HAMPSHIRE GROUP, LIMITED
April 16, 2003
Dear Fellow Stockholder:
We cordially invite you to attend the Annual Meeting of Stockholders of
Hampshire Group, Limited on Thursday, May 22, 2003. The meeting will begin at
9:30 A. M., at HSBC Bank USA, 452 Fifth Avenue, Floor 11, New York, New York.
The official Notice of Annual Meeting, proxy statement and the accompanying
proxy are enclosed with this letter. The Notice of the Annual Meeting and proxy
statement describe the formal business to be transacted at the Annual Meeting.
After the formal part of the meeting, members of management will be making
a presentation regarding the significant achievements of the past year followed
by an opportunity for stockholders to ask questions of the management group or
to comment on matters pertaining to Hampshire Group, Limited.
The vote of every stockholder is important. To ensure proper representation
of your shares at the meeting, please complete, sign and date the enclosed proxy
card and return it as soon as possible, even if you currently plan to attend the
Annual Meeting. This will not prevent you from voting in person but will ensure
that your vote will be counted if you are unable to attend.
This proxy statement and the accompanying proxy are first being mailed to
stockholders on or about April 23, 2003. Your prompt submission of a proxy card
will be greatly appreciated.
Sincerely,
/s/ Ludwig Kuttner
-------------------
Ludwig Kuttner
Chairman of the Board, President
and Chief Executive Officer
HAMPSHIRE GROUP, LIMITED
215 Commerce Boulevard
Anderson, SC 29625
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 22, 2003
Notice is hereby given that the Annual Meeting of Stockholders of Hampshire
Group, Limited, a Delaware corporation (the "Company"), will be held at 9:30
A.M. on Thursday, May 22, 2003, at HSBC Bank USA, 452 Fifth Avenue, Floor 11,
New York, New York, to consider and act on the following proposals:
1. To elect eight Directors to serve until the next Annual Meeting of
Stockholders;
2. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending December 31, 2003; 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.
Stockholders of Record at the close of business on April 9, 2003, will be
entitled to receive notice of, and to vote at, the Annual Meeting, or any
postponements or adjournments thereof.
By Order of the Board of Directors,
/s/ Charles W. Clayton
----------------------------------------
Charles W. Clayton
Secretary
Anderson, South Carolina
April 16, 2003
A PROXY CARD IS ENCLOSED. TO ENSURE THAT YOUR SHARES WILL BE VOTED AT THE
ANNUAL MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND
RETURN IT AS SOON AS POSSIBLE. IF YOU RETURN YOUR SIGNED PROXY CARD, YOU RETAIN
YOUR RIGHT TO VOTE IF YOU ATTEND THE MEETING.
HAMPSHIRE GROUP, LIMITED
215 Commerce Boulevard
Anderson, SC 29625
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
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 (the "Annual Meeting") to be held on May 22, 2003, at 9:30 A.M.,
HSBC Bank USA, 452 Fifth Avenue, Floor 11, New York, New York, or at any and all
adjournments or postponements 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 23, 2003 to Stockholders
of Record as of April 9, 2003 (the "Record Date"). 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, 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.
PROXY INFORMATION
Please complete, date and sign the enclosed proxy and return it to the
principal executive office of Hampshire Group, Limited, at 215 Commerce
Boulevard, Anderson, South Carolina 29625, Attention: Secretary.
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 eight persons designated
as nominees;
(2) FOR the ratification of the appointment of Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year 2003.
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.
The Company may only send one copy of the proxy statement to multiple
shareholders that share the same address. Upon written or oral request, the
Company will promptly supply such stockholders with additional copies of the
proxy statement. Such requests should be made by contacting the Company's
offices at 215 Commerce Boulevard, Anderson, SC 29625, Attention: Secretary or
by calling us at (800) 275-3580. If stockholders sharing the same address are
receiving multiple copies of the annual report or proxy statement, such
stockholders can request delivery in the future of only a single copy of the
annual report or proxy statement by contacting the Company at the above
address.
