UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
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 under SS 240.14a-12
Sport-Haley, Inc.
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(Name of Registrant as Specified In Its Charter)
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[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:
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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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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
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paid previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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[GRAPHIC OMITTED - Sport Haley Logo]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF SPORT-HALEY, INC.
to be held June 25, 2001
NOTICE IS HEREBY GIVEN that the Special Meeting of Shareholders of
Sport-Haley, Inc., in lieu of the Annual Meeting of Shareholders, will be held
at the Company's offices, 4600 E. 48th Avenue, Denver, Colorado 80216 on Friday,
June 25, 2001, at 10:00 a.m., Mountain Time, and thereafter as it may from time
to time be adjourned, for the following purposes:
1. To elect six directors to hold office for the term set forth in
the accompanying Proxy Statement and until their successors shall
have been duly elected and qualified;
2. To ratify the appointment of Hein + Associates LLP as independent
certified public accountants for the Company; and
3. To consider and transact such other business as may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on May 18, 2001,
as the record date for the determination of shareholders entitled to notice of
and to vote at this meeting or any adjournment thereof. A complete list of the
shareholders entitled to vote at the meeting will be available for inspection at
the Special Meeting and for a period of ten days prior to the Special Meeting at
Sport-Haley, Inc., 4600 E. 48th Avenue, Denver, Colorado 80216, during normal
business hours.
A Proxy Statement which describes the formal business to be conducted
at the Special Meeting is attached to this Notice.
By Order of the Board of Directors,
May 29, 2001 /s/ Patrick W. Hurley
Patrick W. Hurley, Corporate Secretary
IMPORTANT
PLEASE MARK, DATE, SIGN, NOTE ANY CHANGE OF ADDRESS AND RETURN THE ENCLOSED
PROXY CARD IMMEDIATELY IN THE ENCLOSED, SELF-ADDRESSED ENVELOPE. NO POSTAGE IS
NECESSARY IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING, WE WILL BE
GLAD TO RETURN YOUR PROXY SO THAT YOU MAY VOTE IN PERSON.
SPORT-HALEY, INC.
4600 E. 48TH AVENUE
DENVER, COLORADO 80216
PROXY STATEMENT
Relating to the Special Meeting
of Shareholders to be held June 25, 2001
GENERAL
The enclosed proxy is solicited by the Board of Directors of Sport-Haley,
Inc. (hereinafter referred to as the "Company") for use at the Special Meeting
of Shareholders, in lieu of the Annual Meeting of Shareholders, to be held at
the Sport-Haley, Inc., 4600 E. 48th Avenue, Denver, Colorado 80216 on Friday,
June 25, 2001, at 10:00 a.m., Mountain Time, for the purposes set forth in the
foregoing Notice of Special Meeting of Shareholders. This Proxy Statement and
the form of proxy will be mailed to shareholders on or about May 29, 2001.
The record date with respect to this solicitation is May 18, 2001. All
holders of record of Common Stock of Sport-Haley, Inc. as of the close of
business on that date are entitled to vote at the meeting. As of the record
date, the Company had 3,441,985 shares of Common Stock outstanding, excluding
treasury shares. Each share of Common Stock is entitled to one vote. A majority
of the votes entitled to be cast constitutes a quorum. If a quorum exists,
action on any matter other than the election of directors will be approved if
the votes cast in person or by proxy at the meeting favoring the action exceed
the votes cast opposing the action. In the election of directors, that number of
candidates equaling the number of directors to be elected having the highest
number of votes cast in favor of their election will be elected. Abstentions and
broker non-votes are not counted in the calculation of the vote.
A proxy may be revoked by the shareholder at any time prior to its being
voted. If a proxy is properly signed and is not revoked by the shareholder, the
shares it represents will be voted at the meeting in accordance with the
instructions of the shareholder, unless it is received in such form as to render
it invalid. If the proxy is signed and returned without specifying choices, the
shares will be voted in accordance with the recommendations of the Board of
Directors.
As a matter of policy, proxies, ballots and voting tabulations that
identify individual shareholders are held confidential by the Company. Such
documents are available for examination only by the inspectors of election, none
of whom is an employee of the Company, and certain employees associated with
tabulation of the vote. The identity of the vote of any shareholder is not
disclosed except as may be necessary to meet legal requirements.
The cost of this solicitation will be borne by the Company. Employees and
directors of the Company may solicit proxies but will not receive any additional
compensation for such solicitation. Proxies may be solicited personally or by
mail, facsimile, telephone or telegraph.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Under the securities laws of the United States, Sport-Haley's directors,
its executive officers and any persons holding more than ten percent of its
Common Stock are required to report their initial ownership of Common Stock and
other equity securities and any subsequent changes in that ownership to the
Securities and Exchange Commission and Sport-Haley. Specific due dates for these
reports have been established and Sport-Haley is required to disclose in this
proxy statement any failure to file, or late filing, of such reports with
respect to the period ended June 30, 2000. Based solely on Sport-Haley's review
of the reports furnished to Sport-Haley and written representations that no
other reports were required during fiscal 2000, Sport-Haley's officers,
directors and beneficial owners of more than ten percent of its Common Stock
complied with all Section 16(a) filing requirements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Sport-Haley has adopted a policy pursuant to which material transactions
between Sport-Haley and its executive officers, directors and principal
shareholders (i.e. shareholders owning beneficially 5% or more of the
outstanding voting securities of Sport-Haley) shall be submitted to the Board of
Directors for approval by a disinterested majority of the directors voting with
respect to the transaction. For this purpose, a transaction is deemed material
if such transaction, alone or together with a series of similar transactions
during the same fiscal year, involves an amount which exceeds $60,000. No such
transactions occurred in fiscal 2000.
ANNUAL REPORT
The Annual Report to Shareholders for the fiscal year ended June 30, 2000
is being sent to all shareholders with this Proxy Statement. The Annual Report
to Shareholders does not form any part of the material for the solicitation of
any Proxy. The Annual Report to Shareholders contains the Company's Annual
Report on Form 10-K for the year ended June 30, 2000 as filed with the
Securities and Exchange Commission. An additional copy, without exhibits, is
available without charge to any shareholder of the Company upon written request
to the Secretary, Sport-Haley, Inc., 4600 E. 48th Avenue, Denver, Colorado
80216.
SHAREHOLDER PROPOSALS
Shareholders who intend to submit proposals for inclusion in the Proxy
Statement relating to the fiscal year beginning July 1, 2001 must do so by
sending the proposal and supporting statements, if any, to the Company no later
than October 20, 2001. Such proposals should be sent to the attention of the
Corporate Secretary, Sport-Haley, Inc., 4600 East 48th Avenue, Denver, Colorado
80216.
-2-
OTHER MATTERS
Except for the matters described herein, management does not intend to
present any matter for action at the Special Meeting and knows of no matter to
be presented at such meeting that is a proper subject for action by the
shareholders. However, if any other matters should properly come before the
Special Meeting, it is intended that votes will be cast pursuant to the
authority granted by the enclosed Proxy in accordance with the best judgment of
the person or person acting under the Proxy.
