SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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 Section240.14a-11(c) or
Section240.14a-12
WAVE SYSTEMS CORP.
-----------------------------------------------------------------------
(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 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
------------------------------------------------------------
(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:
------------------------------------------------------------
WAVE SYSTEMS CORP.
480 PLEASANT STREET
LEE, MASSACHUSETTS 01238
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 25, 2001
TO THE STOCKHOLDERS OF WAVE SYSTEMS CORP.:
Notice is hereby give that the 2001 Annual Meeting of Stockholders of Wave
Systems Corp. (the "Company") will be held at 4 p.m. on Monday, June 25, 2001 at
The New York Helmsley Hotel, 212 East 42nd Street, New York, New York, for the
following purposes:
1. TO RE-ELECT PETER J. SPRAGUE, JOHN E. BAGALAY, JR., NOLAN BUSHNELL,
GEORGE GILDER, JOHN E. MCCONNAUGHY, JR., MICHAEL SEEDMAN AND STEVEN
SPRAGUE AS DIRECTORS OF THE COMPANY TO HOLD OFFICE UNTIL THE NEXT ANNUAL
MEETING AND UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND QUALIFIED; AND
2. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING OR AT ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
The Board of Directors has fixed the close of business on May 1, 2001 as the
record date for the determination of the stockholders entitled to notice of, and
to vote at, the 2001 Annual Meeting of Stockholders and at any adjournments or
postponements thereof.
By Order of the Board of Directors,
/s/ Gerard T. Feeney
---------------------------------------------------
Gerard T. Feeney
SECRETARY
Lee, Massachusetts
May 25, 2001
YOUR VOTE IS IMPORTANT
IF YOU DO NOT EXPECT TO ATTEND THE ANNUAL MEETING, OR IF YOU DO
PLAN TO ATTEND BUT WISH TO VOTE BY PROXY, PLEASE COMPLETE, SIGN,
DATE AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
WAVE SYSTEMS CORP.
480 PLEASANT STREET
LEE, MASSACHUSETTS 01238
------------------------
PROXY STATEMENT
------------------------
2001 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 25, 2001
GENERAL
This Proxy Statement is being furnished to the holders of the common stock,
$.01 par value per share (the "Common Stock") of Wave Systems Corp., a Delaware
corporation (the "Company"), in connection with the solicitation by the Board of
Directors of proxies for use at the 2001 Annual Meeting of Stockholders to be
held on Monday, June 25, 2001 (the "Annual Meeting") commencing at 4 p.m., at
The New York Helmsley Hotel, 212 East 42nd Street, New York, New York, and at
any adjournments or postponements thereof. The matters to be considered and
acted upon at the meeting are described below in this Proxy Statement.
The principal executive offices of the Company are located at 480 Pleasant
Street, Lee, Massachusetts 01238. The approximate mailing date of this Proxy
Statement and the accompanying proxy is May 25, 2001.
VOTING RIGHTS AND VOTES REQUIRED
Only stockholders of record at the close of business on May 1, 2001 will be
entitled to notice of, and to vote at, the Annual Meeting. As of April 26, 2001,
the Company had outstanding 49,458,002 shares of Class A Common Stock and
564,211 shares of Class B Common Stock. Each stockholder is entitled to one vote
for each share of common stock held on the matters to be considered at the
Annual Meeting. The holders of a majority of the outstanding shares will
constitute a quorum for the transaction of business at the meeting. Shares of
common stock present in person, or represented by proxy (including shares which
abstain or do not vote with respect to one or more of the matters presented for
stockholder approval) will be counted for purposes of determining whether a
quorum exists at the meeting.
The affirmative vote of the holders of a plurality of the shares of common
stock present or represented at the meeting is required for the election of
directors. Abstentions will be treated as shares that are present and entitled
to vote for purposes of determining the number of shares present and entitled to
vote with respect to any particular matter, but will not be counted as a vote in
favor of such matter. If a broker or nominee holding stock in "street name"
indicates on the proxy that it does not have discretionary authority to vote as
to a particular matter, those shares will not be considered as present and
entitled to vote with respect to such matter.
The accompanying proxy may be revoked at any time before it is exercised by
giving a later proxy, notifying the Secretary of the Company in writing, or
voting in person at the meeting.
STOCKHOLDERS OF THE COMPANY ARE REQUESTED TO COMPLETE, SIGN, DATE AND PROMPTLY
RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
SHARES REPRESENTED BY A PROPERLY EXECUTED PROXY RECEIVED PRIOR TO THE VOTE AT
THE ANNUAL MEETING AND NOT REVOKED WILL BE VOTED AT THE ANNUAL MEETING AS
DIRECTED BY THE PROXY. IT IS NOT ANTICIPATED THAT ANY MATTERS OTHER THAN THOSE
SET FORTH IN THE PROXY STATEMENT WILL BE PRESENTED AT THE ANNUAL MEETING. IF
OTHER MATTERS ARE PRESENTED, PROXIES WILL BE VOTED IN ACCORDANCE WITH THE
DISCRETION OF THE PROXY HOLDERS.
