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
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
DRYPERS CORPORATION
(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:
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:
5. Total fee paid:
[ ] 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:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
<PAGE>
[DRYPERS CORPORATION LOGO]
April 20, 2000
Dear Stockholder:
You are cordially invited to join us at the Annual Meeting of Stockholders
of Drypers Corporation to be held at 9:00 AM (Houston time), on Friday, May 26,
2000, at the Red Lion Hotel, located at 2525 West Loop South, Houston, Texas
77027.
This year you will be asked to vote in favor of two proposals. The
proposals relate to the election of two directors and the appointment of
independent public accountants for fiscal 2000. These matters are more fully
explained in the attached proxy statement, which we encourage you to read.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, WE STRONGLY
ENCOURAGE YOU TO DESIGNATE THE PROXIES SHOWN ON THE ENCLOSED PROXY CARD TO VOTE
YOUR SHARES. PLEASE RETURN YOUR SIGNED PROXY CARD AT YOUR EARLIEST CONVENIENCE.
Thank you for your cooperation.
Sincerely,
/s/ WALTER V. KLEMP
Walter V. Klemp
Chairman of the Board
and Chief Executive Officer
<PAGE>
DRYPERS CORPORATION
5300 MEMORIAL, SUITE 900
HOUSTON, TEXAS 77007
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Drypers Corporation:
Our 2000 Annual Meeting of Stockholders will be held on May 26, 2000, at
9:00 AM (Houston time), at the Red Lion Hotel, located at 2525 West Loop South,
Houston, Texas, for the following purposes:
1. To elect two persons to serve as our directors for a three-year term
or until their respective successors are duly elected and qualified;
2. To consider and vote on a proposal to ratify the appointment of
Arthur Andersen LLP as our independent public accountants for the
fiscal year ending December 31, 2000; and
3. To transact any other business that may properly come before the
meeting.
The Board of Directors has set April 14, 2000, as the record date for the
annual Meeting. Only those stockholders who were holders of record of our common
stock at the close of business on April 14, 2000, will be entitled to vote at
the annual meeting. All stockholders are cordially invited to attend the meeting
in person. Even if you plan to attend the meeting, YOU ARE REQUESTED TO SIGN,
DATE AND RETURN THE ACCOMPANYING PROXY AS SOON AS POSSIBLE.
By Order of the Board of Directors
/s/ ROBERT F. GRAY, JR.
Robert F. Gray, Jr.
Secretary
April 20, 2000
<PAGE>
DRYPERS CORPORATION
5300 MEMORIAL, SUITE 900
HOUSTON, TEXAS 77007
(713) 869-8693
PROXY STATEMENT
ANNUAL MEETING: DATE: Friday, May 26, 2000
TIME: 9:00 AM (Houston time)
PLACE: The Red Lion Hotel
2525 West Loop South
Houston, Texas 77027
AGENDA: Two proposals, numbered as Items 1 and 2 on the proxy
card, for the election of two nominees as directors of
the Company and the appointment of Arthur Andersen LLP
as the Company's independent public accountants for the
fiscal year ending December 31, 2000.
WHO CAN VOTE: All holders of record of our common stock at the close
of business on April 14, 2000 are entitled to vote.
Holders of the common stock are entitled to one
vote per share at the Annual Meeting. The common stock
is the only class of our securities that is entitled to
vote at the Annual Meeting.
PROXIES SOLICITED BY: Your vote and proxy is being solicited by our Board of
Directors for use at the Annual Meeting.
This Proxy Statement and enclosed proxy card are being
sent on behalf of our Board of Directors to all
stockholders beginning on April 21, 2000. By completing,
signing and returning your proxy card, you will
authorize the persons named on the proxy card to vote
your shares according to your instructions.
PROXIES: If you do not indicate how you wish to vote for one or
more of the nominees for director, the persons named on
the proxy card will vote FOR election of all the
nominees for director (Proposal 1). If you "withhold"
your vote for any of the nominees, this will be entered
as a vote AGAINST that nominee. If you do not indicate
how you wish to vote for the ratification of the
appointment of Arthur Andersen LLP as the Company's
independent public accountants, the persons named on the
proxy card will vote FOR election of Arthur Andersen LLP
(Proposal 2). If you "withhold" your vote for Arthur
Andersen LLP, this will be counted as a vote AGAINST
their appointment.
REVOKING YOUR PROXY: You can revoke your proxy by:
o writing to the Secretary (at 5300 Memorial, Suite
900, Houston, Texas 77007) before the Annual
Meeting;
o voting again via mail; or
o casting your vote in person at the Annual Meeting.
Your last vote will be the vote that is counted.
<PAGE>
QUORUM: As of April 14th, there were 17,762,533 shares of common
stock issued and outstanding and there were
approximately 364 holders of record of common stock. The
presence, in person or by proxy, of stockholders
entitled to cast at least 9,058,892 votes constitutes a
quorum for adopting the proposals at the Annual Meeting.