RECENT DEVELOPMENTS
In July 2000, as previously reported, the Company's Audit Committee
recommended that the Company's prior independent auditors be discharged and that
the Company retain a new independent public accountant to audit the Company's
financial statements for the year ended June 30, 2000. As a result of a review
initiated by senior management and conducted prior to completion of the audit
process for the Company's 2000 fiscal year, information was developed that
indicated certain accounting errors might exist in prior years' financial
statements that, when corrected, would result in a material impact on the
results of operations for the 2000 fiscal year and certain prior periods. At the
conclusion of the review, the Company determined that the financial statements
for the years ended June 30, 1999 and 1998 required restatement due to
accounting errors. The errors consisted primarily of the following: (i)
incorrect recording, classification and valuation of inventory work in process;
(ii) incorrect recording of certain prepaid and fixed assets; (iii) incorrect
accounting for the acquisition of the Company's wholly-owned subsidiary (the
"Subsidiary") and the related minority interest in the loss of the Subsidiary;
(iv) incorrect recording of certain losses relating to discontinued operations;
and, (v) the income tax benefit from stock options exercised.
The Company retained a new independent accounting firm shortly after June
30, 2000. The Company engaged the new accounting firm to re-audit the previously
issued financial statements for the years ended June 30, 1999 and 1998, which
the Company restated. The Audit Committee of the Company retained an independent
consultant to assist it in evaluating the restatements that were necessary in
order that the Company's financial statements, as restated and taken as a whole,
presented fairly in all material respects the Company's financial position,
results of operations and cash flows for the fiscal years ended June 30, 2000,
1999 and 1998, in conformity with generally accepted accounting principles. The
Audit Committee does not believe that the errors that have been identified by
the Company constitute irregularities. As a result of recommendations made by
the audit committee and the Company's senior management, and concurred in by the
independent consultant, the Company has taken appropriate action to ensure that
these errors do not reoccur in the future.
The effects of significant financial statement adjustments related to the
restatements for the years ended June 30, 1999 and 1998 are set forth in the
Company's Form 10-K for the fiscal year ended June 30, 2000, which was filed
with the Securities and Exchange Commission on November 3, 2000.
The restatements described above may lead to litigation against the
Company. There is no litigation currently pending or threatened against the
Company concerning the restatements. However, if such litigation is initiated,
it could have a material adverse impact on the Company's income from continuing
operations.
-3-
During the fiscal year ending June 30, 2001, the Company has incurred to
date approximately $400,000 in expenses related to the restatements of its
fiscal year 1999 and 1998 financial statements and the correction of material
quarterly information for fiscal years 2000, 1999 and 1998. The Company is
presently evaluating whether such expenses will be recoverable in a future
reporting period.
As previously reported, on October 16, 2000, The Nasdaq Stock Market(R)
("Nasdaq") halted trading in the securities of the Company and requested
additional information from the Company. Nasdaq advised the Company that the
trading halt was instituted because of the Company's alleged failure to observe
certain corporate governance requirements for ongoing listing of its securities
on the Nasdaq National Market. Nasdaq advised the Company that the trading halt
would continue until the Company complied with Nasdaq's request for additional
information, which the Company provided. Nasdaq further proposed to de-list the
Company's securities from trading on the Nasdaq National Market. The Company
appeared at a hearing before the Nasdaq Listing Qualifications Panel (the
"Panel") on November 10, 2000 in order to address the proposed de-listing of the
Company's securities.
On December 11, 2000, the Panel rendered its decision, granting an
exception to the filing requirement set forth in Nasdaq Marketplace Rule 4310,
requiring that on or before January 15, 2001, the Company file amended Forms
10-Q for all quarters during fiscal years 2000, 1999 and 1998. Further, the
Panel determined that the Company's late filings of Form 10-K for the fiscal
year ended June 30, 2000 and its Form 10-Q for the period ended September 30,
2000 merited the application of additional and more stringent criteria under
Marketplace Rule 4300. Accordingly, the Panel stated that if the Company
satisfied the first portion of the Panel's exception expiring January 15, 2001,
the Company must also timely file all periodic reports with the Securities and
Exchange Commission and Nasdaq for all reporting periods ending on or before
December 31, 2001. The Panel stated in its decision that if the Company failed
to make any filing in accordance with the exception granted, the Company would
not be entitled to a new hearing and its securities would be de-listed from
Nasdaq. Based upon its determination, the Panel ordered that trading resume in
the Company's securities on Nasdaq effective December 12, 2000.
On December 26, 2000, the Company requested that the Nasdaq Listing Review
Council (the "Review Council") review the Panel's decision. The Company
requested that the Review Council grant it additional time in which to comply
with the filing of historical amended Forms 10-Q and requested that the
additional and more stringent criteria under Marketplace Rule 4300 be applied
only in the event the Company failed to make any current filing during the
calendar year 2001, or had not filed the amended quarterly Forms 10-Q for fiscal
years 2000, 1999 and 1998 by March 15, 2001. The Company filed amended Forms
10-Q for fiscal year 2000 on January 16, 2001 and for fiscal year 1999 on March
15, 2001. On or about January 25, 2001, the Review Council granted the Company
the requested extension to file the remaining amended quarterly filings on or
before March 15, 2001. On March 21, 2001, the Panel rendered another decision,
which confirmed that the Company satisfied the Panel's requirement to file
certain amended quarterly reports for fiscal years 2000, 1999 and 1998, and that
the Company is in compliance with all other requirements for continued listing
on the Nasdaq National Market.
The Company was advised in a letter dated November 7, 2000 that the
Securities and Exchange Commission is conducting an informal inquiry into
matters concerning the Company. The Securities and Exchange Commission has made
an informal request that the Company voluntarily produce certain
-4-
documents. The Company provided the requested documents to the Commission. In
addition, the Company voluntarily provided testimony to the Commission. The
Company was advised in March 2001 that the investigation is pursuant to a Formal
Order of the Commission. The Commission has not brought an action against the
Company, but it may do so in the future. In such an event, the Commission may
seek injunctive or other relief from the Company.
I. ELECTION OF DIRECTORS
Information concerning the six nominees for election as directors is shown
below. All nominees are now members of the Board of Directors. The Board of
Directors knows of no reason why any nominee would be unable to serve as a
director. If any nominee should for any reason become unable to serve, the
shares represented by all valid proxies will be voted for the election of such
other person as the Board of Directors may designate or the Board of Directors
may reduce the number of directors to eliminate the vacancy.
Name Age Capacities in Which Served
---- --- --------------------------
Robert G. Tomlinson 59 Chairman of the Board and Chief Executive Officer
Robert W. Haley 55 President and Director
Kevin M. Tomlinson 41 Executive Vice President- Operations, Chief Operating
Officer, and Director
Mark J. Stevenson(1)(2) 62 Director
Ronald J. Norick(1)(2) 59 Director
James H. Everest(1)(2) 52 Director
---------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Robert G. Tomlinson has served as Chairman of the Board and Chief Executive
Officer of the Company since October 1992. Since March 1998, he has also served
as a director of B & L Sportswear, Inc. (the "Subsidiary"). Prior to joining the
Company, Mr. Tomlinson was a partner in Tomlinson Enterprises, a real estate
investment partnership, and also engaged in management of his personal
investment portfolio. Mr. Tomlinson is the father of Kevin Tomlinson, a director
and the Executive Vice President and Chief Operating Officer of the Company.
