the day and month on which, in the immediately preceding year, the
annual meeting for such year was held.
A stockholder's notice of intent to nominate must set forth as to each
proposed nominee all information relating to such person that is required to be
disclosed in solicitations of proxies pursuant to Regulation 14A promulgated
under the Exchange Act, including, but not limited to, such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected. Such stockholder notice must also set forth the name, age,
business address, residence address and the principal occupation or employment
of the nominee and the name and address, as they appear on the Company's books,
of the nominating stockholder and the class and number of shares of the
Company's stock which are beneficially owned by such stockholder. No person
shall be eligible for election as a director of the Company unless nominated in
accordance with these procedures. The Chairman of any meeting of stockholders
shall direct that any nomination not made in accordance with these procedures be
disregarded.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Exchange Act, the Company's directors, executive
officers and any person holding ten percent or more of the Common Stock are
required to report their ownership of Common Stock and any changes in that
ownership to the Securities and Exchange Commission (the "SEC") and to furnish
the Company with copies of such reports. Specific due dates for these reports
have been established and the Company is required to report in this Proxy
Statement any failure to file on a timely basis by such persons. It is the
Company's policy that all such reports be timely filed. Based solely upon a
review of copies of reports filed with the SEC prior to June 30, 1997, all
persons subject to the reporting requirements of Section 16(a) have timely filed
all reports.
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<PAGE> 9
DIRECTOR COMPENSATION
The Company reimburses each director who is not employed by the Company for
all expenses incurred by him in his capacity as a director of the Company. The
Board of Directors may modify such compensation in the future. In addition, the
Stock Incentive Plan provides for the grant to non-employee directors of options
to purchase Common Stock in the discretion of the committee of the Board of
Directors that administers the plan. On July 1, 1997, Messrs. Hedinger, Morgan
and Newman were each granted an option to purchase up to 25,000 shares of Common
Stock pursuant to the Stock Incentive Plan at an exercise price of $3.50 per
share. Such options are immediately exercisable and will expire on the fifth
anniversary of the date of grant. The Company intends to grant to each of
Messrs. Hedinger and Morgan an additional option to purchase up to 25,000 shares
of Common Stock upon stockholder approval of the increase in the number of
shares available for issuance under the Stock Incentive Plan. Such options will
be granted at the fair market value of the Common Stock on the date of grant,
will be immediately exercisable and will expire on the fifth anniversary of the
date of grant. Upon stockholder approval of the increase in the number of shares
available for issuance under the Stock Incentive Plan, the Company intends to
grant to Mr. Newman an additional option to purchase up to 80,000 shares of
Common Stock at the fair market value of the Common Stock on the date of grant.
Such option will be immediately exercisable and will expire on the tenth
anniversary of the date of grant.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company for services rendered in all capacities during fiscal 1997, 1996 and
1995 to each person who acted in the capacity of an executive officer (the
"Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------------- -------------------------- -------------------------------
SECURITIES
OTHER RESTRICTED UNDERLYING
NAME AND PRINCIPAL ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) AWARDS($) SARS(#) PAYOUTS($) COMPENSATION($)(2)
- ------------------- ---- ------- ------- ------------------ ---------- ------------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Douglas Arbetman,
President and
Chief
Executive
Officer........... 1997 350,000 106,330 13,030 -- -- -- 1,500
1996.. 350,000 39,375 16,031 -- 86,000(3) -- 1,500
1995.. 298,076 200,000 17,531 -- 234,958(4)(5) -- 1,500
Henry R. Mandell,
Executive Vice
President, Chief
Financial Officer
and Secretary..... 1997 160,000 16,320 8,662 -- -- -- 1,500
1996.. 152,849 8,598 9,250 -- 22,000(3) -- 1,500
1995.. 139,615 57,825 11,518 -- 58,317(4) -- 1,500
</TABLE>
- ---------------
(1) Consists of automobile lease, insurance, fuel and maintenance expenses,
premiums on supplemental long-term disability insurance and, for Mr.
Arbetman, premiums on key man life insurance payable to him.
(2) Consists of reimbursement of medical and dental expenses not covered by
insurance plans provided by the Company to employees generally.
(3) Consists of shares issuable pursuant to options granted under the Stock
Incentive Plan on June 28, 1996.
(4) Consists of shares issuable pursuant to options granted under the Stock
Incentive Plan concurrently with the consummation of the Company's initial
public offering in August 1994.
