SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[ ] Soliciting Material Pursuant to Section 240.14a-12
ADVO, Inc.
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(Name of Registrant as Specified In Its Charter)
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[ADVO LOGO]
December 12, 2002
Dear Stockholder:
You are cordially invited to the Annual Meeting of Stockholders of ADVO,
Inc., to be held on Thursday, January 16, 2003, at the Company's corporate
headquarters, One Univac Lane, Windsor, Connecticut, commencing at 11:30 A.M.
(EST).
At the meeting, you will be asked to elect the members of the Board of
Directors; to ratify the appointment of independent auditors for the fiscal year
ending September 27, 2003; and to transact such other business as may properly
be brought before the meeting.
In addition to the specific matters to be acted upon, there will be a
report on the progress of the Company and an opportunity for you to ask
questions of general interest. Important information is contained in the
accompanying proxy statement, which you are urged to read carefully.
It is important that your shares are represented and voted at the meeting,
regardless of the number you own and whether you plan to attend. Accordingly,
you are requested to mark, sign, date and return the enclosed proxy in the
envelope provided at your earliest convenience.
Your interest and participation in the affairs of the Company are greatly
appreciated.
Sincerely,
/s/ Gary M. Mulloy
GARY M. MULLOY
Chairman and Chief
Executive Officer
[ADVO LOGO]
ADVO, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of ADVO, Inc. (the "Company") will be
held at the Company's corporate headquarters, One Univac Lane, Windsor,
Connecticut, on Thursday, January 16, 2003, at 11:30 A.M. (EST), to consider and
take action on the following items:
1. The election of seven directors, as described in the attached
proxy statement, to serve until the Annual Meeting of Stockholders in 2004;
2. The ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending September 27,
2003; and
3. The transaction of such other business as may properly come before
the meeting or any adjournment thereof.
Only holders of Common Stock of record at the close of business on November
22, 2002 are entitled to vote at the meeting or any adjournment thereof. A list
of the stockholders entitled to vote at the meeting will be available for
examination by any stockholder for any purpose related to the meeting during
ordinary business hours for ten days prior to the meeting at the Company's
corporate headquarters, One Univac Lane, Windsor, Connecticut.
By Order of the Board of Directors
/s/ David M. Stigler
DAVID M. STIGLER, Secretary
Windsor, Connecticut
December 12, 2002
YOUR VOTE IS IMPORTANT. EVEN IF YOU PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE MARK, SIGN AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE AS PROMPTLY AS
POSSIBLE.
ADVO, INC.
ONE UNIVAC LANE
P.O. BOX 755
WINDSOR, CONNECTICUT 06095-0755
PROXY STATEMENT
This statement is furnished in connection with the solicitation of proxies
to be used at the Annual Meeting of Stockholders of ADVO, Inc. (the "Company" or
"ADVO"), a Delaware corporation, to be held at the Company's corporate
headquarters, One Univac Lane, Windsor, Connecticut, on Thursday, January 16,
2003 at 11:30 A.M. (EST).
The solicitation of proxies on the enclosed form is made on behalf of the
Board of Directors of the Company.
The cost of soliciting proxies on the accompanying form will be borne by
the Company. The Company will request banks, brokers and other custodians,
nominees, and fiduciaries to send proxy material to the beneficial owners of the
Company's Common Stock to secure their voting instructions, if necessary. The
Company will reimburse banks, brokers, custodians, nominees and fiduciaries for
their expenses in so doing. Directors, officers and regular employees of the
Company, who will receive no compensation for their services other than their
regular salaries, may solicit proxies personally, by telephone and by electronic
mail from stockholders. The Company has retained Mellon Investors Services LLC
to assist in the solicitation of proxies at an estimated cost of $10,000
including expenses, which will be paid by the Company. These proxy materials are
first being mailed to stockholders on or about December 16, 2002. The Company's
Annual Report to stockholders for the fiscal year ended September 28, 2002 is
being furnished concurrently herewith to stockholders of record. Additional
copies of the Annual Report may be obtained upon written request to the
Corporate Secretary, ADVO, Inc., One Univac Lane, Windsor, CT 06095, or by
telephone at 860-285-6100.
A stockholder signing and returning a proxy on the enclosed form has the
power to revoke it at any time before the shares subject to it are voted, by
notifying the Corporate Secretary in writing of such revocation, by filing a
duly executed proxy bearing a later date, or by attending the meeting and voting
in person. Properly executed proxies, not revoked, will be voted in accordance
with the instructions contained thereon. Unless a contrary specification is made
thereon, it is the intention of the attorneys named in the enclosed form of
proxy to vote FOR the election of the nominees named herein as directors and FOR
Proposal 2.
OUTSTANDING VOTING SECURITIES
Only holders of ADVO Common Stock, par value $.01 per share ("Common
Stock"), of record at the close of business on November 22, 2002 (the "Record
Date") are entitled to notice of and to vote at the meeting. On the Record Date,
there were 19,829,748 shares of Common Stock outstanding. Each share of Common
Stock is entitled to one vote.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of the Record Date, those persons known to the Company who beneficially
owned more than 5% of the outstanding Common Stock were as follows:
NAME AND ADDRESS NUMBER OF SHARES
OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT
------------------- ------------------ -------
Private Capital Management(1)............................... 1,331,881 6.7%
8889 Pelican Bay Blvd
Naples, FL 34108
Cramer Rosenthal McGlynn, LLC(1)............................ 1,056,820 5.3%
707 Westchester Ave
White Plains, NY 10604
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(1) The information relating to the ownership of the Common Stock by this entity
is based on a statement on Form 13F for the quarter ended September 30, 2002
filed by such entity with the Securities and Exchange Commission ("SEC").
