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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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-11(c) or Section 240.14a-12
Hooper Holmes, Inc.
- --------------------------------------------------------------------------------
(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.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
[LOGO OF HOOPER HOLMES]
HOOPER HOLMES, INC.
170 Mt. Airy Road
Basking Ridge, New Jersey 07920
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Hooper Holmes, Inc., to be held on Tuesday, May 23, 2000 at 11:00 a.m. local
time, at the Company's headquarters, 170 Mt. Airy Road, Basking Ridge, New
Jersey.
The Notice of Annual Meeting and Proxy Statement which follow describe the
business to be conducted at the meeting. There will also be a brief report on
the current status of our business.
Whether or not you plan to attend the meeting in person, it is important that
your shares be represented and voted. After reading the Notice of Annual Meeting
and Proxy Statement, please complete, sign, date and return your proxy in the
envelope provided.
On behalf of the Officers and Directors of Hooper Holmes, Inc., I wish to
thank you for your interest in the Company and I hope that you will be able to
attend our Meeting.
For the Board of Directors,
/s/ James M. McNamee
James M. McNamee
Chairman, President and Chief Executive Officer
April 19, 2000
HOOPER HOLMES, INC.
170 Mt. Airy Road
Basking Ridge, New Jersey 07920
------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held May 23, 2000
------------
NOTICE IS HEREBY GIVEN that the Annual Meeting (the "Annual Meeting") of
Shareholders of Hooper Holmes, Inc., a New York corporation (the "Company"),
will be held on Tuesday, May 23, 2000 at 11:00 a.m. local time, at the Company's
headquarters, 170 Mt. Airy Road, Basking Ridge, New Jersey, for the following
purposes:
1. To elect directors.
2. To ratify the selection of the firm of KPMG LLP as auditors for the 2000
fiscal year.
3. To transact such other business as may properly come before the Annual
Meeting and any adjournment thereof.
Holders of record of the Company's common stock, par value $.04 per share
(the "Common Stock"), as of the close of business on April 7, 2000, the record
date fixed by the Board of Directors for such purpose (the "Record Date"), are
entitled to notice of, and to vote at, the Annual Meeting and any adjournment
thereof.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Robert William Jewett
Robert William Jewett
Secretary
April 19, 2000
- --------------------------------------------------------------------------------
Please sign the enclosed proxy and return it promptly in the envelope enclosed
which requires no postage if mailed in the United States.
- --------------------------------------------------------------------------------
HOOPER HOLMES, INC.
170 Mt. Airy Road
Basking Ridge, New Jersey 07920
-----------------
PROXY STATEMENT
-----------------
INTRODUCTION
The enclosed proxy is solicited by the Board of Directors of Hooper Holmes,
Inc., (the "Company") for use at the Annual Meeting of Shareholders to be held
on May 23, 2000.
An Annual Report to Shareholders containing the financial statements for the
fiscal year ended December 31, 1999 is enclosed with this proxy statement. This
proxy statement and form of proxy were first sent to shareholders on or about
the date stated in the accompanying Notice of Annual Meeting of Shareholders.
Only shareholders of record as of the Record Date are entitled to vote at the
meeting and any adjournments thereof. As of that date, 33,056,144 shares of
Common Stock of the Company were issued and outstanding. Each share outstanding
as of the record date will be entitled to one vote, and shareholders may vote in
person or by proxy. Execution of a proxy will not in any way affect a
shareholder's right to attend the meeting and vote in person. Any shareholder
giving a proxy has the right to revoke it at any time before it is voted by
providing written notice to the Secretary of the Company or by submitting
another proxy bearing a later date. In addition, shareholders attending the
meeting may revoke their proxies at any time prior to the time such proxies are
exercised.
