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: __________________________________________
<PAGE>
Hampshire Group, Limited
215 Commerce Boulevard
Anderson, South Carolina 29625
April 12, 2000
Dear Fellow Stockholders:
The 2000 Annual Meeting of Stockholders will be held at The Princeton Club,
15 West Forty-Third Street, New York City, on Tuesday, May 16, 2000 at 10:00
o'clock A.M. All Stockholders are welcome and encouraged to attend this meeting.
An official Notice of Annual Meeting, which includes information about the
matters scheduled for consideration at the Meeting, appears on the next page of
this Proxy.
After the formal part of the Meeting, members of management will be making
a presentation about the Company's recent performance and plans for the future.
This will be followed by an opportunity to question the management group, or to
comment on matters pertaining to Hampshire Group, Limited.
I sincerely hope that you will be able to attend the Annual Meeting, but in
any event, please mark and sign your Proxy and return it to the 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
<PAGE>
HAMPSHIRE GROUP, LIMITED
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders of Hampshire
Group, Limited, a Delaware corporation (the "Company"), will be held at 10:00
A.M. on May 16, 2000, at The Princeton Club, 15 West Forty-Third Street, New
York, NY to consider and act on the following proposals:
1. To elect six Directors to serve until the next Annual Meeting of
Stockholders;
2. To consider and act upon an amendment of the Company's Stock Option Plan;
3. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent accountants for the fiscal year ending December 31, 2000; and
4. To consider and act upon any other matters which may properly come before
the meeting, or any and all adjournments thereof.
Information regarding the matters to be considered and voted upon at the
Annual Meeting is set forth in the Proxy Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 7, 2000, 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, 1999, and Form of Proxy are being mailed together with this
Notice.
Please complete and return to the Company the enclosed Proxy, whether or
not you plan to be present at the meeting. If you attend the meeting, you may
revoke your Proxy if you choose to cast your vote in person.
By Order of the Board of Directors,
/s/ Charles W. Clayton
---------------------------------
Anderson, South Carolina Charles W. Clayton
April 12, 2000 Secretary
<PAGE>
HAMPSHIRE GROUP, LIMITED
215 Commerce Boulevard
Anderson, SC 29625
PROXY STATEMENT
The accompanying Proxy is solicited on behalf of the Board of Directors of
Hampshire Group, Limited (the "Company") for use at the Annual Meeting of
Stockholders to be held at The Princeton Club, 15 West Forty-Third Street, New
York, New York, on May 16, 2000, 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 14, 2000 to Stockholders of record as of April 7, 2000 (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.
Properly signed and dated Proxies received by the Company's Secretary prior
to or at the Annual Meeting will be voted as instructed thereon, or in the
absence of such instructions will be voted as follows:
(1) FOR the election as Directors of the Company those six persons designated
as nominees;
(2) FOR approval of the amendment of the Company's Stock Option Plan; and
(3) FOR the ratification of the appointment of Deloitte & Touche LLP as the
Company's independent accountants for the fiscal year 2000.
Any Stockholder giving the Proxy enclosed with this statement may cast a
vote in person by revoking the Proxy at the Annual Meeting. Any Proxy may be
revoked by notice in writing to the Secretary at any time prior to the Annual
Meeting.
1
<PAGE>
OUTSTANDING VOTING STOCK
As of the Record Date, there were 4,116,536 shares of Common Stock, par
value $0.10 per share, (the "Common Stock") eligible to vote at the 2000 Annual
Meeting of Stockholders. Holders of Common Stock are entitled to one vote for
each share of stock held on the Record Date.
Quorum Requirements
- -------------------
The presence in person or by proxy of holders of record of a majority of
the outstanding shares of Common Stock is required for a quorum to transact
business at the Annual Meeting; but if a quorum should not be present, the
Annual Meeting may be adjourned from time to time until a quorum is obtained.
Under applicable Delaware law, abstentions will be counted for purposes of
determining the existence of a quorum, but broker non-votes will not.
Beneficial Ownership
- --------------------
The following table sets forth certain information regarding the ownership
of Common Stock of the Company as of the Record Date by: (a) each person known
to the Company to be the beneficial owner of more than 5% of the outstanding
shares of Common Stock; (b) each director and named executive officer of the
Company designated in the section of the Proxy Statement captioned "Executive
Officers of the Registrant"; and (c) all directors and executive officers of the
Company as a group. Except as otherwise indicated, all persons listed below
have: (x) sole voting power and investment power with respect to their shares of
Common Stock, except to the extent that authority is shared by spouses under
applicable law; and (y) record and beneficial ownership with respect to their
shares of Common Stock of the Company.
2
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP TABLE
Stockholder Shares Percent
- ------------------------------------------------------------------------------
<S> <C> <C>
Ludwig Kuttner -
Estouteville, Keene VA 22946 872,882 (1) 20.53%
Beatrice Ost-Kuttner -
Estouteville, Keene VA 22946 916,137 (2) 22.25%
Hans W. Schmidig - Bleicherweg 39,
CH-8027, Zurich, Switzerland 481,386 11.69%
Fidelity Low-Price Stock Fund -
82 Devonshire St., Boston MA 02109 388,300 9.43%
Peter W. Woodworth - 702 Main Street,
Winona MN 55987 322,203 (3) 7.82%
Heartland Advisors, Inc. -
789 N. Water St., Milwaukee, WI 53202 254,800 6.19%
Charles W. Clayton 145,039 (4) 3.50%
Eugene Warsaw 132,182 (5) 3.19%
Herbert Elish 32,821 *
Harvey L. Sperry 20,922 *
H. Edward Hurley 20,866 *
Joel Goldberg 2,663 *
All directors and executive officers
as a group (eight persons) 1,549,578 35.89%
- ------------------------------------------------------------------------------
<FN>
(*) Less than 1%.
(1) (Ludwig Kuttner) Includes 137,766 shares purchased for the account of Mr.
Kuttner under the Company's Common Stock Purchase Plan for Directors and
Executives (the "Common Stock Purchase Plan"), 72,727 shares issuable upon
exercise of warrants and 60,766 shares issuable under presently exercisable
options; but does not include shares held by Mrs. Beatrice Ost-Kuttner nor
179,636 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 nor
179,636 shares held by their adult sons, as to which Mrs. Ost-Kuttner
disclaims beneficial ownership.
(3) (Peter W. Woodworth) Includes 5,621 shares purchased for the account of Mr.
Woodworth under the Company's Common Stock Purchase Plan and 3,000 shares
issuable under presently exercisable options; but does not include 71,511
shares held by his spouse, as to which Mr. Woodworth disclaims beneficial
ownership.
(4) (Charles W. Clayton) Includes 47,087 shares of Common Stock purchased for
the account of Mr. Clayton under the Common Stock Purchase Plan, 32,774
shares of Common Stock issuable under presently exercisable options and
4,300 shares of Common Stock held by his spouse.
(5) (Eugene Warsaw) Includes 50,717 shares of Common Stock purchased for the
account of Mr. Warsaw under the Common Stock Purchase Plan, 25,794 shares
of Common Stock issuable under presently exercisable options and 250 shares
of Common Stock held by his children.
</FN>
</TABLE>
3
<PAGE>
PROPOSALS
ITEM 1. ELECTION OF DIRECTORS
At the Annual Meeting, six directors for the Company will be elected to
serve for the ensuing year and until their successors shall be duly elected and
qualified. The Board of Directors of the Company is soliciting Proxies for the
election of the persons named below. Should any of these nominees not remain a
candidate at the time of the Annual Meeting, Proxies solicited hereunder will be
voted in favor of those nominees who do remain as candidates and may be voted
for substituted nominees. 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 six persons listed below have been nominated for election as directors
of Hampshire Group, Limited, each currently being an active Director of the
Company.
Ludwig Kuttner Age 53 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 66 Director since 1986
- ------------- ------ -------------------
Mr. Elish serves as Executive Director of The Carnegie Library of
Pittsburgh. Previously, he served as Chairman of the Board of The Kerr Group,
having served in that position from 1995 through 1998.