The Company's Annual Report, including financial statements for the fiscal
year ended December 31, 2000, has been mailed to stockholders concurrent with
the mailing of this Proxy Statement. The Annual Report, however, is not part of
the proxy solicitation material.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the beneficial
ownership of the Company's Class A and Class B Common Stock as of April 26, 2001
(except as otherwise noted) by (i) each stockholder who is known by the Company
to own beneficially more than five percent of the outstanding Class A or
Class B Common Stock, (ii) each director of the Company, (iii) each of the
executive officers of the Company named in the Summary Compensation Table below,
and (iv) all directors and executive officers of the Company as a group. Holders
of Class A Common Stock are entitled to one vote per share on all matters
submitted to a vote of the stockholders of the Company. Holders of Class B
Common Stock are entitled to one vote per share on all matters submitted to a
vote of the stockholders, except that holders of Class B Common Stock will have
five votes per share in cases where one or more directors are nominated for
election by persons other than the Company's Board of Directors and where there
is a vote on any merger, consolidation or other similar transaction which is not
recommended by the Company's Board of Directors. In addition, holders of
Class B Common Stock will have five votes per share on all matters submitted to
a vote of the stockholders in the event that any person or group of persons
acquires beneficial ownership of 20% or more of the outstanding voting
securities of the Company. Shares of Class B Common Stock are convertible into
shares of Class A Common Stock on a one-for-one basis at the option of the
holder.
PERCENT OF
NUMBER OF SHARES NUMBER OF SHARES ALL OUTSTANDING
OF CLASS A COMMON PERCENT OF CLASS B COMMON PERCENT OF COMMON
BENEFICIAL OWNER(1) STOCK OWNED(2) OF CLASS STOCK OWNED CLASS STOCK(3)
- ------------------- ----------------- -------- ----------------- ---------- ---------------
Peter J. Sprague(4)......... 1,599,334 3.1 381,065 67.5 3.8
John E. Bagalay, Jr.(5)..... 106,000 * 0 * *
Nolan Bushnell (6).......... 32,000 * 4,316 * *
George Gilder(7)............ 186,000 * 2,000 * *
John E. McConnaughy,
Jr.(8).................... 46,750 * 0 * *
Michael Seedman(9).......... 32,000 * 0 * *
Steven Sprague(10).......... 1,186,057 2.3 42,102 7.5 2.3
Gerard T. Feeney (11)....... 550,000 1.1 0 * 1.0
All executive officers and
directors as a group (8
persons)(12).............. 3,738,891 7.2 429,483 76.1 8.0
- ------------------------
* Less than one percent.
(1) Each individual or entity has sole voting and investment power, except as
otherwise indicated.
(2) Does not include shares of Class A Common Stock issuable upon the
conversion of Class B Common Stock.
(3) In circumstances where the Class B Common Stock has five votes per share,
the percentages of total voting power would be as follows: Peter J.
Sprague, 6.4%; John E. Bagalay, Jr., less than 1%; Nolan Bushnell, less
than 1%; George Gilder, less than 1%; John E. McConnaughy, Jr., less than
1%; Michael Seedman, less than 1%; Steven Sprague, 2.5%; Gerard T. Feeney,
1%; and all Executive Officers and Directors as a group, 10.7%.
(4) Includes 852,500 shares, of Class A Common Stock which are subject to
options presently exercisable or exercisable within 60 days. Also includes
320,000 shares of Class B Common Stock
2
held in trust for the benefit of Mr. Peter J. Sprague's adult children, and
for which Mr. Peter J. Sprague is a trustee.
(5) Includes 102,000 shares of Class A Common Stock which are subject to
options presently exercisable.
(6) Includes 32,000 shares of Class A Common Stock which are subject to options
presently exercisable.
(7) Includes 182,000 shares of Class A Common Stock which are subject to
options presently exercisable
(8) Includes 20,000 shares of Class A Common Stock which are subject to options
presently exercisable.
(9) Includes 12,000 shares of Class A Common Stock which are subject to options
presently exercisable.
(10) Includes 969,505 shares of Class A Common Stock which are subject to
options presently exercisable or exercisable within 60 days. Also includes
37,102 shares of Class B Common Stock held in trust for the benefit of
Mr. Steven Sprague's family, and for which Mr. Steven Sprague is a
trustee.
(11) Includes 350,000 shares of Class A Common Stock which are subject to
options presently exercisable or exercisable within 60 days.
(12) Includes 2,520,005 shares of Class A Common Stock which are subject to
options presently exercisable or exercisable within 60 days.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Annual Meeting, seven directors are to be elected, each to hold
office until the next annual meeting of stockholders and until his respective
successor has been duly elected and qualified. If no direction is given to the
contrary, all proxies received by the Board of Directors will be voted "FOR" the
election as directors of each of the following nominees. In the event that any
nominee declines or is unable to serve, the proxy solicited herewith may be
voted for the election of another person in his stead at the discretion of the
proxies. The Board of Directors has no reason to believe that any of the
nominees will not be available to serve. Set forth below is the name and age of
each nominee, their position with the Company, if any, the year in which each
first became a director, the principal occupation and employment of each over
the last five years and other directorships, if any. Each nominee is currently a
director of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE ELECTION
OF EACH OF THE NOMINEES.
3
INFORMATION REGARDING THE NOMINEES FOR DIRECTOR
BUSINESS EXPERIENCE AND PRINCIPAL OCCUPATION OR
EMPLOYMENT DURING PAST 5 YEARS; POSITIONS HELD WITH DIRECTOR
NAME AGE WAVE SYSTEMS; OTHER DIRECTORSHIPS SINCE
- ---- -------- --------------------------------------------------- --------
Peter J. Sprague(1)(4).... 62 Chairman of the Board since 1988; Chief Executive 1988
Officer of the Company from July 1991 to March
2000; Chairman of Silicon Film Technologies, Inc.
since August 1998; Director of WaveXpress, (a
majority-owned subsidiary of the Company),
EnLighten Software, Inc., uWink.com, Inc., NewCore
Networks, Inc., Gigamerica.com and SemEquip, Inc.;
Trustee of the Strang Clinic; Member of Academy of
Distinguished Entrepreneurs, Babson College. Mr.
Sprague is the father of Steven Sprague, President
and Chief Executive Officer of the Company.