The presence in person or by proxy of the holders of a majority of the votes
entitled to be cast at the meeting will constitute a quorum. Abstentions and
withhold-authority votes all count for the purpose of determining a quorum, but
broker non-votes do not. Directors who receive a plurality of the votes cast at
the meeting will be elected. The selection of auditors will be approved if a
majority of the votes cast at the meeting are in favor. Votes cast for directors
and auditors include votes for or against, but do not include broker non-votes,
abstentions or withheld-authority votes.
All properly executed proxies returned in time to be cast at the meeting, if
no contrary instruction is indicated, will be voted FOR the election of all
directors nominated herein and FOR the ratification of the auditors.
The solicitation of proxies will be made primarily by mail. Proxies may also
be solicited personally and by telephone or telegraph by regular employees of
the Company, without any additional remuneration and at minimal cost. The cost
of soliciting the proxies will be borne by the Company.
1
ITEM 1--ELECTION OF DIRECTORS
The Board of Directors consists of seven members divided into three classes,
one with three members and two with two members each. At each Annual Meeting of
Shareholders, one class of directors is elected to serve for a three-year term
or until their successors are elected and have qualified. The class of directors
to be elected at this Annual Meeting will serve until the 2003 Annual Meeting.
Any shareholder submitting a proxy has the right to withhold authority to vote
for any individual nominee to the Board of Directors by writing that nominee's
name in the space provided on the proxy. Shares represented by all proxies
received by the Company and not so marked as to withhold authority to vote for
any individual director or for all directors nominated will be voted FOR the
election of the nominees named below. The Company knows of no reason why any
such nominee should be unable to serve, but in the event that any nominee shall
be unavailable or unable to serve as a director, the proxy holders will vote for
substitute nominees in the exercise of their best judgment, but may not vote for
more than two persons.
Nominees for Directors (Term expires 2003)
The nominees for directors and further information with respect to each
nominee are set forth below.
Quentin J. Kennedy
Mr. Kennedy, age 66, was Executive Vice President, Secretary, Treasurer and
Director of Federal Paper Board Company in Montvale, New Jersey until his
retirement in 1996. He had served in various executive positions with Federal
Paper Board since 1960. Mr. Kennedy has been a director of the Company since
1991. He is a member of the Executive Committee and the Executive Compensation
Committee.
John E. Nolan
Mr. Nolan, age 72, is a partner in the law firm of Steptoe & Johnson, LLP,
Washington, D.C. and has been engaged in the practice of law since 1956. He has
been a director of the Company since 1971, and is a member of the Audit
Committee and the Executive Committee.
Directors Continuing in Office
The directors whose terms expire at the Annual Meetings in 2001 and 2002 and
further information with respect to each continuing director are set forth
below.
James M. McNamee
Mr. McNamee, age 55, has served as Chairman of the Board of Directors of the
Company since 1996 and as President and Chief Executive Officer of the Company
since 1984. He has been an employee of the Company since 1968, an officer since
1979 and a director since 1984. Mr. McNamee is a member of the Executive
Committee and the Nominating Committee. (Term expires at the Annual Meeting in
2001.)
Kenneth R. Rossano
Mr. Rossano, age 65, is a private investor. From 1992 to 1999, he was Senior
Vice President, Cassidy & Associates in Boston, Massachusetts. From 1991 to
1992, he was Vice President, Development, Massachusetts Higher Education
Assistance Corporation in Boston, Massachusetts. He has been a director of the
Company since 1967, and is a member of the Executive Committee and the
Nominating Committee. Mr. Rossano is also a director of Psy-Ed Corporation,
Quick Buy, Inc. and A+ America, Inc. (Term expires at the Annual Meeting in
2001.)
2
G. Earle Wight
Mr. Wight, age 66, has served as Senior Vice President of the Company since
1985 and has been a director of the Company since 1966. Mr. Wight is a member of
the Nominating Committee. (Term expires at the Annual Meeting in 2001.)