If you have properly signed and returned your proxy card
by mail, you will be considered part of the quorum, and
the persons named on the proxy card will vote your
shares as you have instructed them. If a broker holding
your shares in "street" name indicates to us on a proxy
card that the broker lacks discretionary authority to
vote your shares, we will not consider your shares as
present or entitled to vote for any purpose.
MULTIPLE PROXY CARDS: If you receive multiple proxy cards it indicates
that your shares are held in more than one
account, such as two brokerage accounts, and are
registered in different names. You should vote each of
the proxy cards to ensure that all of your shares are
voted.
QUESTIONS: You may call Investor Relations at (713) 869-8693 if you
have any questions.
PLEASE VOTE - YOUR VOTE IS IMPORTANT
<PAGE>
BOARD OF DIRECTORS
ELECTION OF DIRECTORS
ITEM NO. 1 ON THE PROXY CARD
Two directors are to be elected at the Annual Meeting. Each director
elected will hold office until the 2003 Annual Meeting. Both of the nominees for
director are now serving as directors. The nominees for election as director
are:
DIRECTOR
NOMINEES AGE SINCE
------------------ --- --------
Terry A. Tognietti 43 1991
Philip A. Tuttle 58 1991
DIRECTOR
OTHER DIRECTORS AGE SINCE
--------------- --- --------
Walter V. Klemp 40 1987
Nolan Lehmann 55 1991
Gary L. Forbes 56 1996
The persons named on the proxy card will vote for both of the nominees for
director listed unless you withhold authority to vote for one or more of the
nominees. The nominees receiving a majority of votes cast at the Annual Meeting
will be elected as directors. Abstentions and broker non-votes will not be
treated as a vote for or against either particular nominee and will not affect
the outcome of the election of directors.
Both of our nominees have consented to serve as directors. Our Board of
Directors has no reason to believe that either of the nominees will be unable to
act as a director. However, if either director is unable to stand for
re-election, the Board will designate a substitute. If a substitute nominee is
named, the persons named on the proxy card will vote for the election of the
substitute nominee.
INFORMATION REGARDING NOMINEES AND DIRECTORS
BACKGROUND OF NOMINEES
Mr. Tognietti has served as one of our directors since August 1991 and has
been our Vice Chairman of the Board of Directors since August 1998. From January
1995 until January 1999, he served as Co-Chief Executive Officer, President of
Drypers North America and Secretary. Mr. Tognietti also served as one of our
Managing Directors from our formation to December 1994. From January 1994 to
December 1994, he served as our Managing Director--Domestic Operations. From
June 1992 to December 1993, he served as President of our Veragon division. From
June 1979 to August 1987, Mr. Tognietti was involved in operations management
within the baby diaper division of Procter & Gamble, serving in various
positions, including Pampers operations department manager, Luvs operations
department manager and Luvs manufacturing development manager.
Mr. Tuttle has served as one of our directors since 1991. Since May 1989,
Mr. Tuttle has been a general partner of Davis Venture Group, the general
partner of Davis Venture Partners, LP. The Davis Venture companies together are
a principal stockholder of the Company. Since May 1997, Mr. Tuttle has been a
general partner of Davis, Tuttle Venture Group, the general partner of Davis,
Tuttle Venture Partners, LP, a private equity partnership. Mr. Tuttle also
serves on the board of directors of Home Care Supply, Inc., Nationwide Graphics,
Inc. and EnLink Geoenergy Services, Inc. Mr. Tuttle is a certified public
accountant and is a fellow of the Institute of Directors, London, England.
2
<PAGE>
BACKGROUND OF DIRECTORS
Mr. Klemp has served as our Chairman of the Board since January 1995 and
has served on our Board of Directors since its formation in February 1987. He
has also served as Chief Executive Officer since August 1998. Prior to August
1998, he served as Co-Chief Executive Officer from January 1995 to July 1998.
From February 1996 to July 1996, in addition to his duties as Chairman and
Co-Chief Executive Officer, he served as Acting Chief Financial Officer. He
served as our Managing Director--Finance from our formation to December 1994. In
1984, Mr. Klemp participated in the formation of VMG and, in 1987, the formation
of Drypers.
Mr. Lehmann has served as one of our directors since 1991. He has served
as President and a director of Equus Capital Management Corporation, located in
Houston, Texas, since 1983, and is also President and a director of Equus
Capital Corporation. Mr. Lehmann also currently serves as President and a
director of Equus II Incorporated. Equus Capital Management Corporation and
Equus Capital Corporation also serve as the management company and managing
general partner of Equus Capital Partners, LP, one of several funds formed by
Equus Capital Corporation. Equus Capital Partners, LP and its affiliate, Equus
II Incorporated, are principal stockholders of the Company. Mr. Lehmann also
serves on the board of directors of Allied Waste Industries, Inc., a company
involved in solid waste disposal and Paracelsus Healthcare Corporation, a
hospital management company. Mr. Lehmann is a certified public accountant.
Mr. Chambers has served as one of our directors since January 1995 and as
President and Chief Operating Officer since August 1998. Prior to August 1998,
he served as Co-Chief Executive Officer and President -- Drypers International
from January 1995 to July 1998. From January 1994 to December 1994, he served as
our Managing Director--International Operations. In June 1992, he became
President of our VMG Division and served in such capacity until December 1993.