SHAREHOLDERS ENTITLED TO VOTE; QUORUM
Holders on record of the Common Stock, par value $.10 (the "Common Stock")
at the close of business on the Record Date are entitled to notice of and to
vote at the Annual Meeting.
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.
OUTSTANDING VOTING STOCK
As of the Record Date, there were 4,696,384 shares of Common Stock eligible
to vote at the Annual Meeting of Stockholders. Holders of Common Stock are
entitled to one vote for each share of stock held on the Record Date.
2
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Annual Meeting, eight 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 for Election as Directors
- ----------------------------------
The eight persons listed below have been nominated for election as
directors of Hampshire Group, Limited, each currently being an active Director
of the Company.
Joel Goldberg Age 57 Director since 1998
- -------------------------------------------------------------------------------
Member of the Audit and Compensation (Chairman) Committees
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 63 Director 1986-1996 and since 2001
- -------------------------------------------------------------------------------
Member of the Investment Committee
Mr. Jackson is a founding partner of Ironwood Partners, LLC and Housatonic
Equity Funds, a private equity investment partnership. Mr. Jackson, now serving
as an Advisor, retired in February 2003 from Lehman Brothers where he was an
employee since 1968.
Ludwig Kuttner Age 56 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 from
1994 through the present. Previously, he served in various capacities in the
textile industry and as an owner and developer of real property.
Richard V. Romer Age 61 Director since November 2002
- -------------------------------------------------------------------------------
Member of the Audit (Chairman), and Investment Committees
Mr. Romer is the founder and President of RVR Associates, a general
business consulting firm. Mr. Romer retired in 2001 from the CIT Group where he
served as Executive Vice President and National Director of Marketing. Prior to
assuming this position in 1997, he was the Northeast Regional Manager.
3
Harvey L. Sperry Age 73 Director since 1977
- -------------------------------------------------------------------------------
Member of the Audit, Compensation and Investment Committees
Mr. Sperry is a retired Partner of the law firm of Willkie Farr &
Gallagher, which provides legal services to the Company.
Eugene Warsaw Age 75 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 Corporation and President of
Sommerset Knitting Mills.
Irwin W. Winter Age 69
- -------------------------------------------------------------------------------
Mr. Winter retired, April 1999, from Phillips-Van Heusen Corporation, a
wholesaler and retailer of branded apparel, where he served as a Director and
Executive Vice President since 1987.
Peter W. Woodworth Age 56 Director since 1995
- -------------------------------------------------------------------------------
Member of the Investment Committee
Mr. Woodworth is the President of WKM Properties. He served as President
and Chief Executive Officer of Winona Knitting Mills, a former division of
Hampshire Designers, Inc. from 1995 through 1999. He serves on the Board of
Directors of Merchants Financial Group, Merchants National Bank, and HBC
Communications.
Information about the beneficial ownership of the Company's Common Stock
held by each nominee is included in the "Beneficial Ownership Table" on Page 8.
Voting and Recommendation. Each nominee for director must be elected by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of directors. Abstentions
will not be included in the vote totals with the result that an abstention will
not have an effect on the vote. The Board of Directors unanimously recommends a
vote `for' each of the persons nominated for election to the Board of Directors.
COMPENSATION OF DIRECTORS
During 2002, Messrs. Goldberg, Jackson, Romer and Sperry each received
annual director's fees of $40,000 and Mr. Woodworth received an annual
director's fee of $25,000. 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 meetings of the Board of Directors and
Committees.
4
INFORMATION ABOUT COMMITTEES TO THE BOARD OF DIRECTORS
The Board of Directors has three standing committees:
Audit Committee-The Audit Committee assists the Board of Directors in
fulfilling its oversight responsibilities relating to the integrity of the
financial statements of the Company, compliance with legal regulatory
requirements, the independent auditor's qualifications and independence, the
performance of the independent auditor, and such other duties as directed by the
Board of Directors. The Committee operates under a charter adopted by the Board
of Directors.
