SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [x]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
CHECK THE APPROPRIATE BOX:
[ ] PRELIMINARY PROXY STATEMENT
[x] DEFINITIVE PROXY STATEMENT
[ ] DEFINITIVE ADDITIONAL MATERIALS
[ ] SOLICITING MATERIAL PURSUANT TO RULE 14a-11(c) OR RULE 14a-12
[ ] CONFIDENTIAL, FOR THE USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14a-6(e)(2))
QUAKER FABRIC CORPORATION
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- --------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT IF OTHER THAN THE REGISTRANT)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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QUAKER FABRIC CORPORATION
941 GRINNELL STREET
FALL RIVER, MASSACHUSETTS 02721
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 17, 2001
-------------------
To: The Stockholders of QUAKER FABRIC CORPORATION
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of QUAKER
FABRIC CORPORATION (the 'Company') will be held at the corporate offices of
Fleet Financial Corporation, 100 Federal Street, Thirty-fifth Floor, Boston, MA
02110, on May 17, 2001 at 11:00 a.m. for the following purposes:
1. To elect four directors to serve until the next Annual Meeting of
Stockholders and until their successors shall have been elected and
qualified;
2. To ratify the selection of Arthur Andersen LLP as independent
auditors for the Company for the fiscal year ending December 29, 2001; and
3. To transact such other business as may properly be brought before the
meeting and all adjournments thereof.
The Board of Directors has fixed the close of business on April 2, 2001 as
the record date for the determination of stockholders entitled to notice of and
to vote at this meeting. The stock transfer books will not be closed.
By Order of the Board of Directors,
CYNTHIA L. GORDAN
Vice President, Secretary and
General Counsel
Fall River, Massachusetts
April 12, 2001
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN,
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE.
EVEN IF YOU HAVE VOTED YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND
THE MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A
BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO ATTEND AND VOTE AT THE MEETING,
YOU MUST OBTAIN FROM SUCH BROKER, BANK OR OTHER NOMINEE, A PROXY ISSUED IN YOUR
NAME.
QUAKER FABRIC CORPORATION
941 GRINNELL STREET
FALL RIVER, MASSACHUSETTS 02721
--------------------------
PROXY STATEMENT
--------------------------
ANNUAL MEETING OF STOCKHOLDERS -- MAY 17, 2001
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Quaker Fabric Corporation (the 'Company' or
'Quaker') for the Annual Meeting of Stockholders to be held on May 17, 2001 at
11:00 a.m., local time, at the corporate offices of Fleet Financial Corporation,
100 Federal Street, Thirty-fifth Floor, Boston, MA 02110. This Proxy Statement
and the enclosed form of proxy were first sent to stockholders commencing on or
about April 12, 2001. A copy of the Company's Annual Report for the fiscal year
ended December 30, 2000 ('Fiscal 2000') is being sent to stockholders together
with this Proxy Statement.
The cost of this solicitation will be borne by the Company. In addition to
the use of the mails, proxies may be solicited personally, or by telephone or
telegram, by directors, officers and employees of the Company who will receive
no additional compensation therefor. Arrangements will be made with brokerage
houses and other custodians, nominees and fiduciaries to forward solicitation
materials to beneficial owners of shares held of record by such persons, and the
Company will reimburse such persons for reasonable out-of-pocket expenses
incurred by them in so doing.
A stockholder who executes the accompanying form of proxy may revoke it
(i) by written notice of revocation or a later dated proxy sent to the Company
at 941 Grinnell Street, Fall River, Massachusetts 02721, Attn: Cynthia L.
Gordan, Vice President, Secretary and General Counsel, and received by the
Company prior to the vote, or (ii) by personal attendance and withdrawal of the
proxy at the Annual Meeting of Stockholders. All shares represented by valid
proxies received pursuant to the solicitation and prior to the meeting and not
revoked before they are exercised will be voted, and, if a choice is specified
with respect to any matter to be acted upon, the shares will be voted in
accordance with such specification.
VOTING SECURITIES OUTSTANDING
Only stockholders of record at the close of business on April 2, 2001 will
be entitled to vote at the Annual Meeting of Stockholders. As of March 16, 2001,
the Company had outstanding 15,722,610 shares of Common Stock, par value $0.01
per share (the 'Common Stock'), which are the only outstanding voting securities
of the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table describes, as of March 16, 2001, shares of the Company's
Common Stock held by (i) each person who is known by the Company to own
beneficially more than 5% of the outstanding shares of the Company's Common
Stock (and the respective addresses of such beneficial owners), (ii) each
director and nominee for director of the Company, (iii) each of the executive
officers named in the Summary Compensation Table, and (iv) all current directors
and officers of the Company as a group, based on information furnished by the
respective entities and individuals.
NAME SHARES PERCENT
---- ------ -------
Larry A. Liebenow(1)(2)..................................... 3,063,094 18.7%
Anthony Degomes(1)(3)....................................... 2,883,361 17.7%
Duncan Whitehead(1)(4)...................................... 2,882,494 17.7%
Nortex Holdings, Inc.(5).................................... 2,824,094 17.3%
Elkin McCallum(6)........................................... 1,392,450 8.9%
Wellington Management Company, LLP(7)....................... 1,215,000 7.7%
Dimensional Fund Advisors, Inc.(8).......................... 1,141,700 7.3%
Peter E. Salas(9)........................................... 971,500 6.2%
Sangwoo Ahn(10)............................................. 540,747 3.4%
M. Beatrice Spires(1)(11)................................... 132,575 *
Jerry I. Porras(12)......................................... 87,866 *
Eriberto R. Scocimara(13)................................... 44,166 *
Mark Hellwig(1)(14)......................................... 34,810 *
All executive officers and directors as a group
(12 persons).............................................. 4,586,272 26.6%
- ---------
* Less than 1%
(1) The address for the named individual is c/o Quaker Fabric Corporation, 941
Grinnell Street, Fall River, Massachusetts 02721.
(2) Consists of (i) 95,000 shares of Common Stock owned directly by
Mr. Liebenow, (ii) 144,000 shares of Common Stock which Mr. Liebenow will
have the right to acquire within the next 60 days pursuant to the 1997
Stock Option Plan (as hereinafter defined) and (iii) the shares of Common
Stock beneficially owned by Mr. Liebenow through Nortex Holdings, Inc.
('Nortex Holdings.') Mr. Liebenow owns 70.5% of the outstanding shares of
Nortex Holdings and is also the President and a director of Nortex Holdings
and, as such, may be deemed to beneficially own the shares owned by Nortex
Holdings.