John E. Bagalay, Jr.,..... 67 Senior Advisor to the Chancellor of Boston 1993
Ph.D.(1)(2)(3)(4) University since January 1998; Chief Operating
Officer and Chief Financial Officer of Eurus
Technologies, Inc. since January 1999; President
and CEO of Cytogen Corporation from January 1998 to
January 1999 and Chief Financial Officer from
October 1997 to September 1998; Managing Director,
Community Technology Fund, venture capital
affiliate of Boston University from September 1989
to December 1997; former General Counsel of Lower
Colorado River Authority, Texas Commerce
Bancshares, Inc. and Houston First Financial Group;
Director of Cytogen Corporation, AES, Inc., and
several privately held companies.
Nolan Bushnell (3)........ 58 Chairman and Chief Executive Officer of uWink.com, 1999
Inc. since December 1999 where he is leading the
development of streaming media distribution models
for internet entertainment; Director of Strategic
Development of Playnet Technology Corp. from 1995
to 1997.
George Gilder(4).......... 61 Chairman of the Executive Committee of the Company 1993
since 1996; Senior Fellow at the Discovery
Institute in Seattle, Washington; author of nine
books, including LIFE AFTER TELEVISION, MICROCOSM,
THE SPIRIT OF ENTERPRISE and WEALTH AND POVERTY;
contributing editor to Forbes Magazine; Director
and President of Gilder Technology Group, Inc.
(publisher of monthly technology reports); former
chairman of the Lehrman Institute Economic
Roundtable; former Program Director for the
Manhattan Institute; recipient of White House award
for Entrepreneurial Excellence from President
Reagan.
4
BUSINESS EXPERIENCE AND PRINCIPAL OCCUPATION OR
EMPLOYMENT DURING PAST 5 YEARS; POSITIONS HELD WITH DIRECTOR
NAME AGE WAVE SYSTEMS; OTHER DIRECTORSHIPS SINCE
- ---- -------- --------------------------------------------------- --------
John E. McConnaughy, Jr... 72 Chairman and Chief Executive Officer of JEMC 1988
(1)(2)(3)(4) Corporation; Director of Riddell Sports Inc.,
Levcor International, Inc., Fortune Natural
Resources, Inc., and Mego Financial Corp. Mr.
McConnaughy is also a member of the Board of
Trustees of the Strang Clinic and the Chairman
Emeritus of the Board of the Harlem School of the
Arts.
Michael S. Seedman........ 44 Independent business entrepreneur since 1997; 2000
Senior Vice President and general manager of the
Personal Communications Division of U.S. Robotics
from 1993 to 1997 where he focused on the design,
manufacture and sale of modems; President of
Practical Peripherals from 1989 to 1993; Director
of Western Multiplex Corp. and Digi International.
Steven Sprague............ 36 President and Chief Executive Officer of the 1997
Company since March 2000; President and Chief
Operating Officer of the Company from May 1996 to
March 2000; President of Wave Interactive Network
from June 1995 to December 30, 1996; Chairman of
the Board of Directors of WaveXpress, (a
majority-owned subsidiary of the Company). Mr.
Sprague is the son of Peter J. Sprague, Chairman of
the Company
BIOGRAPHICAL INFORMATION REGARDING EXECUTIVE OFFICER WHO IS NOT A DIRECTOR
BUSINESS EXPERIENCE AND PRINCIPAL OCCUPATION OR
EMPLOYMENT DURING PAST 5 YEARS; POSITIONS HELD WITH WAVE OFFICER
NAME AGE SYSTEMS; OTHER DIRECTORSHIPS SINCE
- ---- -------- ---------------------------------------------------------- --------
Gerard T. Feeney 42 Secretary of the Company since February 1999, Senior Vice 1998
President of Finance and Administration, and Chief
Financial Officer of the Company since June 1998; Vice
President of Finance and Operations and Chief Financial
Officer of Xionics Document Technologies, Inc. from 1991
to 1998
- ------------------------
(1) Member of Nominating Committee.
(2) Member of Compensation Committee.
(3) Member of Audit Committee.
(4) Member of Executive Committee.
5
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
Mr. McConnaughy was the Chairman of the Board of the Excellence Group, LLC,
which filed a petition for Bankruptcy under Chapter 11 of the U.S. Federal
bankruptcy laws in January 1999. The Excellence Group's subsidiaries produced
labels for a variety of customer
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met five times during 2000. One director, George
Gilder, attended three of the five meetings, which is fewer than 75 percent of
the aggregate number of meetings of the Board and the Board Committees on which
the directors served. The Board Committees include an Audit Committee, a
Compensation Committee, a Nominating Committee and an Executive Committee.
AUDIT COMMITTEE
The members of the Audit Committee are Messrs. McConnaughy, Bagalay and
Bushnell each of whom is independent of management and free from relationships
that, in the opinion of the Board of Directors, would interfere with the
exercise of independent judgment as a committee member. The Audit Committee
reviews the services provided by the Company's independent auditors, consults
with the independent auditors on audits and proposed audits of the Company, and
reviews the need for internal auditing procedures and the adequacy of the
Company's internal control systems. In 2000, the Audit Committee held three
meetings.
COMPENSATION COMMITTEE
The members of the Compensation Committee are Messrs. McConnaughy and
Bagalay. The Compensation Committee administers the Company's stock option
plans, reviews and recommends compensation levels of the Company's executive
officers. In 2000, the Compensation Committee held two meetings.
NOMINATING COMMITTEE
The members of the Nominating Committee are Messrs. Bagalay, McConnaughy and
Peter J. Sprague. The Nominating Committee establishes procedures for
identifying potential candidates for appointment or election as directors,
reviews and makes recommendations regarding the criteria for Board membership,
and proposes nominees for election at the annual meeting and candidates to fill
Board vacancies. The Nominating Committee will consider recommendations for
nominees from any stockholder who is entitled to vote for the election of
directors. Stockholders should send recommendations of candidates for nomination
for the 2002 slate of directors, in writing, no later than December 31, 2001 to
the Company's Secretary, 480 Pleasant Street, Lee, Massachusetts 01238.
