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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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 Section 240.14a-11(c) or Section 240.14a-12
THE SIRENA APPAREL GROUP, INC.
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(Name of Registrant as Specified in its Charter)
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(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)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
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):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
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
paid 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 19, 1998
------------------------
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 Sheraton Hotel, 888 Montebello Boulevard, Rosemead, California 91770, on
Thursday, November 19, 1998, 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 2002 and until his successor has been elected and
qualified. The Board of Directors' nominee is Howard H. Hedinger.
2. 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, 1999.
3. 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 October 19, 1998 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 23, 1998.
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/ MAURICE B. NEWMAN
Maurice B. Newman
Chairman of the Board and
Chief Executive Officer
Dated: October 23, 1998
<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 19, 1998
------------------------
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 Thursday, November
19, 1998, at the Sheraton Hotel, 888 Montebello Boulevard, Rosemead, California
91770, at 11:00 a.m., California time, and at any adjournment thereof. Maurice
B. Newman and Douglas Arbetman, the designated proxyholders (the
"Proxyholders"), are members of the Company's management. Only stockholders of
record (the "Stockholders") on October 19, 1998 (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 23, 1998.
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, to
serve until the annual meeting of stockholders to be held in fiscal year
2002 and until his successor has been elected and qualified. The Board
of Directors' nominee is Howard H. Hedinger.
2. 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, 1999.
3. 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, 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, 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 $15,000.
<PAGE> 4
OUTSTANDING SECURITIES AND VOTING RIGHTS; REVOCABILITY OF PROXIES
The authorized capital of the Company consists of (i) 20,000,000 shares of
common stock, $0.01 par value ("Common Stock"), of which 5,019,391 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
issued and 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, 1,570,000
shares of Common Stock (or approximately 31.3% 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
and "FOR" the ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending June 30, 1999, 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.
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 and "FOR" the ratification of the appointment of Ernst & Young
LLP as the Company's independent auditors for the fiscal year ending June 30,
1999.
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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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 who received salary and
bonus at a rate in excess of $100,000 during fiscal 1998 (the "Named
Executives"), 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........................... 1,570,000 31.3%
Black & Company, Inc.(4)........................... 683,350 13.6%
Douglas Arbetman(5)................................ 200,958 3.8%
Howard H. Hedinger(6).............................. 70,000 1.4%
Henry R. Mandell(7)................................ 8,417 *
Ellison C. Morgan(8)............................... 50,000 1.0%
Maurice B. Newman(9)............................... 109,000 2.1%
All directors and executive officers
as a group (6 persons)........................... 438,375 8.1%
</TABLE>
- ---------------
* Less than 1%.
(1) The address of American Industries, Inc. ("American Industries") is 1750
N.W. Front Avenue, Suite 106, Portland, Oregon 97209, and Black & Company,
Inc. is One S.W. Columbia Street, Suite 1200, Portland, Oregon 97258. The
business address of each of the directors and executive officers of the
Company is 10333 Vacco Street, South El Monte, California 91733.
(2) Except as otherwise noted below, 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) Based on a Schedule 13G/A filed with the Securities and Exchange Commission
(the "SEC") on April 13, 1998. As of March 31, 1998, Black & Company, Inc.
beneficially owned 137,600 shares directly, and 545,750 shares indirectly
through Mazama Capital Management, LLC, the majority shareholder of which
is the current Chairman and beneficial owner of approximately 25% of Black
& Company, Inc. Black & Company, Inc. holds a minority interest (less than
5%) in Mazama Capital Management, LLC.
(5) Consists of 200,958 shares issuable upon the exercise of stock options
granted to Mr. Arbetman, the President, Vice Chairman and Secretary and a
director of the Company, pursuant to the Company's 1994 Employee Stock
Incentive Plan (the "Stock Incentive Plan") on August 12, 1994.