(3) Consists of (i) 11,267 shares of Common Stock owned directly by Mr.
Degomes, (ii) 48,000 shares of Common Stock which Mr. Degomes will have the
right to acquire within the next 60 days pursuant to the 1997 Stock Option
Plan (as hereinafter defined) and (iii) the shares of Common Stock
beneficially owned by Mr. Degomes through Nortex Holdings. Mr. Degomes owns
12.0% of the outstanding shares of Nortex Holdings and is also an officer
and director of Nortex Holdings and, as such, may be deemed to beneficially
own the shares owned by Nortex Holdings.
(4) Consists of (i) 9,800 shares of Common Stock owned directly by Mr.
Whitehead, (ii) 48,000 shares of Common Stock which Mr. Whitehead will have
the right to acquire within the next 60 days pursuant to the 1997 Stock
Option Plan (as hereinafter defined), (iii) 600 shares of Common Stock held
by Mr. Whitehead's children, and (iv) the shares of Common Stock
beneficially owned by Mr. Whitehead through Nortex Holdings. Mr. Whitehead
owns 17.5% of the outstanding shares of Nortex Holdings and is also an
officer and director of Nortex Holdings and, as such, may be deemed to
beneficially own the shares owned by Nortex Holdings.
(5) Consists of (i) 2,268,556 shares of Common Stock owned directly by Nortex
Holdings, and (ii) 555,538 shares which Nortex Holdings has the right to
acquire upon exercise of the Nortex Option (as hereinafter defined). The
address of Nortex Holdings is 941 Grinnell Street, Fall River,
Massachusetts 02721.
(6) Based solely upon information obtained from a Schedule 13G/A filed with the
Securities and Exchange Commission on February 14, 2000. The address for
Mr. McCallum is c/o Joan Fabrics Corporation, 100 Vesper Executive Park,
Tyngsboro, MA 01879. Includes 792,450 shares of Common Stock held by Main
Street Textiles, L.P.
(7) Based solely upon information obtained from a Schedule 13G filed with the
Securities and Exchange Commission on February 14, 2001. The address for
Wellington Management Company, LLP is 75 State Street, Boston, MA 02109.
(footnotes continued on next page)
2
(footnotes continued from previous page)
(8) Based solely upon information obtained from a Schedule 13G filed with the
Securities and Exchange Commission on February 2, 2001. The address for
Dimensional Fund Advisors, Inc. is 1299 Ocean Ave., 11th Floor, Santa
Monica, CA 90401.
(9) Based solely upon information obtained from a Schedule 13D filed with the
Securities and Exchange Commission on December 1, 1999 by Mr. Salas, as
General Partner of Dolphin Offshore Partners, L.P. The address for Mr.
Salas is c/o Dolphin Asset Management, 129 East 17th Street, New York, NY
10003.
(10) Includes (i) 306,281 shares of Common Stock owned directly by Mr. Ahn,
(ii) 44,166 shares which Mr. Ahn has the right to acquire within the next
60 days under stock option agreements between Mr. Ahn and the Company,
(iii) 23,000 shares of Common Stock held by his children, (iv) 157,300
shares of Common Stock held by his spouse, and (v) 10,000 shares of Common
Stock held by the Ahn Family Foundation. Mr. Ahn disclaims beneficial
ownership of the shares owned by his children, his spouse, and the Ahn
Family Foundation. The address for Mr. Ahn is c/o Morgan Lewis Githens &
Ahn, Two Greenwich Plaza, Greenwich, Connecticut 06830.
(11) Consists of (i) 14,075 shares of Common Stock owned directly by
Ms. Spires, (ii) 70,500 shares of Common Stock which Ms. Spires has the
right to acquire upon the exercise of options granted under the 1993 Stock
Option Plan (as hereinafter defined), and (iii) 48,000 shares which she has
the right to acquire within the next 60 days pursuant to the 1997 Stock
Option Plan (as hereinafter defined).
(12) Consists of (i) 43,700 shares of Common Stock held in a family trust for
which Dr. Porras acts as a trustee and (ii) 44,166 shares of Common Stock
which Dr. Porras has the right to acquire within the next 60 days upon the
exercise of options granted under stock option agreements between
Dr. Porras and the Company. The address for Dr. Porras is c/o Stanford
University Graduate School of Business, Stanford, California 94305.
(13) Consists solely of shares of Common Stock which Mr. Scocimara has the right
to acquire within the next 60 days pursuant to stock option agreements
between Mr. Scocimara and the Company. The address for Mr. Scocimara is c/o
Hungarian-American Enterprise Fund, 1 East Putnam Avenue, Greenwich,
Connecticut 06830.
(14) Consists of (i) 10,810 shares of Common Stock owned directly by Mr. Hellwig
and (ii) 24,000 shares of Common Stock which Mr. Hellwig has the right to
acquire within the next 60 days pursuant to the 1997 Stock Option Plan (as
hereinafter defined).
-------------------
Except as noted in the footnotes, the Company believes the beneficial
holders listed in the table above have sole voting and investment power
regarding the shares shown as being beneficially owned by them. Except as noted
in the footnotes, none of such shares is known by the Company to be shares with
respect to which the beneficial owner has the right to acquire such shares.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors and persons who beneficially own more than 10%
of the Company's Common Stock, to file initial reports of ownership and reports
of changes in ownership with the Securities and Exchange Commission ('SEC').
Executive officers, directors and greater than 10% beneficial owners are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the Company's executive officers and
directors, the Company believes that during Fiscal 2000 all Section 16(a) filing
requirements applicable to its executive officers, directors and greater than
10% beneficial owners were met.
3
VOTING OF PROXIES
Each stockholder is entitled to cast, in person or by proxy, one vote for
each share of Common Stock held by such stockholder at the close of business on
April 2, 2001. Stockholders do not have cumulative voting rights in the election
of directors.
On all matters submitted to the vote of the stockholders as described
herein, a plurality (as to the election of the directors) and a simple majority
(as to other matters) of the votes cast at the Annual Meeting will be
determinative. All proxies in the form enclosed received by management,
including those as to which no preference is indicated, will be voted, in the
absence of instructions to the contrary, (i) for election of the nominees listed
under the next heading as directors of the Company to hold office until the next
Annual Meeting of Stockholders and until their successors shall be duly elected
and qualified, (ii) for ratification of the appointment of Arthur Andersen LLP
as independent auditors for the Company for the fiscal year ending December 29,
2001 ('Fiscal 2001'), and (iii) with respect to such other business as may
properly come before the meeting (or any adjournment thereof) in accordance with
the judgment of the persons designated in the proxy. In the unanticipated event
that any of the persons nominated as director cannot be a candidate at the
Annual Meeting, all such proxies received will be voted in favor of such
substituted nominee as shall be designated by the Board of Directors.
