UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrants [ ] Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
HAMPSHIRE GROUP, LIMITED
(Name of Registrant as Specified in its Charter)
Charles W. Clayton, Secretary
(Name of Person Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c) (1) (ii), 14a-6(i) (1), or 14a-6(j)
(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i) (3).
[ ] Fee computed on table below per Exchange Act Rules 14(a)-6(i)
(4) and 0-11.
1) Title of each class of securities to which transaction applies: _______
2) Aggregate number of securities to which transaction applies: _________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: __________________________
4) Proposed maximum aggregate value of transaction: ______________________
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amounts previously paid: ______________________________
2) Form, Schedule or Registration Statement No.: _____________
3) Filing Party: _________________________________________
4) Date Filed: __________________________________________
Hampshire Group, Limited
215 Commerce Boulevard
Anderson, South Carolina 29621
April 7, 1997
Dear Fellow Stockholder:
The 1997 Annual Meeting of Stockholders will be held at The Princeton Club,
15 West Forty-Third Street, New York City, on Wednesday, May 7, 1997 at 10:00
o'clock A.M. All Stockholders are welcome and encouraged to attend this meeting.
An official Notice of Annual Meeting of Stockholders appears on the next page of
this Proxy.
The matters scheduled for consideration at the Annual Meeting are set forth
in the Notice of Annual Meeting. In addition, the management group will be
updating those attending the meeting on the Company's activities and future
plans. We will plan ample time for questions and comments, as we value the
opportunity to have a dialogue with our Stockholders.
Michael C. Jackson who has served as a Director of the Company since 1986,
advised the Board of Directors that he would not stand for re-election at the
1997 Annual Meeting. He said that the demands of his other business activities
would preclude him from devoting the time required for him to continue as a
Director of the Company. Mike Jackson has made a significant and vital
contribution to the Company in his role as both a Director and advisor. We
sincerely thank him for his contribution.
I sincerely hope that you will be able to attend the Annual Meeting, but in
any event, we request that you mark and sign your Proxy and return it to 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 The
Princeton Club, 15 West Forty-Third Street, New York, New York on May 7, 1997,
at 10:00 A.M. to consider and act on the following proposals:
1. The election of five Directors to serve until the next Annual Meeting
of Stockholders;
2. The ratification of the appointment of Price Waterhouse LLP,
independent accountants, as the Company's auditors for the fiscal year
ending December 31, 1997; and
3. Any other business 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 7, 1997, 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, 1996, 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 in person. If you attend the meeting
in person, you may revoke your Proxy if you choose to cast your vote in person.
Anderson, South Carolina By Order of the Board of Directors,
April 7, 1997
/s/ Charles W. Clayton
---------------------------------
Charles W. Clayton
Secretary
HAMPSHIRE GROUP, LIMITED
Post Office Box 2667
215 Commerce Boulevard
Anderson, SC 29621
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 at The Princeton Club, 15 West Forty-Third Street, New
York, New York, on May 7, 1997, at 10:00 A.M., 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 10, 1997 to Stockholders of record as of April 7, 1997 (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 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. To the extent necessary and in
order to ensure sufficient representation, officers and employees of the Company
may, without additional remuneration, solicit proxies from Stockholders by
telephone or personal interviews.
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 five persons
designated as nominees; and
(2) FOR ratification of the appointment of Price Waterhouse LLP,
independent accountants, as the Company's auditors for the fiscal year
ending December 31, 1997.
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 prior to the Annual Meeting.
1
OUTSTANDING VOTING STOCK
As of the Record Date, there were 3,872,830 shares of Common Stock, par
value $0.10 per share, (the "Common Stock") eligible to vote at the 1997 Annual
Meeting of Stockholders. Holders of Common Stock are entitled to one vote for
each share of stock held on the Record Date.
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.
BENEFICIAL OWNERSHIP TABLE
Name Shares Percent
- ------------------------------------------------------------------------------
Ludwig Kuttner
Estouteville, Keene VA 22946 830,003 (1) 19.54%
Beatrice Ost-Kuttner
Estouteville, Keene VA 22946 916,137 (2) 23.75%
Hans W. Schmidig
Bleicherweg 39, CH-8027, Zurich, Switzerland 481,386 12.48%
Michael C. Jackson
177 Sabbaday Lane, Washington Depot, CT 06794 291,741 (3) 7.08%
Peter W. Woodworth
702 Main Street, Winona MN 55987 290,293 (4) 7.33%
Eugene Warsaw 112,043 (5) 2.85%
Charles W. Clayton 111,957 (8) 2.88%
Herbert Elish 43,821 (6) 1.14%
H. Edward Hurley 36,538 (8) 0.94%
Harvey L. Sperry 28,003 (7) 0.73%
Fritz Schulte 9,018 (8) 0.23%
All directors and executive officers
as a group (nine persons) 1,753,417 37.05%
(Footnotes continued on Page 3)
2
(Footnotes continued from Page 2)
(1)(Ludwig Kuttner) Includes 134,996 shares of Common Stock issuable upon
conversion of the Company's Series D Convertible Preferred Stock, 72,727
shares issuable upon exercise of warrants, 165,512 shares issuable under
presently exercisable options and 80,128 shares purchased under the
Company's Common Stock Purchase Plan for Directors and Executives (the
"Common Stock Purchase Plan"); but does not include shares held by Mrs.