Benjamin A. Currier
Mr. Currier, age 66, was Senior Vice President of Operations for Security Life
of Denver Insurance Company, a subsidiary of ING/Barings, in Denver, Colorado
prior to his retirement in 1997. Mr. Currier was Vice President, Allstate Life
Insurance Company from 1978 to 1995. He has been a director of the Company since
1996, and is a member of the Audit Committee and the Executive Compensation
Committee. (Term expires at the Annual Meeting in 2002.)
Elaine L. Rigolosi
Dr. Rigolosi, Ed.D, J.D., age 55, is Professor, Department of Organization and
Leadership, Teachers College, Columbia University. She has been associated with
Columbia University since 1976, and has maintained a private consulting practice
in management for health care organizations since 1974. Dr. Rigolosi has been a
director of the Company since 1989, and is a member of the Audit Committee and
the Executive Compensation Committee. (Term expires at the Annual Meeting in
2002.)
3
Certain Relationships and Related Transactions
Messrs. Wight and Rossano are brothers-in-law.
Mr. John E. Nolan, a director of the Company, is a partner in the law firm of
Steptoe & Johnson LLP, which performs legal services for the Company.
Compensation of Directors
Each outside director of the Company will receive an annual fee of $12,000 in
2000 plus a $500 fee for each committee meeting attended. In accordance with the
1997 Director Option Plan, each outside director received stock options to
purchase 100,000 shares of common stock pursuant to the Plan. Directors who are
employees of the Company do not receive stock options pursuant to the Plan nor
do they receive director fees. Directors are also reimbursed for out-of-pocket
expenses incurred in attending Board and committee meetings.
In June, 1990, the Company entered into supplemental indemnity agreements with
its executive officers and directors. The indemnity agreements require the
Company to indemnify such person for all expenses actually and reasonably
incurred in defending or settling an action to which such person is a party or
threatened to be made a party or is otherwise involved because of his or her
status as an officer or director of the Company. If the action is brought by or
in the right of the Company, the indemnification must be made only if such
person acted in good faith, for a purpose reasonably believed to be in the best
interest of the Company (or, in the case of service to another entity, not
opposed to the interest of the Company).
Committees of the Board
The Board of Directors has an Audit Committee, an Executive Committee, a
Nominating Committee and an Executive Compensation Committee.
The Audit Committee acts as principal liaison between the Board of Directors
and the independent auditors employed by the Company and reviews the annual
financial statements and the Company's internal accounting systems and controls.
The Committee also recommends to the Board of Directors the selection of
independent auditors to be employed by the Company.
The Executive Committee exercises the authority of the Board of Directors in
certain corporate matters between meetings and exercises specific powers and
authority as may from time to time be lawfully delegated to it by the Board of
Directors.
The Nominating Committee nominates individuals for election or reelection to
the Board of Directors. It will consider nominations recommended by shareholders
who submit written recommendations to the Nominating Committee in care of the
Secretary of the Company.
4
The Executive Compensation Committee, among other matters, annually reviews
and determines the compensation of the Chief Executive Officer of the Company
and, upon his recommendation, the compensation of the other elected officers and
senior management of the Company and annually reviews and recommends to the
Board of Directors the compensation and allowances for the Company's outside
directors. The Committee also prepares a report to shareholders (enclosed in
this Proxy Statement) which discusses the Company's compensation policies for
the executive officers, the Committee's bases for determining the compensation
of the Chief Executive Officer for the past fiscal year, and the relationship
between compensation and the Company's performance for the past fiscal year. The
Executive Compensation Committee also administers the 1987 Nonqualified Stock
Option Plan, the 1992 Stock Option Plan the 1994 Stock Option Plan, the 1997
Stock Option Plan, the 1997 Director Option Plan, and the 1999 Stock Option Plan
and determines the amount and terms of the options granted under the plans. The
Committee also administers the 1993 Employee Stock Purchase Plan.
The Board of Directors held four regular meetings and two special meetings
during the fiscal year ended December 31, 1999. The Audit Committee met four
times, the Executive Committee met two times, the Executive Compensation
Committee met four times, and the Nominating Committee did not meet in 1999. All
directors attended at least 75% of the total number of meetings of the Board of
Directors and the committees to which they belong.