Joel Goldberg Age 54 Director since 1998
- ------------- ------ -------------------
Dr. Goldberg is a licensed therapist and has been a human resources
consultant for thirty years. He is the founder and President of Career
Consultants, Inc., an international human resources consulting firm, and the
President of SKA Associates, an employment search firm. Dr. Goldberg serves on
the Board of Directors of Phillips-Van Heusen Corporation, Merrimac Industries,
Inc., Marcal Paper Company and Modell's Inc.
Harvey L. Sperry Age 70 Director since 1977
- ---------------- ------ -------------------
Mr. Sperry is a retired Partner of the law firm of Willkie Farr &
Gallagher. (Willkie Farr & Gallagher renders legal services for the Company.)
4
<PAGE>
Eugene Warsaw Age 72 Director since 1994
- ------------- ------ -------------------
Mr. Warsaw has served as President and Chief Executive Officer of Hampshire
Designers, Inc., a subsidiary of Hampshire Group, Limited, since 1987.
Previously, he served as President and Chief Executive Officer of the Private
Label Sportswear division of Phillips-Van Heusen and President of Sommerset
Knitting Mills from 1982 through 1986.
Peter W. Woodworth Age 53 Director since 1995
- ------------------ ------ -------------------
Mr. Woodworth served as President and Chief Executive Officer of Winona
Knitting Mills, a division of Hampshire Designers, Inc. from 1995 through 1999.
He was the majority stockholder and President of The Winona Knitting Mills, Inc.
from 1983 until the time of its merger into Hampshire Group, Limited in October
1995.
Information about the beneficial ownership of the Company's Common Stock
held by each nominee is included in the "Beneficial Ownership Table" on Page 3.
ITEM 2. AMENDMENT OF THE STOCK OPTION PLAN
The Company seeks Stockholder approval of the amendment of the Hampshire
Group, Limited 1992 Stock Option Plan (as herein amended, the "Stock Option
Plan") to authorize an additional 500,000 shares of Common Stock for issuance
thereunder (the "Plan Amendment"). At the time the Stock Option Plan was
approved by Stockholders, 500,000 shares were authorized for issuance pursuant
thereto and an additional 250,000 shares were approved in 1995. Options with
respect to 472,690 shares authorized under the Stock Option Plan have been
exercised to date; and an additional 290,713 shares remain outstanding at
December 31, 1999, including 13,403 granted subject to the approval of the
amendment of the Stock Option Plan.
The Board believes the authorization of additional shares of Common Stock
for issuance under the Stock Option Plan is essential to the Company's effort to
attract and retain highly qualified individuals to serve the Company and its
affiliates. Compensation through stock options is an extremely important
component of the Company's employee compensation program. The Board and the
Compensation Committee believe that no form of incentive compensation better
aligns the interest of management with those of the Company's Stockholders. In
addition, because stock option plans are common among public companies, the
Board and the Compensation Committee believe that the Company will need to be
able to grant additional options in order to remain competitive in the market
for highly qualified executives.
The following summary of the Stock Option Plan is qualified in its entirety
by the full text of the Stock Option Plan, a copy of which was filed with the
Securities and Exchange Commission along with this Proxy and may be obtained by
Stockholders of the Company upon request directed to the Secretary of the
Company at the corporate office.
5
<PAGE>
General
- -------
The Company's Stock Option Plan has been maintained by the Company since
May 1992. Under the Stock Option Plan, officers and key employees designated by
the Compensation Committee (the "Committee") are granted options to purchase
shares of the Company's Common Stock. The exercise price for Options granted
under the Stock Option Plan is determined by the Committee on the date of grant.
The Stock Option Plan allows for the granting of incentive stock options
(within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, (the "Internal Revenue Code") and/or non-qualified stock options (all
options granted under the Stock Option Plan which are not incentive stock
options) to purchase shares of the Company's Common Stock.
The primary purpose of the Stock Option Plan is to provide the Company's
key employees with a form of incentive compensation that closely aligns the
interests of key employees with those of the Stockholders of the Company. Unless
otherwise determined by the Committee, 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 on the date of grant. In this way, employees can
realize value with respect to options only to the extent that the value of the
Company's Common Stock increases from the date of grant.
Administration of the Stock Option Plan
- ---------------------------------------
The Stock Option Plan is administered by the Committee, which is currently
composed of Messrs. Elish and Goldberg neither of whom have ever been an
employee or officer of the Company, or related entity. The Committee has the
full power to construe and interpret the Stock Option Plan, to establish the
terms of any options granted thereunder, and to determine the 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 Committee may consider such factors as it deems pertinent.
Currently, there are approximately 25 officers and key employees eligible to
participate in the Stock Option Plan.
Shares Reserved for the Stock Option Plan
- -----------------------------------------
Currently, there is an aggregate of 750,000 shares of the Company's Common
Stock reserved for issuance upon exercise of options granted under the Stock
Option Plan, which shares may be authorized and unissued shares or treasury
shares. The Plan Amendment provides for the reservation of an additional 500,000
shares for issuance upon exercise of options granted under the Stock Option
Plan.
6
<PAGE>
Option Terms
- ------------
At the time the Committee approves the granting of an option to an officer
or key employee, the Committee must also designate (i) the date of grant of such
option (provided that such date may not be earlier than the date the option is
approved by the Committee), (ii) the option price per share of Common Stock
(generally no option is granted with an exercise price less than the fair market
value of a share of Common Stock on the date of grant), (iii) the schedule and
times at which such options will vest and become exercisable (provided that no
option may be exercised later than December 31 of the year in which the tenth
anniversary of the date of grant occurs), and (iv) whether the option will or
will not constitute an incentive stock option under Section 422 of the Internal
Revenue Code. Options may be exercised by tendering to the Company a certified
or bank cashiers check for the aggregate purchase price or a number of shares of
Common Stock having an equal value along with a notice of exercise.
The Stock Option Plan also authorizes the Committee to issue replacement
options to participants who voluntarily surrender and cancel prior options with
a price per share of Common Stock 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 Common Stock
subject to the Stock Option Plan (including the number and type that may be
granted to any individual in any calendar year) and outstanding options in order
to prevent a dilution or enlargement of benefits as a result of a corporate
transaction or event.
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 his or her disability,
death or retirement, the option terminates three months after the date of
cessation.
As of April 7, 2000, the closing price of the Common Stock on NASDAQ was
$9.50.
Under the Stock Option Plan, options for no more than 50,000 shares of
Common Stock may be granted to any individual participant during any calendar
year (effective 1995). No option granted under the Stock Option Plan is
transferable otherwise than by will or the laws of descent and distribution.
In the event of a Change in Control of the Company (as defined in the Stock
Option Plan), all outstanding unvested options will immediately become fully
vested and exercisable.
Amendment and Termination of the Stock Option Plan
- --------------------------------------------------
The Board of Directors may amend the Stock Option Plan at any time in its
sole discretion, but no amendment may, without the participant's consent, impair
his or her rights to any option previously granted under the Stock Option Plan,
7
<PAGE>
or without Stockholder approval (i) materially increase the maximum number of
shares of Common Stock which may be issued under the Stock Option Plan (except
to prevent a dilution or enlargement of benefits as a result of a corporate
transaction or event) or (ii) materially change the requirements as to
eligibility.
The Board of Directors may terminate the Stock Option Plan at any time with
respect to shares of Common Stock for which options have not previously been
granted. Stockholder approval may also be required if there are "material
changes" to the Stock Option Plan for purposes of Section 162(m) of the Internal
Revenue Code or to comply with new legislation.
Federal Income Tax Consequences
- -------------------------------
The following is intended only as a brief general summary of the federal
income tax rules relevant to stock options granted under the Stock Option Plan.
This discussion is not intended to provide guidance to participants;
participants should consult their own personal tax advisors.
Non-qualified Stock Options. The holder of a non-qualified stock option
("NQO") does not recognize taxable income upon the grant of the NQO, nor is the
Company entitled, for income tax purposes, to a deduction. The participant
recognizes ordinary income on the exercise of an NQO equal to the excess of the
fair market value of the shares received on exercise over the option exercise
price. The fair market value of the shares is measured on the exercise date.
Upon disposal of the underlying shares the participant's gain (or loss) is
long-term or short-term, depending upon whether the shares were held for one
year or more. The Company does not receive a deduction for any capital gain
recognized by the participant.