Ost-Kuttner and 208,182 shares held by their adult sons as to which Mr.
Kuttner disclaims beneficial ownership.
(2)(Beatrice Ost-Kuttner) Does not include shares held by Mr. Kuttner and
208,182 shares held by their adult sons as to which Mrs. Ost-Kuttner
disclaims beneficial ownership.
(3)(Michael C. Jackson) Includes 265,455 shares of Common Stock issuable upon
exercise of warrants and 14,004 shares purchased under the Common Stock
Purchase Plan.
(4)(Peter W. Woodworth) Includes 101,104 shares of Common Stock issuable upon
conversion of the Company's Series A Convertible Preferred Stock and 750
shares issuable under presently exercisable options; but does not include
shares held by spouse as follows: 42,675 shares Common Stock and 22,896
shares of Common Stock issuable upon conversion of the Company's Series A
Convertible Preferred Stock as to which Mr. Woodworth disclaims beneficial
ownership.
(5)(Eugene Warsaw) Includes 200 shares of Common Stock held in trust for
children of Mr. Warsaw, 39,591 shares of Common Stock purchased for the
account of Mr. Warsaw under the Common Stock Purchase Plan and 71,252
shares of Common Stock issuable under presently exercisable options.
(6)(Herbert Elish) Includes 32,000 shares of Common Stock held by spouse and
11,821 shares of Common Stock purchased for the account of Mr. Elish under
the Common Stock Purchase Plan.
(7)(Harvey L. Sperry) Includes 14,458 shares of Common Stock purchased under th
Common Stock Purchase Plan.
(8)Includes, respectively, for Messrs. Clayton, Hurley and Schulte, 27,887,
14,170 and 2,638 shares of Common Stock purchased under the Common Stock
Purchase Plan and 36,057, 22,068 and 5,625 shares issuable under presently
exercisable options.
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.
3
ITEM 1. ELECTION OF DIRECTORS
At the Annual Meeting, five Directors of 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 (a situation which is not
anticipated), Proxies solicited hereunder will be voted in favor of those
nominees who do remain as candidates and may be voted for substituted nominees.
Directors will be elected by the vote of the holders of a majority of the stock
present in person or represented by Proxy at the Annual Meeting.
Nominees
- --------
The five persons listed below have been nominated for election as Directors
of Hampshire Group, Limited and each is currently a Director of the Company.
Ludwig Kuttner Age 50 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.
Herbert Elish Age 63 Director since 1986
Mr. Elish serves as Chairman of the Board of Kerr Group, Inc., having been
elected to this position in June 1996. Formerly, he served as Chairman of the
Board and Chief Executive Officer of Weirton Steel Corporation, having
served in that position from 1987 through 1995.
Harvey L. Sperry Age 67 Director since 1977
Mr. Sperry has been a Partner in the law firm of Willkie Farr & Gallagher since
1964. Willkie Farr & Gallagher renders legal services to the Company. He has
been a Director of Kerr Group, Inc. since 1973.
Eugene Warsaw Age 69 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. 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 50 Director since 1995
Mr. Woodworth is President and Chief Executive Officer of Winona Knitting Mills,
a division of Hampshire Designers, Inc. He was the majority stockholder and
President of The Winona Knitting Mills, Inc. at the time of its merger into
Hampshire Group, Limited in October 1995.
Information about the beneficial ownership of the Company's Common Stock of each
nominee is included in the "Beneficial Ownership Table" on Page 2.
4
ITEM 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP served as independent accountants of Hampshire Group,
Limited during the fiscal year most recently completed. Price Waterhouse has
audited the consolidated financial statements of the Company each year since
1984 and is, therefore, familiar with the affairs and financial procedures of
the Company. A representative of Price Waterhouse will be present at the Annual
Meeting with the opportunity to make any statement such representative so
desires, and will be available to respond to appropriate questions raised orally
at the meeting or submitted in writing to the Company's Secretary prior to the
meeting.