Compensation Committee-The Compensation Committee assists the Board of
Directors in fulfilling its oversight responsibilities relating to officer and
senior management compensation, succession planning for senior management, and
such other duties as directed by the Board of Directors.
Investment Committee-The Investment Committee assists the Board of
Directors in reviewing with management all significant investment opportunities
and such other duties as directed by the Board of Directors.
The Company does not have a Nominating Committee.
NUMBER OF MEETINGS AND MEETING ATTENDANCE
During fiscal year 2002, the Board of Directors held four meetings, the
Compensation Committee held four meetings, the Audit Committee held six meetings
and the Investment Committee held four meetings. Each Director attended at least
75% of the meetings of the Board and committees on which he served.
5
PROPOSAL NO. 2
APPOINTMENT OF INDEPENDENT AUDITORS
It is proposed that the stockholders ratify the appointment of Deloitte &
Touche LLP as independent auditors of the Company for the year ending December
31, 2003. Deloitte and Touche has served as independent auditors 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 questions.
Voting and Recommendation. The appointment of the independent auditors
requiring ratification by the holders of a majority of the stock present in
person or represented by proxy at the meeting. Abstentions will be included in
the vote totals with the result that an abstention will have the effect of a
negative vote. The Board of Directors unanimously recommends a vote 'for' the
ratification of the appointment of the independent auditors.
INDEPENDENT AUDITORS
Deloitte & Touche LLP served as the Company's independent auditors for the
fiscal year ended December 31, 2002. The appointment of the independent auditors
was approved by the Board of Directors and ratified by the shareholders of the
Company.
Audit Fees
----------
The aggregate fees of Deloitte & Touche LLP for professional services for
the audit of the Company's annual consolidated financial statements as of and
for the year ended December 31, 2002 and for the limited reviews of the
Company's unaudited condensed consolidated financial statements as of September
28, 2002, June 29, 2002, and March 30, 2002 were $168,800.
Financial Information System Design and Implementation Fees
-----------------------------------------------------------
There were no fees billed by Deloitte & Touche LLP to the Company for
financial information system design and implementation services during 2002.
All Other Fees
--------------
The aggregate fees billed to the Company during 2002 for all other services
rendered by Deloitte & Touche LLP were $44,600. These services included tax
services, employee benefit plan audits and research.
6
The Audit Committee considers the non-audit services performed by Deloitte
& Touche LLP as not affecting the independence of Deloitte & Touche LLP.
In fiscal 2002, the Audit Committee had a policy to monitor and limit the
non-audit related services performed by our independent auditors. Effective for
fiscal 2003, the Audit Committee will require all services to be performed by
Deloitte & Touche LLP to be pre-approved by the Audit Committee.
REPORT OF THE AUDIT COMMITTEE
No member of the Audit Committee is an employee of the Company and all
members are independent as defined by Rule 4200(a)(15) of the National
Association of Securities Dealers Listing Standards. The Board of Directors has
adopted a charter for the Audit Committee that specifies the Audit Committee's
duties and responsibilities.
With respect to the audited consolidated financial statements for the year
ended December 31, 2002, the Audit Committee has reviewed and discussed the
audited financial statements with management and Deloitte & Touche LLP. The
Audit Committee has discussed with Deloitte & Touche LLP the matters required to
be discussed by Statement on Auditing Standards Number 61 (Communication with
Audit Committees), as in effect as of the date hereof.
The Audit Committee has received the written disclosures and the letter
from the independent auditors required by Independence Standards Board Standard
Number 1 (Independence Discussions with Audit Committees), as in effect as of
the date hereof, and the Committee has discussed with Deloitte & Touche LLP 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, 2002, for filing with the Securities and Exchange Commission.
The Audit Committee has provided this report.
AUDIT COMMITTEE
RICHARD V. ROMER, CHAIRMAN
HARVEY L. SPERRY
DR. JOEL GOLDBERG
7
Beneficial Ownership
The following table sets forth certain information regarding the beneficial
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 therein have 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 record and beneficial ownership with
respect to their shares of Common Stock of the Company.