GOVERNANCE OF THE COMPANY
In accordance with the Company's By-laws and the applicable laws of
Delaware, responsibility for the management of the Company is vested in the
Board of Directors (the "Board"). During the fiscal year ended September 28,
2002, the Board of Directors met six times. Each Director attended all the
meetings of the Board of Directors and the committees of the Board of Directors
on which he or she served, except John Vogelstein who attended 50% of the
meetings. Bruce Crawford retired from the Board on January 17, 2002. Bobbie
Gaunt joined the Board on August 29, 2002 after participating in the formal
orientation program that the Company has for new directors. Mr. Vogelstein will
retire from the Board on January 16, 2003.
The Company has a standing Audit Committee. Information regarding the
functions performed by the Audit Committee, its membership, and the number of
meetings held during the fiscal year, is set forth in the "Audit Committee
Report", included in this annual proxy statement.
The Board has delegated responsibilities with respect to certain
compensation matters, selection of directors and other governance issues to the
Compensation and Nomination Committee. The members of the Compensation and
Nomination Committee were Messrs. Dyer (Chairman), Newman, and Rockwell. The
Compensation and Nomination Committee has the responsibility to help formulate
short and long-term compensation plans and help develop the Company's
compensation philosophy. The committee also reviews specific proposals regarding
executive compensation and other aspects of the terms of employment of the
Company's senior management. The Compensation and Nomination Committee met four
times during the fiscal year ended September 28, 2002, and no member of the
Compensation and Nomination Committee missed a meeting. The Compensation and
Nomination Committee does not currently have procedures in place to consider
nominees recommended by stockholders.
The Company has no executive committee or other committees, except for the
above. Total attendance was 96% for all board and committee meetings.
At the Company's June 27, 2002 Board meeting, Mr. Mahoney was elected Lead
Outside Director by all of the non-employee directors. As such, Mr. Mahoney will
chair all of the executive sessions of the non-employee directors of the Board
and act as primary spokesperson in communicating matters arising out of
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such meetings to the Company. Executive sessions are scheduled to be held at
every meeting which the Board members attend in person. The first executive
session was held on August 29, 2002.
Directors, other than those who are full-time employees of the Company or a
subsidiary, are each currently eligible to receive an annual fee of $30,000, a
fee of $1,000 for each Board meeting they attend, and $500 for each committee
meeting they attend. Meetings attended via phone are compensated at half of the
regular meeting rate. Directors serving as chairperson of a committee of the
Board of Directors receive an additional $2,000 per year for each chairmanship
held. Directors who are full-time employees of the Company receive no
remuneration for serving on the Board of Directors or its committees. All
Directors' expenses for attending Board of Directors' meetings are reimbursed by
the Company.
Under the 1990 Non-Employee Directors' Restricted Stock Plan (the
"Non-Employee Directors' Plan"), restrictions lapsed in fiscal 2002 on 3,000
shares held by each of the following directors: Messrs. Brown, Crawford, Dyer,
Mahoney, Newman, Rockwell and Vogelstein. In addition, grants of 3,000
restricted shares were made in fiscal 2002 to each of Messrs. Brown, Dyer,
Mahoney, Newman, Rockwell, Vogelstein and Ms. Gaunt. These will vest over a
one-year period if the recipients remain on the Board. Upon election to the
Board, Ms. Gaunt received options to purchase 10,000 shares of Common Stock at
an exercise price of $35.20 per share, which will become exercisable after a
one-year period.
1. ELECTION OF DIRECTORS
The By-laws of the Company provide for a Board of Directors consisting of
not less than three nor more than 15 members, the exact number to be fixed from
time to time by the Board of Directors. The Board of Directors has determined
that the Company will have seven Directors at this time. Each person elected as
a director of the Company will hold office until the next Annual Meeting of
Stockholders or until his successor is duly elected and qualified.
The stockholders elected all of the nominees set forth below to their
present terms at the 2002 Annual Meeting except Ms. Gaunt who was elected to the
Board on August 29, 2002. Each nominee has consented to being named herein and
has agreed to serve if elected.
The affirmative vote of a plurality of the voting power represented at the
meeting is required for a nominee to be elected as a Director of the Company.
"Plurality" means that the nominees who receive the largest number of votes cast
"FOR" are elected as directors up to the maximum number of Directors to be
chosen at the meeting. Votes withheld and broker non-votes are not counted
towards the plurality vote calculation.
NOMINEES FOR ELECTION
GARY M. MULLOY, age 57. Mr. Mulloy became Chairman of the Board on June 28,
1999 and Chief Executive Officer on January 1, 1999. From November 1996 to
December 1998, he was President and Chief Operating Officer. Mr. Mulloy was
elected to the Board of Directors on December 3, 1996. From 1990 to October 1996
he was President and Chief Executive Officer of Pilkington Barnes-Hind, Inc., a
division of Pilkington Vision Care.
TODD C. BROWN, age 53. Mr. Brown has been a director of the Company since
April 2000. Mr. Brown is Executive Vice President of Kraft Foods, Inc. and
President of its e-Commerce Division. Mr. Brown has held various positions at
Kraft Foods, Inc. since 1985. Mr. Brown also serves on the Boards of Johnson
Diversey, Inc. and Colgate University.
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DAVID F. DYER, age 53. Mr. Dyer has been a director of the Company since
May 1997. Mr. Dyer is President and Chief Executive Officer of Lands' End, Inc.,
an international direct merchant of apparel and home furnishings. Mr. Dyer was
the President and Chief Operating Officer of the Home Shopping Network, Inc.
from 1994 to 1995. Previous to that, from 1989 to 1994, Mr. Dyer held senior
management positions with Lands' End, Inc.
BOBBIE GAUNT, age 56. Ms. Gaunt was elected to the Board on August 29,
2002. Ms. Gaunt recently retired after almost 29 years with Ford Motor Company
where she was appointed President and Chief Executive Officer of Ford of Canada,
Ltd. in 1997 and elected an officer of Ford in 1999. Ms. Gaunt is also a
Director of the Great Atlantic & Pacific Tea Company and a member of the Board
of Visitors of the Katz Business School at the University of Pittsburgh.