Kevin M. Tomlinson has served as Executive Vice President - Operations and
Chief Operating Officer since January 1999 and was appointed to the Board of
Directors in November 1999. He also serves as a director and Secretary/Treasurer
of the Subsidiary. Mr. Tomlinson joined the Company in December 1997 as Vice
President of Operations. From 1992 until joining the Company, Mr. Tomlinson was
employed by Nu-Kote International, Inc., an office products manufacturer and
distributor, in capacities including vice president of product marketing, vice
president of marketing, vice president of global procurement and vice president
of retail sales. Mr. Tomlinson is the son of Robert G. Tomlinson, the Chairman
and Chief Executive Officer of the Company.
-5-
Robert W. Haley has served as President and a director of the Company since
May 1996. From January 1992 until his appointment to such positions, he served
as Vice President of Marketing of the Company. Prior to joining the Company, Mr.
Haley served in various marketing positions for golf apparel manufacturers. Mr.
Haley is a Class A PGA professional golfer with over 25 years of experience in
the golf industry.
Mark J. Stevenson has been a director of the Company since November 1993.
Mr. Stevenson served as chairman of the board, president and chief executive
officer of Electronic Manufacturing Systems, Longmont, Colorado, a contract
manufacturer serving the computer, data storage, telecommunications and medical
equipment industries, from June 1, 1994 until that company was merged into
E-M-Solutions in January 1999. At that time he was appointed Executive Chairman
and Chairman of the Board of the successor company, in which position he
currently serves. From 1992 to 1994, Mr. Stevenson served as chairman of the
board of Micro Insurance Software, Inc., Boulder, Colorado, a manufacturer of
computer software oriented to the insurance industry. He currently serves as
Chairman of the American Electronics Association, the nation's largest high
technology trade association.
Ronald J. Norick has been a director of the Company since November 1993.
From April 1987 until April 1998, Mr. Norick served as the elected Mayor of the
City of Oklahoma City, Oklahoma. From 1960 to 1992, Mr. Norick served in various
capacities, including, from 1981 to 1992, serving as president of a closely-held
printing company which was acquired by Reynolds & Reynolds in June 1992. Mr.
Norick serves on a number of civic, community, educational, corporate and public
boards, commissions and committees. Mr. Norick also serves as manager of Norick
Investments Company LLC, a family-owned limited liability company which is
engaged in investments.
James H. Everest has been a director of the Company since November 1993.
Mr. Everest has served as president of the Jean I. Everest Foundation, Oklahoma
City, Oklahoma, since 1991. The Jean I. Everest Foundation was organized by Mr.
Everest's father to conduct charitable activities. Mr. Everest has been the
managing partner of Everest Brothers, a general partnership active in oil and
gas exploration and development, since 1984. Mr. Everest has also been engaged
in managing his personal investments since 1984. Mr. Everest is a member of the
Oklahoma Bar Association and the American Bar Association and serves in a number
of capacities for various civic and community organizations.
Committees of the Board
The Board of Directors has delegated certain of its authority to a
Compensation Committee and an Audit Committee. The Compensation Committee is
composed of Messrs. Stevenson, Norick and Everest. The Audit Committee is
composed of Messrs. Stevenson, Norick and Everest. Each of the members of the
Audit Committee qualifies as an "independent director" under the current listing
standards of the National Association of Securities Dealers, Inc. No member of
either committee is a former or current officer or employee of the Company.
-6-
The Compensation Committee held one meeting in fiscal 2000. The primary
function of the Compensation Committee is to review and make recommendations to
the Board with respect to the compensation, including bonuses, of the Company's
officers and to administer the Company's Option Plan. See "Compensation
Committee Report."
The Audit Committee had one formal meeting in fiscal 2000. The function of
the Audit Committee is to review and approve the scope of audit procedures
employed by the Company's independent auditors, to review and approve the audit
reports rendered by the Company's independent auditors and to approve the audit
fee charged by the independent auditors. The Audit Committee reports to the
Board of Directors with respect to such matters and recommends the selection of
independent auditors. The Board of Directors adopted an Audit Committee Charter
effective June 9, 2000, which describes the Audit Committee's roles and
responsibilities. A copy of the Charter is attached as Appendix B to this Proxy
Statement. On October 10, 2000, the Audit Committee submitted to the Board of
Directors the following report:
Audit Committee Report
We have reviewed and discussed with management the Company's audited
financial statements for the year ended June 30, 2000 (the "Fiscal Year 2000
Financial Statements").
We have discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, Communication with Audit
Committees, as amended, by the Auditing Standards Board of the American
Institute of Certified Public Accountants.
We have received and reviewed the written disclosures and the letter from
the independent auditors required by Independence Standard No. 1, Independence
Discussions with Audit Committees, as amended, by the Independence Standards
Board, and have discussed with the auditors the auditors' independence.
Based upon the reviews and discussions referred to above, we recommended to
the Board of Directors that the Fiscal Year 2000 Financial Statements be
included in the Company's Form 10-K for the year ended June 30, 2000.
This Audit Committee Report shall not be deemed incorporated by reference
in any document previously or subsequently filed with the Securities and
Exchange Commission that incorporates by reference all or any portion of the
proxy statement, in connection with the Special Meeting, except to the extent
that the Company specifically requests that this Report be specifically
incorporated by reference.
Date: October 10, 2000
James H. Everest
Ronald J. Norick
Mark J. Stevenson
-7-
Board and Committee Attendance
In fiscal 2000, the Board of Directors held two formal meetings. Messrs.
Haley and Stevenson attended one of the two meetings and each other director
attended all board and committee meetings held during fiscal 2000.
Executive Officers and Key Employees
Officers are appointed by and serve at the discretion of the Board of
Directors. Each of the Company's officers devote full-time to the Company's
business and affairs.
Patrick W. Hurley, age 48, has served as Controller of the Company since
October 1999 and as Chief Financial Officer since December 2000. From 1992 until
joining the Company, he was employed as Senior Staff Accountant at Saltzman
Hamma Nelson Massaro LLP, an accounting firm located in Denver, Colorado.
Catherine B. Blair, age 49, has served as Vice President of
Merchandising/Design since her appointment in May 1996. Ms. Blair has been part
of the Company's design team since 1992, and was appointed Director of Design in
1995. Prior to joining Sport-Haley, she was a designer for a golfwear company
and also worked as a freelance designer for companies such as Macy's,
Bloomingdale's, Ann Taylor and The Gap.
William L. Blair, age 58, has served as Vice President of Corporate Sales
March 1998 through December 2000. From September 1996 until joining the Company,
Mr. Blair was director of marketing for the Activewear Division of Fruit of the
Loom. From 1992 to 1996, Mr. Blair was a director of and consultant to Osterman
API, Inc., a promotional product company.
Executive Compensation
Summary Compensation Table. The following table sets forth the annual and
long-term compensation for services in all capacities to Sport-Haley for the
three fiscal years ended June 30, 2000 of Robert G. Tomlinson, Chief Executive
Officer, Kevin M. Tomlinson, Chief Operating Officer, Robert W. Haley,
President, and William L. Blair, Vice President-Corporate Sales, the only
executive officers of Sport-Haley whose total annual salary and bonus exceeded
$100,000 during the year ended June 30, 2000 (the "Named Officers").