From July 1989 until joining us in June 1992, Mr. Chambers served as Chief
Executive Officer and President of VMG Enterprises, Inc. Mr. Chambers also
served as Vice President of Manufacturing of VMG from March 1986 to July 1989
and as Operations Manager of VMG from April 1985 to March 1986. From March 1979
to April 1985, Mr. Chambers served in various manufacturing management positions
with Procter & Gamble, including process engineer with divisional
responsibilities for specific Pampers product improvements.
Mr. Forbes has served as one of our directors since May 1996. Mr. Forbes
has served as Vice President of Equus Capital Management Corporation since 1991
and also has served as Vice President of Equus II Incorporated. Mr. Forbes also
serves on the board of directors of Advanced Technical Products, Inc., a
manufacturer of performance composite products, Consolidated Graphics, Inc., a
company involved in commercial and financial printing, and NCI Building Systems,
Inc., a manufacturer of pre-engineered metal buildings. Mr. Forbes is a
certified public accountant.
MEETINGS AND COMMITTEES OF THE BOARD
During 1999, the Board of Directors met four times, the Compensation
Committee met one time and the Audit Committee met one time. Each director
attended at least 75% of all Board of Directors and committee meetings during
1999.
The Board of Directors has an Audit Committee and a Compensation
Committee. The Board of Directors does not have a nominating committee.
3
<PAGE>
Mr. Forbes, Mr. Lehmann and Mr. Tuttle are the current members of the
Audit Committee. The primary functions of the Audit Committee are:
o assessing the independence and performance of our independent and
internal auditors;
o recommending to the Board the selection and discharge of our independent
auditors; and
o evaluating the adequacy of our internal accounting controls.
Messrs. Forbes, Lehmann and Tuttle are the current members of the
Compensation Committee. The primary functions of the Compensation Committee are:
o recommending to the Board the compensation to be paid to Mr. Chambers
and Mr. Klemp; and
o awarding options under the various stock option plans for the directors,
officers and key employees.
COMPENSATION OF DIRECTORS
In 1999, non-employee members of the Board of Directors were compensated
for their services as directors under our 1994 Non-Employee Director Option
Plan. Each non-employee director was granted an option to purchase 6,000 shares
of common stock at a per share exercise price of $3.19, the fair market value of
the common stock on the date of grant. We also have adopted the 1996
Non-Employee Director Stock Option Plan. Each non-employee director was granted
an option to purchase 4,000 shares of common stock at a per share exercise price
of $3.19, the fair market value of the common stock on the date of grant. All
non-employee directors are also reimbursed for ordinary and necessary expenses
incurred in attending Board and committee meetings.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
ITEM NO. 2 ON PROXY CARD
The Audit Committee has recommended and the Board of Directors has
approved and now recommends the ratification of the appointment of Arthur
Andersen LLP as our independent public accountants for the fiscal year ending
December 31, 2000. Representatives of Arthur Andersen LLP are expected to attend
the annual meeting and will be given an opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions by
stockholders.
4
<PAGE>
STOCK OWNERSHIP
STOCK OWNED BY "BENEFICIAL HOLDERS"
This table shows information, as of April 14, 2000, for:
o each person known by us to beneficially own 5% of the outstanding shares
of common stock;
o each director and executive officer of the Company and all directors;
and
o executive officers of the Company as a group.
--------------------------------------------------------------------
BENEFICIAL OWNERSHIP(1)
--------------------------------------------------------------------
COMMON
NAME STOCK PERCENT
--------------------------------------------------------------------
Equus II Incorporated and affiliates(2) 3,904,496 22.0
2929 Allen Parkway, 25th Floor
Houston, Texas 77019
--------------------------------------------------------------------
Davis Venture Group and affiliates(3) 1,544,379 8.7
8 Greenway Plaza, Suite 1020
Houston, Texas 77046
--------------------------------------------------------------------
Penn Capital Management Co. Inc.(4) 1,063,835 6.0
52 Haddonfield Berlin Road,
Suite 1000
Cherry Hill, New Jersey 08034
--------------------------------------------------------------------
Walter V. Klemp 782,835(5) 4.3
5300 Memorial, Suite 900
Houston, Texas 77007
--------------------------------------------------------------------
Terry A. Tognietti 783,950(6) 4.3
5300 Memorial, Suite 900
Houston, Texas 77007
--------------------------------------------------------------------
Raymond M. Chambers 598,104(7) 3.3
5300 Memorial, Suite 900
Houston, Texas 77007
--------------------------------------------------------------------
Joe D. Tanner 324,533(8) 1.8
5300 Memorial, Suite 900
Houston, Texas 77007
--------------------------------------------------------------------
Jonathan P. Foster 73,231(9) *
5300 Memorial, Suite 900
Houston, Texas 77007
--------------------------------------------------------------------
Gary L. Forbes(10) 31,168(10) (10)
--------------------------------------------------------------------
Nolan Lehmann(11) 35,015(11) (11)
--------------------------------------------------------------------
Philip A. Tuttle(12) 32,001(12) (12)
--------------------------------------------------------------------
6 directors and 2 other executive
officers as a group (8 persons)(13) 8,109,712 45.7
--------------------------------------------------------------------
- --------------
*Less than 1%
5
<PAGE>
(1) This information was calculated based on Rule 13d-3(d) of the Securities
Exchange Act of 1934. Under Rule 13d-3(d), shares not outstanding that are
subject to options, warrants, rights or conversion privileges exercisable
within 60 days are deemed outstanding for the purpose of calculating the
number and percentage owned by the holder, but not deemed outstanding for
the purpose of calculating the percentage owned by any other person.