(6) Mr. Hedinger, a director of the Company, is the President and Chairman of
the Board of Directors of American Industries. Mr. Hedinger disclaims
beneficial ownership of 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, 25,000 shares issuable upon the exercise of stock options
granted to Mr. Hedinger pursuant to the Stock Incentive Plan on November 4,
1997 and 20,000 shares owned by Mr. Hedinger's wife, as to which he
disclaims beneficial ownership.
(7) Consists of 8,417 shares issuable upon the exercise of stock options
granted to Mr. Mandell, the former Executive Vice President, Chief
Financial Officer, Secretary and director of the Company pursuant to the
Stock Incentive Plan on August 12, 1994.
(Footnotes continued on next page)
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(8) Mr. Morgan, a director of the Company, is a director of American Industries
and the Chairman of 2030 Investors LLC. Mr. Morgan disclaims beneficial
ownership of the shares of Common Stock held by American Industries and the
8,700 shares of Common Stock held by 2030 Investors LLC. 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 granted to Mr. Morgan pursuant
to the Stock Incentive Plan on November 4, 1997.
(9) Includes 25,000 shares issuable upon the exercise of stock options granted
to Mr. Newman, the Chairman of the Board and Chief Executive Officer and a
director of the Company, pursuant to the Stock Incentive Plan on July 1,
1997 and 80,000 shares issuable upon the exercise of stock options granted
to Mr. Newman pursuant to the Stock Incentive Plan on November 4, 1997.
PROPOSAL 1
ELECTION OF DIRECTORS
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. There currently is a vacancy on the
Board of Directors due to the resignation of Henry R. Mandell, a former Class II
director of the Company. The Company has been conducting a search for a
qualified person to fill this vacancy. While the Company has considered certain
well-qualified individuals to fill this vacancy, the Company has not identified
a nominee at this time, and accordingly, this vacancy will not be filled at the
Meeting. Proxies cannot be voted for a greater number of persons than the number
of nominees named herein. 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 1999 (Class II), 2000 (Class III) and 2001 (Class I).
Only the single member of Class II is to be elected at the Meeting.
Howard H. Hedinger, 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.
Hedinger. In the event that Mr. Hedinger 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. Hedinger 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 65 Chairman of the Board, III
Chief Executive Officer and Director
Douglas Arbetman 51 President, Vice Chairman, III
Secretary and Director
Aneida Cornejo 51 Controller --
Howard H. Hedinger(1)(2) 63 Director II
Ellison C. Morgan(1)(2) 61 Director I
</TABLE>
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(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
MAURICE B. NEWMAN has served as a director since May 1997. Mr. Newman was
appointed Chairman of the Board of the Company effective September 29, 1997, and
Chief Executive Officer effective July 1, 1998. From September 29, 1997 to July
1, 1998, Mr. Newman served as the Chief Operating Officer of the Company. Mr.
Newman was President and Chief Executive Officer of California Mart from May
1994 until his appointment as Chairman of the Board of the Company. From 1987 to
1994, he was President, marketing
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<PAGE> 7
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.
DOUGLAS ARBETMAN has served as the President and a director of the Company
since February 1990 and has served as the Vice Chairman and Secretary since July
1, 1998. From February 1990 to July 1, 1998, Mr. Arbetman served as the Chief
Executive Officer of the Company. 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.
ANEIDA CORNEJO has served as Controller of the Company since June 29, 1998.
From May 1994 until joining the Company, Ms. Cornejo served as Controller for
Apparel Ventures, Inc.
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, 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. On September 30, 1998, Mr.
Morgan settled an action brought by the Securities and Exchange Commission (the
"SEC") alleging a violation of Section 10(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and Rule 10b-5 promulgated thereunder
that is unrelated to Mr. Morgan's position with the Company. Without admitting
or denying the allegations of the SEC's complaint, Mr. Morgan agreed to disgorge
profits and pay civil penalties totaling $229,808, and consented to a permanent
injunction requiring him to comply with the relevant sections of the federal
securities laws and rules.
