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 Section 240.14a-12
FRIENDLY ICE CREAM CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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[LOGO]
Friendly Ice Cream Corporation
1855 Boston Road
Wilbraham, Massachusetts 01095
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 16, 2001
TO ALL SHAREHOLDERS OF FRIENDLY ICE CREAM CORPORATION:
Notice is Hereby Given that the Annual Meeting of Shareholders of Friendly
Ice Cream Corporation ("Friendly's") will be held in the Friendly Ice Cream
Corporation Training Center,
37 Capital Drive, West Springfield, Massachusetts at 10:00 a.m. local time on
Wednesday, May 16, 2001 for the following purposes:
1. To elect two Class I Directors for a term expiring in 2004.
2. To ratify the appointment by the Board of Directors of Friendly's of Arthur
Andersen LLP as independent public accountants of Friendly's for the fiscal
year ending December 30, 2001.
3. To transact such other business as may properly come before the meeting or
any adjournment or adjournments thereof.
Notice is Further Given that the Board of Directors has fixed April 4, 2001,
as the record date, and only holders of Friendly's common stock of record at the
close of business on that date will be entitled to notice of, and to vote at,
the Annual Meeting or any adjournments thereof.
Your copy of the 2000 Annual Report of Friendly Ice Cream Corporation is
enclosed.
IF YOU PLAN TO ATTEND: PLEASE NOTE THAT SPACE LIMITATIONS MAKE IT NECESSARY
TO LIMIT ATTENDANCE TO SHAREHOLDERS AND ONE GUEST FOR EACH SHAREHOLDER.
ADMISSION TO THE MEETING WILL BE ON A FIRST-COME, FIRST-SERVED BASIS.
REGISTRATION WILL BEGIN AT 9:00 A.M., AND SEATING WILL BE AVAILABLE AT
APPROXIMATELY 9:30 A.M. CAMERAS AND RECORDING DEVICES WILL NOT BE PERMITTED AT
THE MEETING. BENEFICIAL OWNERS OF STOCK HELD IN "STREET NAME" WILL NEED TO BRING
A COPY OF A BROKERAGE STATEMENT REFLECTING STOCK OWNERSHIP AS OF THE RECORD
DATE.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING OF SHAREHOLDERS,
PLEASE FILL IN, DATE AND SIGN THE ACCOMPANYING PROXY CARD AND MAIL IT PROMPTLY
IN THE ENCLOSED PREPAID RETURN ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING OF
SHAREHOLDERS, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD.
By Authorization of the Board of
Directors
Aaron B. Parker
Associate General Counsel and
Clerk
Wilbraham, Massachusetts
April 27, 2001
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS OF
FRIENDLY ICE CREAM CORPORATION
TO BE HELD ON MAY 16, 2001
TABLE OF CONTENTS
PAGE
--------
The Annual Meeting.......................................... 1
The Purpose of the 2001 Annual Meeting.................... 1
Voting at the Annual Meeting.............................. 1
Voting By Proxy........................................... 1
What Constitutes a Quorum?................................ 1
Voting to Approve Each Proposal........................... 2
Board's Recommendations................................... 2
Stock Ownership............................................. 3
Who Are the Largest Owners of Friendly's Stock?........... 3
How Much Stock Do Friendly's Directors and Executive
Officers Own?............................................. 4
Proposal 1--Election of Directors........................... 5
Directors Standing for Election........................... 5
Directors Continuing in Office............................ 5
Director Compensation..................................... 6
Board Committees and Meetings............................. 6
Proposal 2--Ratification of Appointment of Independent
Public Accountants 8
Audit Fees................................................ 8
Other Fees................................................ 8
Compensation Committee Report on Executive Compensation..... 8
Base Salaries............................................. 9
Annual Incentives......................................... 9
Long-Term Incentives...................................... 9
Restricted Stock Plan................................... 9
Stock Option Plan....................................... 9
Policy with Respect to the $1 Million Deduction Limit..... 10
Performance Graph........................................... 11
Executive Compensation...................................... 12
Summary Compensation Table................................ 12
Pension Plan.............................................. 13
Certain Relationships and Related Transactions.............. 13
Report of the Audit Committee............................... 15
Other Matters............................................... 16
Shareholder Proposals and Shareholder Nominations of
Directors for the 2002 Annual Meeting..................... 16
Other Business............................................ 16
Proxy Solicitation Costs.................................. 16
Appendix--FRIENDLY ICE CREAM CORPORATION--AUDIT COMMITTEE
CHARTER
PROXY STATEMENT
FRIENDLY ICE CREAM CORPORATION
1855 Boston Road
Wilbraham, MA 01095
The Board of Directors of Friendly Ice Cream Corporation (the "Company")
solicits your proxy for use at the 2001 Annual Meeting of Shareholders. This
proxy statement contains information related to the Annual Meeting of
Shareholders of Friendly's to be held on May 16, 2001 at the Friendly Ice Cream
Corporation Training Center, 37 Capital Drive, West Springfield, Massachusetts
at 10:00 a.m., and at any postponements or adjournments of such meeting. This
proxy statement and form of proxy are first being mailed to shareholders on
approximately April 27, 2001.
THE ANNUAL MEETING
THE PURPOSE OF THE 2001 ANNUAL MEETING
At Friendly's 2001 Annual Meeting, shareholders will act upon the matters
outlined in the accompanying notice of meeting, namely, the election of two
directors and the ratification of Friendly's independent public accountants.
Friendly's management will then report on the performance of Friendly's during
fiscal 2000 and respond to questions from shareholders.
VOTING AT THE ANNUAL MEETING
You are entitled to vote at the meeting if you are an owner of record of
shares of common stock of Friendly's, its only class of voting securities, at
the close of business on April 4, 2001. As an owner of record on the record
date, you are entitled to one vote for each share of common stock of Friendly's
that you hold. On April 4, 2001, there were 7,368,406 shares of common stock
issued and outstanding.