Beneficial ownership includes outstanding shares of common stock and
shares of common stock that the holder has a right to acquire within 60
days upon exercise of outstanding options or warrants. Except as otherwise
noted, each stockholder has sole voting and dispositive power for their
shares of common stock.
(2) "Equus II Incorporated and affiliates" consists of Equus Capital
Management Corporation, Equus Capital Corporation, Equus II Incorporated
and Equus Capital Partners LP. Equus Capital Management Corporation and
Equus Capital Corporation serve as the management company and sub-advisor
of Equus II Incorporated. Equus Capital Management Corporation and Equus
Capital Corporation also serve as the management company and managing
general partner of Equus Capital Partners LP. Because of these
relationships, each of the entities constituting Equus II Incorporated and
affiliates may be deemed to beneficially own the 3,677,906 shares of
common stock held directly by Equus II Incorporated and the 226,590 shares
of common stock held directly by Equus Capital Partners LP.
(3) "Davis Venture Group and affiliates" comprises Davis Venture Group and
Davis Venture Partners, L.P. Davis Venture Group is the general partner of
Davis Venture Partners, L.P. Because of these relationships, Davis Venture
Group may be deemed to be beneficial owner of shares of common stock held
of record by Davis Venture Partners, L.P.
(4) This information is based on information contained in the Schedule 13G
dated June 18, 1998 of Penn Capital Management Co. Inc. filed with the
Securities and Exchange Commission.
(5) Includes 513,916 shares of common stock issuable upon exercise of options.
(6) Includes 583,017 shares of common stock issuable upon exercise of options.
(7) Includes 488,500 shares of common stock issuable upon exercise of options.
(8) Includes 161,834 shares of common stock issuable upon exercise of options.
(9) Includes 60,000 shares of common stock issuable upon exercise of options.
(10) Mr. Forbes is Vice President of Equus Capital Management Corporation and
Equus II Incorporated. Because of these relationships, he may be deemed to
be the beneficial owner of the shares of common stock beneficially owned
by Equus II Incorporated and affiliates. Mr. Forbes disclaims such
beneficial ownership. See Note 2 to this table. Includes 21,001 shares of
common stock issuable upon exercise of options.
(11) Mr. Lehmann is President and a director of each of Equus Capital
Management Corporation, Equus Capital Corporation and Equus II
Incorporated. Because of these relationships, he may be deemed to be the
beneficial owner of the shares of common stock beneficially owned by Equus
II Incorporated and affiliates. Mr. Lehmann disclaims such beneficial
ownership. See Note 2 to this table. Includes 32,001 shares of common
stock issuable upon exercise of options.
(12) Mr. Tuttle is a general partner of Davis Venture Group. Because of this
relationship, Mr. Tuttle may be deemed to be the beneficial owner of the
shares of common stock beneficially owned by Davis Venture Group and
affiliates. Mr. Tuttle disclaims such beneficial ownership. See Note 3 to
this table. Includes 32,001 shares of common stock issuable upon exercise
of options.
(13) See notes 5 through 12 above.
6
<PAGE>
EXECUTIVE OFFICERS AND COMPENSATION
EXECUTIVE OFFICERS
The following persons are our executive officers, together with their ages
and positions with the Company:
NAME AGE POSITION
- ----------------------- --- ---------------------------------------
Walter V. Klemp 40 Chairman of the Board, Chief Executive
Officer and Director
Raymond M. Chambers 44 President, Chief Operating Officer and
Director
Joe D. Tanner 53 Executive Vice President and President-
Drypers International
Jonathan P. Foster 36 Executive Vice President and Chief
Financial Officer
David M. Olsen 42 President-Drypers North America and
Mexico
Chris Richards 34 Executive Vice President - Sales and
Marketing
For information regarding the background of Mr. Klemp and Mr. Chambers,
see the section of this proxy statement called "Board of Directors".
Mr. Tanner has served as our Executive Vice President since February 1996
and as President - Drypers International since October 1998. Prior to that, he
served as Chief Operating Officer--Drypers International since February 1996.
From February 1995 until February 1996, he served as our Vice President, Chief
Operating Officer--Drypers International. Mr. Tanner served as President of
Hygienic Products International, Inc., one of our subsidiaries that was merged
into us in February 1996, from its inception in February 1992 to February 1995.
