- -------------------------------------------------------------------------------
Hampshire Group, Limited
215 Commerce Boulevard
Anderson, South Carolina 29625
April 10, 2001
Dear Fellow Stockholders:
The 2001 Annual Meeting of Stockholders will be held on Thursday, May 17,
2001 at 10:00 o'clock A.M. at The Princeton Club, 15 West Forty-Third Street,
New York City. All Stockholders are welcome and encouraged to attend this
meeting. An official Notice of Annual Meeting, which includes information about
the matters scheduled for consideration at the Meeting, appears on the first
page of the Proxy.
After the formal part of the Meeting, members of management will be making
a presentation about significant achievements of the past year, including
expanding our product line through the acquisition of Item-Eyes, Inc. and
restructuring our manufacturing operations. An opportunity to question the
management group, or to comment on matters pertaining to Hampshire Group,
Limited, will follow.
I sincerely hope that you will be able to attend the Annual Meeting, but in
any event, please mark and sign your Proxy and return it to the Secretary of the
Company. If you attend the meeting in person and wish to change your vote, you
may do so at that time.
Sincerely,
/s/ Ludwig Kuttner
-------------------
Ludwig Kuttner
Chairman of the Board,
President and Chief Executive Officer
Hampshire Group, Limited
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders of Hampshire
Group, Limited, a Delaware corporation (the "Company"), will be held at 10:00
A.M. on Thursday, May 17, 2001, at The Princeton Club, 15 West Forty-Third
Street, New York, New York to consider and act on the following proposals:
1. To elect six Directors to serve until the next Annual Meeting of
Stockholders;
2. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent accountants for the fiscal year ending December 31, 2001; and
3. To consider and act upon any other matters which may properly come before
the meeting, or any and all adjournments thereof.
Information regarding the matters to be considered and voted upon at the
Annual Meeting is set forth in the Proxy Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 6, 2001, as
the Record Date for the determination of the holders of Common Stock entitled to
notice of and to vote at the Annual Meeting.
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 2000 and Form of Proxy are being mailed together with this
Notice.
Please complete and return to the Company the enclosed Proxy, whether or
not you plan to be present at the meeting. If you attend the meeting, you may
revoke your Proxy if you choose to cast your vote in person.
By Order of the Board of Directors,
/s/ Charles W. Clayton
------------------------------------
Anderson, South Carolina Charles W. Clayton
April 10, 2001 Secretary
HAMPSHIRE GROUP, LIMITED
215 Commerce Boulevard
Anderson, SC 29625
PROXY STATEMENT
The accompanying Proxy is solicited on behalf of the Board of Directors of
Hampshire Group, Limited (the "Company") for use at the Annual Meeting of
Stockholders to be held on May 17, 2001, at 10:00 A.M., at The Princeton Club,
15 West Forty-Third Street, New York, New York, or at any and all adjournments
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting. This Proxy Statement and the accompanying Proxy are being mailed
on or about April 18, 2001 to Stockholders of record as of April 6, 2001 (the
"Record Date").
Please complete, date and sign the enclosed Proxy and return to the
principal executive office of Hampshire Group, Limited at 215 Commerce
Boulevard, Anderson, South Carolina 29625, Attention: Secretary. All expenses
incident to the preparation and mailing of, or otherwise making available to the
Stockholders the Notice, Proxy Statement and Proxy, are to be paid by the
Company. In addition to solicitation by mail, arrangements will be made with
brokerage houses and other custodians, nominees and fiduciaries to send material
to their principals, and the Company may reimburse them for their expenses in so
doing.
Properly signed and dated Proxies received by the Company's Secretary prior
to or at the Annual Meeting will be voted as instructed thereon, or in the
absence of such instructions will be voted as follows:
(1) FOR the election as Directors of the Company those six persons designated
as nominees;
(2) FOR the ratification of the appointment of Deloitte & Touche LLP as the
Company's independent accountants for the fiscal year 2001.
Any Stockholder giving the Proxy enclosed with this statement may cast a
vote in person by revoking the Proxy at the Annual Meeting. Any Proxy may be
revoked by notice in writing to the Secretary at any time prior to the Annual
Meeting.
-1-
OUTSTANDING VOTING STOCK
As of the Record Date, there were 4,657,098 shares of Common Stock, par
value $0.10 per share (the "Common Stock"), eligible to vote at the 2001 Annual
Meeting of Stockholders. Holders of Common Stock are entitled to one vote for
each share Common Stock held on the Record Date.
Quorum Requirements
- -------------------
The presence in person or by proxy of holders of record of a majority of
the outstanding shares of Common Stock is required for a quorum to transact
business at the Annual Meeting; but if a quorum should not be present, the
Annual Meeting may be adjourned from time to time until a quorum is obtained.