JOHN J. MAHONEY, age 51. Mr. Mahoney has been a director of the Company
since January 2001. He is Executive Vice President and Chief Administrative
Officer of Staples, Inc. Mr. Mahoney joined Staples as Chief Financial Officer
in September 1996, and was promoted to his current position in October 1997.
Prior to joining Staples, Mr. Mahoney was with Ernst & Young LLP for 20 years,
and served in the Accounting and Auditing Group of the firm's National Office.
HOWARD H. NEWMAN, age 55. Mr. Newman has been a director of the Company
since August 1986. He has been associated with Warburg Pincus, LLC, a private
equity investment firm, since January 1984 and has been a partner of Warburg
Pincus and Company ("Warburg Pincus") since January 1987. Mr. Newman is also a
Director of Newfield Exploration Company, Cox Insurance Holdings, Plc., Encore
Acquisition Company, Spinnaker Exploration Company, and several privately owned
companies. Mr. Newman also serves as Chairman of the Yale Alumni Fund, Senior
Advisor to the Long Island Power Authority and a Trustee of the Salk Institute
for Biological Studies.
JOHN R. ROCKWELL, age 74. Mr. Rockwell has been a director of the Company
since May 1990. Until April 1, 1990, he was Senior Vice President, Group
Executive and a Director of Booz, Allen & Hamilton, Inc., a management
consulting firm, a position he held for more than five years. Mr. Rockwell is
also a Director of Tom's of Maine, Inc.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information with respect to the
Common Stock beneficially owned by the directors, nominees and persons named in
the Summary Compensation Table on page 6 of this Proxy Statement and by all
directors and executive officers as a group, as of the Record Date. Except as
otherwise indicated, each person listed has sole voting and investment power
with respect to shares beneficially owned.
NUMBER OF SHARES
NAME OF INDIVIDUAL OF COMMON STOCK PERCENT
------------------ ---------------- -------
Gary M. Mulloy.............................................. 456,023(1) 2.3%
Donald E. McCombs........................................... 106,632(2) .5
Myron L. Lubin.............................................. 35,662(3) .2
Edwin Harless............................................... 38,999(4) .2
A. Brian Sanders............................................ 42,115(5) .2
Todd C. Brown............................................... 19,000(6) .1
David F. Dyer............................................... 23,875(7) .1
Bobbie Gaunt................................................ 3,000(8) --
John J. Mahoney............................................. 16,000(9) .1
Howard H. Newman............................................ 42,375(10) .2
John R. Rockwell............................................ 40,625(11) .2
All Directors and executive officers as a group (18
persons).................................................. 1,084,375(12) 5.3
---------------
(1) Includes 398,150 shares Mr. Mulloy has the right to acquire within 60 days
of the Record Date pursuant to the exercise of options granted under the
Company's stock option plans.
(2) Includes 54,492 shares Mr. McCombs has the right to acquire within 60 days
of the Record Date pursuant to the exercise of options granted under the
Company's stock option plans.
(3) Includes 4,000 shares of restricted stock awarded on June 27, 2002 and
24,000 shares Mr. Lubin has the right to acquire within 60 days of the
Record Date pursuant to the exercise of options granted under the Company's
stock option plans.
(4) Includes 6,000 shares of restricted stock awarded on June 27, 2002 and
24,375 shares Mr. Harless has the right to acquire within 60 days of the
Record Date pursuant to the exercise of options granted under the Company's
stock options plans.
(5) Includes 29,003 shares Mr. Sanders has the right to acquire within 60 days
of the Record Date pursuant to the exercise of options granted under the
Company's stock option plans.
(6) Includes 3,000 shares of restricted stock awarded on January 17, 2002 and
10,000 shares Mr. Brown has the right to acquire within 60 days of the
Record Date pursuant to options granted under the Company's stock option
plans.
(7) Includes 3,000 shares of restricted stock awarded on January 17, 2002 and
6,875 shares Mr. Dyer has the right to acquire within 60 days of the Record
Date pursuant to option grants awarded by the Company.
(8) Represents 3,000 shares of restricted stock awarded on August 29, 2002.
(9) Includes 3,000 shares of restricted stock awarded on January 17, 2002 and
10,000 shares Mr. Mahoney has the right to acquire within 60 days of the
Record Date pursuant to options granted under the Company's stock option
plans.
(10) Includes 3,000 shares of restricted stock awarded on January 17, 2002 and
4,375 shares Mr. Newman has the right to acquire within 60 days of the
Record Date pursuant to option grants awarded by the Company.
(11) Includes 3,000 shares of restricted stock awarded on January 17, 2002 and
12,375 shares Mr. Rockwell has the right to acquire within 60 days of the
Record Date pursuant to option grants awarded by the Company.
(12) Includes 722,653 shares all directors and executive officers as a group
have the right to acquire within 60 days of the Record Date pursuant to the
exercise of options granted under the Company's stock option plans.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
its executive (and certain other) officers and any persons holding ten percent
or more of the Company's Common Stock are required to report their ownership of
the Company's Common Stock and any changes in that ownership to the SEC.
Specific due dates for these reports have been established. In fiscal 2002, all
required reports of beneficial ownership of the Company's Common Stock were
timely filed.
EXECUTIVE COMPENSATION
The following table shows compensation paid by the Company and its
subsidiaries for services in all capacities during fiscal 2002, 2001, and 2000
to each of the following named executive officers of the Company, including the
Chief Executive Officer.