(5) Consists of shares issuable pursuant to options that were repriced effective
July 1, 1997. See "Election of Director -- Report of the Compensation
Committee of the Board of Directors."
7
<PAGE> 10
EMPLOYMENT AGREEMENTS
In connection with the Company's secondary public offering in November
1995, the Company amended the then existing employment agreement with Mr.
Arbetman. Pursuant to his amended employment agreement with the Company, Mr.
Arbetman is entitled to (i) receive a minimum annual base salary of $350,000,
(ii) receive an annual bonus, up to 100% of his base salary, based upon the
satisfaction of performance goals to be determined by the Board of Directors,
(iii) participate in all plans sponsored by the Company for employees in
general, (iv) receive $500,000 of life insurance payable as directed by him, (v)
receive an option to purchase up to 267,150 shares of the Common Stock of the
Company at the initial public offering price and 86,000 shares of the Common
Stock of the Company at the closing price on June 28, 1996, and (vi) receive a
$850 monthly automobile allowance, together with reimbursement of expenses for
insurance, fuel and maintenance. The agreement, as amended, will terminate on
November 15, 1998. In the event the Company terminates Mr. Arbetman's employment
before the end of the stated term without cause or Mr. Arbetman terminates his
employment for specified causes, the Company will be obligated to pay Mr.
Arbetman an amount equal to his base salary for 730 days. In the event the
Company terminates his employment before the end of the stated term with cause,
the Company is obligated to pay the base salary only through the date of
termination. Effective July 1, 1997, the option granted to Mr. Arbetman to
purchase up to 267,150 shares of Common Stock at the initial public offering
price of $4.75 was repriced at an exercise price of $3.50 per share. See
"Election of Director -- Report of the Compensation Committee of the Board of
Directors." Mr. Arbetman is entitled to purchase up to 234,958 shares at the
amended price of $3.50 per share pursuant to the unexercised portion of such
option.
In connection with the Company's secondary public offering in November
1995, the Company amended the then existing employment agreement with Mr.
Mandell. Pursuant to his amended employment agreement with the Company, Mr.
Mandell is entitled to (i) receive an annual base salary of $160,000, (ii)
receive an annual bonus, up to 50% of his base salary, based upon the
satisfaction of performance goals to be determined by the Board of Directors,
(iii) participate in all plans sponsored by the Company for employees in
general, (iv) receive an option to purchase up to 66,788 shares of the Common
Stock of the Company at the initial public offering price and 22,000 shares of
the Common Stock of the Company at the closing price on June 28, 1996, and (v)
receive a $536 monthly automobile allowance, together with reimbursement of
expenses for insurance, fuel and maintenance. The agreement, as amended, was
renewed in August 1997, and will terminate on November 15, 1999. In the event
the Company terminates Mr. Mandell's employment before the end of the stated
term without cause or Mr. Mandell terminates his employment for specified
causes, the Company is obligated to pay Mr. Mandell an amount equal to his base
salary for 365 days. In the event the Company terminates his employment before
the end of the stated term with cause, the Company is obligated to pay the base
salary only through the date of termination.
On September 12, 1997, the Company announced that it has reached an
agreement in principle pursuant to which Maurice B. Newman has been appointed
Chairman of the Board and Chief Operating Officer of the Company, effective
September 29, 1997. The Company has agreed that it will enter into a definitive
employment agreement with Mr. Newman that will provide for (i) a two-year term
of employment, (ii) an annual base salary of $300,000, plus reimbursement of
reasonable business and entertainment expenses, (iii) an annual bonus, up to
$200,000, based upon the satisfaction of performance goals to be determined by
the Board of Directors, (iv) participation in all plans sponsored by the Company
for employees in general, (v) grant of an option to purchase up to 25,000 shares
of the Common Stock of the Company at $3.50 per share, and 80,000 shares of the
Common Stock of the Company upon stockholder approval of the increase in the
number of shares available for issuance under the Stock Incentive Plan at the
fair market value of the Common Stock on the date of the grant; and (vi) the
right to receive his base salary and employee benefits (or the economic
equivalent) for 90 days if the employment agreement is not renewed or extended
beyond its initial term.