BENEFICIAL OWNERSHIP TABLE
- -------------------------------------------------------------------------------
Stockholder Shares(1) Percent
- -------------------------------------------------------------------------------
Ludwig Kuttner - Estouteville, Keene VA 22946 1,663,423(2) 35.37%
Hans W. Schmidig - Bleicherweg 39, CH-8027,
Zurich, Switzerland 481,386 10.25%
Fidelity Low-Price Stock Fund - 82 Devonshire St.,
Boston MA 02109 466,700 9.94%
Peter W. Woodworth - 702 Main Street, Winona MN 55987 327,203(3) 6.97%
Heartland Advisors, Inc. - 789 N. Water St.,
Milwaukee, WI 53202 300,000 6.39%
Eugene Warsaw 94,442(4) 2.01%
Corey Greenberg 6,375(5) *
Michael Culang 9,703(5) *
H. Edward Hurley 21,173(5) *
Harvey L. Sperry 5,000 *
Joel Goldberg 2,500 *
Michael C. Jackson - *
Richard V. Romer - *
All directors and executive officers as a group
(12 persons) 2,268,231 47.53%
- -------------------------------------------------------------------------------
<FN>
(1) The number of shares of Common Stock issued and outstanding on the Record
Date was 4,696,384. The calculation of percentage ownership for each listed
beneficial owner is based on the number of shares issued and outstanding on
the Record Date, plus shares of Common Stock subject to options held by
such person on the Record Date and exercisable within 60 days thereafter.
8
(2) (Ludwig Kuttner) Includes 153,503 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"), 6,100 shares issuable under
presently exercisable options and 845,000 shares owned by a company
controlled by Mr. Kuttner; but does not include 188,864 shares held by his
spouse nor 80,000 shares held by their sons, as to which Mr. 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) (Eugene Warsaw) Includes 26,756 shares of Common Stock purchased for the
account of Mr. Warsaw under the Common Stock Purchase Plan, 10,000 shares
of Common Stock issuable under presently exercisable options and 250 shares
of Common Stock held by his children.
(5) Includes shares of Common Stock purchased under the Common Stock Purchase
Plan for the account of Mr. Culang-4,703 and Mr. Hurley-6,943; and shares
of Common Stock issuable under presently exercisable options by Mr.
Greenberg-6,375, Mr. Culang-5,000 and Mr.Hurley-10,000.
(*) Less than 1%.
</FN>
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 Office
- -------------------------------------------------------------------------------
Ludwig Kuttner 56 Chairman of the Board, President and
Chief Executive Officer
William W. Hodge 50 Vice President and Chief Financial Officer
Charles W. Clayton 65 Secretary and Treasurer
Eugene Warsaw 75 President and Chief Executive Officer,
Hampshire Designers, Inc.
H. Edward Hurley 54 Executive Vice President,
Hampshire Designers, Inc.
Corey Greenberg 52 President, Designers Originals and Segue Limited,
Divisions of Hampshire Designers, Inc.
Michael Culang 53 President, Hampshire Brands,
Division of Hampshire Designers, Inc.
9
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 from 1994 through the present. Previously, he
served in various capacities in the textile industry and as an owner and
developer of real property.
William W. Hodge has been the Vice President and Chief Financial Officer of
the Company since January 1, 2001. 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.
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 PricewaterhouseCoopers, an international
accounting firm.
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.
H. Edward Hurley has been Executive Vice President of Hampshire Designers,
Inc. since 1993. He served as Vice President of Operations and Controller from
1986 to 1993. Previously, he served as Controller of the Finishing Division of
Springs Industries, Inc.
Corey Greenberg has been President of Designers Originals since 2000 and
President of Segue Limited since 1996 and Vice President since 1994, both of
which are divisions of Hampshire Designers, Inc. Mr. Greenberg became a Named
Executive Officer during 2002.
Michael Culang has been President of Hampshire Brands, a division of
Hampshire Designers, Inc., since 1997. Mr. Culang became a Named Executive
Officer during 2002.