ITEM 3. TRANSACTION OF OTHER BUSINESS
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 50 Chairman of the Board, President
and Chief Executive Officer
Eugene Warsaw 69 President and Chief Executive Officer,
Hampshire Designers, Inc.
H. Edward Hurley 48 Executive Vice President,
Hampshire Designers, Inc.
Peter W. Woodworth 50 President and Chief Executive Officer,
Winona Knitting Mills Division
Fritz Schulte 41 President and Chief Executive Officer,
Hampshire Hosiery Division
Charles W. Clayton 59 Vice President, Secretary, Treasurer and
Chief Financial Officer
Ludwig Kuttner has been Chairman of the Board 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.
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.
Peter W. Woodworth joined the Company in October 1995 with the merger of
The Winona Knitting Mills, Inc. He serves as President of Winona Knitting Mills
Division and previously served as President and Chief Executive Officer of The
Winona Knitting Mills, Inc. since 1983.
Fritz Schulte has been President of Hampshire Hosiery since 1994 and
assumed the responsibilities of Chief Executive Officer on January 1, 1996. From
1991 to 1994 he was employed as Vice President of Manufacturing at Sheffield
Industries, Inc., a hosiery manufacturer. From 1981 until 1991, Mr. Schulte was
employed as President and Chief Executive Officer of Chic Hosiery, Inc.
Charles W. Clayton has been Vice President of the Company since 1979. He
has served as Secretary, Treasurer and Chief Financial Officer of the Company
since 1984. Prior to joining the Company, Mr. Clayton was employed with Price
Waterhouse LLP as an audit manager.
6
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information regarding the compensation of
the Company's five most highly compensated executive officers for the years
1996, 1995 and 1994.
SUMMARY COMPENSATION
TABLE
Annual Compensation
--------------------------------
Other
Annual
Compensa-
Name and Bonus($) tion
Principal Position Year Salary($) (1) ($) (2)
- ------------------ ---- --------- ------- ---------
Ludwig Kuttner 1996 400,000 554,908 15,740
Chairman, President and 1995 400,000 466,281 44,301
Chief Executive Officer 1994 366,252 400,000 34,450
Eugene Warsaw 1996 350,000 537,363 3,801
President and CEO, 1995 350,000 730,579 17,236
Hampshire Designers, Inc. 1994 350,000 684,342 17,860
H.Edward Hurley 1996 105,000 164,967 1,167
Executive Vice President, 1995 100,000 149,021 3,540
Hampshire Designers, Inc. 1994 92,000 164,242 4,286
Fritz Schulte 1996 156,000 38,280 404
President and CEO, 1995 120,000 46,000 785
Hampshire Hosiery Division 1994 72,000 32,000 2,755
Charles W. Clayton 1996 155,000 186,250 5,285
Secretary, Treasurer and CFO 1995 155,000 134,360 12,766
Hampshire Group, Limited 1994 155,000 93,600 8,061
7
(SUMMARY COMPENSATION TABLE CONTINUED)
Long-Term Compensation
------------------------------
Awards Payouts
---------------------- ------
Securities All
Under- Other
Restricted lying LTIP Compensa-
Name and Stock Options/ Payouts tion
Principal Position Year Awards($) SAR (#) ($) ($)
- ------------------ ---- --------- --------- ------- ---------
Ludwig Kuttner 1996 - 7,500 - 78,000(3)
Chairman,President and 1995 - 15,000 - 128,000
Chief Executive Officer 1994 - 65,909 - 53,000
Eugene Warsaw 1996 - - - 3,000(4)
President and CEO, 1995 - 15,000 - 3,000
Hampshire Designers, Inc. 1994 - 37,275 - 3,000
H.Edward Hurley 1996 - - - 3,000(4)
Executive Vice President, 1995 - 7,000 - 3,000
Hampshire Designers, Inc. 1994 - 16,818 - 3,000
Fritz Schulte 1996 - 2,500 - 1,500(4)
President and CEO, 1995 - 5,000 - 1,500
Hampshire Hosiery Division 1994 - 5,000 - -
Charles W. Clayton 1996 - 3,500 - 13,000(3)
Secretary, Treasurer and CFO 1995 - 7,000 - 13,000
Hampshire Group, Limited 1994 - 10,000 - 3,000
<FN>
(1) The annual incentive bonuses for 1996 include amounts paid into the
Company's Common Stock Purchase Plan as follows: Kuttner - $221,963;
Warsaw - $53,736; Hurley - $16,497; Schulte - $5,712 and Clayton - $74,500.