VOTING BY PROXY
To vote by proxy, please promptly complete, sign and return the enclosed
proxy card. Once the enclosed proxy is completed, properly signed and returned
to Friendly's, it will be voted as directed. If you are planning to attend the
annual meeting, the proxy may also be delivered on the day of the annual
meeting.
You may revoke this proxy if you attend the meeting in person and request
that the proxy be revoked. To change your vote before the proxy is exercised,
simply file either a notice of revocation or a duly executed proxy bearing a
later date with the Clerk of Friendly's, BEFORE the proxy is exercised.
Please specify your voting choices on the enclosed form of proxy. If you do
not provide specific instructions, the shares represented by your signed proxy
will be voted FOR the election of the nominees, and FOR the proposal to ratify
the appointment of Arthur Andersen LLP as independent public accountants.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting the meeting to conduct its business. Proxies
received but marked as abstentions and shares held in "street name" and
represented at the meeting which the record holders are not entitled to vote on
certain matters ("broker non-votes") will be included in the calculation of the
number of shares considered to be present at the meeting.
1
VOTING TO APPROVE EACH PROPOSAL
VOTING FOR THE ELECTION OF DIRECTORS: Directors will be elected by a
plurality of the votes cast by the shareholders voting in person or by proxy at
the Annual Meeting. You as a shareholder may vote in favor of the nominees or
withhold your vote as to each nominee. A properly executed proxy marked
"WITHHOLD AUTHORITY" with respect to the election of a director will not be
voted with respect to the director, and will have no effect on the outcome,
although it will be counted for purposes of determining whether there is a
quorum.
VOTING FOR RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC
ACCOUNTANTS: Approval of the ratification of Arthur Andersen LLP as independent
public accountants will require the affirmative vote of a majority of the votes
cast on this matter by the holders of the outstanding shares of common stock
represented at the Annual Meeting in person or by proxy. You as a shareholder
may vote in favor of a proposal, may vote against a proposal or may abstain from
voting. A properly executed proxy marked "ABSTAIN" with respect to this matter
will not be deemed to be voted or cast, and will have no effect on the outcome,
although it will be counted for purposes of determining whether there is a
quorum.
Broker non-votes will have no effect on these outcomes.
BOARD'S RECOMMENDATIONS
Unless otherwise instructed on the proxy card, the persons named as proxy
holders on the proxy card will vote in accordance with the recommendations of
the Board of Directors. The Board's recommendations are set forth below together
with the description of each proposal in this proxy statement. In summary, the
Board recommends a vote:
- -- FOR election of nominated directors (see "Proposal 1--Election of
Directors"); and
- -- FOR ratification of the appointment of Arthur Andersen LLP as Friendly's
independent public accountants (see "Proposal 2--Ratification of Independent
Public Accountants").
Should any other matter come properly before the meeting, the proxy holders
will vote as recommended by the Board of Directors or, if no recommendation is
given, in their own discretion.
2
STOCK OWNERSHIP
WHO ARE THE LARGEST OWNERS OF FRIENDLY'S STOCK?
The following table sets forth the beneficial ownership of Friendly's common
stock by each person who, as of March 1, 2001, is known to Friendly's to be the
beneficial owner of 5% or more of the common stock, with sole voting and
dispositive power except as otherwise indicated.
NAME AND ADDRESS AMOUNT OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- ------------------------------------------------------------ -------------------- ----------
Prestley S. Blake ("Blake")
6799 South Marina Way,
Sailfish Point
Stuart, FL 34996............................................ 856,800(a) 11.6%
Donald N. Smith
1 Pierce Place
Suite 100 East
Itasca, IL 60143............................................ 687,551 9.3%
FleetBoston Financial Corporation
100 Federal Street
Boston, MA 02110............................................ 568,783(b) 7.7%
Cumberland Associates LLC ("CA")
1114 Avenue of the Americas
New York, NY 10036.......................................... 400,700(c) 5.4%
(a) Blake reports sole voting and dispositive power over 846,800 shares
including the 100,000 shares owned by SPB Family Limited Partnership in
which Blake serves as sole general partner. Blake reports beneficial
ownership of 10,000 shares owned by The Helen D. Blake 1993 Trust in which
Blake's wife serves as trustee.
(b) FleetBoston Financial Corporation through its subsidiaries, BankBoston,
National Association, Fleet National Bank, Fleet Investment Advisors, Inc.
and Fleet Trust & Investment Services Company, reports sole voting power as
to 397,783 shares, sole dispositive power as to 568,783 shares, and shared
voting and dispositive power as to 200 shares.
(c) CA is a company engaged in the business of managing, on a discretionary
basis, ten securities accounts, the principal one of which is Cumberland
Partners. Gary Tynes, Bruce G. Wilcox, Andrew Wallach and Dipak M. Patel are
the members of CA. CA reports sole voting and dispositive power as to
379,740 shares and shared voting and dispositive power as to 20,960 shares.
HOW MUCH STOCK DO FRIENDLY'S DIRECTORS AND EXECUTIVE OFFICERS OWN?
The following table sets forth the beneficial ownership of Friendly's common
stock, as of March 1, 2001, for each director and nominee, the Chief Executive
Officer and the other officers named in the
3
Summary Compensation Table, and for all directors and executive officers as a
group, with sole voting and dispositive power except as indicated.
AGGREGATE NO. OF SHARES % OF SHARES
NAME BENEFICIALLY OWNED OUTSTANDING
- ---- ----------------------- -----------
Donald N. Smith............................................. 687,551 9.3
Michael J. Daly............................................. 200(1) *
Steven L. Ezzes............................................. 17,437 *
Charles A. Ledsinger, Jr.................................... 0 --
Burton J. Manning........................................... 0 --
John L. Cutter.............................................. 60,004 *
Gerald A. Sinsigalli........................................ 41,471 *
Michael A. Maglioli......................................... 26,111 *
All directors and executive officers as a group............. 871,330 11.8%
- ------------------------
* Represents less than 1% of Company's outstanding common stock.