Recommendations must be accompanied by the consent of the individual being
recommended to be nominated, to be elected and to serve. The submission also
should include a statement of the candidate's business experience and other
business affiliations. In 2000, the Nominating Committee held one meeting.
EXECUTIVE COMMITTEE
The members of the Executive Committee are Messrs. Bagalay, Gilder,
McConnaughy and Peter J. Sprague. The Executive Committee assists the Chairman
of the Company in the absence of a meeting of all members of the Board of
Directors. The Executive Committee brings material matters to the attention of
the Board of Directors and prepares the deliberation process of the Board of
Directors, thus accelerating vital decisions for the Company. However, the Board
of Directors did not delegate its full power to the Executive Committee and
asked that the Executive Committee include all members of
6
the Board of Directors in major decisions affecting the Company. In 2000, the
Executive Committee held no meetings.
DIRECTOR COMPENSATION
Each director who is not an employee of the Company received cash
compensation of $30,000 for serving on the Board of Directors in 2000 and was
paid $1,000 for each meeting attended. Under the Company's Non-Employee
Directors Stock Option Plan, each director who is not an employee of the Company
receives an initial grant of options to purchase 12,000 shares of Class A Common
Stock and an annual grant to purchase 10,000 shares of Class A Common Stock at
fair market value. The options are granted at the time directors are appointed
to the board and upon re-election after the annual meeting of the stockholders;
and vest the day following the grant. Options terminate upon the earliest to
occur of (i) three months after the optionee ceases to be a director of the
Company, (ii) one year after the death or disability of the optionee, and
(iii) ten years after the date of grant. If there is a change of control of the
Company, all outstanding stock options will become immediately exercisable.
AUDIT COMMITTEE REPORT
CHARTER
The audit committee is governed by a charter which is set forth below:
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF WAVE SYSTEMS CORP.
CHARTER
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing: the
financial reports and other financial information provided by the
Corporation to any governmental body or the public; the Corporation's
systems of internal controls regarding finance, accounting, legal compliance
and ethics that management and the Board have established; and the
Corporation's auditing, accounting and financial reporting processes.
Consistent with this function, the Audit Committee should encourage
continuous improvement of, and should foster adherence to, the corporation's
policies, procedures and practices at all levels. The Audit Committee's
primary duties and responsibilities are to:
Serve as an independent and objective party to monitor the Corporation's
financial reporting process and internal control system.
Review and appraise the audit efforts of the Corporation's independent
accountants and internal auditing department.
Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal auditing
department, and the Board of Directors.
The Audit Committee will primarily fulfill these responsibilities by
carrying out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as
determined by the Board. The Committee's membership will meet the
requirements of the audit committee policy of the National Association of
Securities Dealers' listing standards. Accordingly, all of the members shall
be independent directors, and free from any relationship that, in the
opinion of the Board, would interfere with the exercise of his or her
independent judgment as a member of the Committee. All
7
members of the Committee shall have a working familiarity with basic finance
and accounting practices, and at least one member of the Committee shall
have accounting or related financial management expertise. Committee members
may enhance their familiarity with finance and accounting by participating
in educational programs conducted by the Corporation or an outside
consultant.
The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board or until their successors shall be duly
elected and qualified. Unless a Chair is elected by the full Board, the
members of the Committee may designate a Chair by majority vote of the full
Committee membership.
III. MEETINGS
The Committee shall meet at least four times annually, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management, the director of the
internal auditing department and the independent accountants in separate
executive sessions to discuss any matters that the Committee or each of
these groups believe should be discussed privately. In addition, the
Committee or at least its Chair should meet with the independent accountants
and management quarterly to review the Corporation's financials consistent
with IV.4 below.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
DOCUMENTS/REPORTS REVIEW
1. Review and update this Charter periodically, at least annually, as
conditions dictate.
2. Review the organization's annual financial statements and any reports
or other financial information submitted to any governmental body, or
the public, including any certification, report, opinion, or review
rendered by the independent accountants.
3. Review the regular internal reports to management prepared by the
internal auditing department and management's response.
4. Review with financial management and the independent accountants the
10-Q prior to its filing or prior to the release of earnings. The Chair
of the Committee may represent the entire Committee for purposes of
this review.
INDEPENDENT ACCOUNTANTS
5. Recommend to the Board of Directors the selection of the independent
accountants, considering independence and effectiveness and approve the
fees and other compensation to be paid to the independent accountants.
On an annual basis, the Committee should review and discuss with the
accountants all significant relationships the accountants have with the
Corporation to determine the accountants' independence.
6. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances
warrant.
7. Periodically consult with the independent accountants out of the
presence of management about internal controls and the fullness and
accuracy of the organization's financial statements.
8
FINANCIAL REPORTING PROCESSES
8. In consultation with the independent accountants and the internal
auditors, review the integrity of the organization's financial
reporting processes, both internal and external.
9. Consider the independent accountants' judgments about the quality and
appropriateness of the Corporation's accounting principles as applied
in its financial reporting.
10. Consider and approve, if appropriate, major changes to the
Corporation's auditing and accounting principles and practices as
suggested by the independent accountants, management, or the internal
auditing department.
PROCESS IMPROVEMENT
11. Establish regular and separate systems of reporting to the Audit
Committee by each of management, the independent accountants and the
internal auditors regarding any significant judgment made in
management's preparation of the financial statements and the view of
each as to appropriateness of such judgments.