8
<PAGE> 11
OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information with respect to the
Named Executives concerning the exercise of options during fiscal 1997 and
unexercised options held by the Named Executives as of June 30, 1997.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1997
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT 06/30/97 AT 06/30/97(1)
SHARES ACQUIRED VALUE ----------------------------- -----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Douglas Arbetman.............. -- -- 320,958(2) -- 0 --
Henry R. Mandell.............. -- -- 80,317(3) -- 0 --
</TABLE>
- ---------------
(1) The value of unexercised "in-the-money" options is the difference between
the closing sale price of the Common Stock on June 30, 1997 ($3.00 per
share) and the exercise price of the option, multiplied by the number of
shares subject to the option.
(2) Consists of shares Mr. Arbetman has the right to purchase upon the exercise
of stock options granted pursuant to the Stock Incentive Plan at an exercise
price of between $3.125 and $4.75 per share, which options became
exercisable on the date of grant. Certain of these options were repriced
effective July 1, 1997. See "Election of Director -- Report of the
Compensation Committee of the Board of Directors."
(3) Consists of shares Mr. Mandell has the right to purchase upon the exercise
of stock options granted pursuant to the Stock Incentive Plan at an exercise
price of between $3.125 and $4.75 per share, which options became
exercisable on the date of grant.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Report of the Compensation Committee of the Board of Directors shall
not be deemed filed under the Securities Act of 1993, as amended (the
"Securities Act"), or under the Exchange Act.
REPORT OF THE COMPENSATION COMMITTEE
Since its inception, the Company has maintained the philosophy that
executive compensation should be competitive with that provided to others in the
women's swimwear industry to assist the Company in attracting and retaining
qualified executives critical to the Company's long-term success.
In connection with the Company's secondary public offering in November
1995, this Committee amended the then existing employment agreements with
Messrs. Arbetman and Mandell in order to be assured of their continued services
and their experience, knowledge and abilities, which have been largely
responsible for the Company's success to date. In determining the salaries and
the perquisites provided for in such agreements, the Committee considered, among
other things, (i) the net sales and net income history of the Company, both
before and after the employment of these individuals, (ii) the estimated near
and intermediate term results of operations of the Company, (iii) the position
of the Company in its industry, (iv) the expertise of these individuals, (v) the
current sales, net income, growth and capital structure of the Company and
comparable companies and (vi) salaries and perquisites of executives of
comparable companies.
At the beginning of fiscal 1997, the Committee established individual
performance objectives for each executive officer and performance objectives for
the Company as a whole. Payment of discretionary bonuses in fiscal 1997 was
based upon a subjective assessment of such individual's actual and potential
contribution to the Company. In the case of Mr. Arbetman, the Committee was
particularly influenced by Mr. Arbetman's achievement of certain performance
objectives and the key role played by Mr. Arbetman in the Company's acquisition
of a license to manufacture Liz Claiborne(R) swimwear and related accessories.
In the case of
9
<PAGE> 12
Mr. Mandell, the Committee was particularly influenced by Mr. Mandell's
achievement of certain performance objectives.
Maurice B. Newman has been appointed, effective September 29, 1997,
Chairman of the Board of Directors and Chief Operating Officer of the Company.
In determining the salary and perquisites to be provided for in Mr. Newman's
employment agreement with the Company, the Committee considered, among other
things, (i) Mr. Newman's expertise and prominence in the industry, (ii) the
anticipated effect of his appointment on the results of operations of the
Company and (iii) salaries and perquisites of executives of comparable
companies.
Executive officers are also permitted to participate in the benefit plans
provided to employees generally. The incremental cost to the Company of the
benefits provided to Messrs. Arbetman and Mandell under these plans averaged
approximately 4% percent of their base salaries in fiscal 1997.
The Compensation Committee believes that, in addition to enabling the
Company to attract and retain qualified non-employee directors and management,
stock ownership by key employees, including executive officers, and by
non-employee directors provides valuable performance incentives for such
persons, who will benefit as the price of the Common Stock increases. In support
of these objectives, and in connection with their election to the Board of
Directors, the Company granted, on July 1, 1997, to each of Messrs. Hedinger,
Morgan and Newman an option to purchase up to 25,000 shares of Common Stock
pursuant to the Stock Incentive Plan at an exercise price of $3.50. The Company
intends to grant to each of Messrs. Hedinger and Morgan an additional option to
purchase up to 25,000 shares of Common Stock upon stockholder approval of the
increase in the number of shares available for issuance under the Stock
Incentive Plan. In connection with his appointment as Chairman of the Board of
Directors and Chief Operating Officer of the Company, the Company intends to
grant to Mr. Newman an additional option to purchase up to 80,000 shares of
Common Stock at the fair market value of the Common Stock on the date of grant,
subject to stockholder approval of the increase in the number of shares
available for issuance under the Stock Incentive Plan.