(1) These shares are owned by Mr. Daly's spouse.
4
PROPOSAL 1--ELECTION OF DIRECTORS
The Board of Directors is divided into three classes of directors. The term
of office of the directors in Class I expires at the 2001 Annual Meeting. At the
Annual Meeting, two directors will be elected in Class I to hold office until
the 2004 Annual Meeting of Shareholders or until their successors are elected
and qualified. The Board of Directors proposes that the nominees described
below, who are currently serving as Class I directors, be reelected as Class I
directors to serve until the 2004 Annual Meeting of Shareholders or until their
successors are elected and qualified.
Should either nominee become unable to serve for any reason, which is not
anticipated, the Board of Directors may, unless the Board by resolution provides
for a lesser number of directors, designate a substitute nominee, in which event
the persons named in the enclosed proxy will vote proxies that would otherwise
be voted for the named nominees for the election of such substitute nominee or
nominees.
The nominees and the other directors have furnished certain information
relating to their principal occupations and directorships, and the number of
shares of Friendly's common stock beneficially owned by them.
DIRECTORS STANDING FOR ELECTION
CLASS I DIRECTORS. The directors standing for election are:
MICHAEL J. DALY Age: 59 Director since 1997
Mr. Daly has served as the President and Chief Executive Officer of Baystate
Health Systems, a health care organization, since December 1981.
BURTON J. MANNING Age: 69 Director since 1997
Mr. Manning has been the Chairman Emeritus of J. Walter Thompson, Inc., an
international advertising agency, since January 1998. He served as the Chairman
of J. Walter Thompson, Inc. from 1987 through 1997 and served as its Chief
Executive Officer from 1987 through 1996. Mr. Manning is also a director of
International Specialty Products, Inc.
DIRECTORS CONTINUING IN OFFICE
CLASS II DIRECTORS. The following Class II Directors were elected in 1999
for terms ending in 2002.
STEVEN L. EZZES Age: 54 Director since 1995
Steven L. Ezzes was reelected as a director of Friendly's in December 1995.
Mr. Ezzes previously served as a director of Friendly's from January 1991 to
May 1992. Mr. Ezzes is Managing Director of Thomas H. Lee Capital, a private
investment company. Prior to joining Thomas H. Lee Capital, Mr. Ezzes was a
Managing Director of Societe Generale, a banking and financial services
organization, from April 1998 to October 1999. Mr. Ezzes was a Managing Director
of Scotia Capital Markets (USA), an investment banking firm, from November 1996
until May 1998. Prior to that, he was a partner of the Airlie Group, a private
investment firm, from 1988 until 1994 and from 1995 until 1996. Mr. Ezzes was
also a Managing Director of Lehman Brothers, an investment banking firm, from
1994 to 1995.
CHARLES A. LEDSINGER, JR. Age: 51 Director since 1997
Charles A. Ledsinger, Jr. was reelected as a director of Friendly's in
October 1997 and had previously served as a director of Friendly's from
August 1992 to July 1997. Mr. Ledsinger is a member of the Board of Directors
and has served as the President and Chief Executive Officer of Choice Hotels
International, Inc., an international hospitality chain, since August 1998. He
was previously
5
President and Chief Operating Officer of St. Joe Corporation, a diversified real
estate, forestry, transportation and sugar company, from May 1997 through
July 1998. Prior to joining St. Joe Corporation, he served as the Senior Vice
President and Chief Financial Officer of Harrah's Entertainment, Inc./The Promus
Companies, an operator of hotel and gaming properties, and its predecessor
companies from 1978 to 1997. From December 1993 to April 1997, Mr. Ledsinger was
an officer in Harrah's Jazz Finance Corporation, a non-consolidated special
purpose subsidiary of Harrah's Entertainment, Inc. created in connection with
the Harrah's Jazz Casino project, which filed for bankruptcy in November 1995.
Harrah's Jazz Finance Corporation consummated its bankruptcy reorganization on
October 30, 1998. Mr. Ledsinger is also a director of FelCor Lodging
Trust, Inc. and TBC Corporation.
CLASS III DIRECTOR. The following Class III Director was elected in 2000 for
a term ending in 2003.
DONALD N. SMITH Age: 60 Director since 1988
Donald N. Smith has been Chairman and Chief Executive Officer of Friendly's
since September 1988. Mr. Smith also served as Friendly's President from
September 1988 to December 1998. Since 1986 Mr. Smith has been Chairman of the
Board and Chief Executive Officer of The Restaurant Company and its
predecessors, which owns and franchises a chain of mid-scale restaurants under
the name Perkins Restaurant and Bakery. Since 1998 he has also been the Chief
Operating Officer of The Restaurant Company and its predecessors.
DIRECTOR COMPENSATION
Each director of Friendly's who is not an employee of Friendly's receives a
fee of $2,500 per month, and $1,500 per Board of Directors meeting attended,
plus expenses.
BOARD COMMITTEES AND MEETINGS
Friendly's Board of Directors has established an Audit Committee, a
Compensation Committee and a Nominating Committee. The Board of Directors met
ten times during fiscal 2000. All directors attended at least 83% of the Board
and Committee meetings.
THE AUDIT COMMITTEE: This Committee has three non-employee independent
directors and met three times during fiscal 2000. It annually recommends to the
Board of Directors the appointment of independent auditors and reviews with the
auditors the plan and scope of the audit and audit fees; reviews the guidelines
established for the dissemination of financial information; meets periodically
with the independent and internal auditors, the Board of Directors and
management to monitor the adequacy of reporting and internal controls; reviews
consolidated financial statements; and performs any other functions or duties
deemed appropriate by the Board of Directors. Messrs. Ezzes, Ledsinger and Daly
are the current members of this Committee and meet the standards of independence
as required by the American Stock Exchange. Mr. Ledsinger is the Chair of this
Committee.