12. Following completion of the annual audit, review separately with each
of management, the independent accountants and the internal auditing
department any significant difficulties encountered during the course
of the audit, including any restrictions on the scope of work or access
to required information.
13. Review any significant disagreement among management and the
independent accountants or the internal auditing department in
connection with the preparation of the financial statements.
14. Review with the independent accountants, the internal auditing
department and management to the extent to which changes or
improvements in financial or accounting practices, as approved by the
Audit Committee, have been implemented. (This review should be
conducted at an appropriate time subsequent to implementation of
changes or improvements, as decided by the Committee.)
ETHICAL AND LEGAL COMPLIANCE
15. Establish, review and update periodically a Code of Ethical Conduct and
ensure that management has established a system to enforce this Code.
16. Review management's monitoring of the Corporation's compliance with the
organization's Ethical Code, and ensure that management has the proper
review system in place to ensure that Corporation's financial
statements, reports and other financial information disseminated to
governmental organizations, and the public, satisfy legal requirements.
17. Review activities, organizational structure, and qualifications of the
internal audit department.
18. Review, with the organization's counsel, legal compliance matters
including corporate securities trading policies.
19. Review with the organization's counsel, any legal matter that could
have a significant impact on the organization's financial statements.
20. Perform any other activities consistent with this Charter, the
Corporation's By-laws and governing law, as the Committee or the Board
deems necessary or appropriate.
9
REPORT TO STOCKHOLDERS
The Audit Committee met with members of the Company's management team to
review and discuss the audited financial statements as well as the unaudited
quarterly financial statements. The Audit Committee received from the
independent auditors disclosures regarding the auditors' independence required
by Independence Standard No. 1. In addition, the Audit Committee discussed with
the auditors the auditors' independence and other matters required to be
discussed by Statement on Auditing Standards No. 61. Based on this information
and these discussions, the Audit Committee recommended to the Board of Directors
that the audited financial statements be included in the Company's Annual Report
on Form 10-K.
AUDIT FEES
Aggregate fees billed to the Company for the annual audit and the quarterly
reviews or the consolidated financial statements totaled approximately $230,000.
ALL OTHER FEES
Aggregate fees billed to the Company for services rendered by the Company's
independent accountants other than those billed for the annual audit and the
quarterly reviews of the consolidated financial statements totaled $58,000. The
audit committee believes that the provision of non-audit services during the
2000 fiscal year does not affect the accountants' ability to maintain
independence with respect to the Company.
AUDIT COMMITTEE
John E. McConnaughy
John E. Bagalay Jr.
Nolan Bushnell
10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information with respect to the compensation
paid or awarded by the Company to the Chief Executive Officer and the other
executive officers whose cash compensation exceeded $100,000. (collectively, the
"Named Executive Officers") for services rendered in all capacities during 1998,
1999 and 2000.
LONG-TERM
COMPENSATION
AWARDS
-----------------
NUMBER OF
ANNUAL COMPENSATION SHARES
-------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)
- --------------------------- -------- --------- -------- -----------------
Peter J. Sprague(1)............................ 2000 $185,000 $150,000 100,000
CHAIRMAN 1999 $185,000 $150,000 100,000
1998 $182,917 $150,000 895,505
Steven Sprague(2).............................. 2000 $250,000 $250,000 500,000
PRESIDENT AND CHIEF EXECUTIVE OFFICER 1999 $180,000 $150,000 100,000
1998 $177,500 $150,000 954,505
Gerard T. Feeney(3)............................ 2000 $185,000 $150,000 100,000
SENIOR VICE PRESIDENT, CHIEF FINANCIAL 1999 $160,000 $120,000 100,000
OFFICER AND SECRETARY 1998 $ 90,359 $ 65,000 450,000
- ------------------------
(1) Mr. Peter Sprague was awarded a bonus of $150,000 that was paid in 2000 and
was fully applied to his outstanding loans with the Company. He also
received a bonus for $150,000 in 1998, $75,000 was received in cash and
$75,000 was applied to reduce his loans from the Company (see Item 13).
(2) Mr. Steven Sprague was elected President and Chief Executive Officer of the
Company on June 26, 2000. Previously, Mr. Sprague was President and Chief
Operating Officer of the Company from May 23, 1996 until he was elected
Chief Executive Officer.
(3) Mr. Gerard T. Feeney was hired as Senior Vice President, Finance and
Administration and Chief Financial Officer on June 8, 1998 and was elected
Secretary on February 25, 1999.
OPTION GRANTS TABLE
The following table sets forth certain information regarding options granted
during the fiscal year ended December 31, 2000 by the Company to the Named
Executive Officers.
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SHARES OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM (1)
OPTIONS EMPLOYEES IN PRICE ($/ EXPIRATION ---------------------------
NAME GRANTED (#) FISCAL YEAR SHARE) DATE 5% ($) 10% ($)
- ---- ----------- ------------ --------- ---------- ------------ ------------
Peter J. Sprague................. 100,000 2.9% $12.19 1/20/10 $ 766,623 $1,942,772
Steven Sprague................... 250,000 7.3% $12.19 1/20/10 $1,916,556 $4,856,930
Steven Sprague................... 250,000 7.3% $14.97 6/26/10 $2,353,481 $5,964,183
Gerard T. Feeney................. 100,000 2.9% $12.19 1/20/10 $ 766,623 $1,942,772
- ------------------------
(1) The potential realizable value of the options reported above was calculated
by assuming 5% and 10% compounded annual rates of appreciation of the common
stock from the date of grant of the
11
options until the expiration of the options, based upon the market price on
the date of grant. These assumed annual rates of appreciation were used in
compliance with the rules of the Securities and Exchange Commission and are
not intended to forecast future price appreciation of the common stock.