(2) The amounts reported represent discounts on stock purchased under the
Company's Common Stock Purchase Plan.
(3) Pursuant to the terms of a deferred compensation plan, Kuttner and
Clayton were awarded contributions of $75,000 and $10,000, respectively,
which is included in the amount reported and amounts contributed by the
Company pursuant to the Company's 401(k) Retirement Savings Plan.
(4) Represents amounts contributed by the Company pursuant to the Company's
401(k)Retirement Savings Plan.
</FN>
8
The following table sets forth information regarding grants of stock
options made during 1996 to each of the named executive officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
-------------------------------------
Number of Percent of
Securities Options/SARs
Underlying Granted to Exercise or Grant Date
Options/SARs Employees in Base Price Expiration Present
Name Granted (#) Fiscal Yr. ($/Sh) (1) Date Value($)(2)
- ------------------------------------------------------------------------------
Ludwig Kuttner 1,875 12.10 02/06/01 5,106.94
1,875 12.10 12/31/01 4,943.44
1,875 12.10 12/31/02 6,488.06
1,875 12.10 12/31/03 7,205.25
------------------------------------------------------------
7,500 11.82 23,743.69
- ------------------------------------------------------------------------------
Fritz Schulte 625 11.00 12/31/01 1,266.56
625 11.00 12/31/02 1,576.25
625 11.00 12/31/03 1,933.00
625 11.00 12/31/04 2,413.25
------------------------------------------------------------
2,500 3.94 7,189.06
- ------------------------------------------------------------------------------
Charles W. Clayton 875 11.00 12/31/01 2,755.20
875 11.00 12/31/02 3,425.54
875 11.00 12/31/03 3,754.28
875 11.00 12/31/04 4,092.20
------------------------------------------------------------
3,500 5.51 14,027.22
- -------------------------------------------------------------------------------
<FN>
(1) Options were granted under the Company's 1992 Stock Option Plan at the fair
market value on the date of grant, except options for Kuttner which were
granted at 110% of the fair market value.
(2) A variant of the Black-Scholes option pricing model was used to determine
the grant date present value. In applying the model, the Company assumed a
5.31% risk-free rate of return, a 0% dividend yield, an average annualized
volatility of 22.54% and an expected term from vest of 3.90 years.
</FN>
9
The following table sets forth information regarding the exercise of
options during 1996 and the number and value of unexercised options held at
year-end by each of the named executive officers.
AGGREGATED OPTIONS/SARS EXERCISES IN LAST FISCAL YEAR
AND
FY-END OPTIONS/SARS VALUE
No. of Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/
Shares FY-End (#) SARs at FY-End($)
Acquired Value Exercisable/ Exercisable
Name on Exercise(#) Realized Unexercisable Unexercisable
- -------------------------------------------------------------------------------
(1)
Ludwig Kuttner - - 165,512/31,988 655,369/148,302
- -------------------------------------------------------------------------------
Eugene Warsaw 50,000 302,997 71,252/ - 502,373/ -
- -------------------------------------------------------------------------------
H. Edward Hurley 18,182 92,174 22,068/ - 155,271/ -
- -------------------------------------------------------------------------------
Fritz Schulte 5,000 25,309 5,625/1,875 30,156/4,219
- -------------------------------------------------------------------------------
Charles W. Clayton 18,182 124,524 36,057/2,625 244,959/5,906
- -------------------------------------------------------------------------------
<FN>
(1) The average of the closing bid and closing ask price of the Company's
Common Stock at December 31, 1996 was $13.25.
</FN>
10
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation and Stock Option Committee of the Board of Directors
(the "Committee") is responsible for determining executive compensation.
Compensation of All Executives.
- ------------------------------
The Committee believes that, if the Company is to maximize profitability,
it must attract, motivate and retain executives who will cause the Company to
achieve such profitability. Thus, the Company provides its executives with
competitive salaries and incentives, which include the sale of Common Stock to
executives, thereby aligning the interests of executives and shareholders.
Compensation also recognizes individual contributions as well as Company
financial results.
Annual Compensation.
- -------------------
Annual compensation consists of salary and incentives with emphasis on
lower base salary and higher incentives. Incentive compensation for executives
of Hampshire Designers and Hampshire Hosiery is provided by a Profit Incentive
Plan, whereby approximately 15% of pre-tax profits are allocated to the
executives of each business, either in accordance with employment agreements, or
by management with the approval of the Committee.
Incentive compensation for executives of Winona Knitting Mills Division is
determined by a profit incentive plan pursuant to which five percent of the
operating profits of Winona is allocated annually to key executives.