10
COMPENSATION OF NAMED EXECUTIVE OFFICERS
The following table sets forth information regarding the compensation of
the Company's Chief Executive Officer and its four next most highly compensated
executive officers (the "Named Executive Officers") for the years 2002, 2001 and
2000.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
------------
Annual Compensation Awards
-------------------------------- ----------
Other Annual Securities
Compensation Underlying All Other
Name and Principal Office Year Salary Bonus (1) Options Compensation
- ---------------------------------------------------------------------------------------------
Ludwig Kuttner 2002 $400,000 $1,193,360 - - $208,000 (2)
Chairman, President and 2001 400,000 828,240 - - 106,800
Chief Executive Officer 2000 400,000 666,260 $26,652 - 106,800
- ---------------------------------------------------------------------------------------------
Eugene Warsaw 2002 350,000 1,888,395 - - 564,814 (2)(3)
President and CEO, 2001 350,000 1,100,026 - - 474,214
Hampshire Designers, Inc. 2000 350,000 199,590 2,217 - 243,400
- ---------------------------------------------------------------------------------------------
Corey Greenberg 2002 300,000 861,497 - - 4,000 (2)
President, Designer 2001 300,000 667,872 - - 3,400
Originals & Segue Limited 2000 300,000 334,850 - - 3,400
Division of Hampshire
Designers, Inc.
- ---------------------------------------------------------------------------------------------
Michael Culang 2002 300,000 1,257,394 - - 4,000 (2)
President, Hampshire Brands, 2001 300,000 757,190 - 7,500 3,400
Division of Hampshire 2000 300,000 200,000 - - 3,400
Designers, Inc.
- ---------------------------------------------------------------------------------------------
H. Edward Hurley 2002 155,000 453,215 - - 4,000 (2)
Executive Vice President, 2001 147,000 275,293 - - 3,400
Hampshire Designers, Inc. 2000 132,500 57,100 634 5,000 3,400
- ---------------------------------------------------------------------------------------------
<FN>
(1) The amounts reported represent discounts on stock purchased under the
Common Stock Purchase Plan.
(2) Pursuant to the terms of a deferred compensation plan, Mr. Kuttner was
awarded a contribution of $200,000. In addition, the Company made
contributions to the Company's 401(k) Retirement Savings Plan on behalf of
Messrs. Kuttner, Warsaw, Greenberg, Culang and Hurley in the amounts of
$8,000, $4,000, $4,000, $4,000 and $4,000, respectively.
11
(3) Mr. Warsaw's employment agreement provides for the payment of deferred
compensation, after retirement, in the amount of $1,350,000. In accordance
with this unfunded deferred compensation arrangement, the Company has
accrued $560,814 during 2002, $470,814 during 2001 and $240,000 in 2000.
</FN>
The following table sets forth information regarding the exercise of
options during 2002 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, 2002 OPTION VALUES
- ------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Number of Underlying Unexercised In-the-Money Options
Shares Options at 12/31/02 at 12/31/02
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable (1)
- ------------------------------------------------------------------------------------
Ludwig Kuttner 3,601 $44,559 6,100 / 50,000 $51,935 / 626,733
Eugene Warsaw - - 10,000 / - 36,350 / -
Corey Greenberg 2,250 27,188 6,375 / - 12,236 / -
Michael Culang - - 5,000 / 2,500 66,300 / 29,400
H. Edward Hurley 5,000 40,000 10,000 / - 36,350 / -
- ------------------------------------------------------------------------------------
<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, 2002 was $21.77.
</FN>
No grants of stock options were made to any of the Named Executive Officers
during 2002.
12
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2002, with
respect to shares of the Company's common stock that may be issued under equity
compensation plans.