With regard to the election of directors, votes may be cast in favor of or
withheld from each nominee; votes that are withheld will be excluded entirely
from the vote and will have no effect. Abstentions may be specified on all
proposals except the election of directors and will be counted as present for
purposes of determining the existence of a quorum regarding the item on which
the abstention is noted. Pursuant to the NASD Rules of Fair Practice, brokers
who hold shares in street name have the authority, in limited circumstances, to
vote on certain items when they have not received instructions from beneficial
owners. A broker will only have such authority if (i) the broker holds the
shares as executor, administrator, guardian, trustee, or in similar
representative or fiduciary capacity with authority to vote, or (ii) the broker
is acting pursuant to the rules of any national securities exchange to which the
broker is also a member. Under applicable Delaware law, a broker non-vote will
have no effect on either the outcome of the election of directors or the
ratification of auditors.
PROPOSAL 1.
ELECTION OF DIRECTORS
A Board of four directors is to be elected at the Annual Meeting. The Board
of Directors proposes the election of the following four nominees to serve until
the next Annual Meeting and until their successors are duly elected and
qualified:
BEGINNING
YEAR OF SERVICE
NAME AGE POSITIONS/OFFICE AS DIRECTOR
---- --- ---------------- -----------
Sangwoo Ahn....................... 62 Chairman of the Board of Directors 1993
Larry A. Liebenow................. 57 Director, President, and Chief Executive
Officer 1989
Jerry I. Porras................... 62 Director 1997
Eriberto R. Scocimara............. 65 Director 1993
All of the nominees are at present members of the Board of Directors. The
Board has no reason to believe that any of the foregoing nominees will not serve
if elected, but if any of them should become unavailable to serve as a director
or are withdrawn from nomination, and if the Board of Directors shall designate
a substitute nominee, the persons named as proxy holders will vote for the
substitute.
Sangwoo Ahn. Mr. Ahn has served as a director of the Company since March 12,
1993 and as Chairman of the Board since May 19, 1993. Mr. Ahn has served as a
general partner of Morgan Lewis Githens & Ahn, an investment banking firm, since
1982. Mr. Ahn also serves as a director of Kaneb Services, Inc., Kaneb Pipeline
Partners, L.P., and PAR Technology Corp.
Larry A. Liebenow. Mr. Liebenow has served as President, Chief Executive
Officer, and a director of the Company since September 1989. From July 1983
until September 1989, Mr. Liebenow was Chairman of the Board and President of
Nortex International, Inc. ('Nortex International'). From September 1971 to July
1983, Mr. Liebenow served as the Chief Operating Officer of Grupo Pliana,
4
S.A., a Mexican yarn and upholstery fabric manufacturing concern. Mr. Liebenow
is also a member of the U.S. Advisory Board of the National Grid.
Jerry Ignacio Porras. Dr. Porras has served as a director of the Company
since May 21, 1997. Dr. Porras is the Lane Professor of Organizational Behavior
and Change at Stanford University's Graduate School of Business, where he has
taught various courses on organizational behavior and change for the last
twenty-nine years. Since 1970, Dr. Porras has been the president of Jerry I.
Porras Associates, Inc., a consulting firm which advises a wide variety of
public and private organizations. Dr. Porras is also a co-owner of Stream
Analytics, Inc., a software firm which develops applications for organizational
diagnosis and change management. Dr. Porras also serves on the boards of
directors of State Farm Auto Insurance Company, State Farm Life Insurance
Company, State Farm General Insurance Company and ReloAction.
Eriberto R. Scocimara. Mr. Scocimara has served as a director of the Company
since December 14, 1993. Since April 1, 1994, Mr. Scocimara has been the
President and Chief Executive Officer of the Hungarian-American Enterprise Fund,
a private tax-exempt Delaware corporation established pursuant to Federal law
for the purpose of promoting private enterprise in Hungary. Mr. Scocimara has
been the President and Chief Executive Officer of Scocimara & Company, Inc., a
financial consulting firm since 1984. Mr. Scocimara also serves as a director of
Carlisle Companies Incorporated, Euronet Services, Inc. and Roper Industries,
Inc.
During Fiscal 2000, the Board of Directors held five meetings. Each
continuing director nominated by management for re-election attended at least
75% of the aggregate of such meetings and the meetings of all committees of
which each is a member.
COMMITTEES
The Board has established an Audit Committee, a Compensation Committee and a
Stock Option Committee. The Compensation Committee, currently composed of
Messrs. Ahn, Liebenow and Porras, reviews general policy matters relating to
compensation and benefits of employees generally and has responsibility for
reviewing and approving compensation and benefits for all officers of the
Company. The Stock Option Committee, currently composed of Messrs. Ahn, Porras
and Scocimara, administers the Company's stock option plans.
AUDIT COMMITTEE REPORT
The Audit Committee acts pursuant to a written charter, a copy of which is
annexed hereto as Appendix A. In fulfilling its duties, the Audit Committee has:
(a) reviewed and discussed the Company's audited financial statements for Fiscal
2000 with management; (b) discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61;
(c) received certain written disclosures and the letter from the independent
auditors required by Independence Standards Board Standard No. 1 and discussed
with the independent auditors the independent auditors' independence; and
(d) based upon its review of the above, recommended to the Board that the
Company's audited financial statements for Fiscal 2000 be included in the
Company's Fiscal 2000 annual report on Form 10-K. The Audit Committee currently
consists of Messrs. Ahn, Porras, and Scocimara, none of whom has any
relationship to the Company that may interfere with the exercise of his
independence from management or the Company. The Audit Committee members are
'independent' as defined under listing standards of Nasdaq. The Audit Committee
met five times during the fiscal year ended December 30, 2000 and each member
attended all meetings.
AUDIT FEES
For Fiscal 2000, the Company paid aggregate fees of $169,500 to its auditors
in connection with the Company's annual audit and for the review of the
Company's financial statements included in the Company's quarterly Form 10-Q
filings.
5
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
For Fiscal 2000, the Company paid no fees to its auditors in connection with
financial information systems design or implementation.
ALL OTHER FEES
During Fiscal 2000, the Company was billed aggregate fees of $177,185 from
its principal accountants for all non-audit services. The Audit Committee, in
fulfilling its duties, has considered whether the Company's principal
accountant's provision of non-audit services is compatible with maintaining the
principal accountant's independence.