During the first quarter of fiscal 1998, the Compensation Committee
reviewed the options held by Mr. Arbetman and certain other key employees of the
Company, and noted that a decline in the price of the Common Stock of the
Company had resulted in a substantial number of stock options granted pursuant
to the Stock Incentive Plan having exercise prices well above the recent
historical trading prices for the Common Stock. The Committee believes that such
"out of the money" stock options no longer serve the performance incentive
purposes of the Stock Incentive Plan, and that losses of key employees could
result from the decline in the value of the total compensation package for
long-term employees of the Company holding such options. Considering these
factors, the Committee has determined that it is in the best interests of the
Company and its stockholders to restore the incentives for Mr. Arbetman and
other key employees of the Company to remain as employees and to exert their
maximum efforts on behalf of the Company by amending the stock options
previously granted to them under the Stock Incentive Plan effective July 1, 1997
to reflect an exercise price of $3.50 per share. Options to purchase 234,958
shares initially granted to Mr. Arbetman at $4.75 per share, the initial public
offering price, and 87,500 options initially granted to eleven (11) additional
employees at an exercise price of between $4.00 and $7.00 per share, were so
amended. Such repriced options will remain subject to all other terms and
conditions, including vesting schedules and termination dates, as were
applicable to the original grant.
Dated: October 8, 1997 THE COMPENSATION COMMITTEE
Ellison C. Morgan
Maurice B. Newman
Howard H. Hedinger
10
<PAGE> 13
PERFORMANCE GRAPH
The following graph compares the quarterly percentage change in the
Company's cumulative total stockholder return on Common Stock with (i) the
cumulative total return of the NASDAQ National Market ("NASDAQ") index and (ii)
the cumulative total return of companies with the standard industrial code (SIC)
2339 over the period from August 16, 1994 (the date of the Company's initial
public offering) through September 24, 1997. The component entities of SIC Code
2339 were generated by Media General Financial Services, Inc. All the entities
in SIC Code 2339 were incorporated into the peer group. The graph assumes an
initial investment of $100 and the reinvestment of dividends. The graph is not
necessarily indicative of future price performance.
The graph shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing under
the Securities Act or under the Exchange Act, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Sirena Apparel SIC Code Index Nasdaq Market
<S> <C> <C> <C>
8/16/1994 100.00 100.00 100.00
9/30/1994 100.00 108.70 98.90
12/30/1994 121.05 104.19 96.91
3/31/1995 152.63 105.99 99.77
6/30/1995 173.68 116.56 109.15
9/29/1995 168.42 140.53 121.61
12/29/1995 131.58 136.39 120.64
3/29/1996 119.74 133.60 126.21
6/28/1996 65.79 135.50 135.56
9/30/1996 50.00 115.89 139.30
12/31/1996 54.61 97.26 145.85
3/31/1997 64.47 73.57 138.44
6/30/1997 63.16 73.99 163.78
9/24/1997 86.84 66.88 180.32
</TABLE>
LIMITATION ON LIABILITY AND INDEMNIFICATION
The Amended and Restated Certificate of Incorporation of the Company limits
the liability of the Company's directors for monetary damages arising from a
breach of their fiduciary duties to the Company and its stockholders, except to
the extent otherwise required by the Delaware General Corporation Law. Such
limitation of liability does not affect the availability of equitable remedies
such as injunctive relief or rescission.
The Company's Bylaws provide that the Company shall indemnify its directors
and officers to the fullest extent permitted by applicable law, including
circumstances in which indemnification is otherwise discretionary. Such
provisions may require the Company, among other things, (i) to indemnify its
officers and directors against certain liabilities that may arise by reason of
their status or service as directors or officers provided such persons acted in
good faith and in a manner reasonably believed to be in the best interests of
the Company and, with respect to any criminal action, had no cause to believe
their conduct was unlawful, (ii) to advance the expenses actually and reasonably
incurred by its officers and directors as a result of any proceeding against
them as to which they could be indemnified and (iii) to obtain directors' and
officers' insurance if available on reasonable terms. There is no action or
proceeding pending or, to the knowledge of
11
<PAGE> 14
the Company, threatened which may result in a claim for indemnification by any
director, officer, employee or agent of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE BOARD OF
DIRECTORS' NOMINEE.