If the Company complies with applicable requirements, it is generally
entitled to a deduction in computing its federal income taxes in an amount equal
to the ordinary income recognized by the participant on the exercise of the NQO.
Incentive Stock Options. The holder of an incentive stock option ("ISO")
does not realize taxable income upon the grant or exercise of the ISO and
Company is not entitled to any deduction in respect of such grant or exercise.
As discussed below, however, a participant may be subject to the alternative
minimum tax on the exercise of an ISO.
The income tax treatment of any gain or loss realized upon a participant's
disposition of option shares depends on the timing of the disposition. If the
option shares have been held for at least one year and if at least two years
have elapsed since the date of grant of the ISO (the "Required Holding
Periods"), then the participant recognizes (i) long-term capital gain to the
extent that the selling price exceeds the option price or (ii) capital loss to
the extent that the option price exceeds the selling price. In either case, no
deduction is allowed to the Company.
If a participant disposes of option shares before the expiration of the
Required Holding Periods (a "disqualifying disposition"), then (i) if the
selling price exceeds the fair market value of the option shares on the date the
8
<PAGE>
ISO was exercised, the excess of such fair market value over the option price is
taxable to the participant as ordinary income and the excess of the selling
price over such fair market value is taxable to the participant as capital gain,
(ii) if the selling price exceeds the option price but does not exceed the fair
market value of the option shares on the date the ISO was exercised, the excess
of the selling price over the option price is taxable to the participant as
ordinary income, and (iii) if the selling price is less than the option price,
the difference is treated as capital loss to the participant. In each case, the
Company is entitled to a deduction equal to the amount of ordinary income (but
not capital gain) recognized by the Participant on the disqualifying
disposition.
The amount by which the fair market value of shares of Common Stock
(determined as of the exercise date) received through the exercise of an ISO
exceeds the option exercise price is included in the participant's alternative
minimum taxable income and may subject the participant to alternative minimum
tax. Such alternative minimum tax may be payable even though the participant
receives no cash upon the exercise of his or her ISO with which to pay such tax.
Exercise with Previously Owned Shares. The previous discussion assumes that
all shares of Common Stock acquired on the exercise of an NQO or ISO are paid
for in cash. If a participant pays for all or a portion of the option exercise
price with previously owned shares of Common Stock, the participant will
generally (although not in all cases) recognize no gain or loss on the
previously owned shares surrendered. The participant's tax basis in and holding
period for the surrendered shares (for purposes of determining capital gains and
losses, but not for purposes of determining whether a disqualifying disposition
occurs and its consequences) will generally carry over to an equal number of
shares received.
New Plan Benefits
- -----------------
Because the grant of options under the Stock Option Plan is entirely within
the discretion of the Committee, the Company cannot predict the individuals to
whom the Committee will grant options in the future nor the number of shares of
Common Stock with respect to which such options may be granted. Therefore, the
Company has decided to omit the tabular disclosure of benefits to be granted
under the Stock Option Plan. Information with respect to options granted to the
Named Executive Officers in the last fiscal year can be found in the Summary
Compensation Table.
A favorable vote of a majority of the votes cast is required for approval.
The Board of Directors recommends that the Stockholders vote "FOR" the
approval of this amendment of the Stock Option Plan.
9
<PAGE>
ITEM 3. APPOINTMENT OF INDEPENDENT ACCOUNTANTS
It is proposed that the Stockholders ratify the appointment of Deloitte &
Touche LLP as independent accountants of the Company for the year ending
December 31, 2000. Deloitte and Touche served as auditors for 1999. A Deloitte &
Touche representative will be present at the annual meeting and will have the
opportunity to make a statement if he desires to do so and will be available to
respond to appropriate questions.
The Board of Directors recommends that the accompanying Proxy be voted in
favor of such appointment.
ITEM 4. MISCELLANEOUS
The Board of Directors of the Company is not aware of any other matters
that may come before the meeting. If any other matters are properly presented to
the meeting for action, it is the intention of the persons named as Proxies in
the enclosed form of Proxy to vote such Proxies in accordance with the best
judgment of a majority of the Proxies on such matters.
10
<PAGE>
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 53 Chairman of the Board, President
and Chief Executive Officer
Eugene Warsaw 72 President and Chief Executive Officer,
Hampshire Designers, Inc.
Charles W. Clayton 62 Vice President, Secretary, Treasurer
and Chief Financial Officer
H. Edward Hurley 51 Executive Vice President,
Hampshire Designers, Inc.
Peter W. Woodworth 53 President and Chief Executive Officer
Winona Knitting Mills Division
- -------------------------------------------------------------------------------
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.
Charles W. Clayton has been Vice President, Secretary, Treasurer and Chief
Financial Officer of the Company since 1984. He served as Vice President of
Finance and Controller from 1979 to 1983. Prior to joining the Company, Mr.
Clayton was employed as an audit manager with Price Waterhouse & Co., an
international accounting firm.
H. Edward Hurley has been Executive Vice President of Hampshire Designers,
Inc. since 1993. He served as Vice President of Operations and Corporate
Controller from 1986 to 1993. Formerly, he served as Controller of the Finishing
Division of Springs Industries, Inc.
Peter W. Woodworth joined the Company in October 1995. He served as
President and Chief Executive Officer of Winona Knitting Mills Division from
1995 to 1999 and previously served as President and Chief Executive Officer of
The Winona Knitting Mills, Inc. prior to its merger into the Company.
11
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information regarding the compensation of
the Company's Chief Executive Officer and its four next most highly compensated
executive officers (the "Named Executive Officers") for the years 1999, 1998 and
1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation
----------------------------------------
Other
Annual
Name and Compensa-
Principal Position Year Salary(1) Bonus(1) tion (2)
- ------------------ ---- --------- ------- ---------
<S> <C> <C> <C> <C>
Ludwig Kuttner 1999 400,000 416,418 18,325
Chairman, President and 1998 400,000 403,608 17,902
Chief Executive Officer 1997 400,000 731,583 87,619
- ----------------------------------------------------------------------------
Eugene Warsaw 1999 350,000 171,891 1,910
President and CEO, 1998 350,000 442,148 4,913
Hampshire Designers, Inc. 1997 350,000 763,166 21,692
- ----------------------------------------------------------------------------
Charles W. Clayton 1999 149,500 98,877 6,057
Vice President, Secretary, 1998 155,000 153,117 8,524
Treasurer and CFO 1997 155,000 193,970 23,775
- ----------------------------------------------------------------------------
H. Edward Hurley 1999 117,500 41,254 458
Executive Vice President, 1998 110,000 115,764 1,286
Hampshire Designers, Inc. 1997 110,000 190,075 5,402
- ----------------------------------------------------------------------------
Peter W. Woodworth 1999 134,600 -- --
President and CEO, 1998 155,000 129,147 5,740
Winona Knitting Mills Division 1997 135,000 313,748 28,053
<CAPTION>
Long Term
Compensation
Awards
------------
Securities
Name and Underlying All Other
Principal Position Year Options Compensation
- ------------------ ---- ------------ -------------
<S> <C> <C> <C>
Ludwig Kuttner 1999 50,000 106,400 (3)
Chairman, President and 1998 -- 106,400
Chief Executive Officer 1997 5,000 103,200
- -----------------------------------------------------------------------
Eugene Warsaw 1999 -- 3,200 (4)
President and CEO, 1998 10,000 3,200
Hampshire Designers, Inc. 1997 -- 3,200
- -----------------------------------------------------------------------
Charles W. Clayton 1999 15,000 16,400 (3)
Vice President, Secretary, 1998 10,000 13,200
Treasurer and CFO 1997 -- 13,200
- -----------------------------------------------------------------------
H. Edward Hurley 1999 -- 3,200 (4)
Executive Vice President, 1998 10,000 3,200
Hampshire Designers, Inc. 1997 -- 3,200
- -----------------------------------------------------------------------
Peter W. Woodworth 1999 -- 2,400 (4)
President and CEO, 1998 -- 1,600
Winona Knitting Mills Division 1997 -- 1,170
<FN>
(1) The annual salary and incentive bonuses for 1999 included amounts paid into
the Company's Common Stock Purchase Plan and Voluntary Deferred
Compensation Plan as follows: Kuttner - $164,925; Warsaw - $106,887;
Clayton - $127,624; Hurley - $33,052; and Woodworth - $50,672.