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 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 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. 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, including the
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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 once
during fiscal 1998.
The Compensation Committee is chaired by Mr. Hedinger, and its members are
Messrs. Hedinger and Morgan. Messrs. Hedinger and Morgan were elected to the
Board of Directors and appointed to the Compensation Committee on May 22, 1997.
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 1994 Employee Stock Incentive Plan (the
"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 two times during fiscal 1998.
MEETINGS OF DIRECTORS
The Board of Directors met six times during fiscal 1998. All of the persons
who were directors of the Company during fiscal 1998 attended at least 75% of
the total number of meetings of the Board of Directors and meetings held by all
committees on which they served during fiscal 1998.
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 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, 1998 and certifications furnished by each of the reporting persons,
we believe that all persons subject to the reporting requirements of Section
16(a) have timely filed all reports.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In September 1995, the Company established a swimwear manufacturing
facility in leased premises in Sonora, Mexico to support the growth of the
Company's private label swimwear business and enhance the Company's capacity for
quality, low-cost production. In January 1997, the Company established a
resortwear manufacturing facility in leased premises in Sonora, Mexico to
support the continuing growth of this division. In July 1998, American
Industries, a corporation controlled by Howard H. Hedinger, a director of the
Company, acquired the premises containing the Mexican swimwear manufacturing
facilities. The Company and American Industries have renegotiated the terms of
the Company's lease of these premises and the terms upon which American
Industries will expand these premises for the production of resortwear, Rose
Marie Reid swimwear and intimate apparel. The new lease is for a 10-year term
commencing on August 1, 1998 at a base rent of $2,750 per month for the first 12
months and adjustable thereafter based on changes in the consumer price index
and the completion of the expansion of the premises.
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 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 options 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. Messrs.
Hedinger and Morgan were each granted options to purchase an additional 25,000
shares of Common Stock pursuant to the Stock Incentive Plan at an exercise price
of $3.875 per share on November 4, 1997. Such options are immediately
exercisable and will expire on the fifth 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 1996, 1997 and
1998 to each person who acted in the capacity of an executive officer and who
received salary and bonus at a rate in excess of $100,000 during fiscal 1998
(the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------
ANNUAL COMPENSATION AWARDS
------------------------------------------------ -----------------------
SECURITIES
RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS/
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) AWARDS($) SARS(#)
- --------------------------- ---- --------- -------- ------------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Maurice B. Newman........... 1998 300,000 230,000 13,476 -- 105,000(3)
Chairman of the Board and 1997 -- -- -- -- --
Chief Executive Officer 1996 -- -- -- -- --
Douglas Arbetman............ 1998 365,000 365,000 17,375 -- 234,958(4)
President, Vice Chairman 1997 350,000 106,330 13,030 -- --
and Secretary 1996 350,000 39,375 16,031 -- 86,000(5)
Henry R. Mandell............ 1998 99,000(7) -- -- -- --
Former Executive Vice 1997 160,000 16,320 8,662 -- --
President, Chief Financial 1996 152,849 8,598 9,250 -- 22,000(4)
Officer and Secretary(6)
<CAPTION>
LONG-TERM COMPENSATION
-------------------------
PAYOUTS
-------------------------
ALL OTHER
LTIP COMPENSATION
NAME AND PRINCIPAL POSITION PAYOUTS($) ($)(2)
- --------------------------- ---------- ------------
<S> <C> <C>
Maurice B. Newman........... -- 1,500
Chairman of the Board and -- --
Chief Executive Officer -- --
Douglas Arbetman............ -- 1,500
President, Vice Chairman -- 1,500
and Secretary -- 1,500
Henry R. Mandell............ -- 160,000
Former Executive Vice -- 1,500
President, Chief Financial -- 1,500
Officer and Secretary(6)
</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, and a
severance payment for Mr. Mandell in fiscal 1998.