PROPOSAL 2
AMENDMENT OF THE
1994 EMPLOYEE STOCK INCENTIVE PLAN
GENERAL
The Company adopted the 1994 Employee Stock Incentive Plan (the "Stock
Incentive Plan") pursuant to which officers, directors, employees and
independent contractors (including independent sales representatives) of the
Company are eligible to receive shares of the Common Stock of the Company or
other securities or benefits with a value derived from the value of the Common
Stock of the Company.
The purpose of the Stock Incentive Plan is to enable the Company to
attract, retain and motivate officers, directors, employees and independent
contractors by providing for or increasing their proprietary interests in the
Company and, in the case of non-employee directors, to attract such directors
and further align their interests with those of the Company's stockholders by
providing for or increasing their proprietary interests in the Company.
The maximum number of shares of Common Stock that may be issued pursuant to
awards granted under the Stock Incentive Plan is 822,465 (subject to adjustments
to prevent dilution).
PROPOSED AMENDMENT
The Board of Directors has approved an amendment to the Stock Incentive
Plan to (i) increase the maximum number of shares of Common Stock that may be
issued pursuant to awards granted under the plan from 822,465 to 1,172,465
(subject to adjustments to prevent dilution), subject to stockholder approval
and (ii) eliminate the Stock Incentive Plan's provision for automatic grants of
options to non-employee directors upon their initial election to the Board of
Directors. As of the Record Date, there were 813,459 shares subject to
outstanding options, 9,006 shares available for future grants of options and
five directors and executive officers and 20 employees, consultants and former
directors participating in the Stock Incentive Plan. On July 1, 1997, Messrs.
Hedinger, Morgan and Newman were each granted an option to purchase up to 25,000
shares of Common Stock pursuant to the Stock Incentive Plan at an exercise price
of $3.50 per share. Such options are immediately exercisable and will expire on
the fifth anniversary of the date of grant. The Company intends to grant to each
of Messrs. Hedinger and Morgan an additional option to purchase up to 25,000
shares of Common Stock upon stockholder approval of the increase in the number
of shares available for issuance under the Stock Incentive Plan. Such options
will be granted at the fair market value of the Common Stock on the date of
grant, will be immediately exercisable and will expire on the fifth anniversary
of the date of grant. Upon stockholder approval of the increase in the number of
shares available for issuance under the Stock Incentive Plan, the Company
intends to grant to Mr. Newman an additional option to purchase up to 80,000
shares of Common Stock at the fair market value of the Common Stock on the date
of grant. Such option will be immediately exercisable and will expire on the
tenth anniversary of the date of grant.
Stockholders are being asked to approve the amendment to the Stock
Incentive Plan adopted by the Board of Directors (i) to increase the number of
shares available for issuance under the plan and (ii) to eliminate automatic
grants of options to non-employee directors upon their initial election to the
Board. Approval of the proposal requires the affirmative vote of a majority of
the issued and outstanding shares of Common Stock of the Company present in
person or represented by proxy and entitled to vote at the Meeting.
12
<PAGE> 15
DESCRIPTION OF STOCK INCENTIVE PLAN
The description of the Stock Incentive Plan provided below is qualified in
its entirety by the full text of the Stock Incentive Plan, copies of which are
available for review at the Company's principal executive office and will be
furnished to Stockholders without charge upon request directed to the Secretary
of the Company, 10333 Vacco Street, South El Monte, California 91733.
Administration. The Stock Incentive Plan is administered by a committee
appointed by the Board of Directors of the Company (the "Committee"). The
Committee has full and final authority to select the recipients of awards and to
grant such awards. Subject to the provisions of the Stock Incentive Plan, the
Committee has a wide degree of flexibility in determining the terms and
conditions of awards and the number of shares to be issued pursuant thereto,
including conditioning the receipt or vesting of awards upon the achievement by
the Company of specified performance criteria. The expenses of administering the
Stock Incentive Plan are borne by the Company.
Terms of Awards. The Stock Incentive Plan authorizes the Committee to enter
into any type of arrangement with an eligible recipient that, by its terms,
involves or might involve the issuance of Common Stock or any other security or
benefit with a value derived from the value of the Common Stock. Awards are not
restricted to any specified form or structure and may include, without
limitation, sales or bonuses of stock, restricted stock, stock options, reload
stock options, stock purchase warrants, other rights to acquire stock,
securities convertible into or redeemable for stock, stock appreciation rights,
phantom stock, dividend equivalents, performance units or performance shares. An
award may consist of one such security or benefit or two or more of them in
tandem or in the alternative.