THE COMPENSATION COMMITTEE: This Committee has three non-employee
independent directors and met five times during fiscal 2000. It annually
recommends to the Board of Directors the base salary, incentive compensation and
any other compensation of the Chairman of the Board and the elected officers of
Friendly's and makes recommendations to the Board on the administration of the
terms and policies of Friendly's Annual Incentive Plan, Restricted Stock Plan
and Stock Option Plan; reviews and submits recommendations to the Board of
Directors regarding certain employee benefit plans; and performs any other
functions or duties as deemed appropriate by the Board. Messrs. Daly, Ledsinger
and Manning are the current members of this Committee. Mr. Manning is the Chair
of this Committee.
6
THE NOMINATING COMMITTEE: This Committee has two non-employee independent
directors and one employee director and met once during fiscal 2000. It
considers and proposes director nominees for election at the Annual Meeting;
selects candidates to fill Board vacancies as they occur; makes recommendations
to the Board of Directors regarding Board committee memberships; and performs
any other functions deemed appropriate by the Board of Directors. Messrs. Daly,
Ezzes and Smith are the current members of this Committee. The Nominating
Committee will accept for consideration shareholders' nominations for directors
if made in writing. The nominee's written consent to the nomination and
sufficient background information on the candidate must be included to enable
the Committee to make proper judgments as to his or her qualifications.
Nominations should be addressed to the Nominating Committee at Friendly's
headquarters. Mr. Smith is the Chair of this Committee.
The Board of Directors recommends that stockholders vote "FOR" the election
of the directors standing for election.
7
PROPOSAL 2--RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee recommended the appointment of Arthur Andersen LLP as
independent public accountants for the fiscal year ending December 30, 2001 and
the directors accepted the recommendation of the Audit Committee and appointed
Arthur Andersen LLP, to examine the consolidated financial statements of
Friendly's for that fiscal year. Accordingly, the shareholders will be asked to
ratify such appointment at the Annual Meeting by the affirmative vote of a
majority of the votes cast by the holders of the outstanding shares of common
stock represented at the Annual Meeting in person or by proxy. It is expected
that representatives of Arthur Andersen LLP will attend the Annual Meeting and
be available to make a statement or respond to appropriate questions.
The Board of Directors recommends that stockholders vote "FOR" ratification
of the appointment of Arthur Andersen LLP as Friendly's independent public
accountants for the fiscal year ending December 30, 2001. Should the
stockholders not approve Proposal 2, Friendly's will take such voting results
into consideration when determining who to engage as its auditors for fiscal
year 2002.
AUDIT FEES
The aggregate fees billed by Arthur Andersen LLP for audit services related
to the Company's annual financial statements for the fiscal year ended
December 31, 2000 and for reviews of the quarterly statements included in the
Company's Quarterly Reports on Form 10-Q for that fiscal year were $212,500.
OTHER FEES
Arthur Andersen LLP billed an additional $83,370 for other audits, actuarial
services and tax compliance and consulting. There were no billings for
information systems design or consulting in fiscal 2000.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of Friendly's is comprised of three independent,
non-employee directors. The Compensation Committee is responsible for
recommending compensation and benefits for the elected officers of Friendly's,
including awards under Friendly's stock plans.
The Committee is committed to implementing a compensation program that
supports Friendly's mission--to grow Friendly's revenues and earnings by
building on and reinforcing the Friendly's brand. Thus, executive compensation
will be structured around the following tenets:
- Total compensation programs should strengthen the relationship between pay
and performance by emphasizing variable, at-risk compensation that is
dependent on the achievement of Friendly's and individual performance
goals.
- Management should be focused on the long-term interests of shareholders.
Thus, a significant portion of the compensation opportunity should be
long-term, at-risk pay in the form of equity.
- Friendly's must maintain its ability to attract, retain and encourage the
development of qualified, capable executives. Total compensation
opportunities will generally mirror those offered by comparably sized
organizations within the restaurant industry although, for those positions
where the labor market is not limited to the restaurant industry,
Friendly's will reference broader general industry information for
similarly sized organizations. The comparator group used for compensation
purposes will generally be broader than the group that comprises the
published industry index in the Performance Graph included in this proxy
statement. The Compensation Committee believes that Friendly's competition
for executive talent is not limited to the
8
companies included in the published industry index established for
comparing shareholder returns.
The key elements of Friendly's executive compensation program are base
salary, annual incentives and long-term compensation. These key elements are
addressed separately below.
BASE SALARIES
The Committee regularly reviews each executive officer's base salary. Base
salaries are targeted at or slightly above the median of market levels with
adjustments above or below market to recognize varying levels of responsibility,
prior experience, breadth of knowledge and internal equity issues, as well as
external pay practices. Increases to base salaries are driven primarily by
individual performance. Individual performance is evaluated based on sustained
levels of individual contribution to Friendly's.
As reflected in the Summary Compensation Table, Mr. Smith's base salary was
decreased by 11% to $223,000 in 2000. This was based on the Compensation
Committee's recommendation to the Board in light of Mr. Smith's withdrawal as
the President of Friendly's and the assumption of those duties by Mr. Cutter. In
determining future adjustments to Mr. Smith's base salary, the Committee will
consider his individual performance as measured by short-term achievements as
well as his contributions to Friendly's long-term organizational success.
ANNUAL INCENTIVES
The 2001 Annual Incentive Plan is structured to provide a variable pay
opportunity based on company and individual performance. For the executive
officers, target payouts range up to 100% of base pay. Maximum awards for
superior performance are capped at 150% of target. Each year, the Compensation
Committee establishes Company financial objectives. The financial objectives are
based upon Friendly's achievement of specified levels of earnings as measured by
EBITDA (i.e., earnings before interest, taxes, depreciation and amortization).
These goals are considered achievable but require above-average performance.
Executive officers, other than Mr. Sinsigalli, did not earn an annual incentive
bonus in 2000 due to the fact that only the Food Service Division met the annual
incentive performance targets set by the Board of Directors.
LONG-TERM INCENTIVES
Long-term incentives will be provided pursuant to Friendly's Restricted
Stock and Stock Option Plans.