Mr. Foster has served as our Chief Financial Officer since July 1996 and
as Executive Vice President since November 1996. From September 1995 to July
1996, Mr. Foster was Chief Financial Officer of Dickson Weatherproof Nail
Company, Inc., based in Chicago, Illinois. From September 1991 to August 1995,
Mr. Foster was with Schlumberger, Ltd. as Controller and Treasurer for Global
Tel*Link, Inc., a telecommunications subsidiary in Mobile, Alabama, and as
Assistant Controller and Controller for Schlumberger's Measurement Division, a
manufacturer and worldwide marketer of industrial flow measurement products,
based in Greenwood, South Carolina. Mr. Foster is a certified public accountant.
Mr. Olsen has served as President of Drypers North America and Mexico
since April 1999. Mr. Olsen served as the Vice President of Marketing since
March 1996 and in various management positions in the Marketing Department of
Drypers since January 1992. Mr. Olsen worked at Johnson and Johnson from
December 1998 to December 1991 as Product Manager in their feminine hygiene
business. From 1985 to 1988, Mr. Olsen worked at Saatchi and Saatchi Advertising
where he was the account supervisor on the Procter & Gamble account.
Mr. Richards has served as Executive Vice President of Sales and Marketing
for Drypers North America since May 1999. His previous positions with Drypers
include Vice President of Sales, Director of National Accounts, and Regional
Business Manager. Prior to joining Drypers, Mr. Richards worked in the marketing
and sales departments of a regional U.S. diaper manufacturer, UltraCare
Products, from March 1990 until our acquisition of this manufacturer in 1992.
Prior to that, Mr. Richards worked at Revlon, Inc. in various sales and sales
management positions.
7
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is pleased to present
this report on executive compensation to the stockholders.
OVERALL OBJECTIVES AND PHILOSOPHY OF EXECUTIVE COMPENSATION PROGRAM
The Compensation Committee's philosophy is to ensure that executive
compensation is linked directly to improvements in financial performance and an
increase in stockholder value. The Compensation Committee follows the objectives
of:
o providing a competitive total compensation package that allows Drypers
to attract, motivate and retain key executives;
o providing compensation opportunities that are linked directly to
Drypers' financial performance and that align executive remuneration
with the interest of the stockholders; and
o integrating executive compensation with Drypers' annual and long-term
business objectives and performance goals.
EXECUTIVE COMPENSATION PROGRAM COMPONENTS
The Compensation Committee periodically reviews Drypers' compensation
program to ensure that the pay levels and incentive opportunities reflect
Drypers' performance while providing a compensation package that is competitive
with companies of similar size as Drypers. To assist the Compensation Committee
in this role, Drypers retained an independent outside consulting firm in
November 1998 to review its executive compensation program and to make
recommendations to the Compensation Committee to ensure that its objectives are
being met.
BASE SALARY. Base salary levels are largely determined through comparisons
with companies of similar size and complexity as Drypers. Actual salaries are
targeted by the Compensation Committee to keep each executive slightly below the
midpoint of the market for similarly situated companies, while the Compensation
Committee focuses on incentive compensation to maintain competitive total cash
pay levels.
ANNUAL INCENTIVE COMPENSATION. Drypers' officers are eligible to
participate in an annual incentive compensation plan with awards based primarily
on the achievement of certain financial performance benchmarks. The Compensation
Committee's objective with respect to this plan is to deliver an incentive upon
the achievement of financial and operational performance benchmarks. In
particular, the plan aims to focus corporate behavior on consistent earnings
growth which the Compensation Committee believes determines share price over
time. Targeted minimum awards for executive officers under this plan are also
designed to be slightly below targeted awards of companies of similar size and
complexity as Drypers; however, the maximum bonus payable to eligible executives
under these awards is unlimited. Drypers has made awards to its executive
officers named in the compensation table under this plan during the past three
years. Under the plan, executive officers are entitled to elect to receive a
portion of their payment in either cash or shares of common stock.
STOCK OPTION PROGRAMS. The Compensation Committee strongly believes by
providing those persons who have substantial responsibility for Drypers'
management and growth with an opportunity to increase their ownership of common
stock that the best interests of stockholders and executives will be closely
aligned. Therefore, executives are eligible to receive stock options from time
to time, giving them the right to purchase shares of common stock in the future
at a specified price. The number of stock options granted to executive officers
is based on competitive practices, with the number of these options being
calculated as a percentage of base salary relative to the exercise price of the
stock options.
8
<PAGE>
DISCUSSION OF 1999 COMPENSATION FOR THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
In considering the compensation for the Chairman and Chief Executive
Officer for fiscal 1999, the Compensation Committee reviewed his existing
compensation arrangements and both Drypers' performance and individual
performance. The employment agreement between Drypers and Mr. Klemp was
structured to provide him with a base salary and annual incentive opportunity.
See the section of this proxy statement called "Executive Officers and
Compensation - Employment Agreements" for more information regarding Mr. Klemp's
employment agreement. Because of the nature of these employment arrangements,
the Compensation Committee made the following determinations regarding the
compensation of Mr. Klemp:
o Base salary was $330,000 in 1999 as was authorized in his employment
agreement. The Compensation Committee determined that Mr. Klemp's base
salary is now set at the desired level relative to companies of similar
size and complexity and Drypers' recent performance.
o No bonuses were paid with respect to the full fiscal year 1999.