An award granted under the Stock Incentive Plan may include a provision
accelerating the receipt of benefits upon the occurrence of specified events,
such as a change of control of the Company or a dissolution, liquidation,
merger, reclassification, sale of substantially all of the property and assets
of the Company or other significant corporate transactions. Any stock option
granted to an employee may be a tax-benefited incentive stock option or a
non-qualified stock option that is not tax-benefited. A stock option granted to
a non-employee director may only be a non-qualified stock option.
An award may permit the recipient to pay all or part of the purchase price
of the shares or other property issuable pursuant thereto, or to pay all or part
of such employee's tax withholding obligation with respect to such issuance, by
(i) delivering previously owned shares of capital stock of the Company or other
property, (ii) reducing the amount of shares or other property otherwise
issuable pursuant to the award or (iii) delivering a promissory note, the terms
and conditions of which will be determined by the Committee. If an option
permits the recipient to pay for the shares issuable pursuant thereto with
previously owned shares, the recipient would be able to exercise the option in
successive transactions, starting with a relatively small number of shares and,
by a series of exercises using shares acquired from each such transaction to pay
the purchase price of the shares acquired in the following transaction, to
exercise an option for a large number of shares with no more investment than the
original share or shares delivered. The exercise price and any withholding taxes
are payable in cash by non-employee directors, although the Board of Directors
at its discretion may permit such payment by delivery of shares of Common Stock,
or by delivery of broker instructions authorizing a loan secured by the shares
acquired upon exercise or payment to the Company of proceeds from the sale of
such shares.
Subject to limitations imposed by law, the Board of Directors may amend or
terminate the Stock Incentive Plan at any time and in any manner. However, no
such amendment or termination may deprive the recipient of an award previously
granted under the Stock Incentive Plan of any rights thereunder without his
consent.
Pursuant to Section 16(b) of the Exchange Act, directors, certain officers
and ten percent stockholders of the Company are generally liable to the Company
for repayment of any "short-swing" profits realized from any non-exempt purchase
and sale of Common Stock occurring within a six-month period. Rule 16b-3,
promulgated under the Exchange Act, provides an exemption from Section 16(b)
liability for certain transactions by an officer or director pursuant to an
employee benefit plan that complies with such Rule.
13
<PAGE> 16
Specifically, the grant of an option under an employee benefit plan that
complies with Rule 16b-3 will not be deemed a purchase of a security for
purposes of Section 16(b). The Stock Incentive Plan is designed to comply with
Rule 16b-3.
Awards may not be granted under the Stock Incentive Plan after the tenth
anniversary of the adoption of the Stock Incentive Plan. Although any award that
was duly granted on or prior to such date may thereafter be exercised or settled
in accordance with its terms, no shares of Common Stock may be issued pursuant
to any award after the twentieth anniversary of the adoption of the Stock
Incentive Plan.
FEDERAL INCOME TAX TREATMENT
The following is a brief description of the federal income tax treatment
that generally will apply to awards made under the Stock Incentive Plan, based
on federal income tax laws in effect on the date hereof. The exact federal
income tax treatment of any award will depend on the specific nature of such
award. Such an award may, depending on the conditions applicable to the award,
be taxable as an option, or an award of restricted or unrestricted stock, an
award which is payable in cash or otherwise.
Pursuant to the Stock Incentive Plan, participants may be granted options
which are intended to qualify as incentive stock options. Generally, the
optionee is not taxed, and the Company is not entitled to a deduction, on the
grant or exercise of an incentive stock option. However, if the optionee sells
the shares acquired upon the exercise of an incentive stock option at any time
within (i) one year after the date of exercise of the option or (ii) two years
after the date of grant of the option, then the optionee will recognize ordinary
income in an amount equal to the excess, if any, of the lesser of the sale price
or the fair market value on the date of exercise over the exercise price of the
option. The Company will generally be entitled to a deduction in an amount equal
to the amount of ordinary income recognized by the optionee.
The grant of an option or other similar right to acquire stock that does
not qualify for treatment as an incentive stock option generally is not a
taxable event for the optionee. Upon exercise of the option, the optionee
generally will recognize ordinary income in an amount equal to the excess of the
fair market value of the stock acquired upon exercise (determined as of the date
of exercise) over the exercise price of such option, and the Company will be
entitled to a deduction equal to such amount.