-8-
Long Term Compensation
----------------------
Awards
Annual Compensation ------
Fiscal ------------------- Securities underlying All Other
Name and Principal Position Year Salary Bonus Options/SARs(#) Compensation
--------------------------- ---- ------ ----- --------------- ------------
Robert G. Tomlinson, 2000 $ 176,539 $-0- $-0- $ 2,213 (1)
Chairman of the Board and 1999 202,692 -0- -0- 1,022 (1)
Chief Executive Officer 1998 218,219 22,000 30,000 1,022 (1)
Kevin M. Tomlinson 2000 129,885 -0- -0- 1,278 (1)
Chief Operating Officer,
Executive Vice President-
Operations and Director
Robert W. Haley, 2000 155,769 -0- -0- 1,000 (1)
President 1999 171,154 -0- -0- 1,022 (1)
1998 170,571 15,000 20,001 1,022 (1)
William L. Blair, 2000 124,154 -0- -0- 135 (2)
Vice President-Corporate Sales 1999 114,461 -0- -0- 138
1998 34,615 (3) -0- 20,000 46
(1) Comprised of contributions by Sport-Haley to the Named Officer's 401(k)
plan and term life insurance premiums.
(2) Comprised solely of term life insurance premiums.
(3) Mr. Blair was first employed by Sport-Haley as an executive officer in
March 1998. Accordingly, compensation in fiscal 1998 was paid only for a
four month period.
Option/SAR Grants Table. The following table sets forth information on
grants of options pursuant to the Sport-Haley 1993 Stock Option Plan, as
amended, during fiscal 2000 to the Named Officers.
Individual Grants
-----------------------------------------------------------------------------------------------------------------------------
Number of Securities Percent of Total Exercise or Market Price
Underlying Options/ Options/SARs Granted to Base Price on Date of Expiration
Name SARs Granted(2) Employees in Fiscal Year ($/share)(3) Grant ($/share) Date
---- --------------- ------------------------ ------------ --------------- ----------
Robert G. Tomlinson 25,000(2) 15.1% $ 3.00 $ 3.50 01/05/10
Kevin M. Tomlinson 25,000(2) 15.1 3.00 3.50 01/05/10
Robert W. Haley 25,000(2) 15.1 3.00 3.50 01/05/10
William L. Blair 15,000(2) 9 3.00 3.50 01/05/10
---------------
-9-
Potential Realizable Value
At Assumed Annual Rates
Of Stock Price Appreciation
for option term (1)
--------------------------------------------------------------------------------
Market Value
on Date of
Grant
Name 0% ($) 5% ($) 10% ($)
----------- ------ ------ -------
Robert G. Tomlinson $87,500 $67,528 $151,952
Kevin M. Tomlinson 87,500 67,528 151,952
Robert W. Haley 87,500 67,528 151,952
William L. Blair 52,500 40,517 91,171
---------------
(1) The hypothetical gains or "option spreads"that would exist for the
respective options are included in accordance with the rules of the
Securities and Exchange Commission. As mandated by the Securities and
Exchange Commission, these gains are based on the assumed rates of annual
compound stock price appreciation of 5% and 10% from the date the option
was granted over the full option term. They do not represent any assurance
that the shares of Common Stock will appreciate in value and do not
represent any estimated or projected future prices. The actual value, if
any, realized may be greater or less than the potential realizable value
set forth in the table. If the Common Stock does not appreciate, the Named
Officers will receive no benefit from the options.
(2) One-third of each option becomes exercisable on each January 5, commencing
January 5, 2001.
(3) None of the options have an exercise price equal to the fair market value
of the underlying Common Stock on the date of grant.
Fiscal Year-End Options/Option Values Table. The following table sets forth
information on the number of securities and value underlying exercisable and
unexercisable options and SARs for the year ended June 30, 2000.
Number of Securities Under- Value of Unexercised In-
lying Unexercised Options/ the-Money(1) Options/SARs
Shares SARs at Fiscal Year-End at Fiscal Year-End($)(2)
Acquired Value ----------------------------- --------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
Robert G. Tomlinson -0- -0- 60,000 25,000 -0- $ 28,125
Kevin M. Tomlinson -0- -0- 45,000 25,000 -0- 28,125
Robert W. Haley -0- -0- 43,334 31,667 -0- 28,125
William L. Blair -0- -0- 13,334 21,666 -0- 16,875
---------------
(1) Options are "in the money" if the fair market value of the underlying
securities exceeds the exercise or base price of the option. (2) The dollar
values are calculated be determining the difference between the fair market
value of the securities underlying the options at fiscal yea end and the
exercise or base price of the options. The closing bid price for the Common
Stock was $4.125 on June 30, 2000.
-10-
No employee of Sport-Haley receives any additional compensation for his
services as a director. Non-management directors receive no salary for their
services as such, but may receive a fee of $250 per meeting attended. The Board
of Directors has also authorized payment of reasonable travel or other out-
of-pocket expenses incurred by non-management directors in attending meetings of
the Board of Directors. During fiscal 2000, no non-employee directors were
granted any options.
Employment Agreements. Effective January 1, 1997, Sport-Haley entered into
an employment agreement with Mr. Robert G. Tomlinson. The agreement requires
that he devote his full business time to Sport-Haley as Chief Executive Officer
and/or Chairman of the Board at an annual salary of $200,000, be provided an
automobile and such bonuses as awarded by the Board of Directors. The employment
agreement extends for a three-year term. Mr. Tomlinson has the option to convert
the employment agreement to a consulting agreement in the event of a change in
control of Sport-Haley or upon his resignation. Subject to the right of
Sport-Haley to terminate the consulting agreement for cause, Mr. Tomlinson is
entitled to serve as a consultant to Sport-Haley for the duration of the
agreement and to continue to receive compensation in the amount of 60% of his
annual salary. If Mr. Tomlinson terminates the agreement with "cause" (as
defined in the agreement), or Sport-Haley terminates the agreement for other
than "cause" (as defined in the agreement), or if there is a change in control
of Sport-Haley or if Mr. Tomlinson dies, Mr. Tomlinson or his estate, as
applicable, is entitled to receive severance compensation for three years from
the date of termination in an amount equal to his annual salary and bonus
payments during the preceding 12 months. During the time he is receiving such
severance compensation, he is entitled to participate in all employee benefit
plans, at Sport-Haley's expense. The change of control provisions and death
benefits entitle Mr. Tomlinson or his estate, as applicable, to receive such
amount in a lump sum. If Mr. Tomlinson becomes totally disabled during the term
of the agreement, his full salary will be continued for one year from the date
of disability. If termination is for any reason other than by Sport-Haley with
cause, all options previously granted shall become fully vested on the date of
termination. The agreement contains a non-competition provision for one year
following termination.
Effective December 1, 1999, Sport-Haley entered into an employment
agreement with Mr. Kevin Tomlinson. The agreement requires that he devote his
full business time to Sport-Haley as Chief Operating Officer and Executive Vice
President-Operations at an annual salary of $140,000 per year and such bonuses
as awarded by the Board of Directors. The employment agreement extends from
December 1, 1999 to December 1, 2002, subject to automatic one (1) year
extensions at the end of each year. If Sport- Haley terminates the agreement for
other than "cause" (as defined in the agreement), Mr. Tomlinson is entitled to
receive severance compensation equal to 12 months salary and bonus and incentive
payments over the last 12 months. During the time he is receiving any such
severance compensation, he is eligible to participate in all employee benefit
plans, at Sport-Haley's expense. If there is a non-negotiated change in control
of Sport-Haley, he is entitled to lump sum severance compensation equal to three
times his annual salary and bonus payment during the preceding 12 months. If Mr.