Under applicable Delaware law, abstentions will be counted for purposes of
determining the existence of a quorum, but broker non-votes will not.
Beneficial Ownership
- --------------------
The following table sets forth certain information regarding the ownership
of Common Stock of the Company as of the Record Date by: (a) each person known
to the Company to be the beneficial owner of more than 5% of the outstanding
shares of Common Stock; (b) each director and named executive officer of the
Company designated in the section of the Proxy Statement captioned "Executive
Officers of the Registrant"; and (c) all directors and executive officers of the
Company as a group. Except as otherwise indicated, all persons listed below
have: (x) sole voting power and investment power with respect to their shares of
Common Stock, except to the extent that authority is shared by spouses under
applicable law; and (y) record and beneficial ownership with respect to their
shares of Common Stock of the Company.
-2-
BENEFICIAL OWNERSHIP TABLE
- ------------------------------------------------------------------------------
Stockholder Shares Percent
- ------------------------------------------------------------------------------
Ludwig Kuttner - Estouteville, Keene, VA 22946 962,468(1) 20.47%
Beatrice Ost-Kuttner - Estouteville, Keene, VA 22946 916,137(2) 19.67%
Hans W. Schmidig - Bleicherweg 39, CH-8027,
Zurich, Switzerland 481,386 10.34%
Fidelity Low-Price Stock Fund - 82 Devonshire St.,
Boston, MA 02109 411,300 8.83%
Peter W. Woodworth - 702 Main Street, Winona, MN 55987 319,203(3) 6.86%
Heartland Advisors, Inc. - 789 N. Water St.,
Milwaukee, WI 53202 264,600 5.68%
Charles W. Clayton 165,715(4) 3.53%
Eugene Warsaw 129,279(5) 2.76%
Harvey L. Sperry 24,335 *
H. Edward Hurley 31,660 *
Joel Goldberg 5,143 *
All directors and executive officers as a group (10) 1,646,342 34.49%
- ------------------------------------------------------------------------------
<FN>
(1) (Ludwig Kuttner) Includes 170,018 shares purchased for the account of Mr.
Kuttner under the Company's Common Stock Purchase Plan for Directors and
Executives (the "Common Stock Purchase Plan"), and 45,385 shares issuable
subject to stock options exercisable as of, or within 60 days of the Record
Date; but does not include shares held by Mrs. Beatrice Ost-Kuttner or
159,636 shares held by their sons, as to which Mr. Kuttner disclaims
beneficial ownership.
(2) (Beatrice Ost-Kuttner) Does not include shares held by Mr. Kuttner or
159,636 shares held by their sons, as to which Mrs. Ost-Kuttner disclaims
beneficial ownership.
(3) (Peter W. Woodworth) Does not include 71,652 shares held by his spouse, as
to which Mr. Woodworth disclaims beneficial ownership.
(4) (Charles W. Clayton) Includes 58,716 shares of Common Stock purchased for
the account of Mr. Clayton under the Common Stock Purchase Plan, 32,138
shares of Common Stock subject to stock options exercisable as of, or
within 60 days of the Record Date, and 4,300 shares of Common Stock held by
his spouse.
(5) (Eugene Warsaw) Includes 53,511 shares of Common Stock purchased for the
account of Mr. Warsaw under the Common Stock Purchase Plan, 19,771 shares
of Common Stock subject to stock options exercisable as of, or within 60
days of the Record Date, and 250 shares of Common Stock held by his
children.
(*) Less than 1%.
</FN>
-3-
PROPOSALS
Item 1. ELECTION OF DIRECTORS
At the Annual Meeting, six directors for the Company will be elected to
serve for the ensuing year and until their successors shall be duly elected and
qualified. The Board of Directors of the Company is soliciting Proxies for the
election of the persons named below. Should any of these nominees not remain a
candidate at the time of the Annual Meeting, Proxies solicited hereunder will be
voted in favor of those nominees who do remain as candidates and may be voted
for substituted nominees.
Nominees
- --------
The six persons listed below have been nominated for election as directors
of Hampshire Group, Limited, each currently being a director of the Company.
Ludwig Kuttner Age 54 Director since 1977
Mr. Kuttner was elected Chairman of the Board in 1979 and has served as
President and Chief Executive Officer of the Company from 1979 to 1992 and 1994
through the present. Previously, he served in various capacities in the textile
and real estate industries.
Dr. Joel Goldberg Age 55 Director since 1998
Dr. Goldberg is a licensed Organizational Consultant and has been a human
resources consultant for thirty years. He is the founder and President of Career
Consultants, Inc., an international human resources consulting firm, and the
President of SKA Associates, an employment search firm. Dr. Goldberg serves on
the Board of Directors of Phillips-Van Heusen Corporation, Merrimac Industries,
Inc., Marcal Paper Company and Modell's Inc.