(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 $100,000 and $10,000, respectively. In
addition, $6,400 was contributed by the Company for each executive pursuant
to the Company's 401(k) Retirement Savings Plan.
(4) Represents amounts contributed by the Company pursuant to the Company's
401(k) Retirement Savings Plan.
</FN>
</TABLE>
12
<PAGE>
The following table sets forth information regarding grants of stock
options made during 1999 to each of the Named Executive Officers.
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
Number of Percent of Total
Securities Options/SARs
Underlying Granted to Exercise or Grant Date
Options/SARs Employees in Base Price Expiration Present
Name Granted (#) Fiscal Yr. ($/Sh) Date Value($)(3)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ludwig Kuttner (1) 34,782 $9.488 05/05/04 $59,875
15,218 8.625 05/05/07 36,515
------------------------------------------------------------
50,000 65.2% $96,390
- ------------------------------------------------------------------------------
Charles W.
Clayton (2) 7,500 $8.625 12/31/04 $21,184
7,500 8.625 06/30/05 23,021
------------------------------------------------------------
15,000 19.6% $44,205
- ------------------------------------------------------------------------------
<FN>
(1) The options were granted on May 6, 1999, under the Company's 1992 Stock
Option Plan at or above the fair market value on the date of grant and vest
April 5, 2004 and April 5, 2007, respectively, subject to acceleration of
20% annually provided the Company achieves its annual budget as approved by
the Board of Directors.
(2) The options were granted on May 6, 1999, under the Company's 1992 Stock
Option Plan at the fair market value on the date of grant and vest in
installments of 50% on December 31, 1999 and 50% on June 30, 2000.
(3) A variant of the Black-Scholes option pricing model was used to determine
the grant date present value. In applying the model, the Company assumed a
4.95% risk-free rate of return, a 0% dividend yield, an average annualized
volatility of 22.46% and an expected term from vest of 6.16 years.
</FN>
</TABLE>
13
<PAGE>
The following table sets forth information regarding the exercise of
options during 1999 and the number and value of unexercised options held at
year-end by each of the Named Executive Officers.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND
FY-END OPTION/SAR VALUE
<CAPTION>
No. of Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Option/SARs at Options/SARs
Shares Value FY-End (#) at FY-End($)
Acquired Realized Exercisable/ Exercisable/
Name on Exercise(#) ($) Unexercisable Unexercisable(1)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ludwig Kuttner 64,006 227,062 64,516 / 51,250 20,795 / 12,365
Eugene Warsaw 44,548 143,081 28,294 / 7,500 69,029 / -
Charles W. Clayton 13,636 43,797 27,774 / 15,000 43,279 / 6,094
H. Edward Hurley - - 7,750 / 7,500 10,172 / -
Peter W. Woodworth - - 3,000 / - - / -
<FN>
(1) The average of the closing bid and ask price of the Company's Common Stock
at December 31, 1999 was $9.438.
</FN>
</TABLE>
14
<PAGE>
EMPLOYMENT CONTRACTS
Mr. Kuttner has an employment agreement with the Company effective January
1, 1998, which provides for an annual salary of $400,000; annual incentive
compensation equal to 7% of the net after tax earnings of the Company; and an
annual deferred compensation payment of $100,000. The employment agreement may
be terminated by the Company or Mr. Kuttner at any time. If the Company
terminates the employment agreement without cause, Mr. Kuttner would receive an
amount ("severance payment") equal to: (i) his average compensation for the five
calendar years preceding the year in which the termination occurs; (ii)
multiplied by two; and (iii) paid in equal 24 monthly installments. Mr. Kuttner
would receive an amount equal to the severance payment if he terminates his
employment within 180 days after a change of control, which would include a
merger where the Company did not survive, a sale by the Company of substantially
all of its assets, or the election of a majority of the directors who had not
been nominated by the existing board of directors. Mr. Kuttner's spouse would
receive an amount equal to the severance payment if he were to die while
employed by the Company. The Company carries insurance on the life of Mr.
Kuttner to cover such contingency.
Mr. Warsaw has an employment agreement with Hampshire Designers, Inc.
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.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for determining executive compensation.
Compensation of All Executives. The Committee believes that, in order to
maximize the Company's profitability, it must attract, motivate and retain
executives of the highest caliber to cause the Company to achieve such
profitability. To this end, the Company provides its executives with competitive
salaries and incentives, including equity-based compensation, intended to align
the interests of executives with that of the Stockholders.
Annual Compensation. Annual compensation consists of salary and incentive
bonuses with emphasis on lower base salary and higher incentive bonuses.
Incentive bonuses for executives of Hampshire Designers are provided by a profit
incentive plan, whereby approximately 15% of pre-tax profits are allocated to
the executives of the business, either in accordance with employment agreements,
or by management with the approval of the Committee.
15
<PAGE>
Incentive bonuses for Company officers, including Mr. Kuttner, are based on
annual goals established by the Committee. A major portion of the incentive
bonus is based on the Company achieving profit goals established by the
Committee. The incentive bonus paid to Mr. Kuttner for 1999 reflected the
achievement of both financial and subjective goals.
Chief Executive Officer Compensation. Mr. Kuttner's compensation is based
on his employment agreement with the Company, which provides for an annual
salary of $400,000, annual incentive bonus compensation equal to 7% of net
after-tax earnings of the Company and an annual deferred compensation payment of
$100,000.
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 bonuses to purchase Common Stock of the Company, at a
discount, pursuant to the Company's Common Stock Purchase Plan for Directors and
Executives. Long-term incentive compensation awards are based on the individual
responsibilities of the executive, Company financial results and financial
performance of particular profit centers.
In 1999, the Committee awarded options to Mr. Kuttner to purchase 50,000
shares of Common Stock of the Company in recognition of his contributions to the
performance of the Company. The options vest on May 5, 2004 in respect to 34,782
shares and on May 5, 2007 in respect to 15,218 shares but 20% of the shares vest
each year if the Company achieves its annual budget as approved by the Board of
Directors.
Awards of stock options by the Committee are made on a subjective basis
after the Committee's evaluation of an executive's performance.
Policy with Respect to the $1 Million Deduction Limit. Section 162(m) of
the Internal Revenue Code denies a publicly held corporation a federal income
tax deduction for compensation in excess of $1 million per year paid to or
accrued for each of its Chief Executive Officers and four other most highly
compensated executive officers. Certain "performance- based" compensation, such
as stock options awarded under the Company's 1992 Stock Option Plan, are not
subject to the limitation on deductibility. While the Committee considers the
limits on deductibility imposed by Section 162(m), the Committee believes that
the benefits of having flexibility in awarding cash compensation can sometimes
outweigh the lack of deductibility. All compensation earned by the Named
Executive Officers for 1999 was fully deductible.
COMPENSATION COMMITTEE
Herbert Elish
Joel Goldberg
16
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
Mr. Elish has served as a member of the Compensation Committee since 1992
and Dr. Goldberg joined the Committee in 1998. Neither member of the Committee
is or has been an officer or an employee of the Company. Dr. Goldberg provided
consulting services to the Company during 1999.
COMPENSATION OF DIRECTORS
During 1999, Messrs. Elish, Sperry and Goldberg received annual director's
fees of $15,000 each and Messrs. Elish and Sperry received $10,000 each for
serving as members of the Investment Committee. At their election, all of the
director's fees earned by Mr. Sperry and Dr. Goldberg for 1999 were used to
purchase Common Stock under the Common Stock Purchase Plan. The executive
officers who also serve as directors do not receive director's fees. The Company
reimburses the directors for expenses associated with attendance at the Board of
Directors' meetings.
17
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held seven meetings during the year ended December
31, 1999, and each Director attended at least 75% of the aggregate number of
meetings held and of the total number of meetings held by all committees of the
Board on which he served.
The Company has a Compensation 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 Mr. Elish and Dr. Goldberg, neither
of whom are officers or employees of the Company. The Compensation Committee
held two meetings during fiscal year 1999.