(3) Consists of 25,000 and 80,000 shares issuable pursuant to options granted
under the Stock Incentive Plan on July 1, 1997 and November 4, 1997,
respectively.
(Footnotes continued on next page)
7
<PAGE> 10
(4) Consists of shares issuable pursuant to options originally granted under the
Stock Incentive Plan on August 12, 1994 and that were repriced from $4.75 to
$3.50 per share on July 1, 1997.
(5) Consists of shares issuable pursuant to options granted under the Stock
Incentive Plan on June 28, 1996.
(6) Mr. Mandell resigned as a director and the Executive Vice President, Chief
Financial Officer and Secretary of the Company on January 16, 1998.
(7) Includes a payment of $15,000 for accrued vacation pay.
EMPLOYMENT AGREEMENTS
Effective as of July 1, 1998, the Company amended and restated the then
existing employment agreement with Douglas Arbetman. Pursuant to his amended and
restated employment agreement with the Company, Mr. Arbetman is entitled to (i)
receive a minimum annual base salary of $350,000, plus reimbursement of
reasonable business and entertainment expenses, (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, which bonus shall be fixed at $365,000
only for the fiscal year ended June 30, 1998, (iii) participate in all plans
sponsored by the Company for executive officers in general and receive paid
vacation, (iv) receive $500,000 of life insurance payable as directed by him,
(v) receive an option to purchase up to 100,000 shares of Common Stock at the
fair market value of the shares on the date of grant, and (vi) receive an $850
monthly automobile allowance, together with reimbursement of expenses for
insurance, fuel and maintenance. The agreement, as amended and restated, will
terminate on June 30, 2001 and shall automatically be renewed for successive
one-year terms unless terminated earlier. 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 and employee
benefits for two years. 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. Mr. Arbetman is entitled
to purchase up to 200,958 shares at the amended price of $3.50 per share
pursuant to the unexercised portion of such option.
Effective September 29, 1997, the Company entered into an employment
agreement pursuant to which Maurice B. Newman has been appointed Chief Executive
Officer of the Company. Pursuant to this agreement, as subsequently amended, Mr.
Newman is entitled to (i) receive an annual base salary of $300,000, plus
reimbursement of reasonable business and entertainment expenses, (ii) receive an
annual bonus, up to $250,000, 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 executive officers in general and receive paid
vacation, (iv) receive an option to purchase up to 25,000 shares of Common Stock
at $3.50 per share, and 80,000 shares of Common Stock at $3.875 per share, (v)
receive an $850 monthly automobile allowance, together with reimbursement of
expenses for insurance, fuel and maintenance, (vi) receive a special bonus of
$30,000 to be paid on January 1, 1998, and (vii) the right to receive his base
salary and employee benefits (or the economic equivalent) for 90 days if the
employment agreement is terminated under certain circumstances, not renewed or
extended beyond its initial term or upon Mr. Newman's resignation. The agreement
will terminate on September 29, 1999 and shall be renewed for successive
two-year terms unless terminated earlier.
STOCK INCENTIVE PLAN
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 Common Stock or other securities or
benefits with a value derived from the value of the Common Stock.
8
<PAGE> 11
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 1,172,465 (subject to
adjustments to prevent dilution).
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 of the Company, 10333
Vacco Street, South El Monte, California 91733, Attention: Maurice B. Newman.
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
9
<PAGE> 12
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. 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.
STOCK OPTION GRANTS
The following table sets forth certain information concerning the grant of
stock options during fiscal 1998 to the Named Executives.