SUMMARY COMPENSATION TABLE
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS
------------------- -----------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) AWARDS(2) OPTIONS(3) COMPENSATION(4)
--------------------------- ---- -------- -------- ---------- ---------- ---------------
Gary M. Mulloy.................... 2002 $592,419 $ -- $ -- 70,000 $ 10,200
Chairman and Chief 2001 545,542 -- 162,000 65,000 10,500
Executive Officer 2000 521,815 385,962 -- 57,000 10,500
Donald E. McCombs................. 2002 329,865 -- -- 69,646 19,432
Executive Vice President -- 2001 285,615 -- 40,500 47,507 23,823
President, Operations Group and 2000 266,962 117,433 -- 56,728 18,778
Acting Chief Financial Officer
Myron L. Lubin.................... 2002 329,154 -- 153,160 16,000 20,146
Executive Vice President -- 2001 311,962 -- 40,500 15,000 26,250
President, Diversified Business 2000 298,308 131,538 -- 20,000 21,165
Group
Edwin Harless..................... 2002 309,173 -- 229,740 20,000 16,096
Executive Vice President -- 2001 281,000 -- 20,250 7,750 10,154
Chief Administrative Officer 2000 32,035 16,659 446,875 31,000 111,241
A. Brian Sanders.................. 2002 286,335 -- -- 33,568 15,356
Senior Vice President -- 2001 267,323 -- 40,500 21,432 12,115
Sales and Business Development 2000 242,708 94,923 -- 18,208 6,646
---------------
(1) Amounts for each fiscal year represent bonus compensation earned for that
year payable in the subsequent year.
(2) The number of restricted shares of Common Stock held at fiscal year end and
the value of such holdings, based on the number of restricted shares for
which restrictions have not lapsed times the closing market price at
September 28, 2002, was 4,000 shares and $124,560 for Mr. Lubin and 9,334
shares and $290,661 for Mr. Harless. During the fiscal year, Mr. Lubin and
Mr. Harless were granted 4,000 restricted shares and 6,000 restricted
shares, respectively. Mr. Lubin's shares will vest in July 2004 and Mr.
Harless's
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shares in January 2006. Holders of restricted shares are eligible to receive
dividends to the same extent as holders of Common Stock, when dividends are
declared and payable.
(3) Includes reload option grants received from surrendering previously owned
shares of ADVO Common Stock to pay the exercise price on option exercises
and shares withheld to satisfy income tax withholding requirements.
(4) Amounts represent contributions made on behalf of the named executives to
the Company's 401(k) plan and non-qualified savings plan. Also included in
"All Other Compensation" for fiscal 2000 was $111,241 for Mr. Harless
representing a cash payment upon signing of his employment agreement.
OPTIONS
Set forth below is certain information concerning stock options granted
during fiscal 2002 by the Company to the named executive officers.
The hypothetical present values on the date of grant of stock options
granted in fiscal 2002 shown below are presented pursuant to the SEC proxy rules
and are calculated under the modified Black-Scholes model for pricing options.
(See footnote 3.) The actual before-tax amount, if any, realized upon the
exercise of stock options will depend upon the excess of the market price of the
Common Stock over the exercise price per share of the stock option. There is no
assurance that the hypothetical present values of the stock options reflected in
this table will be realized.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANT
UNDERLYING GRANTED TO EXERCISE DATE
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED FISCAL YEAR ($/SHARE) DATE VALUE(3)
---- ---------- ------------ --------- ---------- ----------
GRANTS(1)
Gary M. Mulloy....................... 70,000 13% $38.70 12/13/11 $1,034,600
Donald E. McCombs.................... 35,000 7 38.70 12/13/11 517,300
Myron L. Lubin....................... 16,000 3 38.70 12/13/11 236,480
Edwin Harless........................ 20,000 4 38.70 12/13/11 295,600
A. Brian Sanders..................... 14,000 3 38.70 12/13/11 206,920
RELOAD GRANTS(2)
Donald E. McCombs.................... 113 * $37.01 12/01/04 $ 800
248 * 37.01 01/24/05 1,756
114 * 37.01 10/09/05 807
552 * 37.01 03/12/06 3,908
983 * 37.01 01/16/07 6,960
19,374 4% 37.01 11/06/07 137,168
901 * 37.01 12/02/07 6,379
7,981 2 37.01 12/01/08 56,505
4,380 1 37.01 12/02/09 31,010
A. Brian Sanders..................... 6,287 1 37.01 07/29/07 44,512
1,802 * 37.01 12/02/09 12,758
5,010 1 32.66 12/02/07 28,858
3,872 1 32.66 12/02/09 22,303
2,597 * 32.66 12/01/08 14,959
7
---------------
* less than 1%
(1) Stock options granted in fiscal 2002 will become exercisable in 25%
increments at one-year intervals from the date of grant. All options are
subject to the reload feature of the 1998 Incentive Compensation Plan.
(2) Represent reload option grants received upon the exercise of previously
outstanding exercisable options (the "existing options"). The number of
reload options awarded upon the exercise of existing options is equal to the
number of previously held shares an optionee tenders to pay the exercise
price of the existing options and the number of shares an optionee elects to
have withheld from the exercise of the existing options to pay minimum
statutory tax withholding requirements. The reload options retain the
expiration date of the existing options and have an exercise price equal to
the fair market value of the Common Stock on the date of exercise of the
existing options. Reload options become exercisable on the earlier of one
year from the date of grant or termination of employment with the Company.
(3) The present values on grant date are calculated under the modified
Black-Scholes model, which is a mathematical formula used to value options
traded on stock exchanges, modified for pricing employee stock options. This
formula considers a number of factors in order to estimate the option's
present value, including the stock's historical volatility (32%), the
exercise period of the option, and the risk free rate of return (ranging
from 3.0% to 6.3% depending on the option's grant and expiration dates).
Set forth below is certain information concerning the number of shares
acquired and the amounts realized on the exercise of stock options by the named
executive officers during fiscal 2002, and the number and value of options held
by the named executive officers at September 28, 2002. The value of exercised
and unexercised in-the-money stock options at September 28, 2002 shown below is
presented pursuant to SEC rules. The actual before-tax amount, if any, realized
upon exercise of stock options will depend upon the excess, if any, of the
market price of the Common Stock over the exercise price per share of the stock
option at the time the stock option is exercised. There is no assurance that the
values of unexercised in-the-money stock options reflected in this table will
actually be realized.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ---------- ----------- ------------- ----------- -------------
Gary M. Mulloy......... -- -- 316,300 181,100 $3,434,541 $454,782
Donald E. McCombs...... 43,910 $ 461,952 28,242 105,896 -- 160,575
Myron L. Lubin......... 58,500 1,108,170 3,750 44,750 -- 146,200
Edwin Harless.......... -- -- 17,437 41,313 -- --
A. Brian Sanders....... 26,713 380,026 15,128 56,318 22,534 95,134
---------------
(1) Value is calculated by determining the difference between the fair market
value at September 28, 2002 of the securities underlying the options ($31.14
per share) and the exercise price of the options.