The Company has an Investment Committee which reviews with management all
significant investment opportunities. The Investment Committee currently consist
of Messrs. Kuttner, Elish and Sperry. The Investment Committee held five
meetings during fiscal year 1999.
The Company has an Audit Committee which consults with management regarding
selection of the independent public accountants, reviews with management all
significant accounting and disclosure matters and reviews the scope and findings
of such accountant's examination. The Audit Committee also meets with the
independent accountants, without the participation of management, to inquire as
to the adequacy of the Company's internal controls and the cooperation of
management and company personnel in respect to the accountant's examination. The
Audit Committee consists of Messrs. Elish, Goldberg and Sperry, none of whom are
officers or employees of the Company. The Audit Committee held two meetings
during fiscal year 1999.
As additional guidance for the Board of Directors and the Audit Committee,
during 1999 the Company adopted the following Audit Committee Charter which
encompasses all of the recommendations of the Securities and Exchange Commission
and the AICPA.
18
<PAGE>
AUDIT COMMITTEE CHARTER
The Audit Committee of the Board of Directors of Hampshire Group Limited
(the "Company") has been established to assist the Board of Directors (the
"Board") in fulfilling its responsibility to oversee management's conduct of the
financial reporting process, the system of internal, financial, and
administrative controls, and the annual independent audit of the Company's
financial statements.
The Audit Committee's role is one of oversight, and recognizes that
management is responsible for preparing the Company's financial statements and
that the external auditor is responsible for auditing those financial
statements.
The Audit Committee is empowered to investigate any matter brought to its
attention with full access to Company records, personnel, facilities, and
outside experts as needed and requested.
MEMBERSHIP
- ----------
- - The Audit Committee will be comprised of at least three directors who are
independent and financially literate as required by SEC Release NASDAQ
34-42331.
- - At least one member must have significant past employment experience in
finance or accounting, relevant professional certification or comparable
experience or background with financial oversight responsibilities, such as
having been a chief financial officer or chief executive officer.
RESPONSIBILITIES
- ----------------
The Audit Committee will fulfill its responsibilities to the Board by:
- - Ensuring accountability of the external auditor to the Board and Audit
Committee by interviewing and recommending to the Board the firm of
external auditors to be appointed as independent auditors of the Company,
and reviewing their qualifications, scope of work, performance, and
professional fees;
- - Approving the external auditor's annual audit plans for the Company;
- - Ensuring receipt from the external auditor of a formal written statement
delineating all relationships between the auditor and the Company, its
directors and management consistent with Independence Standards Board
Standard Number 1;
19
<PAGE>
- - Discussing any disclosed relationships and their impact on the external
auditor's independence, and recommending any actions to the Board necessary
to satisfy itself of the auditor's independence;
- - Reviewing the results of internal and external audit work performed, the
quality and adequacy of internal controls, and focusing on material and
significant controls issues resulting from audit activities;
- - Follow-up of management's implementation of recommendations made by the
external auditors;
- - Reviewing and approving major changes in accounting policies and practices;
- - Meeting periodically with management to review the Company's major
financial risk exposures;
- - Reviewing the annual audited financial statements, and interim financial
statements, prior to submission to the Board. This includes review,
understanding and approval of significant adjustments, estimates, and
accounting policy changes per the Statement on Audit Standards Number 61
(SAS 61);
- - Provide an independent, direct communication between the Board and external
auditors;
- - Oversee legal and regulatory compliance, and compliance with the Company's
Business Ethics Policy; and
DISCLOSURES
- -----------
The Audit Committee will conform to external disclosure requirements by:
- - Certifying to the National Association Security Dealers as required
regarding the independence and financial literacy of all Audit Committee
members; and
- - Preparing for inclusion in the annual proxy statement, per the Securities
and Exchange Commission requirements, a statement certifying that the
Committee has reviewed and discussed the audited financial statements, and
SAS 61 items as described above.
20
<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
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 1999 on these two facilities was $216,000.
The Company leases its sewing plant in La Crescent, Minnesota (15,600
square feet) and certain storage facilities in Winona, Minnesota from Pete
Woodworth, President and Chief Executive Officer of Winona Knitting Mills
Division, and his wife. Further, the Company leases its knitting and finishing
plant (110,000 square feet) from Mr. Woodworth and certain of his relatives. 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 1999 was $201,000.
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 and in such capacity was paid $57,000 in fees during 1999.
Dr. Joel Goldberg, a Director of the Company, is a principal of Career
Consultants, Inc. which has provided human resource consulting services to the
Company since 1997 and in such capacity was paid $7,000 in fees during 1999.
Oliver Kuttner, the son of the Chairman and Chief Executive Officer of the
Company, is managing certain renovations of the real estate owned by the Company
in Charlottesville, Virginia. During 1999 and 1998, the Company paid Mr. Kuttner
$20,000 and $10,000, respectively, and he will receive, as additional
consideration, 30% of the net cash flow of the property after the Company has
received a 10% preferred return on its investment.
During 1999, Hampshire Investments purchased two promissory notes in the
aggregate principal amount of $775,000. The issuers have defaulted under the
notes; and on March 30, 2000, the Chairman and Chief Executive Officer of the
Company, although not obligated to do so, entered into an agreement to purchase
the notes from Hampshire Investments for their aggregate principal amount.
21
<PAGE>
INDEPENDENT ACCOUNTANTS
On October 13, 1999, the Company engaged Deloitte & Touche LLP ("Deloitte")
as its independent accountants to audit its consolidated financial statements
commencing with its fiscal year ending December 31, 1999, and to prepare the
corporate tax returns. On October 11, 1999, the Registrant had notified
PricewaterhouseCoopers LLP ("PricewaterhouseCoopers"), its former independent
accountants, that they were discharged as the Company's independent accountants.
Each of the above actions was recommended by the Audit Committee and approved by
the Board of Directors of the Company.
There have been no disagreements between the Company and
PricewaterhouseCoopers on any matter of accounting principles or practices or
financial statement disclosure during the two fiscal years ended December 31,
1998 and 1997 and during the subsequent interim period through the date of
discharge.
The independent accountant's report on the financial statements of the
Company for the fiscal years ended December 31, 1998 and 1997 did not contain an
adverse opinion or a disclaimer of opinion, nor was it qualified as to
uncertainty, audit scope, or accounting principles.
Further, during the two fiscal years ended December 31, 1998 and 1997 and
the unaudited interim period through the date of the notification, neither the
Company nor any of its representatives sought the advice of Deloitte regarding
the application of accounting principles to a specific completed or contemplated
transaction or the type of audit opinion that might be rendered on the financial
statements of the Company.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
The Company assists the directors and executives in filing reports pursuant
to Section 16 of the Securities Exchange Act of 1934, including Form 4 monthly
transaction reports, for those reporting persons who so requested and who agreed
to advise the Company of changes in the ownership of the Company's equity
securities. To the best of the Company's knowledge and belief, based solely on
the review of reports filed with the Securities and Exchange Commission and upon
written representations by directors and certain executives, there were no
delinquent Section 16 reports during the fiscal year ended December 31, 1999.
22
<PAGE>
PERFORMANCE GRAPH
The following graph sets forth a comparison of the Company's stock
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 December 31, 1994 and the cumulation
and the reinvestment of dividends paid thereafter through December 31, 1999. 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.
<TABLE>
<CAPTION>
[GRAPH APPEARS HERE]
Dec. 1994 Dec. 1995 Dec. 1996 Dec. 1997 Dec. 1998 Dec. 1999
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
HAMP 100 155 174 242 171 113
NASDAQ 100 140 172 209 292 541
DJAI 100 120 180 150 130 123
</TABLE>
23
<PAGE>
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be presented at the 2001 Annual
Meeting must be received by the Company no later than January 31, 2001 to be
considered for inclusion in the Company's Proxy Statement and form of Proxy
relating to that meeting. Such proposals should be addressed to: Hampshire
Group, Limited, Attn.: Secretary, 215 Commerce Boulevard, Anderson, SC 29625.