Michael C. Jackson Age 61 Director 1986-1996; since March 1, 2001
Mr. Jackson was a Partner and Managing Director at Lehman Brothers for over
20 years and remains an Advisory Director. He is a general partner and was a
founding partner with Housatonic Partners, a private equity investment
partnership.
Harvey L. Sperry Age 71 Director since 1977
Mr. Sperry is a retired Partner of the law firm of Willkie Farr &
Gallagher. Mr. Sperry serves on the Board of Directors of Hauser, Inc.
-4-
Eugene Warsaw Age 73 Director since 1994
Mr. Warsaw has served as President and Chief Executive Officer of Hampshire
Designers, Inc., a subsidiary of Hampshire Group, Limited, since 1987.
Previously, he served as President and Chief Executive Officer of the Private
Label Sportswear division of Phillips-Van Heusen and President of Sommerset
Knitting Mills from 1982 through 1986.
Peter W. Woodworth Age 54 Director since 1995
Mr. Woodworth served as President and Chief Executive Officer of Winona
Knitting Mills, a division of Hampshire Designers, Inc. from 1995 through 1999.
He was the majority stock- holder and President of The Winona Knitting Mills,
Inc. from 1983 until 1995 when it merged into Hampshire Designers, Inc.
Information about the beneficial ownership of the Company's Common Stock
held by each nominee is included in the "Beneficial Ownership Table" on Page 3.
Item 2. APPOINTMENT OF INDEPENDENT ACCOUNTANTS
It is proposed that the Stockholders ratify the appointment of Deloitte &
Touche LLP as independent accountants of the Company for the year ending
December 31, 2001. Deloitte and Touche has served as independent accountants
since 1999. A Deloitte & Touche representative will be present at the annual
meeting and will have the opportunity to make a statement if he desires to do so
and will be available to respond to appropriate questions.
Item 3. MISCELLANEOUS
The Board of Directors of the Company is not aware of any other matters
that may come before the meeting. If any other matters are properly presented to
the meeting for action, it is the intention of the persons named as Proxies in
the enclosed form of Proxy to vote such Proxies in accordance with the best
judgment of a majority of the Proxies on such matters.
-5-
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of Hampshire Group, Limited, who are elected by and
serve at the discretion of the Board of Directors of the Company, are as
follows:
- ------------------------------------------------------------------------------
Name Age Position
- ------------------------------------------------------------------------------
Ludwig Kuttner 54 Chairman of the Board, President and
Chief Executive Officer
- ------------------------------------------------------------------------------
Eugene Warsaw 73 President and Chief Executive Officer,
Hampshire Designers, Inc.
- ------------------------------------------------------------------------------
Charles W. Clayton 63 Secretary and Treasurer
- ------------------------------------------------------------------------------
William W. Hodge 48 Vice President and
Chief Financial Officer
- ------------------------------------------------------------------------------
H. Edward Hurley 52 Executive Vice President,
Hampshire Designers, Inc.
- ------------------------------------------------------------------------------
<FN>
Ludwig Kuttner has been Chairman of the Board of Directors of the Company
since 1979 and has served as President and Chief Executive Officer of the
Company from 1979 to 1992 and 1994 through the present. Previously, he served in
various capacities in the textile and real estate industries.
Eugene Warsaw has been President and Chief Executive Officer of Hampshire
Designers, Inc., a subsidiary of Hampshire Group, Limited, since 1987. Prior to
joining the Company, Mr. Warsaw served as President and Chief Executive Officer
of the Private Label Sportswear Division of Phillips-Van Heusen and President of
Sommerset Knitting Mills from 1982 to 1986.
Charles W. Clayton has been Secretary and Treasurer of the Company since
1984. He served as Vice President of Finance and Controller from 1978 to 1983
and Chief Financial Officer from 1984 to 2000. Mr. Clayton was employed
previously as an audit manager with Price Waterhouse, an international
accounting firm.
William W. Hodge joined the Company on January 1, 2001 as Vice President
and Chief Financial Officer. Prior to joining the Company, he served as Vice
President and Chief Financial Officer of American Fast Print, Limited, from 1986
to 2000 and previously as an audit manager with Ernst & Young, an international
accounting firm.
H. Edward Hurley has been Executive Vice President of Hampshire Designers,
Inc. since 1993. He served as Vice President of Operations and Corporate
Controller from 1986 to 1993. Formerly, he served as Controller of the Finishing
Division of Springs Industries, Inc.
</FN>
-6-
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held six meetings during the year ended December 31,
2000, and each Director attended at least 75% of the aggregate number of
meetings of the Board. In addition, each Director attended at least 75% of the
total number of meetings held by all committees of the Board on which he served.