DIRECTORS' REMUNERATION
For their services as directors of the Company, each of Messrs. Ahn, Porras,
and Scocimara is paid a $25,000 annual retainer and is entitled to receive a
$1,000 fee for each Board and Committee meeting attended.
Effective May 18, 2000, the Company granted to each of Messrs. Ahn, Porras
and Scocimara an option, fully exercisable at any time prior to May 17, 2010, to
purchase 10,000 shares of Common Stock at an exercise price of $5.40625 per
share. Effective December 14, 2000, the Company granted to each of Messrs. Ahn,
Porras and Scocimara an option, fully exerciseable at any time prior to
December 13, 2010, to purchase 10,000 shares of Common Stock at an exercise
price of $4.00. For a period of three months following the termination of
directorship for any reason except for cause (as defined in each option
agreement), the optionholder may exercise that portion of the options which were
otherwise exercisable on the date of termination. Upon termination of the
directorship for cause, all unexercised options would be forfeited.
All directors are reimbursed for all out-of-pocket expenses incurred by them
in connection with their attendance at Board and Committee meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Liebenow, Ahn and Porras. Mr.
Liebenow, who is President, Chief Executive Officer and a director of the
Company, participates in all discussions and decisions regarding salaries,
benefits and incentive compensation for all employees of the Company, except
discussions and decisions relating to his own salary, benefits and incentive
compensation.
6
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued by the
Company for services rendered during 1998, 1999 and 2000 to the Chief Executive
Officer of the Company and to each of the four other most highly compensated
executive officers of the Company whose total cash compensation for 2000
exceeded $100,000.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
------------------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
--------------------------- ---- --------- -------- ---------- ---------------
Larry A. Liebenow ...................... 2000 618,000 210,120(2) 135,000(4) 48,138(8)
President and Chief Executive Officer 1999 600,000 -- -- 46,482(9)
1998 600,000 -- 60,000(5) 46,482(10)
M. Beatrice Spires ..................... 2000 258,000 87,720(2) 45,000(6) 15,960(8)
Vice President -- Styling and Design 1999 228,176 -- -- 16,003(9)
1998 180,000 -- 20,000(5) 11,200(10)
Mark Hellwig ........................... 2000 247,000 83,980(2) 45,000(6) 14,660(8)
Vice President -- Supply Chain 1999 240,000 36,000(3) -- 112,775(9)
Management 1998 41,538(1) -- 50,000(7) 7,517(10)
Anthony Degomes ........................ 2000 226,400 61,581(2) 45,000(6) 25,981(8)
Vice President -- New Business 1999 226,400 -- -- 25,368(9)
Development 1998 223,024 -- 20,000(5) 24,855(10)
Duncan Whitehead ....................... 2000 206,000 70,040(2) 45,000(6) 27,113(8)
Vice President -- Research and 1999 195,561 -- -- 25,591(9)
Development 1998 185,000 -- 20,000(5) 25,366(10)
- ---------
(1) Mr. Hellwig joined the Company as an executive officer during October 1998.
(2) Consists of a bonus paid in 2001 attributable to 2000 operations.
(3) Consists of a bonus paid in 2000 attributable to 1999 operations.
(4) Represents options to purchase shares of Common Stock granted by the
Company to such officer pursuant to the 1997 Stock Option Plan (as
hereinafter defined). All such options vest over five years beginning on
(i) May 18, 2000, with respect to the grant of an option to purchase
60,000 shares, and (ii) December 14, 2000, with respect to the grant of an
option to purchase 75,000 shares.
(5) Represents an option to purchase shares of Common Stock granted by the
Company to such officer pursuant to the 1997 Stock Option Plan (as
hereinafter defined). All such options vest over a five-year period which
began on November 2, 1998, the date of grant.
(6) Represents options to purchase shares of Common Stock granted by the
Company to such officer pursuant to the 1997 Stock Option Plan (as
hereinafter defined). All such options vest over five years beginning on
(i) May 18, 2000, with respect to the grant of an option to purchase 20,000
shares, and (ii) December 14, 2000, with respect to the grant of an option
to purchase 25,000 shares.
(7) Represents an option to purchase shares of Common Stock granted by the
Company to Mr. Hellwig pursuant to the 1997 Stock Option Plan (as
hereinafter defined). All such options vest over a five-year period which
began on October 19, 1998, the date of the grant.
(8) Includes the Company's payment of $37,656, $15,560, $14,260, $14,197 and
$12,847 to cover insurance premiums on the split dollar insurance policies
being used to informally fund the Company's obligations to Mr. Liebenow,
Ms. Spires, Mr. Hellwig, Mr. Degomes and Mr. Whitehead, respectively, under
the Company's Retirement Plan (as hereinafter defined); the Company's
contribution of $400 to each of Mr. Liebenow's, Ms. Spires' Mr. Hellwig's
and Mr. Whitehead's
(footnotes continued on next page)
7
(footnotes continued from previous page)
accounts under the Company's 401(k) plan; and the Company's payment of
$10,082, $11,784 and $13,866 in insurance premiums due with respect to
certain personal life and disability insurance policies owned by Messrs.
Liebenow, Degomes and Whitehead, respectively.
(9) Includes the Company's payment of $36,000, $11,850, $14,400, $13,584 and
$11,325 to cover insurance premiums on the split dollar insurance policies
being used to informally fund the Company's obligations to Mr. Liebenow,
Ms. Spires, Mr. Hellwig, Mr. Degomes and Mr. Whitehead, respectively, under
the Company's Retirement Plan (as hereinafter defined); the Company's
contribution of $400 to each of Mr. Liebenow's, Ms. Spires' and Mr.
Whitehead's accounts under the Company's 401(k) plan; the Company's payment
of $10,082, $11,784 and $13,866 in insurance premiums due with respect to
certain personal life and disability insurance policies owned by Messrs.
Liebenow, Degomes and Whitehead, respectively; the Company's payment of
$98,375 to Mr. Hellwig as a moving and relocation allowance; and $3,753 of
imputed interest with respect to a $75,000 loan, with a five year repayment
period, made by the Company to Ms. Spires in 1998.
(10) Includes the Company's payment of $36,000, $10,800, $3,600, $13,071 and
$11,100 to cover insurance premiums on the split dollar insurance policies
being used to informally fund the Company's obligations to Mr. Liebenow,
Ms. Spires, Mr. Hellwig, Mr. Degomes and Mr. Whitehead, respectively, under
the Company's Retirement Plan (as hereinafter defined); the Company's
contribution of $400 to each of Mr. Liebenow's, Ms. Spires and Mr.