Compensation Committee Interlocks and Insider Participation
For 1999, Dr. Elaine L. Rigolosi and Messrs. Quentin J. Kennedy and Benjamin
A. Currier served on the Executive Compensation Committee.
Executive Officers
Set forth below are the executive officers of the Company who are not
Directors. Executive officers serve at the pleasure of the Board of Directors.
Information is not included in this Proxy Statement for that portion of any
period for which information is required during which any executive officer did
not hold such position.
Robert William Jewett
Mr. Jewett, age 47, has served as Senior Vice President and General Counsel of
the Company since 1991 and as Secretary since 1983. He has been an employee of
the Company since 1981.
Fred Lash
Mr. Lash, age 54, has served as Senior Vice President of the Company since
1993, as Chief Financial Officer since 1989 and as Treasurer since 1987.
Paul W. Kolacki
Mr. Kolacki, age 57, has served as Executive Vice President and Chief
Operating Officer of Hooper Holmes since 1998. He has been Executive Vice
President of our Portamedic Health Information Services Division since 1991, and
has been an employee of Hooper Holmes since 1964. Mr.. Kolacki retired March 31,
2000 and continues to serve the Company as a consultant.
Mario L. Cavezza
Mr. Cavezza, age 52, assumed overall field operating responsibilities upon Mr.
Kolacki's retirement on March 31, 2000 as Senior Vice President and General
Manager, Field Operations. Mr. Cavezza was Senior Vice President and Regional
Manager of the Northern Region from 1997 until March 31, 2000 and has been in
various field supervisory positions since 1977. He has been an employee of
Hooper Holmes since 1968.
5
Stock Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of March 1, 2000, the beneficial ownership
of the Company's issued and outstanding Common Stock (on the basis of 32,978,276
shares outstanding), including the stock ownership of each person who, to the
Company's knowledge, owns over 5% of the Company's outstanding Common Stock,
each of the directors of the Company, each executive officer named in the
Summary Compensation Table which follows, and the directors and officers of the
Company as a group, and the percentage which the shares owned constitute of the
total shares outstanding.
Amount & Nature Percent of Class
of Beneficial (based on # of
Name and Position Ownership of shares outstanding
of Beneficial Owners Common Stock (1) 3/01/00)
---------------------- ---------------- ------------------
Lord, Abbett & Co. 1,658,225 (2) 5.02%
Directors
- ---------
G. Earle Wight 500,124 (3) 1.51%
Kenneth R. Rossano 696,376 (4) 2.11%
James M. McNamee 1,714,908 (5) 5.20%
Quentin J. Kennedy 74,000 (6) *
Elaine L. Rigolosi 54,200 (7) *
Benjamin A. Currier 30,760 (8) *
John E. Nolan 80,000 (6) *
Other Most Highly Paid Executive Officers
- -----------------------------------------
Paul W. Kolacki 159,448 (9) *
Fred Lash 208,068 (10) *
Robert William Jewett 49,200 (11) *
All officers and directors as a group (10 total) 3,567,084 (12) 10.81%
- --------------
* Less than 1%
(1) Includes shares, if any, held by or for a spouse or minor children or as a
trustee. Unless otherwise indicated, the director or 5% stockholder
possesses sole investment and voting power in respect of these shares.
(2) Lord, Abbett & Co., ("Lord, Abbett"), a registered investment advisor,
filed a statement on Schedule 13G dated February 1, 2000, disclosing that
on December 31, 1999, it beneficially owned 1,658,225 shares of Common
Stock of the Company, representing approximately 5% of the Common Stock.
On Schedule 13G, Lord, Abbett certifies that the shares of Common Stock
were acquired in the ordinary course of business and were not acquired for
the purpose of, and do not have the effect of changing or influencing the
control of the Company and were not acquired in connection with, or as a
participant in, any transaction having such a purpose or effect.