Special rules will apply, however, if the optionee is subject to Section 16
of the Exchange Act. During any period of time (the "Section 16(b) Period") in
which a sale of the stock acquired upon exercise of the option could subject
such optionee to suit under Section 16, the optionee will not recognize ordinary
income and the Company will not be entitled to a deduction. Upon the expiration
of the Section 16(b) Period, the optionee will recognize ordinary income, and
the Company will be entitled to a deduction, equal to the excess of the fair
market value of the stock (determined as of the expiration of the Section 16(b)
Period) over the option exercise price. As described below, such an optionee may
elect under Section 83(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), to recognize ordinary income on the date of exercise, in which case the
Company would be entitled to a deduction at that time equal to the amount of the
ordinary income recognized.
Awards under the Stock Incentive Plan may also include stock sales, stock
bonuses or other grants of stock. Stock issued pursuant to these awards may be
subject to certain restrictions. Pursuant to Section 83 of the Code, stock sold
or granted under the Stock Incentive Plan will give rise to taxable income at
the earliest time at which such stock is not subject to a substantial risk of
forfeiture or is freely transferable for purposes of Section 83. At that time,
the holder will recognize ordinary income equal to the excess of the fair market
value of the shares (determined as of such time) over the purchase price, and
the Company will be entitled to a deduction equal to such amount. If the holder
of the stock is a person subject to Section 16(b) and if the sale of the stock
at a profit could subject such person to suit under Section 16(b), income will
be recognized in accordance with the rules described above regarding stock
issued to such persons upon the exercise of an option, unless the holder makes
an election under Section 83(b) to recognize income on the date the stock is
issued.
Awards may be granted under the Stock Incentive Plan that do not fall
clearly into the categories described above. The federal income tax treatment of
these awards will depend upon the specific terms of such
14
<PAGE> 17
awards. The Company generally will be required to withhold applicable taxes with
respect to any ordinary income recognized by a participant in connection with
awards made under the Stock Incentive Plan.
The terms of the agreements pursuant to which specific awards are made
under the Stock Incentive Plan may provide for accelerated vesting or payment of
an award in connection with a change in ownership or control of the Company. In
that event and depending upon the individual circumstances of the recipient,
certain amounts with respect to such awards may constitute "excess parachute
payments" under the golden parachute provisions of the Code. Pursuant to such
provisions, an employee will be subject to a 20% excise tax on any "excess
parachute payment," and the Company will be denied any deduction with respect to
such excess parachute payment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT OF THE STOCK
INCENTIVE PLAN.
PROPOSAL 3
RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has appointed Ernst & Young LLP as the Company's
independent certified public accountants for the fiscal year ending June 30,
1998. Ernst & Young LLP, the Company's accountants for the fiscal year ended
June 30, 1997, performed audit services for fiscal 1997 which included the
examination of the consolidated financial statements of the Company and services
relating to filings with the Securities and Exchange Commission. All
professional services rendered by Ernst & Young LLP during fiscal 1997 were
furnished at customary rates and terms. Representatives of Ernst & Young LLP
will be invited to be present at the Meeting, will have the opportunity to make
a statement if they desire to do so and will be available to respond to
appropriate questions from stockholders.
Stockholders are being asked to ratify the appointment of Ernst & Young LLP
as the Company's independent public accountants for the fiscal year ending June
30, 1998. Ratification of the proposal requires the affirmative vote of a
majority of the shares of Common Stock represented and entitled to vote at the
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
OF THE COMPANY FOR THE FISCAL YEAR ENDING JUNE 30, 1998.
PROPOSALS OF STOCKHOLDERS
Under certain circumstances, stockholders are entitled to present proposals
at stockholder meetings. Any such proposal to be included in the proxy statement
for the Company's 1999 annual meeting of stockholders must be submitted to the
Company by a stockholder on or before June 10, 1998, in a form that complies
with applicable regulations.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended June 30, 1997
accompanies or has preceded this Proxy Statement. The Annual Report contains
consolidated financial statements of the Company and its subsidiaries and the
report thereon of Ernst & Young LLP, the Company's independent auditors.
STOCKHOLDERS MAY OBTAIN WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K, INCLUDING FINANCIAL STATEMENTS REQUIRED TO BE FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO THE EXCHANGE ACT FOR THE
FISCAL YEAR ENDED JUNE 30, 1997 BY WRITING TO THE COMPANY AT 10333 VACCO STREET,
SOUTH EL MONTE, CALIFORNIA 91733, ATTENTION: HENRY R. MANDELL.