Incentive compensation for Company officers, including Mr. Kuttner, is
based on annual goals established by the Committee. A major portion of the
incentive compensation is based on the Company achieving profit goals
established by the Committee. The incentive compensation paid to Mr. Kuttner for
1996 reflected the achievement of both financial and subjective goals.
Long-term Incentive Compensation.
- ----------------------------------
Long-term incentive compensation consists of grants of stock options and
the opportunity for key executives to use a portion of their incentive
compensation to purchase Common Stock of the Company pursuant to the Common
Stock Purchase Plan for Directors and Executives. Long-term incentive
compensation awards are based on the individual responsibilities of the
executive, Company financial results and financial performance of particular
profit centers.
In 1996, the Committee granted to 38 employees options to purchase an
aggregate of 63,466 shares of Common Stock at exercise prices of $11.00 - $12.50
per share ($11.28 average exercise price), which was the market price on the
date of grant. Options were granted to Mr. Kuttner at 110% of the market price
on the date of grant.
11
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 Officer and
four other most highly compensated executive officers. Certain
"performance-based" compensation, such as stock options awarded under the
Company's 1992 Stock Option Plan, are not subject to the limitation on
deductibility. The Committee does not believe that such limitation on
deductibility currently affects deductibility of executive compensation for the
Company. Executive compensation will be deductible to the extent the Committee
deems appropriate.
COMPENSATION AND STOCK OPTION COMMITTEE
Herbert Elish
Michael C. Jackson
12
COMPENSATION COMMITTEE INTERLOCKS
Messrs. Elish and Jackson have served as members of the Compensation
Committee since 1992. Neither member of the Committee is or has been an officer
or employee of the Company.
Mr. Elish serves as Chairman of the Board of Kerr Group, Inc. and formerly
served as Chairman of the Board and Chief Executive Officer of Weirton Steel
Corporation.
Mr. Jackson is an Advisory Director of Lehman Brothers which from performs
investment banking services for the Company from time to time, and serves as a
Director of Kerr Group, Inc.
Messrs. Jackson and Sperry serve as members of the Compensation and Stock
Option Committee of the Board of Directors of Kerr Group, Inc. Mr. Sperry
formerly served as a Director of Weirton Steel Corporation.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held eight meetings during the year ended December
31, 1996, and each Director attended at least 75% of the aggregate number of
meetings held while he was a Director and the total number of meetings held by
all committees of the Board on which served.
The Company has an Audit Committee which reviews with management all
significant accounting and disclosure matters, selects the Company's independent
accountants 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 Messrs.
Elish, Jackson and Sperry, none of whom are officers or employees of the
Company. The Audit Committee held two meetings during the fiscal year ended
December 31, 1996.
The Company has a Compensation and Stock Option Committee (the
"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 Messrs. Elish and
Jackson, neither of which are officers or employees of the Company. The
Compensation Committee held two meetings during the fiscal year ended December
31, 1996.
13
COMPENSATION OF DIRECTORS
During 1996, Messrs. Elish, Jackson and Sperry received annual Director's
fees of $25,000 each. At their election, all of the Director's fees earned by
Messrs. Jackson and Sperry was used to purchase Common Stock under the Common
Stock Purchase Plan (see "Common Stock Purchase Plan" page 15). Messrs. Kuttner,
Warsaw and Woodworth do not receive Director's fees. The Company reimburses the
Directors for expenses associated with attendance of Board of Directors
meetings.
EMPLOYMENT CONTRACTS
Mr. Kuttner has an employment agreement with the Company which provides for
a salary of $400,000 per annum during 1996 and an annual rate review determined
by the Board of Directors for each year thereafter. Mr. Kuttner is also entitled
to receive an annual bonus based on goals to be achieved by Mr. Kuttner as
determined by the Board of Directors. Further, pursuant to the terms of a
deferred compensation plan, Mr. Kuttner was awarded contributions of $75,000
during 1996.
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 Company and Mr.
Warsaw each have the right to terminate the agreement at any time upon twelve
months notice.
Mr. Woodworth has an employment agreement with Hampshire Designers, Inc.
pursuant to which he receives a salary of $135,000 per year, plus a $67,000
bonus and an incentive bonus based on the pre-tax income of the sweater
division. Pursuant to the Agreement and Plan of Merger dated June 5, 1995 among
Hampshire Group, Limited, The Winona Knitting Mills, Inc. and Pete and Joyce
Woodworth, Mr. and Mrs. Woodworth are entitled to receive as contingent purchase
price, a percentage of net income before taxes of the Winona Knitting Mills
Division in excess of $1 million in the amount of 10.65% and 7.10%,
respectively, for the years 1997 and 1998.