REPORT OF THE COMPENSATION AND NOMINATION COMMITTEE
A primary role of the Compensation and Nomination Committee of the Board of
Directors is to represent the Board of Directors in its dealings with management
in overseeing the process and substance of ADVO's Executive Compensation Policy
and Philosophy, and in aligning the interests of stockholders and the needs of
8
management. The Compensation and Nomination Committee believes it is generally
in the Company's best interest, and it is the Company's intent, where possible,
to preserve full compensation deductibility as permitted under Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"). However, the Company
recognizes that flexibility is necessary and must be maintained for those
extraordinary circumstances that may arise on occasion for which the interests
of the Company are better served by foregoing full deductibility. The
Compensation and Nomination Committee is composed entirely of non-employee
directors.
Compensation Philosophy:
ADVO's compensation programs are designed to:
-- Provide a fair, competitive and dynamic compensation program.
-- Attract, retain, and develop a highly skilled and motivated workforce.
-- Tie compensation directly to the accomplishment of superior Company
performance, creation of long-term stockholder value and attainment of
specific strategic initiatives by emphasizing variable rather than
fixed compensation.
-- Align stockholders' and management's interests.
To accomplish these objectives, ADVO's executive compensation program is
composed of base salary, and short-term and long-term incentives, which taken
together provide a competitive compensation package that is highly leveraged
toward the attainment of superior Company performance.
Cash Compensation:
ADVO's philosophy is to pay competitive cash compensation as compared with
a broad spectrum of organizations. To assess its competitive position, ADVO
participates in and reviews salary surveys with participant companies from
multiple industry segments. These companies represent a cross section of
organizations in all industries and are of similar size and scope to ADVO. These
companies may or may not be included in the peer group analysis under "Company
Financial Performance," since many of the Company's competitors for executive
talent are outside the Company's business competitor peer group of companies or
are privately held companies. The surveys are professionally administered by
third parties and represent the different functional areas of ADVO's
organization. In general, ADVO's cash compensation position is within the third
quartile of the marketplace (better than the bottom 50% and less remunerative
than the top 25%). Based on these surveys, ADVO annually reviews its salary and
incentive structure and adjusts it as necessary to reflect the market.
Base Pay:
Individual base pay is determined by considering:
-- The individual's background, competencies, experience and current
salary in relation to the market.
-- Accomplishments as determined by the individual's performance
appraisal.
-- The financial spending guidelines of the Company.
9
Short-Term Incentive:
ADVO's philosophy is to provide significant financial incentives for its
associates to attain and exceed the Company's financial objectives. These
incentives are made under the 1998 Incentive Compensation Plan, approved by
stockholders in 1999, and the ADVO Incentive Plan. These plans provide a strong
link between the associate's accountabilities, scope of impact and business
performance through the use of operationally tailored measurement criteria
focusing on margin improvement and/or operating income goals. These plans
provide a competitively benchmarked target award based on the level of the
individual's job. The target awards range from 5% to 100% of salary. To realize
the target award, certain Company financial performance objectives must be
attained. These objectives include corporate, regional and business unit
measures, and are measured in terms of achievement versus the annually
established plan. The corporate measure is based on consolidated operating
income. Regional and business unit objectives incorporate profitability
objectives that are margin-based in the form of operating income or margin.
The mix and weighting of these objectives is dependent on the
organizational role of the individual. All individuals have at least a portion
of their incentive based on the corporate measure as described above. The
specific plan targets are not disclosed herein because they are considered
confidential and their disclosure could competitively injure ADVO's business.
The performance attainment and resulting payout for each objective is evaluated
and calculated independently. Performance below plan results in ratably lower
payouts, or none at all, and performance above plan results in ratably higher
payouts. The combined payout percentages based upon these results are limited to
150% of the associate's target award. A minimum threshold of plan attainment is
in place, below which no payout is made. The Compensation and Nomination
Committee has the discretion to modify the actual awards. The bonuses of the
Chief Executive Officer ("CEO") and any associate subject to Section 162(m) of
the Code are based solely on corporate consolidated operating income financial
results as defined above, and are subject to a capped individual payout.
The Company's financial performance for fiscal 2002 fell below its
operating income target. As a result, no awards were made to its executives.
Long-Term Incentive:
The 1998 Incentive Compensation Plan is the primary vehicle for long-term
incentives. The plan is meant to:
-- Link compensation opportunities to Company achievements.
-- Balance annual results with ADVO's long-term performance.
-- Strengthen the partnership between ADVO's executives and stockholders.
Participation is limited to key management and executives in the Company.
Long-term compensation targets vary by the level of the individual's position
and were established based on market analysis provided from third party external
consultants. Periodically, these targets are reviewed. These targets are
expressed as a fixed share amount, based on the level of the associate's
position. Stock options granted in fiscal 2002 were granted at market price with
10-year terms.
Service-based options are also used for hiring, promotion and retention
situations and are determined in the same manner as described above.
The Company's executives are also given the opportunity to receive "reload
options". To receive such options, the plan requires executives to exercise
their options by tendering mature shares of stock to "pay" for the underlying
cost of the options and withholding shares to meet minimum statutory federal tax
obligations.
10
In return, they receive reload options in the same number as the number of
shares utilized in the exercise. Net shares that result from the exercise are
returned to the executive in the form of stock, which are to be retained for two
years.
Restricted stock may also be granted under the plan. While the governing
plan allows for broader usage, historically grants of restricted stock have been
used only for hiring, promotion and retention situations. When these situations
arise, the number of shares granted is based upon the level of the job. The
Company granted restricted stock for the purposes of hiring and promotion to a
limited number of key positions during fiscal 2002.