The Company has a Compensation Committee which reviews and recommends to
the Board of Directors the cash or other compensation, including any stock
options, to be paid to management. The Compensation Committee currently consists
of Mr. Sperry and Dr. Goldberg, neither of whom are officers or employees of the
Company. The Compensation Committee held four meetings during fiscal year 2000.
The Company has an Investment Committee which reviews with management all
significant investment opportunities. The Investment Committee currently is
composed of Messrs. Kuttner, Jackson and Sperry. The Investment Committee held
four meetings during fiscal year 2000.
The Company has an Audit Committee which consults with management regarding
selection of the independent public accountants, reviews with management all
significant accounting and disclosure matters and reviews the scope and findings
of such accountant's examination. The Audit Committee also meets with the
independent accountants, without the participation of management, to inquire as
to the adequacy of the Company's internal controls and the cooperation of
management and company personnel in respect to the accountant's examination. The
Audit Committee consists of Dr. Goldberg, Mr. Jackson and Mr. Sperry, who are
not officers or employees of the Company. The Audit Committee held twelve
meetings during fiscal year 2000.
COMPENSATION OF DIRECTORS
During 2000, Messrs. Sperry and Goldberg received $15,000 each in annual
director's fees and $10,000 each as compensation for serving on the Audit
Committee. Mr. Sperry also received $10,000 for serving as a member of the
Investment Committee. The executive officers who also serve as directors do not
receive director's fees. The Company reimburses the directors for expenses
associated with attendance at the Board of Directors' meetings.
-7-
COMPENSATION COMMITTEE INTERLOCKS
Dr. Goldberg has served as a member of the Compensation Committee since
1998 and Mr. Sperry joined the Committee in November 2000. Prior to November
2000, Mr. Herbert Elish served as a member of the Committee. Neither Dr.
Goldberg, Mr. Sperry nor Mr. Elish is or has been an officer or an employee of
the Company
REPORT OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
Herbert Elish, Dr. Goldberg, and Mr. Sperry were members of the Board of
Directors and the Audit Committee in 2000. Mr. Elish resigned as a Director on
November 17, 2000. Mr. Jackson became a Director on March 1, 2001 and was
appointed as a member of the Audit Committee. Mr. Sperry, Dr. Goldberg, and Mr.
Jackson are not employees of the Company and are independent. The Board of
Directors has adopted a charter for the Audit Committee, which is included as
Appendix A to this Proxy Statement, which outlines the Audit Committee's
responsibilities and how it carries out those responsibilities.
With respect to the consolidated audited financial statements for the year
ended December 31, 2000, the Audit Committee has reviewed and discussed the
audited financial statements with management and the independent accountants.
The Audit Committee has discussed with the independent accountants the matters
required to be discussed by Statement on Auditing Standards Number 61
(Communication with Audit Committees), as currently in effect.
The Audit Committee has received the written disclosures and the letter
from the independent accountants required by Independence Standards Board
Standard Number 1 (Independence Discussions with Audit Committees), as currently
in effect, and the Committee has discussed with the independent accountants that
firm's independence.
Based upon the reviews and the discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2000, for filing with the Securities and Exchange Commission.
This report has been provided by the Audit Committee.
AUDIT COMMITTEE
HARVEY L. SPERRY, CHAIRMAN
DR. JOEL GOLDBERG
-8-
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for determining executive compensation.
Compensation of All Executives.
------------------------------
The Committee believes that, in order to maximize the Company's
profitability, it must attract, motivate and retain executives of the highest
caliber to cause the Company to achieve such profitability. To this end, the
Company provides its executives with competitive salaries and incentives,
including equity-based incentives, intended to align the interests of executives
with that of the Stockholders.
Annual Compensation.
-------------------
Annual compensation consists of salary and incentive bonuses with emphasis
on lower base salary and higher incentive bonuses. Incentive bonuses for
executives of Hampshire Designers are provided by a profit incentive plan,
whereby approximately 15% of pre-tax profits are allocated to the executives,
either in accordance with employment agreements, or by management with the
approval of the Committee.
Incentive bonuses for Company executives, including Mr. Kuttner, are based
on goals established by the Committee. A major portion of the incentive bonus is
based on the Company achieving profit goals established by the Committee.
Chief Executive Officer Compensation.
------------------------------------
Mr. Kuttner's compensation is based on his employment agreement with the
Company, which provides for an annual salary of $400,000, annual incentive bonus
compensation equal to 7% of net after-tax earnings of the Company and an annual
deferred compensation payment of $100,000.