6
(3) Includes 304,172 shares held by the Lucile K. Wight Trust, of which Mr.
Wight is trustee with sole voting and dispositive power, and 177,180
shares held by 874367 Ontario, Inc., a corporation of which Mr. Wight and
his spouse Sonia are sole shareholders.
(4) Includes 256,726 shares held by Mr. Rossano's spouse, Cynthia, and 338,602
shares held by The Cynthia W. Rossano 1991 Trust, of which Mr. and Mrs.
Rossano are trustees with sole voting and dispositive power. Also includes
60,000 shares underlying options that are currently exercisable or which
will become exercisable within 60 days.
(5) Includes 249,604 shares held by Mr. McNamee and his spouse Patricia as
joint tenants, 52,240 shares held by Mr. McNamee's spouse, Patricia, 7,064
shares held by Mr. McNamee's spouse Patricia as custodian for Sean McNamee,
their minor child, and 36,000 shares held by the Trust under the will of
Eileen Rooney FBO Kevin Rooney, of which Mr. McNamee is Trustee with sole
voting and dispositive power. Also includes 1,367,000 shares underlying
options that are currently exercisable or which will become
exercisable within 60 days.
(6) Includes 60,000 shares underlying options that are currently exercisable or
which will become exercisable within 60 days.
(7) Includes 1,800 shares held by Ms. Rigolosi's spouse, Robert. Also includes
50,000 shares underlying options that are currently exercisable or which
will become exercisable within 60 days.
(8) Includes 20,000 shares underlying options that are currently exercisable or
which will become exercisable within 60 days.
(9) Includes 1,600 shares held by Mr. Kolacki and his spouse, Sandra, as joint
tenants. Also includes 146,500 shares underlying options that are currently
exercisable or which will become exercisable within 60 days.
(10) Includes 1,200 shares held by Mr. Lash and his spouse, Suzanne, as joint
tenants. Also includes 199,200 shares underlying options that are currently
exercisable or which will become exercisable within 60 days.
(11) Includes 48,700 shares underlying options that are currently exercisable or
which will become exercisable within 60 days.
(12) Includes shares owned individually by each officer and director in the
group as well as shares indirectly owned by such persons as trustee of
various trusts; however, where more than one officer or director is a
trustee of the same trust, the total number of shares owned by such trust
is counted only once in determining the amount owned by all officers and
directors as a group. Also includes 2,011,400 shares underlying options
that are currently exercisable or which will become exercisable within 60
days.
Compliance with Section 16(a)
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors of the Company and persons who beneficially own more than
ten percent of the Company's Common Stock to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC") and the
American Stock Exchange. Based solely on a review of reports and written
representations furnished to the Company, the Company believes that all Section
16(a) filing requirements applicable to its executive officers, directors and
shareholders were complied with.
7
Compensation of Executive Officers
The following table provides certain summary information concerning
compensation paid or accrued for the last three complete fiscal years to or on
behalf of the Company's Chief Executive Officer and the three other most highly
paid executive officers of the Company whose total annual salary and bonus
exceeded $100,000 in 1999.
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
Long term compensation
----------------------
Annual compensation Awards Payouts
------------------- ------------ --------
Securities
Name and underlying LTIP All other
principal Salary Bonus options payouts compensation
position Year ($) ($)(1) (#)(2) ($)(3) ($)(4)
- --------------------------------------------------------------------------------------------------------------------
James M. McNamee 1999 425,000 607,500 75,000 707,250 62,652
Chairman, President and 1998 408,000 430,580 140,000 584,136 62,932
Chief Executive Officer 1997 358,000 283,910 560,000 283,124 62,827
Paul W. Kolacki 1999 220,500 150,000 25,000 43,870
Executive Vice President and 1998 210,000 100,000 70,000 - 43,845
Chief Operating Officer (5) 1997 192,500 80,000 88,000 - 44,135
Fred Lash 1999 183,480 100,000 20,000 24,130
Senior Vice President, 1998 176,500 70,000 50,000 - 24,210
Chief Financial Officer 1997 170,500 55,000 80,000 - 24,105
and Treasurer
Robert William Jewett 1999 150,800 27,500 12,000 13,943
Senior Vice President, 1998 142,083 25,000 30,000 - 14,121
General Counsel and Secretary 1997 133,400 20,000 32,000 - 14,118
- -------------------
(1) For Mr. McNamee, includes stock awards with a fair market value of
$307,500, $230,580 and $133,910 in 1999, 1998 and 1997 respectively.