FISCAL YEAR END OPTION VALUE TABLE
The following table sets forth information regarding the aggregate number
and value of options held by the Named Executive Officers as of December 31,
2000, and the aggregate number and value of options exercised by the Named
Executive Officers during 2000.
NUMBER OF SHARES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
ACQUIRED VALUE OPTIONS AT DECEMBER 31, THE-MONEY OPTIONS AT
ON EXERCISE RECEIVED 2000(#) DECEMBER 31, 2000($)(1)
----------- ---------- --------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
Peter J. Sprague................ 175,000 $3,085,250 487,333 465,167 $609,159 $577,744
Steven Sprague.................. 80,000 2,695,200 556,666 884,834 920,956 675,576
Gerard T. Feeney................ 200,000 4,884,500 133,334 316,666 116,667 183,333
- ------------------------
(1) The last reported bid price for the Company's Class A Common Stock on
December 31, 2000 was $4.50 per share. Value is calculated on the basis of
the difference between the respective option exercise prices and $4.50,
multiplied by the number of shares of common stock underlying the respective
options.
EMPLOYMENT CONTRACTS
The Company has an employment agreement with Steven Sprague that provides
that Mr. Sprague shall serve as President and Chief Executive Officer of the
Company for consecutive one year terms unless either party provides written
notice to the other of its/his intention not to renew the contract not less than
sixty (60) days prior to the expiration of the then current term. The agreement
provides that Mr. Sprague will be paid a minimum base salary of $185,000 per
year subject to increase from time to time as determined by action of the Board
of Directors. The Agreement also provides that Mr. Sprague will be entitled to
operational bonuses based on performance. See "Report of the Compensation
Committee--Base Salaries and Bonuses for 2000". In the event that Mr. Sprague's
employment is terminated without cause or in certain other circumstances,
Mr. Sprague will be paid a lump sum in an amount equal to three (3) year's
annual base salary then in effect, and continue health insurance and other
benefits for a period equal to the remaining Term of Employment then in effect.
This agreement also contains a two-year post termination covenant not to
compete.
The Company also has an employment agreement with Gerard T. Feeney that
provides that Mr. Feeney shall serve as Senior Vice President, Finance and
Administration and Chief Financial Officer of the Company for consecutive
one-year terms unless either party provides written notice to the other of
its/his intention not to renew the contract not less than sixty (60) days prior
to the expiration of the then current term. The agreement provides that
Mr. Feeney will be paid a minimum base salary of $160,000 per year subject to
increase from time to time as determined by action of the Board of Directors.
The Agreement also provides that Mr. Feeney will be entitled to operational
bonuses based on performance. See "Report of the Compensation Committee--Base
Salaries and Bonuses for 2000". In the event that Mr. Feeney's employment is
terminated without cause or in certain other circumstances, Mr. Feeney will be
paid a lump sum in an amount equal to one (1) year's annual base salary then in
effect, and guaranteed portion of bonus, benefits and similar relocation
package. However in the event Mr. Feeney secures employment elsewhere during the
one year period subsequent to termination, severance pay will stop once
employment has begun with the new employer. In addition, Mr. Feeney's options
will continue to vest for at least one year from the termination date and for
the portion of time greater than one year and up to his next anniversary vesting
period. This agreement also contains a two-year post termination covenant not to
compete.
12
COMPENSATION INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee of the Company were
officers or employees of the Company, nor was any executive officer of the
Company a director or member of the compensation committee of any entity, of
which an executive officer or director served on the Compensation Committee of
the Company.
REPORT OF THE COMPENSATION COMMITTEE
GENERAL
The Compensation Committee of the Board of Directors (the "Committee") is
comprised of non-employee directors. The current members of the Committee are
Messrs. McConnaughy and Bagalay. The Committee reviews and recommends to the
Board of Directors compensation levels for the Company's executive officers, and
administers the Company's stock option plans, including the awarding of grants
thereunder.
COMPENSATION PHILOSOPHY
Executive compensation is heavily tied to corporate performance through the
granting of stock options. As a development stage company, the Company has
sought to contain costs with low cash salaries and bonuses.
The Company has not established a policy with regard to Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code") since the Company has
not and does not currently anticipate paying cash compensation in excess of
$1 million per annum to any employee. The Company intends to administer its
stock option plans in accordance with Section 162(m) of the Code.
BASE SALARIES AND BONUSES FOR 2000
Base salaries for 2000 remained substantially lower than levels in the
competitive marketplace for executives with comparable experience, consistent
with the Company's position as a development stage company. As part of the
Company's compensation policy of meeting defined goals and objectives, the
Company awarded the following bonuses to the Named Executive Officers: $150,000
to Mr. Peter J. Sprague, Chairman; $250,000 to Mr. Steven Sprague, President and
Chief Executive Officer; and $150,000 to Mr. Gerard T. Feeney, Senior Vice
President, Chief Financial Officer and Secretary.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Compensation of the Chief Executive Officer was determined in accordance
with the criteria set forth above. The Committee believes that CEO compensation
was appropriately based upon the Company's financial position and performance in
that the Company has met or exceeded its key objectives in terms of obtaining
adequate funding, developing its technology and establishing key strategic
relationships which will enable the Company to reach its ultimate deployment
goals.
Respectfully submitted,
Compensation Committee
John E. McConnaughy, Jr.
John E. Bagalay, Jr.
13
PERFORMANCE GRAPH
The following line graph compares the Company's cumulative total return to
stockholders with the cumulative total return of the Nasdaq Market Value Index
and the Computer Related Services SIC Code Index from December 31, 1995 through
December 31, 2000. These comparisons assume the investment of $100 on
December 31, 1995 and the reinvestment of dividends. The stock performance on
the graph is not necessarily indicative of future stock price performance.