Long-Term Incentives. Long-term incentives consist of grants of stock
options and the opportunity for key executives to use a portion of their
incentive bonuses to purchase Common Stock of the Company, at a discount,
pursuant to the Company's Common Stock Purchase Plan for Directors and
Executives. Long-term incentive awards are based on the individual
responsibilities of the executive, Company financial results and financial
performance of particular profit centers. Awards of stock options by the
Committee are made on a subjective basis after the Committee's evaluation of an
executive's performance.
-9-
Policy with Respect to the $1 Million Deduction Limit. Section 162(m) of
the Internal Revenue Code denies a publicly held corporation a federal income
tax deduction for compensation in excess of $1 million per year paid to or
accrued for each of its Chief Executive Officers and four other most highly
compensated executive officers. Certain "performance-based" incentives, such as
stock options awarded under the Company's 1992 Stock Option Plan, are not
subject to the limitation on deductibility. While the Committee considers the
limits on deductibility imposed by Section 162(m), the Committee believes that
the benefits of having flexibility in awarding cash compensation can sometimes
outweigh the lack of deductibility. All compensation earned by the Named
Executive Officers for 2000 was fully deductible.
COMPENSATION COMMITTEE
DR. JOEL GOLDBERG, CHAIRMAN
HARVEY L. SPERRY
EMPLOYMENT AGREEMENTS
Mr. Kuttner has an employment agreement with the Company effective January
1, 1998, which provides for an annual salary of $400,000, annual incentive
compensation equal to 7% of the net after tax earnings of the Company, and an
annual deferred compensation payment of $100,000. The employment agreement may
be terminated by the Company or Mr. Kuttner at any time. If the Company
terminates the employment agreement without cause, Mr. Kuttner would receive an
amount ("severance payment") equal to his average compensation for the five
calendar years preceding the year in which the termination occurs multiplied by
two. If required, this severance payment is payable in equal 24 monthly
installments. Mr. Kuttner would receive an amount equal to the severance payment
if he terminates his employment within 180 days after a change of control, which
would include a merger where the Company did not survive, a sale by the Company
of substantially all of its assets, or the election of a majority of the
directors who had not been nominated by the existing board of directors. Mr.
Kuttner's spouse is entitled to receive an amount equal to the severance payment
if Mr. Kuttner were to die while employed by the Company. The Company carries
insurance on the life of Mr. Kuttner to cover such contingency.
Mr. Warsaw has an employment agreement with Hampshire Designers, Inc.
pursuant to which he receives a salary of $350,000 per year, plus an incentive
bonus based on the pre-tax income of the sweater division. The employment
agreement provides for the payment of deferred compensation of $175,000 per year
for five years commencing in the year his employment terminates. This payment
would be due only if Mr. Warsaw remains employed by Hampshire Designers through
December 31, 2002 and assists in an orderly transition for his successor. The
Company and Mr. Warsaw each have the right to terminate the agreement at any
time upon twelve months notice.
-10-
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information regarding the compensation of
the Company's Chief Executive Officer and its three next most highly compensated
executive officers (the "Named Executive Officers") for the years 2000, 1999 and
1998.
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------
Long Term
Annual Compensation Compensation
---------------------------- ------------
Other Annual Securities
Name and Salary Bonus Compensation Underlying All Other
Principal Position Year (2) (2) (3) Options Compensation
- -----------------------------------------------------------------------------------------
Ludwig Kuttner 2000 $400,000 $666,260 $26,652 - $106,800 (4)
Chairman, President and 1999 400,000 416,418 18,325 50,000 106,400
Chief Executive Officer 1998 400,000 403,608 17,902 - 106,400
- -----------------------------------------------------------------------------------------
Eugene Warsaw 2000 350,000 199,590 2,217 - 243,400 (4)
President and CEO, 1999 350,000 171,891 1,910 - 3,200
Hampshire Designers, Inc. 1998 350,000 442,148 4,913 10,000 3,200
- -----------------------------------------------------------------------------------------
Charles W. Clayton (1) 2000 144,000 180,860 9,439 5,000 16,800 (4)
Vice President, Secretary, 1999 149,500 98,877 6,057 15,000 16,400
Treasurer 1998 155,000 153,117 8,524 10,000 13,200
- -----------------------------------------------------------------------------------------
H. Edward Hurley 2000 132,500 57,100 634 5,000 3,400 (5)
Executive Vice President, 1999 117,500 41,254 458 - 3,200
Hampshire Designers, Inc. 1998 110,000 115,764 1,286 10,000 3,200
- -----------------------------------------------------------------------------------------
<FN>
(1) Effective January 1, 2001, William W. Hodge was appointed Chief Financial
Officer replacing Charles W. Clayton who will continue as Secretary and
Treasurer of the Company.