OPTION/SAR GRANTS IN FISCAL YEAR 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------- POTENTIAL
REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL
NUMBER OF TOTAL RATES OF STOCK
SECURITIES OPTION/SARS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(1)
OPTIONS/SARS EMPLOYEES IN OR BASE EXPIRATION ---------------------
NAME GRANTED FY 1998 PRICE DATE 5% 10%
---- ------------ --------------- -------- ------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Maurice B. Newman......................... 25,000(2) 4.3% $ 3.50 July 2002 $ 8,221 $ 33,288
80,000(3) 13.6 3.875 November 2007 194,960 494,056
Douglas Arbetman.......................... 234,958(4) 40.0 3.50 August 2004 325,816 1,005,620
Henry R. Mandell(5)....................... -- -- -- -- -- --
</TABLE>
- ---------------
(1) The Potential Realizable Value is the product of (a) the difference between
(i) the product of the closing sale price per share at the date of grant and
the sum of (A) 1 plus (B) the assumed rate of appreciation of the Common
Stock compounded annually over the term of the option and (ii) the per share
exercise price of the option and (b) the number of shares of Common Stock
underlying the option at June 30, 1998. These amounts represent certain
assumed rates of appreciation only. Actual gains, if any, on stock option
exercises are dependent on a variety of factors, including market conditions
and the price performance of the Common Stock. There can be no assurance
that the rate of appreciation presented in this table can be achieved.
(2) Consists of shares which Mr. Newman had the right to purchase at June 30,
1998 upon the exercise of stock options granted pursuant to the Stock
Incentive Plan on July 1, 1997, which options became exercisable upon the
date of grant.
(3) Consists of shares which Mr. Newman had the right to purchase at June 30,
1998 upon the exercise of stock options granted pursuant to the Stock
Incentive Plan on November 4, 1997, which options became exercisable upon
the date of grant.
(4) Includes 200,958 shares which Mr. Arbetman had the right to purchase at June
30, 1998 upon the exercise of stock options originally granted pursuant to
the Stock Incentive Plan on August 12, 1994, which options became
exercisable upon the date of grant and were repriced from $4.75 to $3.50 per
share on July 1, 1997.
(Footnotes continued on next page)
10
<PAGE> 13
(5) Mr. Mandell resigned as a director and the Executive Vice President, Chief
Financial Officer and Secretary of the Company on January 16, 1998.
OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information with respect to the
Named Executives concerning the exercise of options during fiscal 1998 and
unexercised options held by the Named Executives as of June 30, 1998.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1998
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT 06/30/98 AT 06/30/98(1)
SHARES ACQUIRED VALUE ---------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Maurice B. Newman.................. -- -- 105,000(2) -- $311,250 --
Douglas Arbetman................... 120,000 $387,750 200,958(3) -- $653,114 --
Henry R. Mandell................... 71,900 $305,775 -- -- -- --
</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, 1998 as reported on
the Nasdaq National Market ($6.75 per share) and the exercise price of the
option, multiplied by the number of shares subject to the option.
(2) Consists of 25,000 and 80,000 shares Mr. Newman has the right to purchase
upon the exercise of stock options granted pursuant to the Stock Incentive
Plan at an exercise price of $3.50 and $3.875 per share, respectively, which
options became exercisable on the date of grant.
(3) Consists of shares Mr. Arbetman has the right to purchase upon the exercise
of stock options granted pursuant to the Stock Incentive Plan and repriced
at an exercise price of $3.50 per share, which options became exercisable on
the date of grant.
OPTION REPRICINGS
The following table sets forth certain information with respect to
executive officers concerning the repricing of options during fiscal 1998.
TEN-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF ORIGINAL
SECURITIES MARKET PRICE EXERCISE OPTION TERM
UNDERLYING OF STOCK AT PRICE AT REMAINING AT
OPTIONS/SARS TIME OF TIME OF NEW DATE OF
REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME DATE AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT
---- ------------ ------------ ------------ ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Douglas Arbetman................... July 1, 1997 234,958(1) $3.00(2) $4.75 $3.50 7 years
President, Vice Chairman
and Secretary
</TABLE>
- ---------------
(1) Consists of shares issuable pursuant to options originally granted under the
Stock Incentive Plan on August 12, 1994.