RESTRICTED STOCK PLAN
Friendly's 1997 Restricted Stock Plan provides for the award of common
stock, the vesting of which is subject to such conditions and limitations as are
established by Friendly's Board of Directors, which may include conditions
related to continued employment with Friendly's or the achievement of
performance measures. During fiscal 2000, no shares of restricted stock were
awarded to executive officers. Four executives along with other Friendly's
employees were reimbursed during 2000 for certain tax obligations previously
incurred in connection with stock awards issued by the Company in November,
1997. Two of the four executives received cash payments and the other two were
released from bank loans used to finance such tax liabilities and guaranteed by
the Company.
STOCK OPTION PLAN
Friendly's 1997 Stock Option Plan provides for the grant of incentive stock
options, non-qualified stock options or stock appreciation rights. The Committee
anticipates that stock options will be the primary form of long-term incentives.
Stock options representing 240,000 shares were awarded to
9
executive officers during fiscal 2000. As of January 1, 2001, no stock
appreciation rights had been issued.
Stock options are granted at the fair market value of the common stock on
the date of grant. The ultimate value of an option grant to the recipient
depends on the shareholder value created between the date of grant and the date
of exercise. Option awards are based primarily on competitive practice but may
also be adjusted to reflect factors such as individual and company performance.
Stocks options are exercisable in accordance with the terms established by
the Board of Directors, which terms may relate to continued service with
Friendly's or attainment of performance goals. Most of the stock options awarded
in 2000 will become exercisable over a three-year period, subject to the
optionee's continued employment with Friendly's. All awards under the Stock
Option Plan will become fully vested and exercisable upon a change in control of
Friendly's. In general terms, a change in control may occur when:
(i) (a) third parties acquire 35% or more of the voting stock of Friendly's,
with certain exceptions; and
(b) existing senior management and certain existing shareholders
collectively own less voting stock than such third parties and no
longer have the ability to elect a majority of the Board of
Directors;
(ii) individuals currently on the Board of Directors cease to constitute a
majority of the Board of Directors unless a majority of the existing
Board of Directors approves such new directors; or
(iii) a reorganization, merger, consolidation, liquidation, dissolution or
sale of substantially all the assets of Friendly's occurs.
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT
Section 162(m) of the Internal Revenue Code generally limits the corporate
deduction for compensation paid to elected officers named in the proxy to
$1 million, unless certain requirements are met. The Compensation Committee will
consider the impact of this provision when making compensation decisions.
However, the Committee will weigh all pertinent factors to determine appropriate
plan design and incentive awards.
THE COMPENSATION COMMITTEE
Burton J. Manning
Charles A. Ledsinger, Jr.
Michael J. Daly
10
PERFORMANCE GRAPH
The following indexed graph and table indicate the Company's total
stockholder return for the period beginning November 14, 1997 (the first trading
day for the Company) and ending December 31, 2000 as compared to the total
return for the Standard & Poor's 500 Composite Index and the Standard & Poor's
Restaurant Index, assuming an investment of $100 in each as of November 14,
1997. Total stockholder return for the Company, as well as for the Indexes, is
based on the cumulative amount of dividends for a given period (assuming
dividend reinvestment) and the difference between the share price at the
beginning and at the end of the period. Please note that the graph and table are
historical representations and, as such, are not indicative of future
performance relative to the Indexes.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
11/14/97 12/28/97 12/27/98 1/2/00 12/31/00
Friendly Ice Cream Corporation 100 63.19 33.33 24.65 11.46
S&P Restaurant Index 100 95.85 156.8 161.32 145.57
S&P 500 Index 100 102.34 136.02 165.07 150.06
11/14/97 12/28/97 12/27/98 1/02/00 12/31/00
-------- -------- -------- -------- --------
Friendly Ice Cream Corporation...................... 100.00 63.19 33.33 24.65 11.46
S&P Restaurant Index................................ 100.00 95.85 156.80 161.32 145.57
S&P 500 Index....................................... 100.00 102.34 136.02 165.07 150.06
11
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table below sets forth the compensation earned for
the last three fiscal years by Friendly's Chief Executive Officer and each of
the other four most highly compensated executive officers (the "Named Executive
Officers").
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ------------
OTHER RESTRICTED
NAME AND FISCAL ANNUAL STOCK
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS(A)
- ------------------ -------- -------- -------- ------------ ------------
Donald N. Smith (f) 2000 $235,670 -- -- --
Chairman and Chief 1999 267,423 -- -- --
Executive Officer 1998 545,109 -- -- --
John L. Cutter 2000 $399,600 -- $ 5,190 --
President and Chief 1999 337,533 -- 4,312 $180,000
Operating Officer 1998 13,942(b) -- -- --
Gerald E. Sinsigalli 2000 $288,667 $56,400 $ 99,243(e) --
President, Food Service 1999 303,520 -- 3,343 $ 14,059
Division 1998 290,879 -- 3,106 --
Paul J. Kelley 2000 $251,282 -- $149,340(d) --
Senior Vice President, 1999 20,800(c) $30,000(g) -- $ 50,000
Chief Financial Officer and
Treasurer -- -- -- --
Michael A. Maglioli 2000 $222,733 -- $ 51,414(e) --
Vice President, Operations 1999 190,608 -- -- $ 11,132
1998 178,694 -- -- --
- ------------------------
(a) Awards for 1999 were made under Friendly's 1997 Restricted Stock Plan to
Messrs. Cutter, Sinsigalli, Kelley and Maglioli of 30,000, 2,445, 10,000 and
1,936 shares, respectively. The 1999 awards to Messrs. Sinsigalli and
Maglioli vest in eight equal annual installments on the third full business
day following the release of earnings by Friendly's for Friendly's fiscal
years 2000 through 2007. The award to Mr. Cutter vested 25% in 2000 and the
balance vests in six equal annual installments 90 days following the end of
Friendly's fiscal years 2000 through 2005. Dividends, if any, are payable on
restricted common stock, although Friendly's does not presently intend to
pay dividends. At the end of fiscal 2000, Messrs. Cutter, Sinsigalli, Kelley
and Maglioli held 30,000, 16,625, 10,000 and 11,686 restricted shares valued
at $61,890, $34,297, $20,630 and $24,108, respectively. Mr. Kelley's
Restricted Stock was forfeited upon his separation from Friendly's.