INFORMATION AVAILABLE TO STOCKHOLDERS
The Company's 1999 Annual Report to Stockholders on Form 10-K are being
mailed with this Proxy Statement. Additional copies of the 1999 Annual Report on
Form 10-K as filed with the United States Securities and Exchange Commission may
be obtained by Stockholders, without charge, from the Company, or write to:
Hampshire Group, Limited, Attn.: Secretary, 215 Commerce Boulevard, Anderson, SC
29625; or by request at Hampshire's e-mail address: [email protected]. Financial
statements are also on file with the United States Securities and Exchange
Commission, Washington, DC 20549 and can be obtained directly at
http://www.sec.gov/.
By order of the Board of Directors,
/s/ Ludwig Kuttner
-------------------------------
Anderson, South Carolina Ludwig Kuttner
April 12, 2000 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 GREATLY APPRECIATED.
24
<PAGE>
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
16, 2000 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 16, 2000,
at 10:00 A.M. and at any and all adjournments thereof, with all power the
undersigned would possess if personally present.
Item 1: Election of six Directors. Nominees: 01-Ludwig Kuttner; 02-Herbert
Elish; 03-Joel Goldberg; 04-Harvey L. Sperry; 05-Eugene Warsaw; and
06-Peter W. Woodworth.
_____ For all nominees listed above
_____ Withhold authority to vote for all nominees
_____ Withhold authority to vote for any individual
nominee _____, _____, _____, _____, _____.
(write numbers of nominee(s) above)
Item 2: To approve an amendment to the Company's Stock Option Plan.
_____ For ____ Against ____ Abstain
Item 3: To ratify the appointment of Deloitte & Touche LLP as the Company's
independent accountants for the fiscal year ending December 31, 2000.
_____ For ____ Against ____ Abstain
This proxy will be voted as directed; but if no direction is indicated
it will be voted FOR the election of the six nominees listed above and
FOR the other two proposals.
Number of shares: __________
Dated: _______________, 2000
Signature(s) ____________________________
____________________________
[Please sign exactly as name(s) appear(s) on
the stock certificate. For joint accounts,
all co-owners must sign and Executor,
Administrators, Trustees, etc. should so
indicate when signing.]
HAMPSHIRE GROUP, LIMITED
AUDIT COMMITTEE CHARTER
The Audit Committee of the Board of Directors of Hampshire Group Limited
(the "Company") has been established to assist the Board of Directors (the
"Board") in fulfilling its responsibility to oversee management's conduct of the
financial reporting process, the system of internal, financial, and
administrative controls, and the annual independent audit of the Company's
financial statements.
The Audit Committee's role is one of oversight, and recognizes that
management is responsible for preparing the Company's financial statements and
that the external auditor is responsible for auditing those financial
statements.
The Audit Committee is empowered to investigate any matter brought to its
attention with full access to Company records, personnel, facilities, and
outside experts as needed and requested.
MEMBERSHIP
- ----------
- - The Audit Committee will be comprised of at least three directors who are
independent and financially literate as required by SEC Release NASDAQ
34-42331.
- - At least one member must have significant past employment experience in
finance or accounting, relevant professional certification or comparable
experience or background with financial oversight responsibilities, such as
having been a chief financial officer or chief executive officer.
RESPONSIBILITIES
- ----------------
The Audit Committee will fulfill its responsibilities to the Board by:
- - Ensuring accountability of the external auditor to the Board and Audit
Committee by interviewing and recommending to the Board the firm of
external auditors to be appointed as independent auditors of the Company,
and reviewing their qualifications, scope of work, performance, and
professional fees;
- - Approving the external auditor's annual audit plans for the Company;
- - Ensuring receipt from the external auditor of a formal written statement
delineating all relationships between the auditor and the Company, its
directors and management consistent with Independence Standards Board
Standard Number 1;
1
<PAGE>
- - Discussing any disclosed relationships and their impact on the external
auditor's independence, and recommending any actions to the Board necessary
to satisfy itself of the auditor's independence;
- - Reviewing the results of internal and external audit work performed, the
quality and adequacy of internal controls, and focusing on material and
significant controls issues resulting from audit activities;
- - Follow-up of management's implementation of recommendations made by the
external auditors;
- - Reviewing and approving major changes in accounting policies and practices;
- - Meeting periodically with management to review the Company's major
financial risk exposures;
- - Reviewing the annual audited financial statements, and interim financial
statements, prior to submission to the Board. This includes review,
understanding and approval of significant adjustments, estimates, and
accounting policy changes per the Statement on Audit Standards Number 61
(SAS 61);
- - Provide an independent, direct communication between the Board and external
auditors;
- - Oversee legal and regulatory compliance, and compliance with the Company's
Business Ethics Policy; and
DISCLOSURES
- -----------
The Audit Committee will conform to external disclosure requirements by:
- - Certifying to the National Association Security Dealers as required
regarding the independence and financial literacy of all Audit Committee
members; and
- - Preparing for inclusion in the annual proxy statement, per the Securities
and Exchange Commission requirements, a statement certifying that the
Committee has reviewed and discussed the audited financial statements, and
SAS 61 items as described above.
2
HAMPSHIRE GROUP, LIMITED
1992 STOCK OPTION PLAN
(Amended and Restated as of February 8, 2000)
ARTICLE I.
Purpose
This 1992 Stock Option Plan, as amended and restated effective February 8,
2000 (the "Plan") is intended as an incentive to improve the performance and
encourage the continued employment of eligible employees of Hampshire Group,
Limited (the "Company") participating in the Plan, by means of increasing their
proprietary interest in the Company's long-term success through stock ownership
and by affording them the opportunity for additional compensation related to the
value of the Company's stock.
The word "Company", when used in the Plan with reference to employment,
shall include subsidiaries of the Company. The word "subsidiary", when used in
the Plan, shall mean any subsidiary of the Company within the meaning of Section
424(f) of the Internal Revenue Code of 1986, as it may be amended from time to
time (the "Code").
It is intended that certain options granted under the Plan will qualify as
"incentive stock options" under Section 422 of the Code.
ARTICLE II.
Administration
The Plan shall be administered by a Stock Option Committee (the
"Committee") appointed by the Board of Directors of the Company (the "Board")
from among its members and shall consist of not less than two members thereof
who are (and shall remain Committee members only so long as they remain)
"non-employee directors" as defined in Rule l6b-3 under the Securities Exchange
Act of 1934 (the "Exchange Act"). Subject to the provisions of the Plan, the
Committee shall have sole authority, in its absolute discretion: (a) to
determine which of the eligible employees of the Company and its subsidiaries
shall be granted options; (b) to authorize the granting of both incentive stock
options and non-qualified stock options; (c) to determine the times when options
shall be granted and the number of shares to be subject to options; (d) to
determine the option price of the shares subject to each option, which price
shall be not less than the minimum specified in ARTICLE V; (e) to determine the
time or times when each option becomes exercisable, the duration of the exercise
period and any other restrictions on the exercise of options issued hereunder;
(f) to prescribe the form or forms of the option agreements under the Plan
(which forms shall be consistent with the terms of the Plan but need not be
identical and may contain such terms as the Committee may deem appropriate to
carry out the purposes of the Plan); (g) to adopt, amend and rescind such rules
and regulations as, in its opinion, may be advisable in the administration of
the Plan; and (h) to construe and interpret the Plan, the rules and regulations
and the option agreements under the Plan and to make all other determinations
<PAGE>
deemed necessary or advisable for the administration of the Plan. All decisions,
determinations and interpretations of the Committee shall be final and binding
on all optionees.
ARTICLE III.
Stock
The stock to be subject to options granted under the Plan shall be shares
of authorized but unissued Common Stock of the Company or previously issued
shares of Common Stock reacquired by the Company and held in its treasury (the
"Stock"). Under the Plan, the total number of shares of Stock which may be
purchased pursuant to options granted hereunder shall not exceed, in the
aggregate, 1,250,000 shares, except as such number of shares shall be adjusted
in accordance with the provisions of ARTICLE X hereof. Under the Plan, Options
for no more than 50,000 shares of Stock may be granted to any individual
employee during any calendar year that the Plan is in effect, except as such
number shall be adjusted in accordance with the provisions of ARTICLE X hereof.
The number of shares of Stock available for grant of options under the Plan
shall be decreased by the sum of the number of shares with respect to which
options have been issued and are then outstanding and the number of shares
issued upon exercise of options. In the event that any outstanding option under
the Plan for any reason expires, is terminated, or is canceled prior to the end
of the period during which options may be granted, the shares of Stock called
for by the unexercised portion of such option may again be subject to an option
under the Plan.