Perquisites fall below the thresholds required for disclosure and,
accordingly, have been omitted.
(2) Includes the effect of two for one stock splits in 1997 and 1999.
(3) Represents the fair market value of the stock bonus awarded to Mr.McNamee
under the CEO Compensation Plan, which provides the potential for annual
stock bonuses.
(4) The amounts disclosed in this column include:
(a) Company contributions of the following amounts in 1999, 1998, and 1997
respectively, under the Company's Salary Reduction Plan, a defined
contribution plan on behalf of Mr. McNamee ($2,200, $2,480 and
$2,375), Mr. Kolacki ($2,400, $2,500 and $2,375), Mr. Lash ($2,400,
$2,480 and $2,375) and Mr. Jewett ($2,260, $2,378 and $2,208).
(b) Payment by the Company in 1999, 1998 and 1997 of premiums on
whole-life insurance policies in the following annual amounts for Mr.
McNamee ($55,877 per year), Mr. Kolacki ($41,470 per year), Mr. Lash
($21,730 per year) and Mr. Jewett ($11,743 per year).
(c) Payment by the Company in 1999, 1998 and 1997 of premiums on a
disability insurance policy for Mr. McNamee of $4,575 per year.
(5) The Company has entered into a consulting agreement with Mr. Kolacki, who
retired on March 31, 2000, whereby Mr. Kolacki will provide consulting
services to the Company for a two-year period. Mr. Kolacki will recieve an
annual consulting fee of $125,000 the first year and $62,500 the second
year. In addition, the Company will pay Mr. Kolacki a pro-rata cash bonus
of not less than $31,250 by May 15, 2000. The Company will also pay the
annual premium on Mr. Kolacki's life insurance policy ($41,470) for a five
year period.
8
Option Grants in Last Fiscal Year
OPTION GRANTS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------
Individual grants
- ----------------------------------------------------------------------------------
Number of % of total
securities underlying options granted Grant date
options to employees in Exercise Expiration present
Name granted (#)(1) fiscal year price ($/Sh) date value ($)(3)
- ------------------------------------------------------------------------------------------------------------------
James M.McNamee
Chairman, President and 75,000 13.8% $25.75 12/31/09 1,164,750
Chief Executive Officer
Paul W. Kolacki
Executive Vice President 25,000 4.6% $25.75 3/31/01 (2) 388,250
and Chief Operating
Officer
Fred Lash
Senior Vice President, 20,000 3.7% $25.75 12/31/09 310,600
Chief Financial Officer
and Treasurer
Robert William Jewett
Senior Vice President, 12,000 2.2% $25.75 12/31/09 186,360
General Counsel and
Secretary
(1) These options were granted under the 1992 Stock Option Plan on December 31,
1999. The 1992 Stock Option Plan grants become exercisable commencing 24
months after grant date and 25% become exercisable on each successive
anniversary of that date, with full vesting occurring on the fourth
anniversary date. The options terminate upon termination of employment for
any reason other than death, disability or retirement. Further, to be
eligible to exercise the options, an optionee must remain in the employment
of the Company for a period of 24 months from the date of grant (or
retirement, if earlier). Options that are not fully vested and exercisable
as of the date the optionee terminates employment because of death,
disability or retirement, or as of the date of an actual or threatened
change in control of the Company, become vested and exercisable in full on
such date.Similarly, the vesting of options may be accelerated in
connection with certain mergers, consolidations, sales or transfers by the
Company of substantially all of its assets.