14
OTHER COMPENSATION ARRANGEMENTS
The Company has certain other compensation plans which are available to the
Chief Executive Officer, and the named executive officers including the
following:
STOCK OPTION PLAN
GENERAL: The Stock Option Plan has been maintained by the Company since May
1992. Under the Stock Option Plan, executives and key employees designated by
the Compensation Committee of the Board of Directors are granted stock options
to purchase shares of the Company's Common Stock. Options are granted at the
fair market value on the date of grant and may be granted as incentive or
non-qualified stock options.
ADMINISTRATION: The Stock Option Plan is administered by the Compensation
Committee which is composed of Messrs. Elish and Jackson who have never been
officers of the Company, or related entity. The Committee has the full power to
construe, interpret or amend the Stock Option Plan, to establish the terms of
any options granted thereunder, and to determine individuals to whom options
will be granted under the Stock Option Plan. In selecting participants and in
determining the type and amount of their respective benefits, the Compensation
Committee may consider such factors as it deems pertinent. Currently, there are
approximately 35 executives and key employees eligible to participate in the
Stock Option Plan.
Pursuant to the Stock Option Plan Amendment dated June 7, 1995, there is an
aggregate of 750,000 shares reserved for issuance upon exercise of options
granted under the Stock Option Plan, which may be authorized and unissued shares
or treasury shares. As of December 31, 1996, 578,692 shares have been granted
and 171,308 shares were available for future grants. Shares previously granted
which have been canceled or which have expired are included as shares available
for future grants.
OPTION TERMS: The minimum purchase price at which options are granted under
the Stock Option Plan is the fair market value per share of the Common Stock as
of the date of grant. At the time of approval of the granting of an option to an
executive or key employee, the Compensation Committee designates (i) the date
of grant of such option, (ii) the schedule and times at which such options will
vest and become exercisable and whether the options will constitute an incentive
stock option under Section 422 of the Internal Revenue Code, as amended.
Vested but unexercised options may be exercised for 12 months following a
termination of employment on account of death and following a termination of
employment on account of disability, or until such earlier time as the option
would otherwise expire or terminate on its own terms. If a participant ceases to
be employed by the Company for reasons other than disability, death or
retirement, the option terminates three months after date of termination of
employment.
INTERNAL REVENUE CODE. The Stock Option Plan also authorizes the
Compensation Committee to determine the form of option price payments (cash,
Company Common Stock, or a combination thereof), to issue replacement options to
participants who voluntarily surrender prior options with a price per share
equal to or greater than the price per share of the prior option, to accelerate
the vesting and exercisability of all or part of any option, and to adjust the
number and type of shares of the Company Common Stock subject to the Stock
Option Plan, in order to prevent a dilution or enlargement of benefits as a
result of a corporate transaction or event.
15
COMMON STOCK PURCHASE PLAN
GENERAL: The Hampshire Group, Limited and Affiliates Common Stock Purchase
Plan for Directors and Executive (the "Stock Purchase Plan") encourages
non-employee directors and key executives to receive a portion of their cash
compensation in the form of Company Common Stock. The Stock Purchase Plan
entitles each non-employee director to contribute up to 100% of his annual
retainer fees and to have such amounts credited to a deferral account where it
is used to purchase Common Stock at a purchase price equal to 95% of the fair
market value of a share of Common Stock on the last day of each calendar quarter
of the Plan Year.
With respect to key executives, the Stock Purchase Plan entitles each
participating key executive to contribute between 4% and 10% of their annual
base salary to a deferral account where it is used to purchase Common Stock at a
purchase price equal to 90% of the fair market of a share of Common Stock on the
last day of each calendar quarter of the Plan Year to which the contributions
relate. In addition, key executives are entitled to contribute 10% to 40% of
their annual bonus to a deferral account where it is used to purchase Common
Stock at a purchase price equal to 90% of the lower of (1) the average fair
market value of a share of Common Stock on the last day of each calendar quarter
during the Plan year, or (2) the fair market value of a share of Common stock on
the last day of the Plan year.
With respect to 1996 compensation, a total of $560,000 was contributed by
non-employee directors and key executives to purchase an aggregate of 51,256
shares of Common Stock of the Company pursuant to the Plan. Company Common Stock
to be issued under the Stock Purchase Plan may be acquired in open market
purchases or through the issuance of treasury stock.
The Plan is not subject to the Employee Retirement Income Security Act of
1974, as amended, and is not qualified under Section 401(a) of the Internal
Revenue Code.