ARTICLE IV.
Eligibility of Participants
Subject to ARTICLE VII, officers and other key employees of the Company or
of its subsidiaries (excluding any person who is a member of the Committee)
shall be eligible to participate in the Plan.
ARTICLE V.
Option Price
Subject to ARTICLE VII, the option price of each option granted under the
Plan shall be determined by the Committee; provided, however, that in the case
of each incentive stock option granted under the Plan, the option price shall be
not less than the fair market value of the Stock at the time the option was
granted. In no event shall the option price of any option be less than the par
value per share of Stock on the date an option is granted.
If the Company's Common Stock is quoted on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") the fair market value
shall be deemed to be the mean between the last quoted bid and asked prices on
NASDAQ on the date immediately preceding the date on which the option is
granted, or if not quoted on that day, then on the last preceding date on which
<PAGE>
such stock is quoted. If the Company's Common Stock is listed on one or more
national securities exchanges, the fair market value shall be deemed to be the
mean between the highest and lowest sale prices reported on the principal
national securities exchange on which such stock is listed and traded on the
date immediately preceding the date on which the option is granted, or, if there
is no such sale on that date, then on the last preceding date on which such a
sale was reported. If the Company's Common Stock is not quoted on NASDAQ or
listed on an exchange, or representative quotes are not otherwise available, the
fair market value of the Stock shall mean the amount determined by the Committee
to be the fair market value based upon a good faith attempt to value the Stock
accurately and computed in accordance with applicable regulations of the
Internal Revenue Service.
ARTICLE VI.
Exercise and Terms of Options
The Committee shall determine the dates after which options may be
exercised, in whole or in part. If an option is exercisable in installments,
installments or portions thereof which are exercisable and not exercised shall
remain exercisable.
Any other provision of the Plan notwithstanding and subject to ARTICLE VII,
(i) no option which is not an incentive stock option shall be exercised after
the date ten years and one month from the date of grant of such option, and no
option which is an incentive stock option shall be exercised after the date
which is ten years from the date of grant of such option (in each case, a
"Termination Date"), and (ii) in the event the Company files a registration
statement under the Securities Act of 1933 (the "Securities Act") for the
initial public offering of its equity securities, no option granted under the
Plan shall be exercisable during the 180-day period (or such longer period
required by the underwriter of such initial public offering) immediately
following the effective date of such registration statement.
Stock options granted hereunder to employees may provide that if, prior to
the Termination Date, an optionee shall cease to be employed by the Company or a
subsidiary thereof (otherwise than by reason of death or disability within the
meaning of Section 22(e)(3) of the Code), the option will remain exercisable for
a period not extending beyond three months after the date of cessation of
employment to the extent it was exercisable at the time of cessation of
employment. If, prior to the Termination Date, an optionee shall cease to be
employed by the Company or any subsidiary thereof by reason of a disability
within the meaning of Section 22(e)(3) of the Code, options granted hereunder
may provide that they will remain exercisable for a period not extending beyond
one year after the date of cessation of employment to the extent exercisable at
the time of cessation of employment. In no event, however, shall an option be
exercisable after the Termination Date. In the event of the death of an optionee
prior to the Termination Date while employed by the Company or a subsidiary
thereof or while entitled to exercise an option pursuant to the preceding two
sentences, options granted hereunder may provide that they will remain
exercisable at any time prior to the Termination Date, but in no event later
than one year from the date of death, by the person or persons to whom the
optionee's rights under the option would pass by will or the applicable laws of
descent and distribution to the extent that the optionee was entitled to
exercise it on the date of death. Notwithstanding the foregoing provisions of
<PAGE>
this paragraph, stock options granted hereunder shall provide that no option
shall be exercisable after the optionee's cessation of employment, unless at the
time of exercise the Certificate of Incorporation or the By-laws of the Company
do not limit ownership of Common Stock of the Company to selected persons,
including employees of the Company.
ARTICLE VII.
Special Provisions Applicable to Incentive Stock Options Only
Notwithstanding anything contained in the Plan to the contrary, to the
extent the aggregate fair market value (determined at the time the option is
granted) of the Stock with respect to which incentive stock options may be
exercisable for the first time by an optionee during any calendar year (under
this Plan and any other stock option plan of the Company and any parent or
subsidiary thereof) exceeds $100,000, such options shall not be treated as
incentive stock options. No incentive stock option may be granted to an
individual who, at the time the option is granted, owns directly, or indirectly
within the meaning of Sections 422(b)(6) and 424(d) of the Code, stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company or of any parent or subsidiary thereof, unless
such option (i) has an option price of at least 110 percent of the fair market
value of the Stock on the date of the grant of such option; and (ii) such option
cannot be exercised more than five years after the date it is granted.
If Stock acquired by an employee through the exercise of an incentive stock
option granted under the Plan is disposed of within two years following the date
of grant or one year following the acquisition of such Stock by the employee (a
"disqualifying disposition"), the holder of such Stock shall, immediately prior
to such disqualifying disposition, notify the Company in writing of the date and
terms of such disposition and provide such other information regarding the
disposition as the Company may reasonably require.
ARTICLE VIII.
Payment for Shares
Payment for shares of Stock acquired pursuant to an option granted
hereunder shall be made in full, upon exercise of the option, by certified or
bank cashier's check payable to the order of the Company, by the surrender to
the Company of shares of its Common Stock or by any combination thereof. The
form of payment shall be at the election of the optionee. The Company in its
discretion, and subject to any reasonable procedures required by its registrars
and transfer agents, may credit or apply shares of Common Stock held by the
optionee and identified to the Company toward payment of the applicable option
exercise price without actual surrender of the certificate representing such
shares and may cause to be issued to the optionee certificates for shares
representing the balance of the shares to be issued upon exercise of the option.
The Company may, in its discretion, require that an optionee pay to the Company,
at the time of exercise, such amount as the Company deems necessary to satisfy
its obligation to withhold Federal, state, or local income or other taxes
incurred by reason of the exercise or the transfer of shares thereupon.
<PAGE>
ARTICLE IX.
Restrictions on Options and Stock Acquired Through Options
No option shall be transferable, except by will or the laws of descent and
distribution. During the lifetime of the optionee, the option shall be
exercisable only by the optionee.
No options shall be granted under the Plan, and no shares of Stock shall be
issued and delivered upon the exercise of options granted under the Plan, unless
and until any applicable Federal or state registration, listing and/or
qualification requirements and any other requirements of law or of any
regulatory agencies having jurisdiction shall have been fully complied with.
No share of Stock acquired by an employee through the exercise of an option
granted under the Plan may be sold or transferred (other than by will or the
laws of descent and distribution) by the employee prior to an initial public
offering of Stock by the Company.
The Committee in its discretion may, as a condition to the exercise of any
option granted under the Plan, require an employee to whom options have been
granted under the Plan (i) to represent in writing that the shares of Stock
received upon exercise of an option are being acquired for investment and not
with a view to distribution and (ii) to make such other representations and
warranties as are deemed necessary by counsel to the Company Stock certificates
representing unregistered shares of Stock acquired upon the exercise of options
shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR AN OPINION OF COUNSEL TO THE COMPANY THAT REGISTRATION IS
NOT REQUIRED ADDITIONALLY, PURSUANT TO THE PROVISIONS OF THE HAMPSHIRE GROUP,
LTD. 1992 STOCK OPTION PLAN, THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE SOLD OR TRANSFERRED PRIOR TO AN INITIAL PUBLIC OFFERING OF THE COMMON STOCK
OF HAMPSHIRE GROUP, LTD."
ARTICLE X.
Adjustment for Recapitalization, Merger, Etc.
The aggregate number of shares of Stock which may be purchased or acquired
pursuant to options granted hereunder, the maximum number of shares of Stock for
which options may be granted to any individual employee during any calendar
year, the number of shares of Stock covered by each outstanding option and the
price per share thereof in each such option shall be appropriately adjusted for
any increase or decrease in the number of outstanding shares of Stock resulting
from a stock split or other subdivision or consolidation of shares of Stock or
for other capital adjustments or payments of stock dividends or distributions or
other increases or decreases in the outstanding shares of Stock effected without
receipt of consideration by the Company. Any adjustment shall be conclusively
determined by the Committee.