Whitehead's accounts under the Company's 401(k) plan; the Company's payment
of $10,082, $11,784 and $13,866 in insurance premiums due with respect to
certain personal life and disability insurance policies owned by Messrs.
Liebenow, Degomes and Whitehead, respectively; and the Company's payment of
$3,917 to Mr. Hellwig as a moving and relocation allowance.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------------------------------------- ANNUAL RATE OF
NUMBER OF STOCK PRICE
SECURITIES APPRECIATION FOR
UNDERLYING % OF TOTAL OPTION TERMS(3)(4)
OPTIONS/SARS OPTIONS/SARS EXERCISE BASE EXPIRATION -------------------
NAME GRANTED(#)(1) GRANTED(2) PRICE($/SH) DATE 5%($) 10%($)
- ---------------------------------- ------------- ---------- ----------- ---- ----- ------
Larry A. Liebenow................. 60,000 7.8 5.41 05/17/10 204,225 517,425
75,000 9.7 4.00 12/13/10 189,000 477,750
M. Beatrice Spires................ 20,000 2.6 5.41 05/17/10 68,075 172,475
25,000 3.2 4.00 12/13/10 63,000 159,250
Mark Hellwig...................... 20,000 2.6 5.41 05/17/10 68,075 172,475
25,000 3.2 4.00 12/13/10 63,000 159,250
Anthony Degomes................... 20,000 2.6 5.41 05/17/10 68,075 172,475
25,000 3.2 4.00 12/13/10 63,000 159,250
Duncan Whitehead.................. 20,000 2.6 5.41 05/17/10 68,075 172,475
25,000 3.2 4.00 12/13/10 63,000 159,250
- ---------
(1) Includes options granted on May 18, 2000 and December 14, 2000. All such
options become exerciseable in five equal installments, the first
installment becoming exerciseable one year after the date of grant.
(2) During Fiscal 2000, stock options representing an aggregate of 774,000
shares of Common Stock were granted by the Company to all employees as a
group.
(3) Represents gain before income taxes. The fair market values of the Common
Stock on May 18, 2000 and December 14, 2000 were $5.40625 and $4.00 per
share, respectively.
(footnotes continued on next page)
8
(footnotes continued from previous page)
(4) The dollar amounts under these colums are the result of calculations at 5%
and 10% rates set by the SEC and, therefore, are not intended to forecast
possible future appreciation, if any, of the Company's Common Stock.
OPTION/SAR EXERCISES AND HOLDINGS
The following table sets forth certain information concerning the fiscal
year-end value of unexercised options held by the executives named in the
Summary Compensation Table.
FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF NUMBER OF VALUE OF THE VALUE OF THE
SECURITIES SECURITIES UNEXERCISED IN- UNEXERCISED IN-
UNDERLYING UNDERLYING THE-MONEY THE-MONEY
SHARES OPTIONS/SARS OPTIONS/SARS OPTIONS/SARS OPTIONS/SARS
ACQUIRED AT FY-END(#) AT FY-END(#) AT FY-END($)(1) AT FY-END($)(1)
ON VALUE ------------ -------------- ---------------- ----------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- ----------- ----------- ----------- ------------- ----------- -------------
Larry A. Liebenow.......... -- -- 391,654(2) -- 1,253,293 --
-- -- 81,000(3) 54,000(3) -- --
-- -- 24,000(6) 36,000(6) -- --
-- -- -- 60,000(7) -- --
-- -- -- 75,000(8) -- --
M. Beatrice Spires......... -- -- 70,500(4) -- 127,041 --
-- -- 27,000(3) 18,000(3) -- --
-- -- 8,000(6) 12,000(6) -- --
-- -- -- 20,000(7) -- --
-- -- -- 25,000(8) -- --
Mark Hellwig............... -- -- 20,000(5) 30,000(5) -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- 20,000(7) -- --
-- -- -- 25,000(8) -- --
Anthony Degomes............ -- -- 66,664(2) -- 213,325 --
-- -- 27,000(3) 18,000(3) -- --
-- -- 8,000(6) 12,000(6) -- --
-- -- -- 20,000(7) -- --
-- -- -- 25,000(8) -- --
Duncan Whitehead........... -- -- 97,219(2) -- 311,101 --
-- -- 27,000(3) 18,000(3) -- --
-- -- 8,000(6) 12,000(6) -- --
-- -- -- 20,000(7) -- --
-- -- -- 25,000(8) -- --
- ---------
(1) Based on a closing sales price of $4.00 per share as quoted on the Nasdaq
National Market on December 29, 2000, the last trading date in Fiscal 2000.
(2) Represents the indicated person's proportionate interest (based upon
ownership of Nortex Holdings shares) in options granted by the Company to
Nortex Holdings (the 'Nortex Option'). The exercise price of the shares
covered by each option is $0.80 per share and the Nortex Option covers a
total of 555,538 shares of Common Stock.
(3) Represents options granted by the Company on May 21, 1997 to certain
executive officers of the Company (the '1997 Stock Option Plan'). The
exercise price of the shares covered by each option is $10.17 per share. The
1997 Stock Option Plan currently covers a total of 1,270,000 shares of
Common Stock.
(4) Represents options granted by the Company on April 13, 1993 to certain
executive officers of the Company (the '1993 Stock Option Plan'). The
exercise price of the shares covered by each option is $2.75 per share as to
60% of the shares purchasable upon exercise of the option and $1.37 per
share as to 40% of the shares purchasable upon exercise of the option. The
1993 Stock Option Plan currently covers a total of 318,391 shares of Common
Stock.
(5) Represents options granted by the Company on October 19, 1998 to Mr. Hellwig
pursuant to the 1997 Stock Option Plan. The exercise price of the shares
covered by each option is $4.25 per share.
(6) Represents options granted by the Company on November 2, 1998 to certain
executive officers of the Company pursuant to the 1997 Stock Option Plan.
The exercise price of the shares covered by each option is $7.25 per share.
(7) Represents options granted by the Company on May 18, 2000 to certain
executive officers of the Company pursuant to the 1997 Stock Option Plan.
The exercise price of the shares covered by each option is $5.40625 per
share.
(8) Represents options granted by the Company on December 14, 2000 to certain
executive officers of the Company pursuant to the 1997 Stock Option Plan.
The exercise price of the shares covered by each option is $4.00 per share.