To foster greater alignment of the interests of executives and
stockholders, ADVO expects executives who receive stock options to also make a
personal financial commitment to acquire and hold significant amounts of ADVO
stock. Individuals receiving stock options are asked to acquire ADVO stock in an
amount expressed as a portion of their annual base salary, to be acquired over a
five-year period. The guidelines increased during fiscal 2002 and range from
300% of base salary for the CEO to 25% of base salary for entry level stock
option recipients. The guidelines cover approximately 110 persons.
CEO Compensation and Company Performance:
Mr. Mulloy's salary is reviewed annually and may be increased, but not
decreased, by the committee. External executive compensation consultants, at the
request of the Board, prepared a comprehensive competitive compensation
analysis. Based on this analysis, Mr. Mulloy was granted a 10.1% increase or
$55,000 bringing his salary to $600,000. This represented a combination of a
competitive equity adjustment and merit increase.
As provided in his employment agreement, Mr. Mulloy's short-term incentive
is determined under the 1998 Incentive Compensation Plan. Under this plan, the
CEO's bonus is determined based solely on financial results and is awarded at
the discretion of the Board. Mr. Mulloy received no short-term incentive for
fiscal 2002.
Mr. Mulloy was awarded options under the 1998 Incentive Compensation Plan
to purchase 70,000 shares of Common Stock in the annual grant using the approach
for options granted to executives generally as described above.
Benefits:
ADVO offers benefits to its key executives, serving a different purpose
than do the above described elements of compensation. In general, these benefits
provide a level of security against financial misfortune, which may result from
illness, disability or death. The benefits are principally those that are
offered to all ADVO employees, with some variations, and generally promote tax
efficiency and replacement of benefit opportunities afforded other employees,
but which are lost to executives due to regulatory limits.
COMPENSATION AND NOMINATION COMMITTEE:
David F. Dyer (Chair)
Howard H. Newman
John R. Rockwell
11
COMPANY FINANCIAL PERFORMANCE
The following graph compares the performance of the Company's Common Stock
with the S&P 500 Index and a Selected Peer Group Index constructed by the
Company. The comparison of total return for each of the years assumes $100 was
invested on October 1, 1997 in each of the Company, the S&P 500 Index and the
Selected Peer Group Index with investment return weighted on the basis of market
capitalization. The Peer Group is comprised of Acxiom Corp., Catalina Marketing,
R.R. Donnelley & Sons Co., Dunn & Bradstreet, Information Resources, Inc.,
Knight-Ridder, Inc., Readers Digest, Scholastic Corp., Tribune Co., Valassis
Communications and the Washington Post. The Peer Group represents a mix of
newspaper, publishing, database and marketing services companies that ADVO
competes with in several of its major markets.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG ADVO, INC., S&P INDEX AND A SELECTED PEER GROUP**
[LINE GRAPH]
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
ADVO, Inc. $100.00 $133.90 $109.25 $180.82 $186.30 $173.97
S&P 500 100.00 109.50 139.37 157.88 115.84 92.12
Peer Group 100.00 96.88 127.78 126.15 117.51 136.44
Assumes $100 invested October 1, 1997 in ADVO, Inc. Common Stock, S&P 500
Index and the Peer Group Index.
* Total Return assumes reinvestment of dividends.
** ADVO's fiscal year ends on the last Saturday in September.
12
AUDIT COMMITTEE REPORT
In accordance with its written charter adopted by the Board of Directors
("Board"), the Audit Committee of the Board ("Audit Committee") assists the
Board in fulfilling its responsibility for the oversight of the quality and
integrity of the financial reporting process and internal and financial
controls.
The Audit Committee is composed entirely of non-employee Directors who have
no relationship to the Company that may interfere with the exercise of their
independence from management and the Company and who are otherwise independent
under applicable New York Stock Exchange standards. The Company has a contract
with Staples, Inc. to purchase office products and other supplies. Mr. Mahoney,
who is a Director of the Company and Chair of the Audit Committee, is Executive
Vice President and Chief Administrative Officer of Staples, Inc. The Board has
determined this contract does not interfere with Mr. Mahoney's independence
since it was determined by competitive bidding with which Mr. Mahoney was not
involved directly or indirectly, and the contract is not material to either
party.
Audit Committee members for the fiscal year ended September 28, 2002 were
Messrs. Newman (who served as Chairman through March 6, 2002), Brown and
Mahoney. Mr. Mahoney was elected to the chairmanship on March 6, 2002. The New
York Stock Exchange rules require that at least one member of the Audit
Committee has "financial expertise" and the Company is in full compliance with
this requirement. The Audit Committee met six times during the fiscal year ended
September 28, 2002, and no member of the Audit Committee missed a meeting.
The Audit Committee has received the written disclosures and the letter
from the independent auditors required by the Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees" and has
discussed with the independent auditors the auditors' independence from
management and the Company, including matters in such written disclosures, and
has considered the compatibility of non-audit services with the auditors'
independence.
The Audit Committee discussed and reviewed with the Company's independent
auditors all communications required by generally accepted auditing standards,
including those described in Statement on Auditing Standards No. 61, as amended,
"Communications with Audit Committees" and, with and without management present,
discussed and reviewed, the overall scope and plans for the audit, the results
of their examination of the financial statements, their evaluation of the
Company's internal controls, and the overall quality of the Company's financial
reporting. The Audit Committee also discussed audit plans and results of the
internal audit examinations.
The Audit Committee reviewed the audited financial statements of the
Company as of and for the fiscal year ended September 28, 2002 with management
and the independent auditors. Management has the primary responsibility for the
financial statements and the reporting process, including the systems of
internal controls. The independent auditors have a responsibility for expressing
an opinion on the conformity of the audited financial statements with generally
accepted accounting principles.