(2) The closing sale price of the Common Stock as reported on the Nasdaq
National Market on July 1, 1997.
11
<PAGE> 14
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 1933, 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
executives critical to the Company's long-term success.
Effective September 29, 1997, the Company entered into an employment
agreement pursuant to which Maurice B. Newman was employed as the Chief
Executive Officer of the Company, and effective July 1, 1998, amended and
restated the employment agreement of Douglas Arbetman, the President of the
Company, in order to be assured of their continued services and their
experience, knowledge and abilities. 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, (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 1998, 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 1998 was
based upon the satisfaction of such objectives, as well as a subjective
assessment of the individual's actual and potential contribution to the Company.
In the case of Messrs. Arbetman and Newman, the Committee was particularly
influenced by their roles in the Company's performance (including the
substantial improvement in the Company's net sales, gross profit margin and net
income compared with fiscal 1997), the successful launch of the Liz Claiborne
line of better contemporary swimwear and acquisition and successful launch of
the Jezebel line of intimate apparel. On September 22, 1998, the Committee
approved an amendment to Mr. Newman's employment agreement increasing the
maximum bonus thereunder from $200,000 to $250,000.
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 Newman under these plans averaged
approximately 4% percent of their base salaries in fiscal 1998.
On September 2, 1997, the Board of Directors adopted and on November 4,
1997 the stockholders approved an amendment to the Stock Incentive Plan
increasing from 822,465 to 1,172,465 the number of shares of Common Stock which
may be subject to awards granted pursuant thereto. The purpose of this Plan is
to enable the Company to attract and retain employees by providing for
performance-based incentive compensation awards, including stock options, stock
appreciation rights and other performance-based awards.
The 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 Common Stock increases. In support of these objectives, the Company
granted (i) 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 per share; (ii) to each of Messrs. Hedinger and Morgan
an additional option to purchase up to 25,000 shares of Common Stock at an
exercise price of $3.875 per share and to Mr. Newman an additional option to
purchase up to 80,000 shares of Common Stock at an exercise price of $3.875 per
share.
During the first quarter of fiscal 1998, the 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 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
12
<PAGE> 15
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: September 22, 1998 THE COMPENSATION COMMITTEE
Ellison C. Morgan
Howard H. Hedinger
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee is or has been an officer
or employee of the Company except for Mr. Newman, the Chairman of the Board and
Chief Executive Officer, who served on the Compensation Committee during a
portion of fiscal 1998. None of the Company's executive officers currently
serves as a director or member of the compensation committee of another entity
or of any other committee of the board of directors of another entity performing
similar functions.
In July 1998, American Industries, a corporation controlled by Howard H.
Hedinger, a director and member of the Compensation Committee of the Company,
acquired the premises containing the Company's Mexican swimwear manufacturing
facilities. The Company and American Industries have renegotiating the terms of
the Company's lease of these premises and the terms upon which American
Industries will expand these premises for the production of resortwear, Rose
Marie Reid swimwear and intimate apparel. The new lease is for a 10-year term
commencing on August 1, 1998 at the base rent of $2,750 per month for the first
12 months and adjustable thereafter based on changes in the consumer price index
and the completion of the expansion of the premises. See "Certain Relationships
and Related Transactions."