WAVE SYSTEMS CORP.
COMPARISON OF CUMULATIVE TOTAL RETURN TO STOCKHOLDERS
DECEMBER 31, 1995 THROUGH DECEMBER 31, 2000
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Dollars
1995 1996 1997 1998 1999 2000
Wave Systems Corp. 100 79.55 40.91 137.48 434.09 163.63
Peer Group (SIC Code 7379) 100 181.74 192.45 405.53 828.69 109.59
NASDAQ Stock Market 100 124.27 152 214.39 378.12 237.66
PEER GROUP
WAVE SYSTEMS (SIC CODE 7379) NASDAQ MARKET
------------ --------------- -------------
12/31/95................ 100.00 100.00 100.00
12/31/96................ 79.55 181.74 124.27
12/31/97................ 40.91 192.45 152.00
12/31/98................ 137.48 405.53 214.39
12/31/99................ 434.09 828.69 378.12
12/31/00................ 163.63 109.59 237.66
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors and executive officers, and
persons owning more than ten percent of a registered class of the Company's
equity securities, to file with the Securities and Exchange Commission reports
of ownership and changes in ownership of equity securities of the Company. Such
persons are also required to furnish the Company with copies of all such forms.
Based solely upon a review of the copies of such forms furnished to the
Company and, in certain cases, written representations that no Form 5 filings
were required, the Company believes that, with respect to the 2000 fiscal year,
all required Section 16(a) filings were made.
14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
NOTE RECEIVABLE FROM DIRECTOR/OFFICER
On March 26, 2001 the Company made a personal loan to Mr. Gerard T. Feeney,
Senior Vice President, Chief Financial Officer and Secretary of the Company as
evidenced by a demand note for $250,000, which sum is due and payable to the
Company on March 26, 2002 and bears interest at a rate per annum equal to 1%
over the prime interest rate.
On February 27, 2001, the Company made a personal loan to Mr. Peter J.
Sprague, Chairman of the Company as evidenced by a demand note for $713,320,
which sum is due and payable to the Company on February 27, 2002 and bears
interest at a rate per annum equal to 1% over the prime rate of interest.
On November 16, 1992, the Company made a personal loan to Mr. Peter J.
Sprague, Chairman and former Chief Executive Officer of the Company, as
evidenced by a note for $150,000, which sum was due and payable to the Company
on January 16, 1993 and which bore interest at the rate of ten percent (10%) per
annum. On the due date, the note was canceled and the total amount owed was
"rolled-over" into a subsequent note, dated May 12, 1993 for $150,000, plus
accrued interest. The note was due on demand by the Company and accrued interest
at the rate of 10% per annum. On April 22, 1993, the Company made an additional
loan to Mr. Peter Sprague for $23,175 as evidenced by a subsequent note, which
is due on demand by the Company and which bears interest at a rate of 10% per
annum. All of these loans were made to Mr. Sprague for personal reasons. The
notes were secured by a pledge of 67,000 shares of Class B Common Stock. Of
Mr. Sprague's $150,000 bonus for 1998, $75,000 was applied against his
indebtedness to the Company. As of December 31, 1999, Mr. Sprague's aggregate
indebtedness (including accrued interest) to the Company under the notes totaled
$154,160. During March 2000 the entire note was paid. No demand has been made as
of the date hereof.
WAVEXPRESS
In April 1999, the Company joined with Sarnoff Corporation to announce the
formation of a new joint venture, WaveXpress. On October 15, 1999 Wave and
Sarnoff signed a Joint Venture Agreement which formally established WaveXpress.
Under this agreement Sarnoff and affiliates received a 40% equity stake in
WaveXpress. Wave and its affiliates that purchased founders stock in April 1999
own the remaining 60% of the outstanding capital stock. The affiliates of Wave
include Peter Sprague and Steven Sprague, the Chief Executive Officer and
President of Wave, respectively, certain members of the Board of Directors of
Wave and certain employees of Wave. This affiliate group purchased for a nominal
amount, founders stock representing, in the aggregate, 7% of the outstanding
capital stock of WaveXpress. Wave is currently funding WaveXpress through a
series of convertible notes. Through December 31, 2000, Wave has loaned
WaveXpress approximately $16.8 million. Neither Sarnoff nor any of the other
minority shareholders are obligated to provide any funding to the venture.
AMENDED AND RESTATED LICENSE AGREEMENT AND ASSIGNMENT
Pursuant to an Amended and Restated License Agreement, dated February 14,
1994, and related Patent Assignment and Security Agreement, Mr. Peter J. Sprague
assigned his interest in a patent for the metering and usage of serial data
information to the Company in exchange for a non-terminable royalty interest.
The Company has agreed to pay royalties to Mr. Sprague in an amount equal to 2%
of the gross revenues (less actual amounts paid to information, database and
content providers, hardware manufacturers and suppliers, search and retrieval
software suppliers, consolidators of information and network providers) derived
from the Company's technology based on the patent. The royalty payments are
allocated 75% to Mr. Sprague and 25% to one of our former officers, and are
secured by a security interest in the patent.
15
LICENSE AND CROSS-LICENSE AGREEMENT
On May 1, 1992, the Company entered into a Joint Technology Development
Agreement and License and Cross-License Agreement with The Titan Corporation
whereby Titan granted to the Company license rights to the use of certain
patents which are co-owned by Titan. Dr. Gene W. Ray, a former director of the
Company, is a director, President and Chief Executive Officer of Titan. The
Company granted to Titan the exclusive right to make for, sell in, and lease in
a "Retained Market," as defined in the agreement, the subject matter described
in any Company patent. The Retained Market is defined generally as the market
for "Government Information," as defined in the agreement, used solely by a
government entity, and the market for products used to access such information.