Tomlinson becomes disabled during the term of the agreement, his full salary
shall be continued for one year from the date of disability. If termination is
for any reason other than by Sport-Haley with cause, all options previously
granted shall become fully vested on the date of termination. The agreement
contains a non-competition provision for one-year following termination.
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Effective January 1, 1997, Sport-Haley entered into an employment agreement
with Mr. Robert W. Haley. The agreement requires that he devote his full
business time to Sport-Haley as President or Senior Executive Officer at an
annual salary of $160,000 and such bonuses as awarded by the Board of Directors.
The employment agreement extended through December 31, 1998 and was subsequently
automatically renewed for an additional one year term. If Sport-Haley terminates
the agreement for other than "cause" (as defined in the agreement), Mr. Haley is
entitled to receive severance compensation for one year from the date of
termination in an amount equal to his annual salary and bonus payment during the
preceding 12 months. If Mr. Haley terminates the agreement with or without
cause, Mr. Haley is entitled to receive severance compensation for one year in
an amount equal to 60% of his annual salary and bonus payment during the
preceding 12 months. During the time he is receiving any such severance
compensation, he is eligible to participate in all employee benefit plans, at
Sport-Haley's expense. If there is a non-negotiated change in control of
Sport-Haley or if Mr. Haley dies, Mr. Haley or his estate, as applicable, is
entitled to lump sum severance compensation equal to three times his annual
salary and bonus payment during the preceding 12 months. If Mr. Haley becomes
disabled during the term of the agreement, his full salary will be continued for
one year from the date of disability. If termination is for any reason other
than by Sport-Haley with cause, all options previously granted shall become
fully vested on the date of termination. The agreement contains a
non-competition provision for one year following termination.
Sport-Haley entered into an employment agreement with Mr. William Blair
effective March 2, 1998. The agreement was terminated by Mr. Blair in January
2001. The agreement requires that he devote his full business time to
Sport-Haley as Vice President of Corporate Sales at an annual salary of $120,000
and such bonuses as awarded by the Board of Directors. The employment agreement
for Mr. Blair extends through March 1, 2001 and is by its terms automatically
renews for one additional year unless notice of termination is given by either
party. If Sport-Haley terminates the agreement for other than "cause" (as
defined in the agreement) or if Mr. Blair terminates the agreement with or
without "cause", he is entitled to receive severance compensation equal to six
months' salary and 50% of the last annual bonus. During the time he is receiving
any such severance compensation, he is eligible to participate in all employee
benefit plans, at Sport-Haley's expense. If there is a non-negotiated change in
control of Sport-Haley, he is entitled to lump sum severance compensation equal
to three times his annual salary and bonus payment during the preceding 12
months. Options previously granted may become fully vested on the date of
termination, depending on the reason for termination. The agreement contains a
non-competition agreement for six months following termination, provided Mr.
Blair may be released from the non-compete if the agreement is terminated
without cause and he elects to forego any severance pay.
Stock Option Plan
Sport-Haley adopted a stock option plan in 1993 (as amended, the "Option
Plan"). The Option Plan, as amended, provides for the granting of incentive
stock options within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended, non-qualified stock options and stock appreciation rights
("SARs"), up to a maximum number of 1,350,000 shares. Non-qualified options may
be granted to employees, directors and consultants of Sport-Haley, while
incentive options may be granted only to employees. No options may be granted
under the Option Plan subsequent to February 28, 2003.
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The Option Plan is administered by the Compensation Committee of the Board
of Directors, which determines the terms and conditions of the options and SARs
granted under the Option Plan, including the exercise price, number of shares
subject to the option and the exercisability thereof.
The exercise price of all incentive options granted under the Option Plan
must be at least equal to the fair market value of the Common Stock of
Sport-Haley on the date of grant. In the case of an optionee who owns stock
possessing more than ten percent of the total combined voting power of all
classes of stock of Sport-Haley, the exercise price of incentive options shall
be not less than 110% of the fair market value of the Common Stock on the date
of grant. The exercise price of all non-qualified stock options granted under
the Option Plan shall be determined by the Compensation Committee, but shall not
be less than 85% of the fair market value of the Common Stock. The term of all
non-qualified stock options granted under the Option Plan may not exceed ten
years and the term of all incentive options may not exceed five years. The
Option Plan may be amended or terminated by the Board of Directors.
The Option Plan provides the Board of Directors or the Compensation
Committee the discretion to determine when options granted thereunder shall
become exercisable and the vesting period of such options. Upon termination of a
participant's employment or consulting relationship with Sport-Haley, all
unvested options terminate and are no longer exercisable. Vested options shall
remain exercisable for a specified period of time following the termination
date. The length of such extended exercise period generally ranges from 30 days
to one year, depending on the nature and circumstances of the termination.
The Option Plan provides that, in the event Sport-Haley enters into an
agreement providing for the merger of Sport-Haley into another corporation or
the sale of substantially all of Sport-Haley's assets, any outstanding
unexercised option shall become exercisable at any time prior to the effective
date of such agreement. Upon the consummation of a merger or sale of assets,
such options shall terminate unless they are assumed or another option is
substituted therefor by the successor corporation.
As of June 30, 2000, a total of 547,881 non-qualified and incentive options
were outstanding, with exercise prices ranging from $2.50 to $10.63 per share
and a weighted average exercise price per share of $6.79.
401(k) Plan
In January 1996, Sport-Haley adopted a defined contribution savings plan
(the "401(k) Plan") to provide retirement income to employees of Sport-Haley.
The 401(k) Plan is intended to be qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended. The 401(k) Plan covers all employees who are
at least age 18 and have been employed at least three months. It is funded by
voluntary pre-tax contributions from employees up to a maximum amount equal to
15% of annual compensation and through matching contributions by Sport-Haley of
$0.25 on the dollar for employee contributions on the first 5% of the employee's
annual compensation. Upon leaving Sport-Haley, each participant is 100% vested
with respect to the participant's contributions and is vested based on years of
service with respect to Sport- Haley's matching contributions. Contributions are
invested as directed by the participant in investment funds available under the
401(k) Plan. Full retirement benefits are payable to each participant in a
single
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cash payment or an actuarial equivalent form of annuity on the first day of the
month following the participant's retirement.
Compensation Committee Report
Notwithstanding anything to the contrary set forth in any of the previous
filings made by Sport- Haley under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including, but not limited to, this Report on Form 10-K, in whole or in
part, the following Compensation Committee Report shall not be deemed to be
"filed" with the Securities and Exchange Commission nor shall it be incorporated
by reference into any such future filings.
This Compensation Committee Report discusses Sport-Haley's executive
compensation policies and the basis for the compensation paid to Sport-Haley's
executive officers, including its Chief Executive Officer, during fiscal 2000.
Compensation Policy. Sport-Haley's policy with respect to executive
compensation has been designed to:
o Adequately and fairly compensate executive officers in relation
to their responsibilities, capabilities and contributions to
Sport-Haley in a manner that is commensurate with compensation
paid by companies of comparable size or within the golf apparel
industry;
o Reward executive officers for the achievement of short-term
operating goals and for the enhancement of the long-term value of
Sport-Haley; and
o Align the interests of the executive officers with those of
Sport-Haley's shareholders.