(2) The annual salary and incentive bonuses for 2000 included amounts paid into
the Company's Common Stock Purchase Plan and Voluntary Deferred
Compensation Plan as follows: Kuttner - $139,878, Warsaw - $19,959, Clayton
- $84,944 and Hurley - $5,210.
(3) The amounts reported represent discounts on stock purchased under the
Common Stock Purchase Plan.
(4) Pursuant to the terms of a deferred compensation plan, Kuttner, Warsaw and
Clayton were awarded contributions of $100,000, $240,000 and $10,000,
respectively. The remaining balance was contributed by the Company for the
executive pursuant to the Company's 401(k) Retirement Savings Plan.
(5) Represents amounts contributed by the Company for the executive pursuant to
the Company's 401(k) Retirement Savings Plan.
</FN>
-11-
The following table sets forth information regarding grants of stock options
made during 2000 to each of the Named Executive Officers.
Option Grants in Last Fiscal Year
- --------------------------------------------------------------------------------------
Number of Percent of Total
Securities (1) Options Granted Exercise or Expira- Grant Date
Underlying to Employees in Base Price tion Present
Name Options Granted Fiscal Year (Per Share) Date Value (2)
- --------------------------------------------------------------------------------------
Charles W. Clayton 5,000 2.5% $8.00 09/10/05 $14,985
- --------------------------------------------------------------------------------------
H. Edward Hurley 5,000 2.5% 8.00 09/10/05 14,985
- --------------------------------------------------------------------------------------
<FN>
(1) The options were granted on September 11, 2000, under the Company's 1992
Stock Option Plan at the fair market value on the date of grant and vested
on December 31, 2000.
(2) A variant of the Black-Scholes option-pricing model was used to determine
the grant date present value. In applying the model, the Company assumed a
5.37% risk-free rate of return, a 0% dividend yield, an average annualized
volatility of 50.31% and an expected term from vest of 2.5 years.
</FN>
The following table sets forth information regarding the exercise of options
during 2000 and the number and value of unexercised options held at year-end by
each of the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND DECEMBER 31, 2000 OPTION VALUES
- -----------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Number of Underlying Unexercised In-the-Money Options
Shares Options at 12/31/00 at 12/31/00
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable (1)
- -----------------------------------------------------------------------------------
Ludwig Kuttner 15,476 $10,824 45,385 / 16,667 $ 11,328 / -
Eugene Warsaw 11,023 21,929 19,771 / 5,000 117,252 / -
Charles W. Clayton 10,636 20,057 32,138 / 5,000 28,878 / -
H. Edward Hurley 1,750 1,531 13,500 / 5,000 27,783 / -
- -----------------------------------------------------------------------------------
<FN>
(1) The average of the closing bid and ask price of the Company's Common Stock
as reported by the NASDAQ National Market at December 31, 2000 was $7.938.
</FN>
-12-
CERTAIN RELATIONSHIPS AND TRANSACTIONS
The Company leases its Anderson, South Carolina corporate office facilities
(10,500 square feet) and distribution center (57,000 square feet) from Commerce
Center Associates, Inc. ("Commerce Center"). Ludwig Kuttner, Chief Executive
Officer of the Company, and his wife, Beatrice Ost-Kuttner, together own
approximately 18% of the voting stock of Commerce Center. The terms of these
leases were approved by the Board of Directors of the Company without the
participation of Mr. Kuttner. The Board believes, based upon the advice of an
independent appraiser, that the leases are fair and reasonable and are at market
terms. The aggregate rent paid during 2000 on these two facilities was $232,000.
During 1999, Hampshire Investments made advances supported by two
promissory notes in the aggregate principal amount of $775,000. The issuers
defaulted under the notes. On March 30, 2000, Mr. Kuttner, although not
obligated to do so, purchased the notes from Hampshire Investments for their
aggregate principal amount.
Mr. Kuttner has guaranteed the subordinated notes issued as part of the
purchase price of the assets and business of Item-Eyes, Inc. and also certain
debt of Hampshire Investments, Limited with balances as of December 31, 2000 of
$2,100,000 and $6,549,000 respectively. For such guarantees, Mr. Kuttner was
paid a fee of $24,000 for the year 2000.
The Company leases certain buildings in Winona, Minnesota, from a director
of the Company, Peter Woodworth. The Board believes based upon the advice of an
independent appraiser, that the leases are fair and reasonable and are at market
terms. The aggregate rent paid for the facilities during 2000 was $164,000.
Mr. Harvey L. Sperry, a Director of the Company, retired March 31, 2000
from the law firm of Willkie Farr and Gallagher.
Dr. Joel Goldberg, a Director of the Company, is a principal of Career
Consultants, Inc. which has provided organizational consulting services to the
Company since 1997 and in such capacity was paid $25,000 in fees during 2000.