If the Company shall be the surviving corporation in any merger or
reorganization or other business combination, any option granted hereunder shall
cover the securities or other property to which a holder of the number of shares
of Stock covered by the unexercised portion of the option would have been
entitled pursuant to the terms of the merger. Upon any merger or reorganization
or other business combination in which the Company shall not be the surviving
<PAGE>
corporation, or a dissolution or liquidation of the Company, or a sale of all or
substantially all of its assets, the Company shall pay to each optionee in cash,
in exchange for the cancellation of any outstanding options of the optionee
hereunder, an amount equal to the difference between the fair market value (on
the date of the applicable corporate transaction) of the Stock subject to the
unexercised portion of the option and the exercise price of such portion of the
option. Notwithstanding the foregoing, in the event of such merger or other
business combination or a sale of all or substantially all of the Company's
assets, the surviving or resulting corporation, as the case may be, or any
parent or acquiring corporation thereof may grant substitute options to purchase
its shares on such terms and conditions, both as to the number of shares and
otherwise, which shall substantially preserve, in the good faith judgment of the
Committee, the rights and benefits of any option then outstanding hereunder.
Stock option agreements under the Plan may provide that upon stockholder
approval of a merger, reorganization or other business combination, whether or
not the Company is the surviving corporation, or a dissolution or liquidation of
the Company or a sale of all or substantially all of its assets, all unmatured
installments of the stock option shall vest and become immediately exercisable
in full.
The foregoing adjustments and the manner of application of the foregoing
provisions including the issuance of any substitute options, shall be determined
by the Committee in its sole discretion. Any such adjustment may provide for the
elimination of any fractional share which might otherwise become subject to an
option.
ARTICLE XI.
No Obligation to Exercise Option
Granting of an option shall impose no obligation on the recipient to
exercise such option.
ARTICLE XII.
Use of Proceeds
The proceeds received front the sale of Stock pursuant to the Plan shall be
used for general corporate purposes.
ARTICLE XIII.
Rights as a Stockholder
An optionee or a transferee of an option shall have no rights as a
stockholder with respect to any share covered by his option until such person
shall have become the holder of record of such share, and such person shall not
be entitled to any dividends or distributions or other rights in respect of such
share for which the record date is prior to the date on which such person shall
have become the holder of record thereof, except as otherwise provided in
ARTICLE X.
<PAGE>
ARTICLE XIV.
Employment Rights
Nothing in the Plan or in any option granted hereunder shall confer on any
optionee any right to continue in the employ of the Company or any of its
subsidiaries, or to interfere in any way with the right of the Company or any of
its subsidiaries to terminate the optionee's employment at any time.
ARTICLE XV.
Compliance with the Law
The Company is relieved from any liability for the non-issuance or
non-transfer or any delay in the issuance or transfer of any shares of Stock
subject to options under the Plan which results from the inability of the
Company to obtain, or any delay in obtaining, from any regulatory body having
jurisdiction all requisite authority to issue or transfer any such shares if
counsel for the Company deems such authority necessary for lawful issuance or
transfer thereof. Appropriate legends in addition to that described in ARTICLE
IX may be placed on the stock certificates evidencing shares issued upon
exercise of options to reflect any transfer restrictions.
ARTICLE XVI.
Cancellation of Options
The Committee, in its discretion, may, with the consent of any optionee,
cancel any outstanding option hereunder.
ARTICLE XVII.
Effective Date; Expiration Date of Plan
The Plan shall become effective upon adoption by the Company's Board of
Directors and approval by the stockholders of the Company in a manner which
complies with both Rule 16b-3 under the Exchange Act and Section 422(b)(1) of
the Code and the Treasury Regulations thereunder. The expiration date of the
Plan, after which no option may be granted hereunder, shall be the tenth
anniversary of the later of (i) adoption of the Plan by the Board of Directors
or (ii) the approval of the Plan by the stockholders of the Company pursuant to
the previous sentence.
ARTICLE XVIII.
Amendment or Discontinuance of Plan
The Board may, without the consent of the optionees under the Plan, at any
time terminate the Plan entirety and at any time or from time to time amend or
modify the Plan, provided that no such action shall adversely affect options
theretofore granted hereunder without the optionee's consent. Notwithstanding
the above, the approval of the stockholders of the Company will be required for
any amendment which (i) materially changes the requirements as to eligibility
<PAGE>
for participation in the Plan, as specified in ARTICLE IV or (ii) materially
increases (unless pursuant to ARTICLE X) the maximum number of shares subject to
Options granted under the Plan, as specified in ARTICLE III.
ARTICLE XIX.
Change in Control
In the event of a Change in Control, all outstanding unvested options
granted under the Plan shall immediately become fully vested and exercisable.
For the purpose of this Article XIX, a "Change in Control" shall be deemed
to have taken place if and when:
(a) individuals who, on October 1, 1999, constitute the Board (the
"Incumbent Directors") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director
subsequent to the date hereof, whose election or nomination for election
was approved by a vote of at least two-thirds of the Incumbent Directors
then on the Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for
director, without written objection to such nomination) shall be an
Incumbent Director; provided, however, that no individual initially elected
or nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors or as a result of any
other actual or threatened solicitation of proxies or consents by or on
behalf of any person other than the Board shall be deemed to be an
Incumbent Director;
(b) any "Person" (as such term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50% or
more of the combined voting power of the Company's then outstanding
securities eligible to vote for the election of the Board (the "Voting
Securities"); provided, however, that the event described in this paragraph
(b) shall not be deemed to be a Change in Control by virtue of any of the
following acquisitions: (i) by the Company or any subsidiary of the Company
in which the Company owns more than 50% of the combined voting power of
such entity (a "Subsidiary"), (ii) by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any Subsidiary, (iii) by
any underwriter temporarily holding the Company's Voting Securities
pursuant to an offering of such Voting Securities or (iv) pursuant to a
Non-Qualifying Transaction (as defined in paragraph (c));
(c) the consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the Company or
any Subsidiary that requires the approval of the Company's stockholders,
whether for such transaction or the issuance of securities in the
transaction (a "Business Combination"), unless immediately following such
Business Combination: (i) more than 50% of the total voting power of (A)
the corporation resulting from such Business Combination (the "Surviving
Corporation"), or (B) if applicable, the ultimate parent corporation that
directly or indirectly has beneficial ownership of 100% of the voting
securities eligible to elect directors of the Surviving Corporation (the
"Parent Corporation"), is represented by the Company's Voting Securities
that were outstanding immediately prior to such Business Combination (or,
if applicable, is represented by shares into which the Company's Voting
Securities were converted pursuant to such Business Combination), and such
voting power among the holders thereof is in substantially the same
proportion as the voting power of the Company's Voting Securities among the
holders thereof immediately prior to the Business Combination, (ii) no
Person (other than any employee benefit plan (or related trust) sponsored
or maintained by the Surviving Corporation or the Parent Corporation), is
or becomes the beneficial owner, directly or indirectly, of 30% or more of
<PAGE>
the total voting power of the outstanding voting securities eligible to
elect directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) and (iii) at least a majority of
the members of the board of directors of the Parent Corporation (or, if
there is no Parent Corporation, the Surviving Corporation) following the
consummation of the Business Combination were Incumbent Directors at the
time of the Board's approval of the execution of the initial agreement
providing for such Business Combination (any Business Combination which
satisfies all of the criteria specified in (i), (ii) and (iii) above shall
be deemed to be a "Non-Qualifying Transaction");
(d) a sale of all or substantially all of the Company's assets;
(e) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company; or
(f) such other events as the Board may designate.
Notwithstanding the foregoing, a Change in Control of the Company shall not
be deemed to occur solely because any person acquires beneficial ownership of
more than 50% of the Company's Voting Securities as a result of the acquisition
of the Company's Voting Securities by the Company which reduces the number of
the Company's Voting Securities outstanding; provided, that if after such
acquisition by the Company such person becomes the beneficial owner of
additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such person, a
Change in Control of the Company shall then occur.