(b) Mr. Cutter joined Friendly's in late December, 1998.
(c) Mr. Kelley joined Friendly's on December 1, 1999 and terminated his
employment with Friendly's on February 2, 2001.
(d) Mr. Kelley received $137,934 in relocation reimbursement benefits.
(e) Messrs. Sinsigalli and Maglioli were reimbursed for tax liabilities of
$95,243 and $51,414, respectively incurred in connection with prior Company
stock awards.
(f) Mr. Smith also devotes a portion of his time to The Restaurant Company
("TRC"), where he serves as Chairman, Chief Executive Officer and Chief
Operating Officer.
(g) Represents hiring bonus paid to Mr. Kelley.
12
PENSION PLAN
Benefits under the Friendly Ice Cream Corporation Cash Balance Pension Plan
(the "Pension Plan") for Messrs. Smith, Cutter and Maglioli are generally
determined based on the value in their respective notional cash balance accounts
under the Pension Plan. Each year each participant's cash balance account is
credited with a percentage of compensation, which percentage is determined based
on the participant's years of service. Interest is also credited to the cash
balance account each year. Amounts in excess of those payable under the Pension
Plan as a result of limits imposed by the Internal Revenue Code will be paid
under the Friendly Ice Cream Corporation Supplemental Executive Retirement Plan
(the "SERP"). Benefits under the Pension Plan and the SERP for Mr. Sinsigalli
were determined primarily based on final compensation and years of credited
service. As of December 31, 2000, the estimated annual benefits, payable upon
retirement at age 65 in the form of a straight life annuity, unreduced for
social security benefits and including benefits payable under the SERP, for each
of Messrs. Smith, Sinsigalli, Cutter and Maglioli were $43,000, $177,100,
$19,200 and $64,300, respectively. Pursuant to the terms of the SERP,
Mr. Sinsigalli elected to receive an early lump sum distribution of his SERP
benefits in February, 2001 and is no longer a participant in the SERP.
Accordingly, the estimated annual benefit listed above for Mr. Sinsigalli would
be reduced to $97,667.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 12, 1998, Friendly's entered into a franchise agreement with The
Ice Cream Corporation ("TICC"), as franchisee, which conditionally granted TICC
exclusive rights to purchase and develop Friendly's full service restaurants in
the Lancaster and Chester counties of Pennsylvania (the "TICC Agreement"). The
owners of TICC are family members of Donald N. Smith, the Chairman of the Board
and Chief Executive Officer of Friendly's. Pursuant to the TICC Agreement, TICC
purchased at fair market value certain assets and rights in two existing
Friendly's restaurants, committed to open an additional ten restaurants by
October 11, 2004 and received an option to purchase an additional three
restaurants. The franchisee is required by the terms of the TICC Agreement to
purchase from Friendly's all of the frozen dessert products it sells in the
franchised restaurants. For the year ended December 31, 2000 TICC purchased
$1,102,928 of food service products from Friendly's including frozen desserts.
Friendly's had a ground lease and owned the improvements on one of the
properties franchised to TICC. In October 1998, Friendly's assigned the ground
lease and, in connection with that assignment, Friendly's receives monthly
assignment fees from TICC for the value of the improvements on the property. The
term of the assignment and related assignment fees is for approximately
18 years ending in August 2016. The monthly assignment fees payable to
Friendly's are $2,500, which increase over the term of the assignment to $2,833
in September 2001, $3,250 in September 2006 and $3,750 in September 2011.
TRC has provided management services to Friendly's under a Management
Agreement executed in 1996 and has received a management fee from Friendly's of
approximately $88,000 for fiscal 2000 services. The Management Agreement
provides for certain office space and support staff services provided by TRC to
Friendly's. Friendly's leases or subleases certain land, buildings, and
improvements from a subsidiary of TRC. The two subleases extend until 2002 and
have respective annual rents of approximately $98,500 and $130,000 plus a
percentage of revenues over a set amount. The lease extends until 2014 and
provides for annual rental of $64,000. During the year ended December 31, 2000,
Friendly's rent expense related to the subleases and lease was approximately
$312,000.
In 1999, TRC Realty LLC (a subsidiary of TRC) entered into a ten-year
operating lease with an independent third party for an aircraft, for use by both
Friendly's and TRC. Friendly's shares proportionately with TRC in reimbursing
TRC Realty LLC for leasing, tax and insurance expenses. In addition, Friendly's
also incurs actual usage costs. Total expense for the year ended December 31,
2000 was approximately $927,000.
13
Friendly's purchases certain food products used in the normal course of
business from a division of TRC. For the year ended December 31, 2000, purchases
were approximately $759,000.
Friendly's is a party to two agreements with TRC relating to taxes. In
connection with the distribution by TRC to its shareholders of the common stock
in Friendly's in 1996, Friendly's entered into a Tax Disaffiliation Agreement
under which TRC must indemnify Friendly's for all income taxes during periods
when Friendly's and its affiliates were includable in a consolidated federal
income tax return with TRC and for any income taxes due as a result of
Friendly's ceasing to be a member of the TRC consolidated group. TRC does not
retain any liability for periods when Friendly's and its affiliates were not
includable in the TRC consolidated federal income tax return and Friendly's must
indemnify TRC if any such income taxes are assessed against TRC. TRC also does
not indemnify Friendly's for a reduction of Friendly's existing net operating
loss ("NOLs") or for NOLs previously utilized by TRC. The Tax Disaffiliation
Agreement terminates 90 days after the statute of limitations expires for each
tax covered by the agreement including unfiled returns as if such returns had
been filed by the appropriate due date. Friendly's also entered into a Tax
Responsibility Agreement in 1997 in connection with the sale of Restaurant
Insurance Corporation ("RIC") to Friendly's by TRC. Under the Tax Responsibility
Agreement, Friendly's must indemnify TRC for any income taxes that are assessed
against TRC as a result of the operations of RIC. The Tax Responsibility
Agreement terminates 90 days after the statute of limitations expires for each
tax covered by the agreement. No payments were made since the beginning of
Friendly's 2000 fiscal year under either of these agreements.