15
<PAGE> 18
OTHER BUSINESS
Management knows of no business which will be presented for consideration
at the Meeting other than as stated in the Notice of Meeting. If, however, other
matters are properly brought before the Meeting, it is the intention of the
Proxyholders to vote the shares represented by the Proxies on such matters in
accordance with the recommendation of the Board of Directors and authority to do
so is included in the Proxy.
By Order of the Board of Directors,
/s/ Douglas Arbetman
Douglas Arbetman
Chief Executive Officer
Dated: October 8, 1997
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<PAGE> 19
REVOCABLE PROXY THE SIRENA APPAREL GROUP, INC. REVOCABLE PROXY
ANNUAL MEETING OF STOCKHOLDERS -- NOVEMBER 4, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholder(s) of The Sirena Apparel Group, Inc. (the
"Company") hereby nominates, constitutes and appoints Douglas Arbetman and Henry
R. Mandell, and each of them, the attorney, agent and proxy of the undersigned,
with full power of substitution, to vote all stock of the Company which the
undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company (the "Meeting") to be held at the Ramada Suites Hotel, 1089 Santa Anita
Avenue, South El Monte, California 91733 on Tuesday, November 4, 1997 at 11:00
a.m., California time, and any adjournments thereof, as fully and with the same
force and effect as the undersigned might or could do if personally thereat, as
follows:
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS [ ] FOR the nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary to vote for the nominees listed below
below)
Nominees and the fiscal year in which their terms expire: Ellison C. Morgan..... 2001
</TABLE>
(Instructions: To withhold authority to vote for the nominee whose name appears
above, write that nominee's name in the space provided below)
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2. AMENDMENT OF 1994 EMPLOYEE STOCK INCENTIVE PLAN. To approve the amendment
of the 1994 Employee Stock Incentive Plan (the "Stock Incentive Plan") to,
among other things, increase from 822,465 to 1,172,465 the number of
shares available for issuance under the plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS. To ratify the
appointment of Ernst & Young LLP as the Company's independent public
accountants for the fiscal year ending June 30, 1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. OTHER BUSINESS. In their discretion, the Proxyholders are authorized to
transact such other business as may properly come before the Meeting and
any adjournment thereof. FOR [ ] AGAINST [ ] ABSTAIN [ ]
Please Sign and Date on Reverse Side
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE OF "FOR" THE ELECTION OF THE NOMINEE
LISTED FOR DIRECTOR ABOVE, "FOR" THE AMENDMENT OF THE STOCK INCENTIVE PLAN AND
"FOR" RATIFICATION OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING JUNE 30, 1998. IF ANY OTHER BUSINESS IS
PRESENTED AT THE MEETING, THIS PROXY SHALL BE VOTED BY THE PROXYHOLDERS IN
ACCORDANCE WITH THE RECOMMENDATIONS OF A MAJORITY OF THE BOARD OF DIRECTORS.
The undersigned hereby ratifies and confirms all that said attorneys and
proxyholders, or either of them, or their substitutes, shall lawfully do or
cause to be done by virtue hereof, and hereby revokes any and all proxies
heretofore given by the undersigned to vote at the Meeting. The undersigned
hereby acknowledges receipt of the Notice of Annual Meeting and the Proxy
Statement accompanying said notice.
Date:
- --------------------------- -------------------------
(Number of Shares)
-------------------------
(Name of Stockholder,
Printed)
-------------------------
(Signature of
Stockholder)
-------------------------
(Name of Stockholder,
Printed)
-------------------------
(Signature of
Stockholder)
(Please date this Proxy
and sign your name as it
appears on your stock
certificate(s).
Executors,
administrators, trustees,
etc., should give their
full titles. All joint
owners should sign.)
I (We) do [ ] do not [ ]
expect to attend the
Meeting.
This Proxy will be voted "FOR" the election of the nominee whose name appears
above unless authority to do so is withheld. Unless "AGAINST" or "ABSTAIN" is
indicated on the reverse hereof, this Proxy will be voted "FOR" the amendment of
the Stock Incentive Plan and "FOR" ratification of the appointment of Ernst &
Young LLP as the Company's certified public accountants for the fiscal year
ending June 30, 1998. PLEASE SIGN, DATE AND RETURN THIS PROXY AS PROMPTLY AS
POSSIBLE IN THE POSTAGE PREPAID ENVELOPE PROVIDED.