The components of compensation paid to certain executive officers consist
of (a) base salary, (b) incentive compensation in the form of discretionary
annual bonus payments, (c) long-term incentive compensation in the form of
awards under Sport-Haley's Option Plan, and (d) various other benefits.
Base Salary. For fiscal 2000, the Compensation Committee reviewed the base
salary paid by Sport-Haley to its executive officers under their respective
employment agreements. Annual adjustments to base salaries, if any, are
determined based upon a number of factors, including Sport-Haley's performance
(to the extent such performance can fairly be attributed or related to each
executive officer's performance), as well as the value of each executive
officer's responsibilities, capabilities and contributions and internal
compensation equity considerations. In addition, for fiscal 2000, the
Compensation Committee reviewed the base salaries of its executive officers in
an attempt to ascertain whether those salaries fairly reflect job
responsibilities and prevailing market conditions and rates of pay. The
Compensation Committee believes that base salaries for Sport-Haley's executive
officers have been reasonable in relation to its size and performance in
comparison with the compensation paid by similarly sized companies or companies
within the golf apparel industry. The Compensation Committee did not increase
the base pay of any executive officer in fiscal 2000.
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Incentive Cash Bonus Compensation. The Compensation Committee feels that a
relatively lower level of base salary and relatively higher level of incentive
compensation, in the form of bonuses and grants of options, most effectively
aligns the interests of management with that of shareholders. It also believes
that its policy regarding incentive compensation is similar to policies of other
companies of comparable size within the golf apparel industry. The decision on
whether to award incentive cash bonus compensation is based on a combination of
achievement of business targets and objectives and certain other financial
measures which the Compensation Committee feels will dictate, in large part,
Sport-Haley's future operating results, and on an officer's responsibilities,
capabilities and contribution to Sport-Haley. There is no formal written bonus
incentive plan for executive officers', although certain executive officers
employment agreements provide that the executive is eligible for a discretionary
bonus of up to a specified percentage of his or her base salary. Although all of
the executive officers' contributions were noted and commended, the Compensation
Committee did not award any incentive cash bonuses to any of the executive
officers because it did not believe that such bonuses were merited in view of
the significant slow down in growth of Sport-Haley in fiscal 2000.
Long-Term Incentive (Option) Compensation. The Compensation Committee also
has authority to select the executive officers and employees who will be granted
options and other awards and to determine the timing, pricing and amount of any
such options or awards. As stated above, the Compensation Committee believes
that incentive compensation, in the form of bonuses and grants of options, most
effectively aligns the interests of management with that of shareholders. In
fiscal 2000, the Compensation Committee granted a total of 166,000 shares to
executive and employees of the Company, at an exercise price of $3.00 per share.
Other Benefits. Executive officers are eligible for various benefits,
including health and welfare plans generally available to all full-time
employees. In addition, the executive officers are eligible to participate in
the 401(k) Plan, also generally available to all employees, whereby they may
elect to defer part or all of their base and incentive cash compensation, with
matching contributions from Sport-Haley. Sport-Haley does not maintain any other
plans and arrangements for the benefit of its executive officers except to
provide a life insurance policy for the benefit of certain executive officers'
named beneficiaries and vehicles for its Chief Executive Officer and Chief
Operating Officer. The Compensation Committee believes these benefits are
reasonable in relation to the executive compensation practices of other
similarly sized companies or companies within the golf apparel industry.
Tax Considerations. Beginning in 1994, the Internal Revenue Code limited
the federal income tax deductibility of compensation paid to a company's chief
executive officer and to each of the four most highly compensated executive
officers. For this purpose, compensation can include, in addition to cash
compensation, the difference between the exercise price of stock options and the
value of the underlying stock on the date of exercise. A company may deduct
compensation with respect to any of these individuals only to the extent that
during any fiscal year such compensation does not exceed $1 million or meets
certain other conditions (such as shareholder approval). Considering current
compensation plans and policy and the exercise price of currently outstanding
stock options held by the executive officers, the Compensation Committee
believes that, for the near future, there is little risk that Sport-Haley will
lose any significant tax deduction relating to executive compensation. At such
time, if any, that the deductibility of
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executive compensation becomes an issue, modifications to compensation plans and
policies will be considered by the Compensation Committee.
CEO Compensation. In reviewing the Chairman and Chief Executive Officer's
compensation package, the Committee pursues the same objectives, which apply for
other executive officers. The overall goal is to base the Chairman and Chief
Executive Officer's salary at a base comparable to those of persons employed in
similar capacities with competitors that are similar in industry size and
performance. However, the actual level approved by the Committee may be higher
or lower based upon the Committee's subjective evaluation of the annual and
long-term performance of Sport-Haley, the individual performance of the Chairman
and Chief Executive Officer particularly with respect to leadership and
strategic vision, and the cash resources and needs of Sport-Haley. The Committee
believes that Mr. Tomlinson's leadership has been essential in growing
Sport-Haley's revenues up to seven fold from 1994 to 2000. The Compensation
Committee noted that Mr. Tomlinson previously had made a voluntary decision to
reduce his base salary and commended that action as a demonstration of his
continued leadership and administration of resources. In fiscal 2000, no raises
or cash bonuses were awarded to Mr. Tomlinson. Mr. Tomlinson's voluntary
reduction in his salary has continued into fiscal 2000 and he is currently being
paid at an annual rate of $170,000, rather than the $220,000 to which he is
entitled under his employment agreement.
The Compensation Committee believes that the concepts discussed above
further the shareholders interests and that officer compensation encourages
responsible management of Sport-Haley. The Compensation Committee considers the
effect of management compensation on shareholder interests. In the past, the
Board of Directors based its review in part on the experience of its own members
and on information requested from management personnel. These same factors will
be used in the future in determining officer compensation.
This report was furnished by Mark J. Stevenson, Ronald J. Norick and James
H. Everest, all of the members of the Compensation Committee.
Compensation Committee Interlocks and Insider Participation
All of the Compensation Committee members are independent directors of
Sport-Haley. None of these members have ever been an officer or employee of
Sport-Haley or its Subsidiary nor have any of them had a relationship which
would require disclosure under the "Certain Relationship and Related
Transactions" captions of any of Sport-Haley's filings with the Commission
during the past three fiscal years.
Performance Graph
Notwithstanding anything to the contrary set forth in any of the previous
filings made by Sport- Haley under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including, but not limited to, this Proxy Statement, in whole or in
part, the following performance graph shall not be deemed to be incorporated by
reference into any such future filings.
-16-
Set forth below is a line graph prepared by Media General Financial
Services comparing the yearly percentage change in Sport-Haley's cumulative
total shareholder return (share price appreciation plus dividends) on
Sport-Haley's Common Stock with the cumulative total return of (i) a Nasdaq
Market Index and (ii) the stocks of apparel manufacturers having Standard
Industrial Classification codes from industry group numbers 231 through 235,
which is deemed as a market weighted index of publicly traded peers, for the
period from July 1, 1995 through June 30, 2000 (the "Measurement Period"). The
graph assumes that $100 is invested in each of Sport Haley's Common Stock, the
Nasdaq Market Index and the publicly traded peers on July 1, 1995 and that all
dividends were reinvested (there were no dividends paid by Sport-Haley during
the Measurement Period). Sport-Haley's shareholder return is calculated by
dividing (i) the difference between Sport-Haley's share price at July 1, 1995
and at each June 30 of the Measurement Period by (ii) the share price at the
beginning of the Measurement Period. [GRAPHIC OMITTED]
[Graph reflecting values of table below is omitted]
Fiscal Year Ending June 30,
-------------------------------------------------
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
Sport-Haley, Inc. 100.00 158.11 181.08 141.89 52.03 44.59
Industry Peer Group Index 100.00 141.98 164.06 194.66 167.82 127.74
Nasdaq Market Index 100.00 125.88 151.64 201.01 281.68 423.84
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding beneficial
ownership of Sport-Haley's Common Stock as of May 18, 2000 by (i) each person
known by Sport-Haley to own beneficially more than 5% of the outstanding Common
Stock, (ii) each director or nominee, and (iii) all executive officers and
directors as a group. The information with respect to institutional investors is
derived solely from statements filed with the Commission under Section 13(d) of
the Securities Exchange Act. Each person has sole voting and sole investment or
dispositive power with respect to the shares shown except as noted.