14
REPORT OF THE AUDIT COMMITTEE
During fiscal 2000, the Audit Committee of the Board of Directors developed
an updated charter for the Committee, which was approved by the full Board on
May 10, 2000. The complete text of the new charter is reproduced in the appendix
to this proxy statement.
In overseeing the preparation of the Company's audited financial statements,
the Committee met with both management and the Company's outside auditors to
review and discuss the financial statements prior to their issuance and to
discuss significant accounting issues. Management advised the Committee that the
financial statements were prepared in accordance with generally accepted
accounting principles, and the Committee discussed the statements with both
management and the outside auditors. The Committee's review included discussion
with the outside auditors of matters required to be discussed pursuant to
Statement on Auditing Standards No. 61 (Communication With Audit Committees).
With respect to the Company's outside auditors, the Committee, among other
things, discussed with Arthur Andersen LLP matters relating to its independence,
including the letter received from the outside auditors and the written
disclosures they made to the Committee as required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees). The
Committee has considered whether the provision of the non-audit services
referred to under PROPOSAL 2--RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC
ACCOUNTANTS is compatible with maintaining the independence of the outside
auditors.
On the basis of these reviews and discussions, the Committee recommended to
the Board of Directors that the Board approve the inclusion of the Company's
audited financial statements in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000, for filing with the Securities and Exchange
Commission.
THE AUDIT COMMITTEE
Charles A. Ledsinger, Jr.
Steven L. Ezzes
Michael J. Daly
15
OTHER MATTERS
SHAREHOLDER PROPOSALS AND SHAREHOLDER NOMINATIONS OF DIRECTORS FOR THE 2002
ANNUAL MEETING
To be eligible for inclusion in Friendly's proxy statement for the 2002
Annual Meeting, shareholder proposals must be received by Friendly's Clerk no
later than December 10, 2001 and must comply with the requirements of the
Securities and Exchange Commission. Shareholders otherwise interested in
presenting a proposal for consideration at Friendly's Annual Meeting of
Shareholders in 2002 must comply with the procedures set forth in Friendly's
By-Laws and the proposal must be received by the Clerk of Friendly's no later
than 60 days in advance of the meeting if such meeting is held on a day which is
within 30 days preceding the anniversary of the previous year's meeting, or
90 days in advance of such meeting if such meeting is to be held on or after
May 16, 2002.
Only a stockholder of record entitled to vote in the election of Directors
generally may nominate a person for election as a Director at an annual meeting
of stockholders. Such nominations "must be noticed" to Friendly's Clerk no later
than 60 days in advance of the annual meeting if it is to be held within
30 days preceding the anniversary of the previous year's annual meeting, or
90 days in advance of such meeting if such meeting is to be held on or after
May 16, 2002.
OTHER BUSINESS
As of the date of this proxy statement, Friendly's knows of no business that
will be presented for consideration at the Annual Meeting other than the
proposals referred to above. Should any other matter be properly brought before
the meeting for action by the shareholders, proxies in the enclosed form
returned to Friendly's will be voted in accordance with the recommendation of
the Board of Directors or, in the absence of such a recommendation, in
accordance with the judgment of the proxy holder.
PROXY SOLICITATION COSTS
The cost of soliciting proxies in the enclosed form will be borne by
Friendly's. Officers and regular employees of Friendly's may, but without
compensation other than their regular compensation, solicit proxies by further
mailing or personal conversations, or by telephone, telex, facsimile or
electronic means. Friendly's will, upon request, reimburse brokerage firms and
others for their reasonable expenses in forwarding solicitation material to the
beneficial owners of stock.
By Authorization of the Board of
Directors
Aaron B. Parker
Associate General Counsel and Clerk
April 27, 2001
16
APPENDIX
FRIENDLY ICE CREAM CORPORATION--AUDIT COMMITTEE CHARTER
The audit committee will be comprised of at least three members. At least
one member must also have accounting or related financial management experience.
A member cannot have been employed by the Company in the past three years. Only
independent directors as defined by The American Stock Exchange will serve on
the audit committee. An independent director is free of any relationship that
could influence his or her judgment as a committee member. An independent
director may not be associated with a major vendor to, or customer of, the
Company. When there is some doubt about independence, as when a member of the
committee has a short-term consulting contract with a major customer, the
director should recuse himself from any decisions that might be influenced by
that relationship.
The primary function of the audit committee is to assist the board in
fulfilling its oversight responsibilities by reviewing the financial information
that will be provided to the shareholders and others, the systems of internal
controls which management and the board of directors have established and all
audit processes.
GENERAL REPONSIBILITIES
1. The audit committee provides open avenues of communication among the
internal auditors, the independent accountant and the board of directors.
2. The audit committee must report committee actions to the full board of
directors and may make appropriate recommendations.
3. The audit committee has the power to conduct or authorize investigations
into matters within the committee's scope of responsibilities. The committee
is authorized to retain independent counsel, accountants or others it needs
to assist in an investigation.
4. The committee will meet at least four times each year, more frequently if
circumstances make that preferable. The audit committee chairman has the
power to call a committee meeting whenever he or she thinks there is a need.
An audit committee member should not vote on any matter in which he or she
is not independent. The committee may ask members of management or others to
attend the meeting and is authorized to receive all pertinent information
from management.
5. The committee will do whatever else the law, the Company's charter or bylaws
or the board of directors require.