ADMINISTRATION: The Stock Purchase Plan is administered by an administrator
(the "Administrator") chosen by the Board of Directors consisting of two members
of the Board and two executive officers of the Company. The Administrator has
sole discretionary authority to enforce the terms and conditions of the Stock
Purchase Plan and has all powers necessary to do so, including the computation
and certification of the amount and kind of benefits that are payable to
participants in the Stock Purchase Plan and their beneficiaries. The
Administrator furnishes to each Participant (as defined below) promptly after
the end of each plan year a statement indicating the benefits credited to and
the status of the Participant's accounts, maintained under the Plan, as of the
end of such plan year. Participation in the Plan is voluntary and all amounts
deferred are fully vested.
16
ELECTION TO PARTICIPATE: Each non-employee director who elects to defer
part or all of his annual retainer fees and each key executive who elects to
defer a portion of his annual bonus or annual base salary under the terms of the
Stock Purchase Plan will become a participant in the Plan (a "Participant"). In
general, a non-employee director must file a written application with the
Administrator no later than the December 31 immediately preceding such plan
year, indicating the percentage of his annual retainer he wishes to defer during
such plan year and the date on which such portion of the Participant's annual
retainer shall be distributed. In general, each key executive electing to defer
a portion of his annual compensation for a particular plan year must file a
written application with the Administrator prior to the first day of such plan
year. Deferrals of non-employee directors and key executives must be
subsequently approved by the Board of Directors.
PURCHASE OF COMMON STOCK: Common Stock will be purchased under the Stock
Purchase Plan through a trust (the "Trust") created for such purposes. Not later
than 10 days following each day that amounts are converted into stock
equivalents, the Company will contribute to the Trust either (i) that number of
shares of Common Stock, or (ii) cash in an amount sufficient to allow the
trustee of the Trust (the "Trustee") to purchase from the Company or in the open
market that number of shares of Common Stock equal to the aggregate number of
stock equivalents credited to all Participants' Deferral Accounts on such date.
Such Common Stock will then be held in the Trust until distribution. Voting
rights on Common Stock held in the Trust will be exercised by the Company.
Dividends payable with respect to stock equivalents credited to each
participant's deferral account will be credited to such deferral account as of
the date such dividends are actually paid, and will be converted into a number
of stock equivalents as of the next quarter end.
DISTRIBUTIONS OF COMMON STOCK: A Participant may elect to have the amount
deferred by such Participant during a particular plan year distributed in a
single lump sum, or in substantially equal annual installments over two to ten
years beginning on either (i) any specific anniversary of the last day of the
plan year to which such deferral relates, or (ii) immediately upon termination
as a non-employee director or key executive.
No right or interest of a Participant under the Stock Purchase Plan is
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment nor garnishment by creditors of the Participant
or his beneficiary, nor is transferable by the Participant other than by will or
the laws of descent and distribution.
17
ADJUSTMENTS RELATING TO SHARES: The amount of stock equivalents in each
Participant's Deferral Account will be appropriately adjusted upon the
occurrence of any stock split, reverse stock split, or stock dividend or other
non-cash distribution.
NO STOCKHOLDER RIGHTS: A Participant will have no rights or privileges as a
shareholder with respect to the amounts credited to his Deferral Account or
shares of Common Stock held for him in the Trust until the date a distribution
is made.
AMENDMENTS/TERMINATION: The Board of Directors may at any time amend,
alter, suspend, discontinue or terminate the Plan without the consent of any
Participant, provided that no such action may materially and adversely affect
the rights of the Participants with respect to payment of amounts already
credited to Participants' Deferral Accounts, or amounts elected to be so
credited for the plan year in which such action is taken. The Stock Purchase
Plan has no fixed termination date.
NO RIGHT TO CONTINUED ELECTION AS A DIRECTOR OR EMPLOYMENT: Nothing
contained in the Stock Purchase Plan shall confer, and no establishment of or
crediting of any amounts to a Deferral Account shall be construed as conferring,
upon any Participant, any right to continue as a member of the Board of
Directors, or an employee of the Company, or any of its affiliates, or to
interfere in any way with the right of the Company to increase or decrease the
amount of the annual retainer, salary or bonus payable to a participant.
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 and 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 SEC and upon written
representations by directors and certain executives, there were no delinquent
Section 16 reports during the fiscal year ended December 31, 1996.
18
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Pursuant to an Agreement and Plan of Merger dated June 5, 1996, the Company
acquired all the issued and outstanding common stock of The Winona Knitting
Mills, Inc. ("Winona") from Pete and Joyce Woodworth and certain minority
shareholders. Mr. Woodworth subsequently was elected to the Hampshire Group,
Limited Board of Directors. The purchase price consisted of cash, convertible
preferred stock, common stock and $3,250,000 of debt to Mr. and Mrs. Woodworth
including $2,000,000 of short-term purchase obligations which were paid in
February 1996.