- --------------------------- ------------------------- ------------------------- --------------------
Number of securities to Weighted-average Number of securities
be issued upon exercise exercise price of remaining available for
of outstanding options, outstanding options, future issuance under
Plan category warrants and rights warrants and rights equity compensation plans
(excluding securities
reflected in column (a)
- ----------------------------------------------------------------------------------------------------
(a) (b) (c)
- ----------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security holders 328,695 $12.76 636,000
Equity compensation plans not
approved by security holders None N/A None
- ----------------------------------------------------------------------------------------------------
Total 328,695 $12.76 636,000
- ----------------------------------------------------------------------------------------------------
COMPENSATION COMMITTEE INTERLOCKS
Dr. Goldberg and Mr. Sperry have served as members of the Compensation
Committee since 1998 and 2000, respectively. Neither member of the Committee is
or has been an officer or an employee of the Company.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION
The Compensation Committee is responsible for determining executive
compensation. The Committee reviews and recommends to the Board of Directors
cash and other compensation, including stock options, to be paid to the
management.
Compensation of All Executives. The Committee believes that, in order to
maximize the Company's profitability, the Company must attract, motivate and
retain highly-qualified executives. To this end, the Company provides its
executives with competitive salaries and incentives, including equity-based
compensation, intended to align the interests of executives with that of the
stockholders.
13
Annual Compensation. Annual compensation for executives consists of a
salary and an incentive bonus with emphasis on lower base salary and higher
incentive bonuses. Incentive bonuses for executives of Hampshire Designers are
provided by a profit incentive plan, based on pre-tax profits of Hampshire
Designers, Inc., either in accordance with employment agreements, or by
management with the approval of the Committee.
Incentive bonuses for Company officers, including Mr. Kuttner, are based on
annual goals established by the Committee. The incentive bonus is based on the
Company achieving profit goals established by the Committee. The incentive bonus
paid to Mr. Kuttner for 2002 reflected the achievement of the established goals.
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
$200,000.
Long-Term Incentive Compensation. Long-term incentive compensation consists
of grants of stock options. Long-term incentive compensation 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.
Deductibility of Compensation Expenses. Section 162(m) of the Internal
Revenue Code generally disallows a federal income tax deduction to publicly held
corporations for compensation over $1 million for its Chief Executive Officer or
any of its four other highest paid executive officers. Certain "performance-
based" compensation is not subject to the deduction limit if certain
requirements are met. On November 21, 2002, at a Special Meeting, the
Stockholders of the Company approved the Hampshire Group, Limited Management
Incentive Bonus Plan (the "Bonus Plan"). The Bonus Plan is designed to allow the
Company to pay "performance-based" compensation that is exempt from the
deduction limitation of Section 162(m). As a result of the adoption of the Bonus
Plan, the Company will be entitled to a tax deduction for certain "performance-
based" compensation paid to Messrs. Kuttner, Warsaw, Greenberg and Culang which
does not exceed $2 million individually in any fiscal year of the Company. The
Committee intends to administer executive compensation programs in such a way
that anticipated compensation would be fully deductible under the Internal
Revenue Code, including submitting plans for stockholder approval when
necessary.
COMPENSATION COMMITTEE
DR. JOEL GOLDBERG, CHAIRMAN
HARVEY L. SPERRY
14
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 $200,000. 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: (i) his average compensation for the five
calendar years preceding the year in which the termination occurs; (ii)
multiplied by two; and (iii) paid in 24 equal 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 would
receive an amount equal to the severance payment if he 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. which
provides for an annual salary of $350,000, plus an incentive bonus of 7% of the
adjusted pre-tax income of Hampshire Designers, Inc. Either party may terminate
the employment agreement with a 30 day written notice. The employment agreement
provides for the payment of deferred compensation after Mr. Warsaw retires in
the amount of $300,000 per year for the first two years and $250,000 per year
for the next three years.
Mr. Greenberg has an employment agreement with Hampshire Designers, Inc.,
terminating December 31, 2005, which provides for an annual salary of $300,000,
plus an incentive bonus based on the adjusted pre-tax income of Hampshire
Originals and Segue Limited, divisions of Hampshire Designers, Inc.
Mr. Culang has an employment agreement with Hampshire Designers, Inc.,
terminating December 31, 2005, which provides for an annual salary of $300,000,
plus an incentive bonus based on the adjusted pre-tax income of Hampshire
Brands, a division of Hampshire Designers, Inc.