RESPONSIBILITIES FOR ENGAGING INPEPENDENT ACCOUNTANTS AND CONTROLLING INTERNAL
AUDITING ACTIVITIES
1. The audit committee will select the independent accountants for Company
audits. The committee's selection is subject to approval by the full board
of directors. The audit committee also will review any fees paid to the
independent accountants and review and approve dismissal of the independent
accountants.
2. The audit committee will have the right to determine the nature and scope of
the internal audit function.
3. The audit committee will confirm and assure the independence of the internal
auditors and the independent accountant, including a review of management
consulting services provided by the independent accountant and the fees paid
for them.
17
4. The audit committee will consider, in consultation with the independent
accountant and the officer responsible for internal auditing, the audit
scope and procedural plans made by the internal auditors and the independent
accountant.
5. The audit committee will listen to management and the primary independent
auditor if either thinks there might be a need to engage additional
auditors. The audit committee will decide whether to engage an additional
firm and, if so, which one.
6. The audit committee will make sure that the officer responsible for internal
audit and the independent accountant coordinate the internal and external
audits. The purpose of coordinating these efforts is to assure completeness
of coverage, reduce redundancy and use audit resources effectively.
RESPONSIBILITIES FOR REVIEWING INTERNAL AUDITS, THE ANNUAL EXTERNAL AUDIT AND
THE REVIEW OF QUARTERLY AND ANNUAL FINANCIAL STATEMENTS.
1. The audit committee will ascertain that the independent accountant views the
board of directors as its client, that it will be available to the full
board of directors at least annually and that it will provide the committee
with a timely analysis of significant financial reporting issues.
2. The audit committee will ask management, the officer responsible for
internal auditing and the independent accountant about significant risks and
exposures and will assess management's steps to minimize them.
3. The audit committee will review the following with the independent
accountant and the officer responsible for internal auditing:
(a) The adequacy of the Company's internal controls, including computerized
information system controls and security.
(b) Any significant findings and recommendations made by the independent
accountant or internal auditing, together with management's responses to
them.
4. Shortly after the annual examination is completed, the audit committee will
review the following with management and the independent accountant:
(a) The Company's annual financial statements and related footnotes.
(b) The independent accountant's audit of and report on the financial
statements.
(c) The auditor's qualitative judgments about the appropriateness, not just
the acceptability, of accounting principles and financial disclosures and
how aggressive (or conservative) the accounting principles and underlying
estimates are.
(d) Any serious difficulties or disputes with management encountered during
the course of the audit.
(e) Anything else about the audit procedures or findings that GAAS requires
the auditors to discuss with the committee.
5. The audit committee will consider and review with management and the officer
responsible for internal auditing:
(a) Any significant findings during the year and management's responses to
them.
(b) Any difficulties the internal audit encountered while conducting audits,
including any restrictions on the scope of their work or access to
required information.
18
(c) Any changes to the planned scope of management's internal audit plan
that the committee thinks advisable.
(d) The internal auditing department's budget and staffing.
6. The audit committee will review quarterly and annual filings with the SEC
and other published documents containing the Company's financial statements
and will consider whether the information in the filings is consistent with
the information in the financial statements.
7. The audit committee will review the interim financial reports with
management and the independent accountant before those interim reports are
filed with the SEC or other regulators.
8. The audit committee will prepare a letter for inclusion in the proxy that
describes the committee's composition and responsibilities and how the
responsibilities were fulfilled.
PERIODIC RESPONSIBILITIES
1. Review and update the committee's charter annually.
2. Review policies and procedures covering officers' expense accounts and
perquisites, including their use of corporate assets, and consider the
results of any review of those areas by the internal auditors or the
independent accountant.
3. Review, with the independent accountant, the results of their examination of
compliance with the Company's code of conduct.
4. Review legal and regulatory matters that may have a material effect on the
organization's financial statements, compliance policies and programs and
reports from regulators.
5. Meet with the officer responsible for internal auditing, the independent
accountant and management in separate executive sessions to discuss and
matters the committee or these groups believe should be discussed privately
with the audit committee.
19
FRIENDLY ICE CREAM CORPORATION PROXY/VOTING INSTRUCTION CARD
- -------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
FRIENDLY ICE CREAM CORPORATION
FOR THE ANNUAL MEETING ON MAY 16, 2001
The undersigned appoints John L. Cutter, Allan J. Okscin and Aaron B.
Parker and each of them, with full power of substitution in each, the proxies
of the undersigned, to represent the undersigned and vote all shares of
Friendly Ice Cream Corporation Common Stock which the undersigned may be
entitled to vote at the Annual Meeting of Shareholders to be held on May 16,
2001, and at any adjournment or postponement thereof, as indicated on the
reverse side.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 AND 2.
(Continued, and to be signed and dated, on the reverse side.)
FRIENDLY ICE CREAM CORPORATION
P.O. BOX 11389
NEW YORK, N.Y. 10203-0389
1. To elect two Class I Directors FOR the nominees listed below WITHHOLD AUTHORITY to vote *EXCEPTIONS
for terms expiring in 2004. for the nominees listed below
Nominee: Michael J. Daly, Burton J. Manning
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR NOMINEE, MARK THE "EXCEPTIONS"
BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
*Exceptions
-------------------------------------------------------------------
2. Ratify the appointment by the Board of Directors of Friendly's of Arthur
Andersen LLP as independent public accountants of Friendly's for the fiscal
year ending December 30, 2001.
3. To transact such other business as may properly come before the meeting or
any adjournment or adjournments thereof.
FOR AGAINST ABSTAIN
CHANGE OF ADDRESS AND
OR COMMENTS MARK HERE
The signature on this Proxy should correspond exactly with stockholder's
name as printed to the left. In the case of joint tenancies, co-executors,
or co-trustees, both should sign. Persons signing as Attorney, Executor,
Administrator, Trustee or Guardian should give their full title.
Dated: __________________________________________, 2001
- --------------------------------------------------------
SIGNATURE
- --------------------------------------------------------
SIGNATURE IF HELD JOINTLY
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK. X
(PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE.)