13
<PAGE> 16
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 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 June 30, 1998. 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.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG THE SIRENA APPAREL GROUP,
NASDAQ MARKET INDEX AND SIC CODE INDEX
<TABLE>
<CAPTION>
'FEMALE OUTERWEAR, NASDAQ MARKET
SIRENA APPAREL GRP NEC' INDEX
<S> <C> <C> <C>
AUG-94 100.00 100.00 100.00
SEP-94 100.00 108.70 98.90
DEC-94 121.05 104.19 96.91
MAR-95 152.63 105.99 99.77
JUN-95 173.68 116.56 109.15
SEP-95 168.42 140.53 121.61
DEC-95 131.58 136.39 120.64
MAR-96 119.74 133.60 126.21
JUN-96 65.79 135.50 135.56
SEP-96 50.00 115.89 139.30
DEC-96 54.61 97.26 145.85
MAR-97 64.47 73.57 138.44
JUN-97 63.16 73.99 163.78
SEP-97 89.47 69.44 190.95
DEC-97 84.21 49.95 178.92
MAR-98 113.16 51.65 209.69
JUN-98 142.11 39.65 215.10
</TABLE>
14
<PAGE> 17
LIMITATION ON LIABILITY AND INDEMNIFICATION
The 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 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
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,
1999. Ernst & Young LLP, the Company's accountants for the fiscal year ended
June 30, 1998, performed audit services for fiscal 1998 which included the
examination of the consolidated financial statements of the Company and services
relating to filings with the SEC. All professional services rendered by Ernst &
Young LLP during fiscal 1998 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, 1999. 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, 1999.
15
<PAGE> 18
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 2000 annual meeting of stockholders must be submitted to the
Company by a stockholder on or before June 25, 1999, in a form that complies
with applicable regulations. Recently, the SEC amended its rule governing a
company's ability to use discretionary proxy authority with respect to
stockholder proposals which were not submitted by the stockholders in time to be
included in the proxy statement. As a result of that rule change, in the event a
stockholder proposal is not submitted to the Company prior to September 8, 1999,
the proxies solicited by the Board of Directors for the 2000 annual meeting of
stockholders will confer authority on the holders of the proxy to vote the
shares in accordance with their best judgment and discretion if the proposal is
presented at the 2000 annual meeting of stockholders without any discussion of
the proposal in the proxy statement for such meeting.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended June 30, 1998
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 SEC PURSUANT TO THE EXCHANGE ACT FOR THE FISCAL YEAR ENDED JUNE 30, 1998 BY
WRITING TO THE COMPANY AT 10333 VACCO STREET, SOUTH EL MONTE, CALIFORNIA 91733,
ATTENTION: MAURICE B. NEWMAN.
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/ MAURICE B. NEWMAN
Maurice B. Newman
Chairman of the Board and
Chief Executive Officer
Dated: October 23, 1998
16
<PAGE> 19
REVOCABLE PROXY THE SIRENA APPAREL GROUP, INC. REVOCABLE PROXY
ANNUAL MEETING OF STOCKHOLDERS -- NOVEMBER 19, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholders(s) of The Sirena Apparel Group, Inc. (the
"Company") hereby nominate(s), constitute(s) and appoint(s) Maurice B. Newman
and Douglas Arbetman, 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 Sheraton Hotel, 888 Montebello
Boulevard, Rosemead, California 91770, on Thursday, November 19, 1998, 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>
1. ELECTION OF DIRECTOR [ ] FOR the nominee listed below [ ] WITHHOLD AUTHORITY
to vote for the nominee
listed below
</TABLE>
Nominee and the year his term expires: Howard H. Hedinger . . . . . 2002
2. 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, 1999.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. 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
<PAGE> 20
THE BOARD OF DIRECTORS RECOMMENDS A VOTE OF "FOR" THE ELECTION OF THE
NOMINEE LISTED FOR DIRECTOR ON THE REVERSE AND "FOR" RATIFICATION OF ERNST &
YOUNG LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR
ENDING JUNE 30, 1999. 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 on
the reverse unless authority to do so is withheld. Unless "AGAINST" or "ABSTAIN"
is indicated on the reverse hereof, this Proxy will be voted "FOR" ratification
of the appointment of Ernst & Young LLP as the Company's certified public
accountants for the fiscal year ending June 30, 1999. PLEASE SIGN, DATE AND
RETURN THIS PROXY AS PROMPTLY AS POSSIBLE IN THE POSTAGE PREPAID ENVELOPE
PROVIDED.