In reliance on reviews and discussions with management and the independent
auditors, the Audit Committee recommended to the Board that the Company's
audited financial statements be included in the Annual Report on Form 10-K for
the year ended September 28, 2002 for filing with the SEC. The Audit Committee
and the Board have also recommended, subject to stockholder approval, the
reappointment of the Company's independent auditors.
13
Audit Fees
Fees for the fiscal 2002 annual audit and reviews of the financial
statements included in the Company's Quarterly Reports on Form 10-Q were $0.3
million.
Financial Information Systems Design and Implementation Fees
The Company's auditors did not render any services to the Company related
to financial systems design and implementation for fiscal year ended September
28, 2002.
All Other Fees
All other fees for fiscal 2002 were $0.6 million, including audit related
services of $0.4 million and non-audit services of $0.2 million. Audit related
services generally include fees for employee benefit audits, business
acquisitions, internal audit and accounting consultations. The Audit Committee
has considered whether the provision of non-audit services is compatible with
maintaining the principal outside auditor's independence and concluded that
performing such services does not affect Ernst & Young LLP's independence.
As of June 30, 2002, the Company ceased to use its outside auditors to
perform the internal audit function. Beginning in July 2002, the Company's
internal audit function was performed by PricewaterhouseCoopers.
AUDIT COMMITTEE:
John J. Mahoney (Chair)
Todd C. Brown
Howard H. Newman
EXECUTIVE AGREEMENTS
Employment Agreement -- Mulloy
On July 31, 1998, the Company entered into an employment agreement with Mr.
Mulloy, pursuant to which he is employed as Chief Executive Officer of the
Company. The employment agreement has a term of six years from its effective
date of January 1, 1999. The salary under the employment agreement is $500,000
per year, subject to increases as determined by the Board of Directors (or the
Compensation and Nomination Committee) plus bonuses pursuant to the Company's
bonus plan. In addition, Mr. Mulloy receives a housing allowance of $2,000 per
month throughout the employment period.
In accordance with the employment agreement, Mr. Mulloy received, on
January 1, 1999, options to purchase 100,000 shares of the Company's Common
Stock at a price of $27.063 per share, such options becoming exercisable in
installments of one-fourth each year from the date of grant. Mr. Mulloy was also
granted 25,000 shares of restricted stock units on January 21, 1999. Under the
terms of the agreement, the restrictions lapsed one-third each year on January
1, 2000, 2001, and 2002.
The employment agreement provides that if the Company terminates Mr.
Mulloy's employment for any reason other than for Cause (as defined), the
Company will continue to pay a salary to Mr. Mulloy at the same rate, plus a
bonus of 75% (subsequently changed by the Board to 100%) of such salary, and
allow him to continue to participate in other benefit programs, for two years
after the date of termination.
14
EXECUTIVE SEVERANCE AGREEMENTS
The Board of Directors authorized the Company to enter into individual
Executive Severance Agreements (the "Agreements") with Messrs. Mulloy, McCombs,
Lubin, Harless, and Sanders. These Agreements were dated as follows:
Mr. Mulloy................................................ November 4, 1996
Mr. McCombs............................................... January 4, 1999
Mr. Lubin................................................. October 17, 1995
Mr. Harless............................................... August 14, 2000
Mr. Sanders............................................... May 19, 1997
The structure of the Agreements is substantially similar, but the terms of
the individual Agreements differ in some important respects as noted below.
The Agreements' provisions become effective upon the occurrence of a Change
of Control (as described below) and continue for the duration of the severance
period. With regard to Messrs. Mulloy, McCombs and Harless, the severance period
is two years following a Change of Control. With regard to Messrs. Lubin and
Sanders, the severance period is one and one-half years following a Change of
Control. In all cases, the severance period ends with the death of the
executive. If, during the severance period, an executive's employment is
terminated by the Company for any reason other than death, disability or Cause
(as described below), or if the executive terminates his employment for Good
reason (as described below), the Company must pay to the executive a lump sum
severance payment. With regard to Messrs. Mulloy and Harless, the severance
payment due upon such a termination of employment is equal to two times the sum
of (i) the executive's annual base pay at the highest rate in effect at any time
within the 90-day period preceding the date a notice of termination of
employment is given or, if higher, at the highest rate of base pay in effect
within the 90-day period immediately preceding the Change of Control and (ii)
the greatest amount of incentive (bonus) pay received by the executive for any
calendar year or portion thereof from and including the third year prior to the
first occurrence of a Change of Control. With regard to Messrs. McCombs, Lubin
and Sanders, the severance payment is equal to one and one-half times the
foregoing sum. Additionally, upon termination, Messrs. Mulloy, McCombs and
Harless will be entitled to receive medical and life insurance benefits for the
period of two years from the date of the termination or cash in lieu thereof.
Messrs. Lubin and Sanders will be entitled to receive medical and life insurance
benefits for the period of one and one-half years from the date of termination
or cash in lieu thereof.
Under the Agreements, "Cause" means an executive's intentional act of
fraud, embezzlement, theft, damage to Company property or disclosure of
confidential information that causes material harm to the Company. "Good reason"
means (i) an adverse change in the executive's responsibilities; (ii) a
reduction in the executive's base pay, bonus pay, or benefits; (iii) a failure
of any successor to the Company to assume the obligations under the Agreement;
(iv) any material breach of the Agreement by the Company; or (v) any action of
the Company requiring the executive to perform his or her services at a location
which is more than thirty-five miles from the location where the executive was
employed immediately preceding the date of the Change in Control.