As indicated in the discussion above, after its review of all existing
programs, the Compensation Committee continues to believe that the total
compensation program for Drypers' executives is competitive with the
compensation programs provided by other corporations of similar size and
complexity as Drypers. The Compensation Committee believes that any amounts paid
under the annual incentive plan will be appropriately related to corporate and
individual performance, yielding awards that are directly related to Drypers'
annual financial and operational results. The Compensation Committee also
believes that Drypers' stock option plans provide opportunities to participants
that are consistent with the returns that are generated on behalf of Drypers'
stockholders.
COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS
Gary L. Forbes
Nolan Lehmann
Philip A. Tuttle
9
<PAGE>
EXECUTIVE COMPENSATION
This table shows the total compensation paid for the years ended December
31, 1997, 1998 and 1999, to the five most highly compensated executive officers
during 1999:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
------------------------
COMMON
STOCK
ANNUAL COMPENSATION RESTRICTED UNDERLYING
---------------------------- STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS($) (SHARES) COMPENSATION($)(1)
- --------------------------- ---- -------- --------- --------- ------- -----------------
<S> <C> <C> <C> <C> <C>
Walter V. Klemp 1999 330,000 --(2) -- 75,000 5,000
Chief Executive 1998 300,000 --(2) -- 61,600 5,093
Officer and 1997 230,192 155,000(3) 207,500(4) 22,500 5,117
Chairman of the Board
- ------------------------------------------------------------------------------------------------------
Raymond M. Chambers 1999 330,000 --(2) -- 75,000 15,000
President and Chief 1998 300,000 --(2) -- 61,600 14,800
Operating Officer 1997 230,192 155,000(3) 207,500(4) 22,500 15,068
- ------------------------------------------------------------------------------------------------------
Joe D. Tanner 1999 270,000 75,000 -- 50,000 5,000
Executive Vice 1998 195,000 75,000 -- 28,400 4,800
President and President- 1997 169,231 60,000 21,000(5) 20,000 5,459
Drypers International
- ------------------------------------------------------------------------------------------------------
Jonathan P. Foster 1999 223,000 35,000 -- 37,500 5,000
Executive Vice 1998 180,000 35,000 -- 25,600 4,302
President and Chief 1997 147,308 25,000 25,000(5) 15,000 5,072
Financial Officer
- ------------------------------------------------------------------------------------------------------
David M. Olsen 1999 200,000 27,125 -- 30,000 5,000
President - Drypers 1998 146,346 20,000 -- 19,600 4,800
North America 1997 122,692 40,000 12,000(6) 20,000 4,086
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Amounts represent contributions in 1999 under our 401(k) savings and
employee stock purchase plans for Mr. Klemp, Mr. Chambers, Mr. Tanner, Mr.
Foster and Mr. Olsen of $5,000 each and term life insurance premiums paid by
us in each year for Mr. Chambers of $10,000.
(2) No bonuses were paid with respect to the full fiscal year 1998 or 1999.
(3) Of the total bonuses paid in 1997 to Mr. Klemp and Mr. Chambers, $80,000
represents a bonus paid in June 1997 related to the successful completion of
our $115,000,000 Senior Notes offering. The remainder represents
performance-based bonuses related to 1997 which were paid in March 1998.
(4) On August 13, 1997, we awarded $157,500 in restricted stock (or 24,706
shares of common stock) to each of Mr. Klemp and Mr. Chambers. On April 9,
1998, we awarded $50,000 in restricted stock (or 7,692 shares of common
stock) to each of Mr. Klemp and Mr. Chambers related to 1997 performance.
The terms of the restricted stock were amended in December 1998 to allow for
the stock to fully vest in December 2000.
(5) On April 2, 1998, the Company awarded $21,000 in restricted stock (or 3,704
shares of common stock) to Mr. Tanner. On April 9, 1998, the Company awarded
$25,000 in restricted stock (or 3,231 shares of common stock) to Mr. Foster.
These stock awards related to 1997 performance. This restricted stock vests
over a two-year period.
(6) On April 9, 1998, we awarded $12,000 in restricted stock (or 1,846 shares of
common stock) to Mr. Olsen. This stock award related to 1997 performance.
This restricted stock vests over a two-year period.
10
<PAGE>
This table shows information regarding options granted in the fiscal year
ended December 31, 1999 to each of the executive officers named in the Summary
Compensation Table.
OPTION GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES OF
COMMON STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
---------------------------------------------- ------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(2) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- ------------------- ---------- ------------ -------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Walter V. Klemp ... 75,000 10.0 $ 2.19 03/08/09 103,296 261,772
Raymond M. Chambers 75,000 10.0 $ 2.19 03/08/09 103,296 261,772
Joe D. Tanner ..... 50,000 6.7 $ 2.19 03/08/09 68,864 174,515
Jonathan P. Foster 37,500 5.0 $ 2.19 03/08/09 51,648 130,886
David M. Olsen .... 37,500 4.0 $ 2.19 03/08/09 41,318 104,709
</TABLE>
(1) Based upon Black-Scholes option valuation model. The calculation assumes
volatility of 83.36%, a risk free rate of 4.78%, a five year expected life,
no expected dividends and option grants at $2.19 per share. The actual
value, if any, of any option will depend on the amount, if any, by which the
stock price exceeds the exercise price on the date the option is exercised.