15
CERTAIN RELATIONSHIPS AND TRANSACTIONS
The Company leases certain buildings from an affiliated company. Ludwig
Kuttner and his wife own approximately 18% of the voting stock of the affiliate.
Rent expense under such leases was $243,000 in 2002. The Company also leases
certain buildings from Peter Woodworth, a Director of the Company. Rent expense
under such leases was $96,000 for 2002. The terms of these leases were approved
by the Board of Directors of the Company based on independent confirmation that
the leases are fair and reasonable and are at market terms.
Mr. Kuttner received a fee of $49,000 in 2002 for guaranteeing certain of
the Company's debt.
Michael Jackson, a Director of the Company, is a principal in Ironwood
Partners, LLC, which has provided financial consulting services to the Company
for which it was paid fees in the amount of $75,000 during 2002.
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, 2002.
APPRAISAL RIGHTS
Under Delaware law, no appraisal rights are available to dissenting
stockholders in regard to either of the Proposals.
16
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 and Apparel Index,
in each case assuming an investment of $100 on December 31, 1997 and the
accumulation and the reinvestment of dividends paid thereafter through December
31, 2002. The Company chose the S&P 500 Composite Index as a measure of the
broad equity market and the S&P Textiles Apparel Index as a measure of its
relative industry performance.
COMPARISON OF RETURNS
------------------------------------------------------------
12/97 12/98 12/99 12/00 12/01 12/02
----- ----- ----- ----- ----- -----
HAMP 100 71 47 42 68 116
S&P 500 100 127 151 136 118 91
Textile & Apparel 100 92 90 108 111 107
------------------------------------------------------------
[GRAPH OMITTED]
OTHER MATTERS
The Company knows of no other business to be acted upon at the Annual
Meeting. However, if any business is properly presented at the Annual Meeting,
the persons named as proxies will vote on them in accordance with their best
judgment on such matters.
17
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2004 Annual
Meeting must be received by the Company no later than December 24, 2003 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. If
the Company does not receive notice of any matter to be considered for
presentation at the Annual Meeting by March 9, 2004, management proxies may
confer discretionary authority to vote on matters presented at the Annual
Meeting by a stockholder in accordance with Rule 14a-4 under the Securities
Exchange Act of 1934.
By order of the Board of Directors,
/s/ Ludwig Kuttner
---------------------------------------
Anderson, South Carolina Ludwig Kuttner
April 16, 2003 Chairman of the Board of Directors,
President and Chief Executive Officer
The Company's Annual Report on Form 10-K for the year ended December 31, 2002
(other than exhibits) filed with the Securities and Exchange Commission, which
provides additional information about the Company is available on the internet
at www.hamp.com and is available in paper form to the beneficial owners of the
Company's Common Stock without charge upon written request to the Company's
offices at 215 Commerce Boulevard, Anderson, SC 29625, Attention: Secretary.
==============================================================================
STOCKHOLDERS ARE URGED TO PROMPTLY COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY. YOUR COOPERATION IS GREATLY APPRECIATED
18
HAMPSHIRE GROUP, LIMITED
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, MAY 22, 2003
AND PROXY STATEMENT
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
22, 2003 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 HSBC
Bank USA, 452 Fifth Avenue, Floor 11, New York, New York, on May 22, 2003, at
9:30 A.M. and at any and all adjournments thereof, with all power the
undersigned would possess if personally present.
In their discretion the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournments of the
meeting.
Proposal No.1: Election of eight Directors. Nominees: 01- Joel Goldberg;
02-Michael C. Jackson, 03-Ludwig Kuttner; 04 Richard V. Romer; 05-Harvey L.
Sperry; 06-Eugene Warsaw; 07-Irwin W. Winter and 08-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).
Proposal No. 2: To ratify the appointment of Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year ending December 31, 2003.
__ 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 eight nominees listed above and FOR Proposal
No. 2.
Number of shares: ___________
Dated: _______________, 2003
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.