9
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AGREEMENTS
The Company is a party to an Employment Agreement, amended as of February
24, 1997, and further amended as of December 17, 1999 (the 'Employment
Agreement'), with Larry A. Liebenow pursuant to which Mr. Liebenow serves as
President and Chief Executive Officer of the Company on a full-time basis for
the period ending March 12, 2002, subject to an automatic three-year extension
unless terminated by the Company upon one year's prior notice.
Mr. Liebenow may terminate the Employment Agreement at any time upon three
months' prior notice. The Employment Agreement provides for a base salary of
$600,000 (effective January 1, 1997), subject to annual increases as may be
determined by the Board, as well as certain benefits and reimbursement of
expenses. The Employment Agreement provides for annual bonuses in such amounts
as the Board shall determine. Pursuant to the Employment Agreement, the Company
has the right to terminate Mr. Liebenow's employment only for cause (as defined
in the Employment Agreement). Upon voluntary termination of employment by Mr.
Liebenow, termination of his employment for cause (other than conviction of a
crime involving moral turpitude) or termination of his employment for any other
reason (other than conviction of a crime involving moral turpitude), Mr.
Liebenow will receive a lump sum payment equal to three times his prior year's
base salary plus any bonus paid or payable with respect to the prior year. If
the Employment Agreement had terminated as of January 1, 2001, Mr. Liebenow
would have been entitled to receive $2,484,360. Payments and benefits payable to
Mr. Liebenow as a result of a change-in-control are grossed up to offset
applicable Federal excise taxes. The Employment Agreement also provides for the
continuation of his salary through March 12, 2002 in the event Mr. Liebenow dies
or becomes disabled or incapacitated. In addition, the Employment Agreement
prohibits Mr. Liebenow from disclosing or using any confidential information of
the Company or competing with the Company during the period of his employment
and for one year thereafter.
Effective December 17, 1999, the Company entered into change-in-control
agreements (the 'CIC Agreements') with each of its vice presidents. The CIC
Agreements provide that in the event of the termination of employment of a vice
president in connection with a change-in-control of the Company, as that term is
defined in the CIC Agreements, then such vice president would be entitled to a
lump sum payment equal to one and one-half times the base salary and any bonus
payable for the year preceding the change-in-the-control, plus certain other
benefits. If the employment relationships of Ms. Spires, Mr. Hellwig, Mr.
Degomes and Mr. Whitehead had terminated on January 1, 2001 as a result of a
change-in-control, they would have received $518,580, $496,470, $431,972 and
$414,060, respectively, under the CIC Agreements.
INCENTIVE COMPENSATION PLAN
The Company's annual executive incentive compensation plans (the 'EIC
Plans'), in which all the Company's Vice Presidents participate, are designed to
encourage the executives to work effectively together as a team and to establish
a clear relationship between the Company's financial performance and overall
executive compensation levels. Prior to 1999, the Compensation Committee had
based the formula for the EIC Plan bonus pools on a percentage (which, in the
previous three years, had ranged from 3 to 7%) of the amount by which the
Company's Adjusted Pre-tax Income during the applicable EIC Plan year exceeded
the preceding year's Adjusted Pre-tax Income, subject to a maximum bonus pool
equal to 25% of the aggregate base salaries paid to all EIC Plan participants
during the applicable EIC Plan year. Each EIC Plan participant's actual
allocable share of the bonus pool was determined by Quaker's President and
reviewed by the Compensation Committee. Bonus pools have historically been
distributed equally to each EIC participant, rather than based upon individual
performance, to further promote teamwork among the Company's executives.
Beginning in 1999, the Company's EIC Plan was redesigned to encourage
teamwork while also providing recognition of individual contributions. Pursuant
to the terms of the 2000 EIC Plan, the Company's President and each Vice
President would have been entitled to receive a cash bonus equal to 30% of
his/her base salary if the Company had achieved its 2000 net income objectives
and the Company officer had met his/her individual goals and objectives, with
80% of the executive's bonus based upon achieving the Company's 2000 net income
goal and 20% based on his or her individual
10
performance. Individual bonuses of up to 35% of base salary would have been
payable in the event the Company exceeded its 2000 net income goals by 20% or
more and the executive met all of his or her individual performance objectives.
The formulas resulted in total bonuses paid of $782,568 for EIC Plan year
2000, and no bonuses paid with respect to EIC Plan years 1998 and 1999. No
payments are permitted under the EIC Plan to participants who resigned or were
terminated for cause during the applicable EIC Plan year. Pro rata distributions
would have been made with respect to any participant who died, retired, or whose
employment was terminated without cause during the applicable EIC Plan year.
It is anticipated that the Company will continue, annually, to establish
executive incentive compensation plans similar to those described above.
DEFERRED COMPENSATION PLAN
On July 16, 1992, the Company established a Deferred Compensation Plan (the
'Retirement Plan'), for the benefit of all of the Company's executive officers.
Pursuant to the provisions of the Retirement Plan, the Company has agreed to
provide certain benefits to each plan participant based on the value of
accumulated contributions made under the Retirement Plan on their behalf and
split-dollar variable life insurance contracts insuring the lives of each plan
participant have been purchased to informally fund the Company's obligations
under the Retirement Plan. The Company has established an irrevocable 'grantor'
trust for the purpose of accumulating the amounts needed to pay benefits under
the Retirement Plan and to hold the variable life insurance contracts. The
Company has agreed to make annual contributions to the trust in an amount equal
to 6% of the base salaries of all plan participants (or such higher amount as
the Board of Directors may determine). The assets of the trust will be
considered to be assets of the Company for purposes of satisfying the claims of
the Company's general creditors.
Among the benefits provided to each plan participant are a pre-retirement
death benefit, a monthly retirement benefit payable over a 15-year period for a
participant who terminates employment after attaining age 55 and completing at
least five years of plan participation, and certain other amounts payable
pursuant to the provisions of the Retirement Plan in the event a plan
participant's employment with the Company is terminated as a result of a
change-in-control, or the plan participant's employment with the Company is
terminated prior to attaining age 55 and completing five years of plan
participation. The Retirement Plan was amended as of December 17, 1999 to make
all balances due immediately payable in the form of a single lump sum payment in
the event of a change-in-control of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The report of the Compensation Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
The Company's executive compensation program is based on the philosophy that
a performance-based program that encourages ownership in the Company and
provides management with meaningful economic incentives to improve the Company's
financial performance will ensure both an annual and a long-term perspective by
the management team. With this in mind, the program objectives are:
To provide a competitive compensation program in order to attract,
motivate, reward, and retain qualified personnel for positions of
substantial responsibility.
To serve as a management tool in focusing and directing the energies and
efforts of key executives toward achieving individual and corporate
objectives.