Thus, this valuation may not be a reliable indication as to value and there
is no assurance the value realized will be at or near the value estimated by
the Black-Scholes model.
(2) Represents shares issuable under an incentive stock option plan. Options
vest 33-1/3% beginning in the second year of the option term.
This table shows summary information regarding the value of all unexercised
options as of December 31, 1999, for each of the executive officers named in the
Summary Compensation Table.
FISCAL YEAR-END OPTION VALUES
---------------------------------------------------------
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1999 (SHARES) DECEMBER 31, 1999 ($)(1)
--------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Walter V. Klemp 513,917 144,100 -- 16,500
Raymond M. Chambers 488,500 144,100 -- 16,500
Joe D. Tanner 161,833 89,067 -- 11,000
Jonathan P. Foster 60,000 68,100 -- 8,250
David M. Olsen 82,283 56,267 -- 6,600
(1) Assumes a fair market value of $2.41 per share of common stock as of
December 31, 1999.
11
<PAGE>
CERTAIN TRANSACTIONS
On June 30, 1997, we made non-interest bearing loans of $130,000 to Walter
V. Klemp, Raymond M. Chambers and Terry A. Tognietti, then our three Co-Chief
Executive Officers. One-half of the loan balances were to be forgiven on June
30, 1998 and the remaining balances were to be forgiven on June 30, 1999, if
these individuals remained employed by us. However, in May 1998, the
Compensation Committee determined that it was in our best interests to extend
the period for which these individuals must be employed before the loans will be
forgiven. Therefore, these notes were exchanged for otherwise identical notes
the loan balances of which will be forgiven on August 31, 2001, if these
individuals remain employed by us and no change of control has occurred.
Effective January 5, 1999, Terry A. Tognietti resigned his position of
Co-Chief Executive Officer and President - Drypers North America. We entered
into a consulting agreement with Mr. Tognietti which provides for a fee for
service of $300,000 per year, and approximately $90,000 per year for various
expense allowances and the continuation of his employee benefits. This agreement
terminates on November 1, 2002, subject to early termination on November 1, 2001
based on a specified price of our common stock. In addition, the $130,000
non-interest bearing loan made to Mr. Tognietti on June 30, 1997 was forgiven
and extinguished. In January 1999 we entered into an agreement with Mr.
Tognietti which provides for a fee of $300,000 upon successful disposition of
our discontinued laundry detergent business. This amount is payable to Mr.
Tognietti in January 2001.
PERFORMANCE PRESENTATION
The graph below compares the performance of our common stock to the Russell
2000 Stock Index and a peer group. We have chosen to use the Russell 2000 Stock
Index for the broad equity market index, as it is designed to be a
representation of the U.S. small-cap equities market. Information with respect
to the common stock, the Russell 2000 Stock Index and the peer group is from
December 31, 1994, to December 31, 1999. The graph assumes that the value of the
investment in the common stock and each index was $100 at December 31, 1994, and
that all dividends were reinvested.
The peer group is comprised of Paragon Trade Brands, Inc. (OTCBB - PGTR.OB)
and DSG International Limited (Nasdaq-DSGIF), which are the only two public
companies known to us to derive substantially all of their revenue from the
manufacture and sale of disposable baby diapers. Due to the unique
characteristics of the diaper industry and the unusual competitive activity
present in this category, we believe that this is an appropriate peer group for
comparison.
12
<PAGE>
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG DRYPERS CORPORATION, THE RUSSELL 200 STOCK INDEX,
AND A PEER GROUP
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
12/94 12/95 12/96 12/97 12/98 12/99
----- ------ ------ ------ ------ ------
Drypers Corporation ..... 100 25 30 47 26 19.25
Peer Group .............. 100 176.42 226.42 97.17 21.01 19.07
Russell 2000 Stock Index 100 127.49 154.73 203.91 190.75 187.92
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with Mr. Klemp, Mr. Chambers
and Mr. Tanner. The employment agreements provide for an annual salary of
$330,000 for Messrs. Klemp and Chambers, and $270,000 for Mr. Tanner. In
addition, each of Mr. Klemp and Mr. Chambers may receive an annual bonus of an
amount to be determined by the Board of Directors and Mr. Tanner may receive an
annual bonus of an amount to be determined by Mr. Klemp and Mr. Chambers. The
employment agreements also provide for certain employee benefits, vacation and
reimbursement of expenses. The term of each employment agreement is for a period
ending on the third anniversary of the receipt by the employee of written notice
of termination by us. Each of the employment agreements may be terminated by us
for:
o the commission of certain dishonest or fraudulent acts;
o upon the death of the employee;
o upon disability of the employee; or
o if the employee resigns at any time other than after a "change in
control" without "good cause", as defined in each employee's employment
agreement.