-17-
Shareholdings on May 18, 2001
Name and Address (1) Number of Shares(2) Percent of Class (3)
------------------------------- -------------------- ----------------------
Robert G. Tomlinson(4)......................................... 113,000 3.3%
Kevin M. Tomlinson(7).......................................... 45,000 1.3
Robert W. Haley(5)............................................. 54,950 1.6
Patrick W. Hurley ............................................. -0- *
Catherine Blair(6)............................................. 17,500 *
William L. Blair(7)............................................ 13,334 *
Mark J. Stevenson(7)........................................... 25,000 *
Ronald J. Norick(8)............................................ 63,117 1.8
James H. Everest(9)............................................ 65,000 1.9
U.S. Bancorp(10)............................................... 314,500 9.1
601 Second Avenue South
Minneapolis, Minnesota 55402
Catalyst Master Fund, L.P. (11)................................ 210,085 6.1
c/o W.S. Walker & Co.
Walker House, Mary Street P.O. Box 265GT
George Town, Grand Cayman, Cayman Islands
Hillison Partners Limited Partnership (12) .................... 213,800 6.2
6900 Wisconsin Avenue, Suite 501
Bethesda, MD 20815
Kennedy Capital Management, Inc. (13) 250,400 7.3
10829 Olive Blvd.
St. Louis, MO 63141
Dimensional Fund Advisors Inc.(14)............................. 259,500 7.5
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Michael W. Cook Asset Management, Inc.(15)..................... 523,100 15.2
d/b/a Cook Mayer Taylor
5170 Sanderlin Avenue, Suite 200
Memphis, Tennessee 38117
All directors and officers as a group
(Nine persons)(16)............................................. 406,901 11.8
-------------------
* Less than 1%
(1) Except as noted above, the address for all persons listed is 4600 E. 48th
Avenue, Denver, Colorado 80216.
(2) Ownership includes both outstanding Common Stock and shares issuable upon
exercise of options that are currently exercisable or will become
exercisable within 60 days after the date hereof.
(3) All percentages are calculated based on the number of outstanding shares in
addition to shares which a person or group has the right to acquire within
60 days of May 18, 2001.
(4) Includes 60,000 shares subject to currently exercisable options or options
which will become exercisable within 60 days after the date hereof.
(5) Includes 43,334 shares subject to currently exercisable options or options
which will become exercisable within 60 days after the date hereof.
(6) Includes 17,500 shares subject to currently exercisable options or options
which will become exercisable within 60 days after the date hereof.
-18-
(7) Consists solely of shares subject to currently exercisable options or
options which will become exercisable within 60 days after the date hereof
(8) Includes 25,000 shares subject to currently exercisable options or options
which will become exercisable within 60 days after the date hereof.
(9) Includes 16,667 shares subject to currently exercisable options or options
which will become exercisable within 60 days after the date hereof.
(10) U.S. Bancorp beneficially owns 314,500 (with sole power to vote or direct
the vote of 312,100 of such shares and with shared power to dispose or
direct the disposition of 4,100 of such shares) shares owned of record by
The Small Cap Value Fund, a mutual fund of the First American Investment
Funds, Inc., an open-end investment company.
(11) Catalyst Master Fund, L.P. has sole voting power and sole dispositive power
over 210,085 of the shares.
(12) Hillison Partners Limited Parthership has sole voting power and sole
dispositive power over 213,800 shares.
(13) Kennedy Capital Management, Inc. is an investment advisor company which
beneficially owns 250,400 shares.
(14) Dimensional Funds Advisors Inc., is an investment advisor company, which,
beneficially owns shares of owned of record by advisory clients of
Dimensional Funds Advisors, Inc.
(15) Michael W. Cook Asset Management, Inc., has sole voting power and sole
dispositive power over 523,100 shares.
(16) Includes 213,335 shares of Common Stock subject to currently exercisable
options. Excludes shares of Common Stock which the officers and directors
disclaim beneficial ownership.
The Board of Directors has unanimously approved and recommends that
shareholders vote FOR the director nominees identified above.
II. SELECTION OF AUDITORS
As previously reported, as of July 13, 2000, at the recommendation of the
Audit Committee, the Company terminated the services of Levine, Hughes &
Mithuen, Inc., the Company's independent auditors. The report of Levine, Hughes
& Mithuen, Inc. on the Company's financial statements for the years ending June
30, 1999 and 1998 did not contain any adverse opinion or disclaimer of opinion,
and was not qualified or modified as to uncertainty, audit scope or accounting
principles. At the advice of the Audit Committee, the Company has retained the
services of Hein + Associates, LLP.
The firm of Hein + Associates, LLP has examined the financial statements of
the Company for the period from July 1, 1997 to June 30, 2000. Subject to
shareholder approval, Hein + Associates, LLP will serve as the Company's
independent auditors for the fiscal year ending June 30, 2001. Representatives
of Hein + Associates, LLP are expected to be present at the Special Meeting with
the opportunity to make a statement if it is their desire to do so, and will be
available to respond to appropriate questions from shareholders.
Audit Fees. The aggregate fees billed for audit of Sport-Haley's annual
financial statements for fiscal 2000 and reviews of financial statements
included in Sport-Haley's Forms 10-Q was $47,802.
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Financial Information Systems Design and Implementation Fees. Sport-Haley
did not engage the former or present principal accountant for services of this
nature during fiscal 2000.
All Other Fees. The aggregate of all other fees billed by the present
principal accountant during fiscal 2000 was $202,091.15, which consisted
primarily of fees and expenses related to the re-audit of fiscal years 1998 and
1999.
The Board of Directors recommends a vote FOR ratification of Hein +
Associates, LLP as independent auditors for the Company.
-20-
Appendix A
PROXY SPORT-HALEY, INC. PROXY
Special Meeting of Shareholders to be held on June 25, 2001
This proxy is solicited by the Board of Directors of Sport-Haley, Inc.
KNOW ALL MEN BY THESE PRESENTS: that the undersigned shareholder of
Sport-Haley, Inc. (the "Company") hereby constitutes and appoints Robert G.
Tomlinson, as attorney and proxy, with the power to appoint his substitute, and
hereby authorizes him to represent and vote, as designated below, all of the
shares of Common Stock of the Company which the undersigned is entitled to vote
at the Special Meeting of Shareholders of the Company to be held June 25, 2001
and at any and all adjournments thereof with respect to the matters set forth
below and described in the Notice of Special Meeting of Shareholders and Proxy
Statement dated May 29, 2001, receipt of which is acknowledged.