Mr. Jackson, a Director with the Company, is a general partner with
Housatonic Partners, a private equity investment partnership. The Company has
$1,762,000 invested with the partnership.
Oliver Kuttner, a son of Mr. Kuttner, is managing certain renovations of
the real property owned by the Company in Charlottesville, Virginia. During
2000, the Company paid Mr. Oliver Kuttner $20,000 in fees, and he will receive,
as additional consideration, 30% of the net cash flow of the property after the
Company has received a 10% preferred return on its investment.
-13-
INDEPENDENT ACCOUNTANTS
On October 14, 1999 upon recommendation of the Audit Committee, the Company
changed to Deloitte & Touche LLP as its independent accountants from
PricewaterhouseCoopers LLP. The action was approved by the Board of Directors of
the Company.
The aggregate fees of Deloitte & Touche LLP for professional services for
the audit of our annual consolidated financial statements for 2000 and the
review of the consolidated financial statements included on our Report on Form
10-Q for 2000 were $206,100.
There were no fees billed by Deloitte & Touche LLP to us for financial
system design and implementation services during 2000.
The aggregate fees billed to us for all other services rendered by Deloitte
& Touche LLP during 2000 were $131,000. These services included tax services,
accounting matters related to the sale of manufacturing facilities, various
non-audit related SEC filings, audit of employee benefit plans and accounting
research.
The Audit Committee considers the provision of non-audit services by
Deloitte & Touche LLP to be compatible with maintaining the principal
accountant's independence.
There have been no disagreements between the Company and either independent
accountant on any matter of accounting principles or practices or financial
statement disclosure during the three fiscal years ended December 31, 2000, 1999
and 1998 and during the subsequent interim period through the date hereof.
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
The Company assists the directors and executives in filing reports pursuant
to Section 16 of the Securities Exchange Act of 1934, including Form 4 monthly
transaction reports, for those reporting persons who so requested and who agreed
to advise the Company of changes in the ownership of the Company's equity
securities. To the best of the Company's knowledge and belief, based solely on
the review of reports filed with the Securities and Exchange Commission and upon
written representations by directors and certain executives, there were no
delinquent Section 16 reports during the fiscal year ended December 31, 2000,
except for, Form 3, for William W. Hodge. Mr. Hodge became an officer of the
Company on January 1, 2001 and filed his Form 3 on January 24, 2001.
-14-
PERFORMANCE GRAPH
The following graph sets forth a comparison of the Company's stock
performance, the S&P 500 Composite Index and the S&P Textiles Index, in each
case assuming an investment of $100 on December 31, 1995 and the accumulation
and the reinvestment of dividends paid thereafter through December 31, 2000. The
Company chose the S&P 500 Composite Index as a measure of the broad equity
market and the S&P Textiles Index as a measure of its relative industry
performance.
[GRAPH APPEARS HERE]
12/95 12/96 12/97 12/98 12/99 12/00
----- ----- ----- ----- ----- -----
HAMP 100 113 156 110 73 65
S&P 500 100 120 158 200 239 214
S&P TEXTILES 100 131 141 120 90 100
-15-
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be presented at the 2002 Annual
Meeting must be received by the Company no later than January 31, 2002 to be
considered for inclusion in the Company's Proxy Statement and Form of Proxy
relating to that meeting. Such proposals should be addressed to: Hampshire
Group, Limited, Attn.: Secretary, 215 Commerce Boulevard, Anderson, SC 29625.
INFORMATION AVAILABLE TO STOCKHOLDERS
The Company's 2000 Annual Report to Stockholders on Form 10-K is being
mailed with this Proxy Statement. Additional copies of the 2000 Annual Report on
Form 10-K as filed with the Securities and Exchange Commission may be obtained
by Stockholders, without charge, from the Company, by writing: Hampshire Group,
Limited, Attn.: Secretary, 215 Commerce Boulevard, Anderson, SC 29625; or by
request at Hampshire's e-mail address: lwest@hamp.com.
Financial statements are also on file with the Securities and Exchange
Commission, Washington, DC 20549 and can be obtained directly at
http://www.sec.gov/ or may be obtained from the Company's website at
http://www.hamp.com.
By order of the Board of Directors,
/s/ Charles W. Clayton
--------------------------------
Anderson, South Carolina Charles W. Clayton
April 10, 2001 Secretary
==============================================================================
STOCKHOLDERS ARE URGED TO PROMPTLY COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY.
YOUR COOPERATION IS GREATLY APPRECIATED.
-16-
Appendix A
AUDIT COMMITTEE CHARTER
The Audit Committee of the Board of Directors of Hampshire Group, Limited
(the "Company") has been established to assist the Board of Directors (the
"Board") in fulfilling its responsibility to oversee management's conduct of the
financial reporting process, the system of internal, financial, and
administrative controls, and the annual independent audit of the Company's
financial statements.