To provide a long-term incentive for the executive to continue providing
service to the Company by linking the success and prosperity of the
individual to the success and prosperity of the Company.
The Compensation Committee achieves these objectives through periodic
performance reviews and related adjustments to the base salaries of the
Company's executives, through cash bonuses awarded
11
pursuant to the Company's annual incentive compensation plans, and through the
Retirement Plan and stock option plans.
Generally, when new executives are recruited by the Company, salary offers
are based upon a review of the current salaries of the candidates, an assessment
of their relative qualifications and a judgment of what salary would be required
to hire a selected candidate. Thereafter, annual increases in each executive's
salary are based upon the Company's overall performance, as well as upon an
evaluation of the executive's individual performance. The performance measures
used for performance evaluation purposes include both subjective measures, such
as the attainment of agreed-upon departmental or corporate objectives, and
various quantitative measures, such as the attainment of sales, productivity, or
expense goals.
In addition, while the performance measures used to evaluate each
executive's performance vary from executive to executive, depending upon the
executive's specific corporate responsibilities, they are, in every case, a
function of the Company's strategy, business plan, and operating objectives for
the year. For example, the performance criteria used to measure the performance
of the Company's vice president of sales and marketing include, but are not
limited to, sales and order rates in relationship to the Company's operating
objectives for the period, expansion of the Company's international business
pursuant to the Company's export strategy, market reaction to the introduction
of new Company products, and maintaining department staffing levels at or below
the Company's employment level objectives.
The annual salary increases awarded to the Company's executives are
generally higher, on a percentage basis, in years when the Company's overall
performance has been good, and lower in those years when the Company's overall
performance has not been as good. In addition, the Compensation Committee takes
various external factors into consideration when reviewing the annual increases
to be awarded to the Company's executives. These external factors include an
evaluation of general economic conditions, the rate of inflation, and market
demand for executives with skills comparable to those of the Company's senior
managers.
The Company's annual executive incentive compensation plans are designed to
encourage the Company's executives to work effectively together as a team to
maximize the Company's profitability. With the exception of a guaranteed bonus
paid to Mr. Hellwig in 2000 pursuant to the terms of the initial offer of
employment made to Mr. Hellwig by the Company in 1998, no bonus payments were
made to any corporate officers with respect to the Company's fiscal 1998 and
1999 operations. The 2000 Executive Incentive Compensation Plan (the '2000 EIC
Plan') set 30% of base salary as a targeted incentive opportunity for all
executives, with 80% of the target award (24% of salary) based on achieving the
Company's 2000 net income plan (before extraordinary adjustments), 20% of the
target award (6% of salary) based on the attainment of agreed upon individual
performance objectives, and a maximum award of 35% of base salary payable only
in the event the Company's 2000 net income equaled or exceeded 120% of the
Company's 2000 business plan objective and the executive had met all of his or
her individual performance objectives. Proportionate bonuses of between 30 and
35% of base salary would have been payable in the event the Company's 2000 net
income fell between 100 and 120% of the Company's business plan objective, and
there would have been no individual awards if 2000 net income had been less than
100% of the Company's 2000 business plan objective. Pursuant to the terms of the
2000 EIC Plan, each 2000 EIC Plan participant's actual payout under the Plan was
determined by Quaker's President and reviewed by the Compensation Committee of
the Board of Directors, and bonuses of $782,568, in the aggregate, were paid to
the Company's executives.
The Retirement Plan provides a benefit which vests over five years and is
based on accumulated contributions to the Plan over the executive's entire
period of service. The level of contributions for any year is determined by a
formula based on the executive's base salary for that year. This Plan is
intended to provide each executive with an incentive to remain with the Company
and to perform in a manner which will result in continuing salary increases.
The stock option plans offer the Company's executives an incentive to
perform in a manner which will result in an increasing price for the Company's
stock, since the value of the options granted pursuant to these plans is
directly related to the value of the Company's common stock. Options vest over a
period of five years and, therefore, provide each executive with an incentive to
remain with the Company. In determining the persons who are to receive options,
the Compensation Committee
12
considers the person's position, responsibilities, years of service, and
accomplishments, as well as the individual's present and future value to the
Company, the anticipated length of his future service, and other relevant
factors. Options were granted to the Company's executives under the 1993 Stock
Option Plan and the 1997 Stock Option Plan (as herein defined) to provide each
with a direct stake in the success of the Company and to support the Company's
efforts to attract and retain qualified employees.
Pursuant to the terms of the Employment Agreement, the Company's
Compensation Committee reviews Mr. Liebenow's salary annually and concurrently
determines what cash bonus, if any, should be paid to him with respect to the
Company's performance during the fiscal year immediately preceding the review
date. These reviews take place shortly after the Company's audited financial
statements for the prior fiscal year become available and the salary increases
and bonuses awarded to Mr. Liebenow are based on the Compensation Committee's
evaluation of the Company's operating and financial performance under Mr.
Liebenow's leadership during the review period, as measured by revenues and net
income for the review period compared to (i) the business plan for the review
period and, (ii) revenues and net income for the period immediately prior to the
review period. For Fiscal 2000, Mr. Liebenow's base salary was increased in
accordance with the criteria set forth above and his bonus for Fiscal 2000 was
determined by the Compensation Committee and deemed to be appropriate, from a
total compensation standpoint, in light of the Company's financial performance
during the period. There were no adjustments to Mr. Liebenow's base salary
during 1998 and 1999, and no bonus payments were made to him with respect to the
Company's Fiscal 1998 or 1999 operations.
Compensation Committee
SANGWOO AHN
LARRY A. LIEBENOW
JERRY I. PORRAS
13
PERFORMANCE GRAPH
The Performance Graph below shall not be deemed incorporated by reference by
any general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG QUAKER FABRIC CORPORATION,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
[PERFORMANCE GRAPH]
ASSUMES $100 INVESTED ON DEC. 29, 1995
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 30, 2000
COMPANY/INDEX/MARKET 12/29/95 01/03/97 01/02/98 12/31/98 12/31/99 12/29/00
-------------------- -------- -------- -------- -------- -------- --------
Quaker Fabric......................... $100.00 $158.57 $217.14 $107.09 $ 72.82 $ 68.54
Peer Group Index...................... 100.00 92.17 112.00 79.41 33.02 13.66
NASDAQ Market Index................... 100.00 124.27 152.00 214.39 378.12 237.66
The above graph compares the cumulative total stockholder return for the
Company's Common Stock for the period beginning December 29, 1995 and ending
December 29, 2000 with the comparable returns of two indexes. The first index is
the NASDAQ Market Index (NMS Industrials) and the second is a peer group
consisting of companies which were formed for purposes similar to that of the
Company (Burlington Industries Equity, Inc. (NYSE symbol 'BUR'), Collins &
Aikman Corporation ('C&A') (NYSE symbol 'CKC'), and Culp Inc. (NYSE symbol
'CFI').) C&A is not represented in the graph after January 4, 1997. C&A sold its
Mastercraft division during 1997; as a result, C&A is no longer included in the
Company's peer group.