1. To consider and act upon a proposal to elect Messrs. Robert G.
Tomlinson, Robert W. Haley, Kevin M. Tomlinson, Mark J.
Stevenson, Ronald J. Norick and James H. Everest as directors to
hold office for one-year terms or until their successors are
elected and qualified.
[ ] FOR ELECTION OF ALL NOMINEES (Except as shown below)
[ ] WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES
Instructions: To withhold authority to vote for any individual nominee, strike
through the nominee's name below:
Robert G. Tomlinson Robert W. Haley Kevin M. Tomlinson
Mark J. Stevenson Ronald J. Norick James H. Everest
2. To ratify the appointment of Hein + Associates LLP as auditors
of the Company.
[ ] FOR RATIFICATION [ ] AGAINST RATIFICATION [ ] ABSTAIN
(Continued on reverse side.)
3. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting or any and
all adjournments thereof.
[ ] AUTHORIZED TO VOTE [ ] ABSTAIN
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder(s). IF NO INDICATION IS MADE, THIS PROXY WILL BE
VOTED FOR THE NOMINEES LISTED AND FOR PROPOSAL 2 AND THE PROXY HOLDER WILL VOTE
ON ANY PROPOSAL UNDER 3 IN HIS DISCRETION AND IN HIS BEST JUDGMENT.
Please mark, date, and sign exactly as your name appears on your stock
certificate. When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person. If this Proxy is not dated, the Proxy
will be deemed to bear the date the form was mailed to the shareholder.
Dated: _______________________________
______________________________________
Signature
______________________________________
Signature if held jointly
SPORT-HALEY, INC.
AUDIT COMMITTEE CHARTER
Purpose
The primary function of the Audit Committee (the "Committee") is to assist the
Board of Directors (the "Board") in fulfilling its oversight responsibilities by
reviewing the financial reports and other financial information provided by
Sport-Haley, Inc. (the "Corporation") to any governmental body or the public;
the Corporation's internal control systems regarding finance, accounting, and
ethics established by the Board and management; and the Corporation's auditing,
accounting and financial reporting processes generally. Consistent with this
function, the Committee should encourage continuous improvement of, and should
foster adherence to, the Corporation's policies, procedures and practices at all
levels. The Committee's primary responsibilities are to:
Serve as an independent and objective party to monitor the Corporation's
financial reporting process and internal control systems.
Review and appraise the audit efforts of the Corporation's independent
accountants and internal controls.
Provide an open avenue of communication among the independent accountants,
financial and senior management, and the Board.
Membership
The Committee will be composed of not less than three (3) members of the Board.
They will be selected by the Board at the annual Board meeting, taking into
account prior experience in matters to be considered by the Committee, probable
availability at times required for consideration of such matters, and their
individual independence and objectivity. The Chair will be elected by a majority
of the full Committee, unless otherwise designated by the Board.
The Committee's membership will meet the requirements of the audit committee
policy of the National Association of Securities Dealers (NASD). Accordingly,
all of the members will be financially literate and be directors independent of
the management and free from relationships that in the opinion of the Board
would interfere with the exercise of independent judgment as a Committee member.
In addition, at least one member of the Committee shall have accounting or
financial management expertise.
No officers or employees of the Corporation or any of its subsidiaries may serve
on the Committee, although former officers or employees may serve on the
Committee (even though the former officers may be receiving pension or deferred
compensation payments from the Corporation) if, in the opinion of the Board, the
former officers or employees will exercise independent judgment and will
significantly assist the Committee to function. However, a majority of the
Committee will be directors who were not formally officers or employees of the
Corporation or and of its subsidiaries.
1
When considering relationships that might affect the independence of members of
the Committee, including possible affiliate status, the Board will give
appropriate consideration, in addition to its Committee policy, to guidelines
issued by the NASD, which were provided to assist Board in observing the spirit
of the NASD policy.
Meetings
The Committee shall meet at least four times annually, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management, the chief internal
auditor and the independent accountants in separate executive sessions to
discuss any matters that the Committee or each of these groups believe should be
discussed privately. In addition, the Committee or at least its Chair should
meet with the independent accountants and management quarterly to review the
Corporations financials prior to filing reports with the Securities and Exchange
Commission (the "SEC").
Actions of the Committee
The Committee's activities will include the following actions:
Review and update this Audit Committee Charter periodically, at least
annually, as conditions dictate.
Oversight of the financial statements and relations with the independent
auditors.
Instruct the independent auditors that the Board is the client in its
capacity as the shareholder's representative and that they are accountable
to the Board and the Committee, each of which have the ultimate authority
over the Corporation's independent auditor relations.
Expect the independent auditors to meet with the Board at least annually so
the Board has a basis on which to recommend the independent auditors'
appointment to the shareholders or to ratify its selection of the
independent auditors.
Expect financial management and the independent auditors to analyze
significant financial reporting issues and practices on a timely basis and
consider the integrity of internal and external financial reporting
processes.
Expect financial management and the independent auditors to discuss with
the Committee and consider:
Qualitative judgments about whether current or proposed accounting
principles and disclosures are appropriate, not just acceptable.
Aggressiveness or conservatism of accounting principles and financial
estimates.
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Expect the independent auditors to provide the audit Committee with:
Independent judgments about the appropriateness of the Corporation's
current or proposed accounting principles and whether current or
proposed financial disclosures are clear.
Views on whether the accounting principles chosen by management are
conservative, moderate, or aggressive as they relate to income, asset,
and liability recognition and whether these accounting principles are
commonly used.
Reasons why accounting principles and disclosure practices used for
new transactions or events are appropriate.
Reasons for accepting or questioning significant estimates made by
management.
Views on how selected accounting principles and disclosure practices
affect shareholder and public attitudes about the Corporation.
Actions taken on the Board's behalf that require Board notification but not
Board approval:
Review and approve the scope of the Corporation's audit and that of
its subsidiaries as recommended by the independent auditors, internal
auditors and the president.
Answer questions raised by shareholders during annual shareholder's
meeting on matters relating to the Committee's activities if asked to
do so by the Board.
Ask the president to have the internal audit staff review and study a
particular area of interest or concern to the Committee.
Matters requiring the Committee's review and study before making a
recommendation for the Board's action:
Appointment of the independent auditors.
Implementation of major accounting policy changes.
SEC registration statements to be signed by the Board.
The auditors' reports and financial statements prior to publication in
the annual report.
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Matters requiring the Committee's review and study before providing summary
information to the Board:
Accounting policy changes proposed or adopted by organizations such as
the Financial Accounting Standards Board (FASB), the SEC, and the
American Institute of Certified Public Accountants (AICPA), or by the
comparable bodies outside the U.S.
The independent auditors' assessment of the strength and weakness of
the Corporation's financial staff, systems, and controls, and other
factors that might be relevant to the integrity of the financial
statements.
Quarterly financial statements before earnings release or publication.
Administration of the Corporation's "conflict of interest" policy.
The performance of management and operating personnel under the
Corporation's code of ethics.
Gaps and exposures in insurance programs.
Reports about the Corporation and its subsidiaries submitted by
government agencies in countries in which the Corporation or its
subsidiaries operate.
Periodic SEC filings and the adequacy of programs and procedures to
assure compliance with the SEC regulations and the regulations of the
NASD.