The Audit Committee's role is one of oversight, and recognizes that
management is responsible for preparing the Company's financial statements and
that the external auditor is responsible for auditing those financial
statements.
The Audit Committee is empowered to investigate any matter brought to its
attention with full access to Company records, personnel, facilities, and
outside experts as needed and requested.
MEMBERSHIP
- ----------
- - The Audit Committee will be comprised of at least three directors who are
independent and financially literate as required by SEC Release NASDAQ
34-42331.
- - At least one member must have significant past employment experience in
finance or accounting, relevant professional certification or comparable
experience or background with financial oversight responsibilities, such as
having been a chief financial officer or chief executive officer.
RESPONSIBILITIES
- ----------------
The Audit Committee will fulfill its responsibilities to the Board by:
- - Ensuring accountability of the external auditor to the Board and Audit
Committee by interviewing and recommending to the Board the firm of
external auditors to be appointed as independent auditors of the Company,
and reviewing their qualifications, scope of work, performance, and
professional fees;
- - Approving the external auditor's annual audit plans for the Company;
- - Ensuring receipt from the external auditor of a formal written statement
delineating all relationships between the auditor and the Company, its
directors and management consistent with Independence Standards Board
Standard Number 1;
A-1
- - Discussing any disclosed relationships and their impact on the external
auditor's independence, and recommending any actions to the Board necessary
to satisfy itself of the auditor's independence;
- - Reviewing the results of internal and external audit work performed, the
quality and adequacy of internal controls, and focusing on material and
significant controls issues resulting from audit activities;
- - Follow-up of management's implementation of recommendations made by the
external auditors;
- - Reviewing and approving major changes in accounting policies and practices;
- - Meeting periodically with management to review the Company's major
financial risk exposures;
- - Reviewing the annual audited financial statements, and interim financial
statements, prior to submission to the Board. This includes review,
understanding and approval of significant adjustments, estimates, and
accounting policy changes per the Statement on Audit Standards Number 61
(SAS 61);
- - Provide an independent, direct communication between the Board and external
auditors;
- - Oversee legal and regulatory compliance, and compliance with the Company's
Business Ethics Policy; and
DISCLOSURES
- -----------
The Audit Committee will conform to external disclosure requirements by:
- - Certifying to the National Association Security Dealers as required
regarding the independence and financial literacy of all Audit Committee
members; and
- - Preparing for inclusion in the annual proxy statement, per the Securities
and Exchange Commission requirements, a statement certifying that the
Committee has reviewed and discussed the audited financial statements, and
SAS 61 items as described above.
- ------------------------------------------------------------------------------
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF
HAMPSHIRE GROUP, LIMITED FOR ANNUAL MEETING OF STOCKHOLDERS
- ------------------------------------------------------------------------------
The undersigned Stockholder(s) of Hampshire Group, Limited (the "Company"),
having received Notice of the Annual Meeting of Stockholders to be held on May
17, 2001 and the Proxy Statement accompanying such Notice, hereby constitutes
and appoints Ludwig Kuttner and Harvey L. Sperry and each of them, with several
powers of substitution, for and in the name, place and stead of the undersigned,
to attend and vote all shares of Common Stock of the Company, which the
undersigned would be entitled to vote at the Annual Meeting, to be held at the
Princeton Club, 15 West Forty-Third Street, New York, New York, on May 17, 2001,
at 10:00 A.M. and at any and all adjournments thereof, with all power the
undersigned would possess if personally present.
Item 1: Election of six Directors. Nominees: 01 - Ludwig Kuttner; 02 - Joel
Goldberg; 03 - Michael Jackson; 04 - Harvey L. Sperry; 05 - Eugene
Warsaw; and 06 - Peter W. Woodworth.
[ ] For all nominees listed above.
[ ] Withhold authority to vote for all nominees.
[ ] Withhold authority to vote for any individual nominee
_______, _______, _______, _______,
(write numbers of nominee(s) above)
- -------------------------------------------------------------------------------
Item 2: To ratify the appointment of Deloitte & Touche LLP as the Company's
independent accountants for the fiscal year ending December 31, 2001.
[ ] For [ ] Against [ ] Abstain
This proxy will be voted as directed; but if no direction is indicated it
will be voted FOR the election of the six nominees listed above and FOR the
other proposal.
Number of shares: __________
Dated: _______________, 2001
Signature(s) -------------------------------
--------------------------------------------
Please sign exactly as name(s) appear(s)
on the stock certificate. For joint accounts,
all co-owners must sign and Executor,
Administrators, Trustees, etc. should so
indicate when signing.
- -------------------------------------------------------------------------------