13
<PAGE>
Each of Mr. Klemp, Mr. Chambers and Mr. Tanner has agreed that for the term of
his employment agreement and for a period of one year after termination for any
reason described in the previous sentence, he will not, directly or indirectly,
employ any of our employees, induce any of our employees to leave their
employment or in any way interfere with our employee relations. We may remove
the employee as an officer at any time without cause but such removal will not
affect his right to his salary or his right to remain covered by our medical
insurance policies. If removed, all other benefits will cease, including any
right to receive any predetermined bonus or variable bonus.
OTHER INFORMATION
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
All of our executive officers and directors are required to file initial
reports of stock ownership and reports of changes in ownership with the
Securities and Exchange Commission and the Nasdaq SmallCap Market pursuant to
Section 16(a) of the Securities Exchange Act of 1934. We have reviewed these
reports, including any amendments, and written representations from our current
executive officers and directors. Based on this review, we believe that all
filing requirements were met during 1999.
PROPOSALS TO STOCKHOLDERS
Stockholder proposals for our annual meeting to be held in 2001 must be
received by us by December 21, 2000, to be considered for inclusion in our proxy
statement for that year. Stockholder proposals submitted outside the process of
Rule 14a-8 promulgated under the Securities Exchange Act of 1934 will be
considered untimely if received by the Company after March 6, 2001. Any
stockholder proposal must be sent to our Investor Relations Department at our
principal executive offices and must comply with the form and substance
requirements established by applicable laws and regulations to be included in
the proxy statement.
OTHER BUSINESS
We know of no other business that will be brought before our annual
meeting. If any other matters are properly presented, the persons named on the
enclosed proxy card will vote the proxies as they deem advisable.
ADDITIONAL INFORMATION AVAILABLE
We have filed an Annual Report on Form 10-K for 1999 with the Securities
and Exchange Commission. A complete copy of our Annual Report on Form 10-K is
available on the SEC's website at WWW.SEC.GOV. We also will provide to any
stockholder a copy of our Annual Report on Form 10-K without charge upon written
request. Copies of any exhibits to our Annual Report on Form 10-K also are
available upon written request subject to a charge for copying and mailing. If
you wish to obtain a paper copy of our Annual Report on Form 10-K or have any
questions about us, please contact our Investor Relations Department in writing
(5300 Memorial, Suite 900, Houston, Texas 77007) or by telephone ((713)
869-8693) or visit our website at WWW.DRYPERS.COM.
14
<PAGE>
DRYPERS CORPORATION
Notice of 2000 Annual Meeting of Stockholders
and Proxy Statement
Friday, May 26, 2000
9:00 AM (Houston time)
Red Lion Hotel
2525 West Loop South
Houston, Texas 77027
<PAGE>
<TABLE>
<CAPTION>
<S><C>
- ------------------------------------------------------------------------------------------------------------------------------------
DRYPERS CORPORATION
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 26, 2000
The stockholder of Drypers Corporation whose signature appears on the
reverse side of this Proxy hereby appoints Walter V. Klemp and Robert F. Gray,
Jr., and each of them, attorneys and proxies of the undersigned, with full power
of substitution, to vote, as designated below, the number of votes which the
undersigned would be entitled to cast if personally present at Drypers' Annual
Meeting of Stockholders to be held at the Red Lion Hotel, 2525 West Loop South,
Houston, Texas at 9:00 a.m., on Friday, May 26, 2000, and at any adjournment
thereof.
P
1.ELECTION OF DIRECTORS--NOMINEES:
R Terry A. Tognietti (three-year term) and Philip A. Tuttle (three-year term).
O 2.PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR 2000.
X In their discretion, the above named proxies are authorized to vote on such other business as may properly come before the
meeting or any adjournment thereof and upon matters incident to the conduct of the meeting.
Y SEE REVERSE SIDE
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
1. Election of Directors: |_| FOR all nominees listed, except as indicated to the contrary below
|_| WITHHOLD authority for election of all nominees
Terry A. Tognietti and Philip A. Tuttle
(Instruction: to withhold authority to vote for any individual nominee, write that person's name in the space provided below)
- ------------------------------------------------------------------------------------------------------------------------------------
2. Ratification of appointment of Arthur Andersen LLP as Independent Public Accountants
for 2000. |_| FOR |_| AGAINST |_| ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE DIRECTOR NOMINEES NAMED IN ITEM 1 OR, IF ANY ONE OR MORE OF THE NOMINEES BECOMES UNAVAILABLE, FOR ANOTHER NOMINEE OR
OTHER NOMINEES TO BE SELECTED BY THE BOARD OF DIRECTORS, AND FOR RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS
INDEPENDENT PUBLIC ACCOUNTANTS FOR 2000 SET FORTH IN ITEM 2.
PLEASE MARK, SIGN, DATE AND RETURN IMMEDIATELY. PLEASE NOTE ANY CHANGE OF ADDRESS
SIGNATURE(S) DATE
-------------------------------------------------------------------------- ------------------------------------------
SIGNATURE(S) DATE
-------------------------------------------------------------------------- ------------------------------------------
Note: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as it appears hereon.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