For purposes of this comparison, the cumulative total stockholder return of
each issuer within the peer group has been weighted according to the respective
issuer's stock market capitalization at the beginning of the period
(December 29, 1995). This comparison assumes $100 invested on December 29,
14
1995 in the Company's Common Stock and $100 invested in each of the indexes.
This comparison also assumes that all dividends have been reinvested.
CERTAIN TRANSACTIONS
In 1998, the Company made a $75,000 loan to Ms. Spires in connection with
her purchase of a home. Under the terms of the promissory note evidencing the
loan, Ms. Spires must repay the full principal amount in sixty equal
installments, which commenced on January 1, 2001, Interest is imputed on the
loan at the applicable short-term federal rate.
PROPOSAL 2.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed the firm of Arthur Andersen LLP,
independent accountants, to be the independent auditors of the accounts of the
Company for Fiscal 2001 and recommends to stockholders that they vote for
ratification of that appointment.
Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting and will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
OTHER MATTERS
As of the date of this Proxy Statement, the Company is not aware of any
other matters to be brought before the Annual Meeting. However, if other matters
do come before the meeting, it is the intention of the persons named in the
accompanying form of proxy to vote such proxy in accordance with their judgment
on such matters.
STOCKHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Any stockholder of the Company who desires to present a proposal at the 2002
Annual Meeting of Stockholders for inclusion in the proxy statement and form of
proxy relating to that meeting must submit the proposal to the Company at its
principal executive offices on or before December 12, 2001.
By Order of the Board of Directors
CYNTHIA L. GORDAN
Vice President, Secretary and
General Counsel
April 12, 2001
15
APPENDIX A
QUAKER FABRIC CORPORATION
AUDIT COMMITTEE CHARTER
MAY 18, 2000
The Audit Committee is appointed by the Board to assist the Board in
monitoring (1) the integrity of the financial statements of the Company,
(2) the compliance by the Company with legal and regulatory requirements that
may have a material effect on the financial statements of the Company, and
(3) the independence and performance of the Company's independent auditors.
The members of the Audit Committee shall meet the independence and
experience requirements applicable to companies listed on the NASDAQ National
Market. The members of the Audit Committee shall be appointed by the Board.
The Audit Committee shall make regular reports to the Board.
In meeting its responsibilities, the Audit Committee is expected to:
1. Provide an open avenue of communication between the Board and the
Company's independent auditors, which firm shall be ultimately
accountable to the Audit Committee and the Board.
2. Review and update the Committee's charter annually.
3. Recommend to the Board the independent auditors to be nominated,
evaluate the performance of the independent auditors, and review and
approve the discharge of the independent auditors.
4. Confirm and assure the independence of the independent auditors,
including a review of management consulting services and related fees
provided by the independent auditors and such other information as
the independent auditors shall be required to provide in writing to
the Audit Committee for this purpose.
5. Inquire of management and the independent auditors about significant
risks or exposures and assess the steps management has taken to
minimize such risks to the Company.
6. Consider, in consultation with management and the independent
auditors, the scope and plan of the independent auditors with respect
to each annual audit of the Company's financial statements and
review, with management and the independent auditors, the resulting
annual audited financial statements.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditors. Nor is it
the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditors, or to
assure compliance with laws and regulations.
A-1
Appendix 1
ZQKR6B DETACH HERE
PROXY
QUAKER FABRIC CORPORATION
Proxy Solicited by the Board of Directors
for Annual Meeting of Stockholders
May 17, 2001
The undersigned stockholder of QUAKER FABRIC CORPORATION (the
"Company") hereby appoints Larry A. Liebenow and Cynthia L. Gordan, and either
of them the attorneys and proxies of the undersigned, with full power of
substitution, to vote on behalf of the undersigned all the shares of Common
Stock of the Company which the undersigned is entitled to vote at the Annual
Meeting of Stockholders of the Company, to be held at the corporate offices of
Fleet Financial Corporation, 100 Federal Street, Thirty-fifth Floor, Boston, MA
02110 on May 17, 2001 at 11:00 A.M. and at all adjournments thereof, hereby
revoking any proxy heretofore given with respect to such stock; and the
undersigned authorizes and instructs said proxies to vote as follows on the
reverse side.
NOTE: PROXIES THAT ARE MARKED ABSTAIN WILL BE COUNTED AS PRESENT AT THE MEETING.
|----------------| |----------------|
| SEE REVERSE | CONTINUED AND TO BE SIGNED ON REVERSE SIDE | SEE REVERSE |
| SIDE | | SIDE |
- ----------------- -----------------
ZQKR6A DETACH HERE
[X] Please mark
vote as in
this sample.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE VOTED AS
DIRECTED HEREIN. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE
DIRECTORS NAMED IN PROPOSAL 1, FOR PROPOSAL 2, AND IN ACCORDANCE WITH THE
DISCRETION OF THE PROXY HOLDERS RESPECTING SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING.
1. ELECTION OF DIRECTORS:
Nominees: (01) Sangwoo Ahn, (02) Larry A. Liebenow,
(03) Jerry I. Porras, (04) Eriberto R. Scocimara.
FOR [ ] [ ] WITHHELD
ALL FROM ALL NOMINEES
NOMINEES
[ ]
- -----------------------------------------------------------------------------
INSTRUCTION: To withhold authority to vote for any individual
nominee(s), write that nominee's name in the space provided above.
FOR AGAINST ABSTAIN
2. PROPOSAL TO APPROVE THE APPOINTMENT OF [ ] [ ] [ ]
ARTHUR ANDERSEN LLP AS INDEPENDENT
AUDITORS OF THE COMPANY FOR FISCAL 2001.
3. In their discretion, the holders of this proxy are authorized to
vote upon such other matters as may properly come before the
meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please date and sign exactly as your name(s) appear(s) hereon. If shares are
held jointly, each joint owner must sign. Executors, administrators, trustees,
etc., should so indicate when signing and when more than one executor, etc. is
named, a majority must sign. If signing for a corporation, please sign full
corporate name by duly authorized officer.
Signature:_______________ Date:______ Signature:__________________ Date:________