On February 28, 1997 the Company and Titan executed an addendum to the License
and Cross-License Agreement whereby the Company received a sole license to the
licensed patent to develop and distribute products to the in-home consumer
microcomputer market segment.
Under this addendum to the License and Cross-License Agreement, Titan waived
any and all defaults by the Company under the License and Cross-License
Agreement occurring prior to February 28, 1997.
COMPENSATION TO MICHAEL SPRAGUE
Since November 1, 1999 Michael Sprague has served as Vice President of
Services Development at the Company's subsidiary, WaveXpress. His annual salary
for serving in this capacity is $120,000 per year. Mr. Michael Sprague is the
son of Mr. Peter J. Sprague, the Chairman and former Chief Executive Officer of
the Company.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not know
of any other matters which may come before the Annual Meeting. If any other
matters properly come before the meeting, the accompanying proxy confers
discretionary authority with respect to any such matters, and the persons named
in the accompanying proxy intend to vote in accordance with their best judgment
on such matters.
All expenses in connection with the solicitation of proxies will be borne by
the Company. In addition to this solicitation, officers, directors and regular
employees of the Company, without any additional compensation, may solicit
proxies by mail, telephone or personal contact. Kissel-Blake Inc. may be
retained to assist in the solicitation of proxies for a negotiated fee plus
reasonable out-of-pocket expenses. The Company will, upon request, reimburse
brokerage houses and other nominees for their reasonable expenses in sending
proxy materials to their principals.
The prompt return of your proxy will be appreciated and helpful in obtaining
the necessary vote. Therefore, whether or not you expect to attend the Annual
Meeting, please sign the proxy and return it in the enclosed envelope.
16
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the proxy materials for the 2002
Annual Meeting should be addressed to the Company's Secretary, Gerard T. Feeney,
480 Pleasant Street, Lee, Massachusetts 01238 and must be received by
January 26, 2002. In addition, the Company's By-laws currently require that for
business to be properly brought before an annual meeting by a stockholder,
regardless of whether included in the Company's proxy statement, the stockholder
must give written notice of his or her intention to propose such business to the
Secretary of the Company, which notice must be delivered to, or mailed and
received at, the Company's principal executive offices not less than sixty
(60) days and not more than ninety (90) days prior to the scheduled annual
meeting (except that if less than seventy (70) days' notice of the date of the
scheduled annual meeting is given, notice by the stockholder may be delivered or
received not later than the tenth (10th) day following the day on which such
notice of the date of the scheduled annual meeting is given). Such notice must
set forth as to each matter the stockholder proposes to bring before the annual
meeting: (i) a brief description of the business desired to be brought before
the meeting and the reasons for conducting such business at the meeting,
(ii) the name and address of the stockholder proposing such business, (iii) the
class and number of shares which are beneficially owned by the stockholder; and
(iv) any material interest of the stockholder in such proposal. The By-laws
further provide that the chairman of the annual meeting may refuse to permit any
business to be brought before an annual meeting without compliance with the
foregoing procedures.
By Order of the Board of Directors,
/s/ Gerard T. Feeney
---------------------------------------------------
Gerard T. Feeney
SECRETARY
Wave Systems Corp.
Lee, Massachusetts
May 25, 2001
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON SOLICITED HEREBY,
UPON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (WITHOUT EXHIBITS). REQUESTS SHOULD BE MADE
TO WAVE SYSTEMS CORP., ATTENTION: MR. GERARD T. FEENEY, 480 PLEASANT STREET,
LEE, MASSACHUSETTS 01238.
17
WAVE SYSTEMS CORP.
PROXY
For the 2001 Annual Meeting of the Stockholders of Wave Systems Corp.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Gerard T. Feeney, with power to act
alone and with full power of substitution, as proxy to vote the shares that the
undersigned is entitled to vote at the 2001 Annual Meeting of the Company to be
held at The New York Helmsley Hotel, 212 East 42nd Street, New York, New York,
on Monday, June 25, 2001, commencing at 4 p.m., and at any adjournments thereof
with all the powers the undersigned would possess if personally present, as
specified on the ballot below on the matters listed below and, in accordance
with their discretion, on any other business that may come before the meeting,
and revokes all proxies given by the undersigned with respect to the shares
covered hereby.
(Continued and to be signed on Reverse Side)
Please date,
sign and mail your
proxy card back as
soon as possible!
2001 Annual Meeting of Stockholders
WAVE SYSTEMS CORP.
June 25, 2001
Please Detach and mail in the Envelope Provided
The Board of Directors recommends a vote FOR the proposal listed below. Please
mark your vote with an "X", as in this example: [X]
1. Election of Directors:
[ ] FOR all nominees listed: Peter J. Sprague, John E. Bagalay, Jr., Nolan
Bushnell, George Gilder, John E. McConnaughy, Jr., Michael Seedman and Steven
Sprague except vote withheld from following nominees listed in space below (if
any):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[ ] VOTE WITHHELD FOR all nominees
[ ] ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
MARK HERE FOR ADDRESS CHANGE AND [_] NOTE AT LEFT
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO CONTRARY DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1.
Dated: ____________, 2001
----------------------------------
Signature
NOTE: THIS PROXY MUST BE SIGNED EXACTLY AS NAME APPEARS HEREON. EXECUTORS,
ADMINISTRATORS, TRUSTEES, ETC. SHOULD GIVE FULL TITLE AS SUCH. FOR JOINT
ACCOUNTS, EACH OWNER SHOULD SIGN. IF THE SIGNER IS A CORPORATION, PLEASE SIGN
FULL CORPORATE NAME BY DULY AUTHORIZED OFFICER.