On March 3, 1995, the Company purchased substantially all of the assets of
Babette & Partners, Ltd. ("Babette") for a purchase price consisting of $200,000
cash and the assumption of $690,000 of liabilities. Included in the assumed
liabilities was a $500,000 principal amount demand note sold by Babette to
Ludwig Kuttner, Chief Executive Officer of the Company. In the purchase of
assets, the Babette note owed to Mr. Kuttner was exchanged for a note of the
Company in the principal amount of $500,000, bearing interest at 9 1/2% per
annum. The note was paid in full in February 1997.
The Company leases its Anderson, South Carolina corporate office facilities
(10,000 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 1996 on these two facilities was $192,000.
The Company leases its sewing plant in La Crescent, Minnesota (15,000
square feet) and certain storage facilities in Winona, Minnesota from Pete
Woodworth, President and Chief Executive Officer of Winona Knitting Mills
Division, and Joyce Woodworth, his wife. Further, the Company leases its
knitting and finishing plant (110,000 square feet) from relatives of Mr.
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 annual rent for these facilities during 1996 was $135,000.
Mr. Harvey L. Sperry, a Director of the Company, is a partner in the law
firm of Willkie Farr and Gallagher. The firm has served as legal counsel to the
Company since 1977.
Mr. Michael C. Jackson, a Director of the Company, is an Advisory Director
of Lehman Brothers who performs investment banking services for the Company from
time to time.
19
PERFORMANCE GRAPH
The following graph sets forth a comparison of the Company's Stockholder
performance, the National Association of Security Dealers Automated Quotation
Composite Index and the Dow Jones Apparel Industry Index (United States), in
each case assuming an investment of $100 on June 17, 1992, the date on which the
Common Stock of the Company was registered pursuant to Section 12 of the
Securities Exchange Act of 1934, and the cumulation and the reinvestment of
dividends paid thereafter through December 31, 1996. The Company chose the
NASDAQ Composite Index as a measure of the broad equity market and the Dow Jones
Apparel Index as a measure of its relative industry performance.
[GRAPH APPEARS HERE]
The NASDAQ
Stock Market 100 123 141 137 191 235
"NASDAQ"
Dow Jones
Apparel Index 100 132 96 110 132 198
"DJAI"
Hampshire
Group, Limited 100 63 61 84 130 146
"HAMP"
| | | | | |
---------------------------------------------------------------
June 1992 Dec. 1992 Dec. 1993 Dec. 1994 Dec. 1995 Dec. 1996
20
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company no later than January
31, 1998 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, Post Office Box 2667, Anderson, SC
29622.
INFORMATION AVAILABLE TO STOCKHOLDERS
The Company's 1996 Annual Report to Stockholders and Form 10-K are being
mailed with this Proxy Statement. Additional copies of the 1996 Annual Report
and Form 10-K as filed with the United States Securities and Exchange
Commission, may be obtained without charge from the Company by writing to:
Hampshire Group, Limited, Attn.: Secretary, Post Office Box 2667, Anderson, SC
29622; or by request at our e-mail address: lwest@hamp.com. Financial statements
are also on file with the United States Securities and Exchange Commission,
Washington, DC 20549 and can be retrieved on the Internet.
Anderson, South Carolina By order of the Board of Directors,
April 7, 1997
/s/ Ludwig Kuttner
-------------------------------------
Ludwig Kuttner
Chairman of the Board, President
and Chief Executive Officer
STOCKHOLDERS ARE URGED TO PROMPTLY COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY.
YOUR COOPERATION IS APPRECIATED.
21
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
7, 1997 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 7, 1997,
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 five Directors.
Nominees: 01-Ludwig Kuttner; 02-Herbert Elish; 03-Harvey L. Sperry;
04-Eugene Warsaw; and 05-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. Proposal to ratify the appointment of Price Waterhouse LLP,
independent accountants, as the Company's auditors for the fiscal
year ending December 31, 1997.
_____ 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 ratification of the appointment of
Price Waterhouse LLP.
_____ Please check here if you plan to attend the Annual Meeting.
Number of shares: _____
Dated: ________, 1997
Signature(s) ____________________________
____________________________
[Please sign exactly as names(s) appear(s)
on the stock certificate. For joint accounts,
all co-owners must sign Executor, Administrators,
Trustees, etc. should so indicate when signing.]