A "Change in Control" means the occurrence of any of the following events:
(i) Any person (other than the Company, any trustee or other fiduciary
holding securities under any employee benefit plan of the Company, or any
company owned, directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of the common
stock of the
15
Company) acquires securities of the Company and immediately thereafter is
the beneficial owner (as defined) of securities of the Company representing
30% or more of the combined voting power of the Company's then outstanding
securities (except that an acquisition of securities directly from the
Company shall not be deemed an acquisition for purposes of this clause
(i));
(ii) During any period of two consecutive years, individuals who at
the beginning of the period constitute the Board, plus any new directors
treated as continuing directors (as described below), cease to constitute
at least a majority of the Board ( treating as continuing directors all
persons whose nomination or election was approved by a vote of at least
two-thirds of the directors then in office who either were directors of the
Company at the beginning of such two-year period or whose nomination or
election to the Board was previously so approved, but excluding any
director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clause (i), (iii) or (iv) of
this paragraph, and any director whose initial assumption of office occurs
as a result of either an actual or threatened election contest or actual or
threatened solicitation of proxies by or on behalf of any person other than
the Board);
(iii) The consummation of a merger or consolidation of the Company
with any other entity, other than (i) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving or resulting
entity) more than 50% of the combined voting power of the surviving or
resulting entity outstanding immediately after such merger or consolidation
or (ii) a merger or consolidation in which no premium is intended to be
paid to any shareholder participating in the merger or consolidation;
(iv) The stockholders of the Company approve a plan or agreement for
the sale or disposition of all or substantially all of the consolidated
assets of the Company (other than such a sale or disposition immediately
after which such assets will be owned directly or indirectly by the
stockholders of the Company in substantially the same proportions as their
ownership of the common stock of the Company immediately prior to such sale
or disposition) in which case the Board shall determine the effective date
of the Change in Control resulting therefrom; or
(v) any other event occurs which the Board determines, in its
discretion, would materially alter the structure or its ownership.
Each executive is solely responsible for all federal, state, local or
foreign taxes due with respect to any payment received under the Agreements,
including, without limitation, any excise tax imposed by Section 4999 of the
Code. However, all payments under the Agreements would be reduced to the extent
necessary so that no portion of the payments would be subject to the excise tax
imposed by Section 4999 of the Code, but only if, by reason of such reduction,
the net after-tax benefit received by the executive exceeds the net benefit
received by the executive if no such reduction was made.
If the Company fails to comply with any of its obligations under the
Agreements or, in the event that the Company or any other person takes or
threatens to take action to declare the Agreements void or unenforceable, or
institutes any litigation or other action or proceeding designed to deny, or to
recover from the executive, the benefits provided or intended to be provided to
the executive by the Company, the executive is authorized by the Agreements to
retain counsel of the executive's choice, at the expense of the Company, to
advise and represent the executive in connection with any such interpretation,
enforcement, or defense, including without limitation the initiation or defense
of any litigation or other legal action, whether by or against the Company or
any member of the Board of Directors, officer, stockholder, or other person or
entity affiliated with the Company, in any jurisdiction.
16
Benefits under the Agreements are in addition to severance amounts payable
under an executive's employment agreement.
2. APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors recommends that proxies be voted in favor of the
ratification of the appointment of Ernst & Young LLP, certified public
accountants, as independent auditors for the fiscal year ending September 27,
2003. Approval of this proposal will be determined by a majority of votes cast.
Abstentions and broker non-votes will have no effect on the outcome of this
proposal.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting where they will have an opportunity to make a statement if they
desire to do so and are expected to be available to answer appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2.
OTHER BUSINESS
The Board of Directors does not know of any matters to be presented at the
Annual Meeting other than those set forth in the Notice of Annual Meeting of
Stockholders. However, if any other matters properly come before such meeting,
the persons named in the enclosed form of proxy will have discretionary
authority to vote all proxies on such matters in accordance with their judgment.
STOCKHOLDER PROPOSALS
In order to be considered for inclusion in the Company's proxy statement
and form of proxy for the 2004 Annual Meeting of Stockholders, any stockholder
proposal must be received by the Secretary of the Company prior to August 14,
2003. In addition, the form of proxy issued with the Company's 2004 proxy
statement will confer discretionary authority to vote for or against any
proposal made by a stockholder at the 2003 Annual Meeting and which is not
included in the Company's proxy statement. However, under the rules of the SEC,
such discretionary authority may not be exercised if the stockholder proponent
has given the Secretary of the Company notice of such proposal prior to October
28, 2003, and certain other conditions provided for in the SEC rules have been
satisfied.
/s/ David M. Stigler
David M. Stigler
Secretary
December 12, 2002
17
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" ITEMS 1 AND 2.
PLEASE MARK YOUR
VOTES AS INDICATED [X]
IN THIS EXAMPLE
1. Election of Directors:
FOR all nominees
listed to the WITHHOLD
right: (except as AUTHORITY
marked to the to vote for all nominees
contrary) listed to the right
[ ] [ ]
Nominees for election by holders of Common Stock: 01 Todd Brown, 02 David F.
Dyer, 03 Bobbie Gaunt, 04 John Mahoney, 05 Gary M. Mulloy, 06 Howard H. Newman,
07 John R. Rockwell.
INSTRUCTION: To withhold your vote for any nominee(s), write that nominee's name
on the line below.
--------------------------------------------------------------------------------
2. Ratification of the Appointment of Ernst & Young LLP as the Company's
Independent Auditors for fiscal 2003.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
I PLAN TO ATTEND THE MEETING [ ]
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
SIGNATURE SIGNATURE DATE
---------------------- -------------------------- -----------
Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
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PROXY ADVO, INC. PROXY
ONE UNIVAC LANE, P.O. BOX 755, WINDSOR, CONNECTICUT 06095-0755
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints David M. Stigler and John D. Speridakos,
and each of them, with full power of substitution, the proxies of the
undersigned to vote all the shares of the Common Stock of ADVO, Inc. which the
undersigned is entitled to vote at the Annual Meeting of Stockholders to be held
on January 16, 2003 at the Company's corporate headquarters, One Univac Lane,
Windsor, CT commencing at 11:30 a.m. (EST) or any adjournment thereof.
In their discretion the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" ALL NOMINEES FOR DIRECTOR AND WILL BE VOTED "FOR" PROPOSAL 2.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and the related Proxy Statement.
(PLEASE VOTE, SIGN AND DATE REVERSE SIDE)
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