(2) All of Mr. Kolacki's options that were not already vested , became vested
pursuant to the terms of the various stock option plans as of March 31,
2000, the date of his retirement. Mr. Kolacki must exercise these options
within one year following his retirement date, or they will cancel.
9
(3) The values shown were calculated using the Black-Scholes option pricing
model and are presented solely for the purposes of comparative disclosure
in accordance with certain regulations of the SEC.The Black-Scholes model
is a mathematical formula widely used to value traded stock price
volatility and dividend yield.The actual value that an executive officer
may realize, if any, depends on the amount by which the stock price at the
time of exercise exceeds the exercise price (fair market value of the stock
at the time of the grant). There is no assurance that the value realized by
an executive officer will be at or near the value estimated by the
Black-Scholes model.In calculating the grant date present values set forth
the table, the Company used the following assumptions: (a) expected
volatility of 40.98%; (b) discount rate of 6%; (c) dividend yield of .26%;
and (d) exercise at the end of 10 year period from the date of grant. No
adjustments have been made for non-transferability or risk of forfeiture.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table provides certain information on options exercised in 1999
and the value of unexercised options at December 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
- --------------------------------------------------------------------------------
Value of
Number of securities unexercised
underlying in-the-money
unexercised options options at
at FY-end(#)(2) FY-end ($)(3)
Shares
acquired Value Exercisable/ Exercisable/
Name on exercise(#) realized ($)(1) Unexercisable Unexercisable
- ----------------------------------------------------------------------------------------------------------------
James M. McNamee -- -- 1,292,000/385,000 28,854,750/5,883,125
Paul W. Kolacki 214,000 $3,518,121 37,000/194,000 833,375/261,938
Fred Lash 60,000 $983,835 162,900/156,300 3,749,827/2,664,978
Robert William Jewett 28,300 $501,872 30,500/81,200 707,875/1,312,991
- -----------------
(1) Amount represents the difference between the exercise price and the fair
market value on the date of exercise, multiplied by the number of options
exercised.
(2) Includes the effect of a two for one stock split of the Company's Common
Stock in 1997 and 1999.
(3) Amount represents the difference between the exercise price and the fair
market value on December 31, 1999 ($25.75), multiplied by the number of
options exercisable and unexercisable.
10
Report of the Executive Compensation Committee
The report of the Executive Compensation Committee below shall not be
deemed to be filed under, or incorporated by reference into any filing
under, the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent that the Company specifically incorporates
this Report by reference.
The Company's Executive Compensation Committee for 1999 was comprised of three
directors who are not present or former employees of the Company. The Committee
establishes compensation policies for the CEO and other executive officers and
administers the Company's programs for cash compensation and stock awards,
bonuses and options.
Essentially, the Committee believes that executive compensation should be
largely determined by management's performance in the shareholders' interests.
This usually means earnings. Sustained growth in earnings will ultimately be
reflected in increased shareholder value and positioning the Company for future
growth in revenues and earnings is an important management function.
The Committee believes that employee stock ownership effectively aligns
employees with the interests of stockholders and looks to stock options to
provide an opportunity for employee stock ownership. The Committee further
believes that compensation is important to attract talented individuals to the
Company, to retain them and to provide incentive. In addition, the CEO is
entitled to stock awards and stock bonuses (or cash payments in lieu of stock
awards or stock bonuses) under the CEO Plan that has been in effect. Each year
the Committee reviews and determines the compensation of other executive
officers. In furtherance of the Company's policy to provide incentives and to
reward performance, compensation is based on specific criteria developed through
the company's experience, including attainment of revenue and expense
objectives, planning and organizational development and personal leadership. The
weight accorded each of these factors is within the Committee's discretion and
may depend on the Company's performance during the year.
The following information regarding stock options and stock awards is
presented after giving effect to two for one stock splits effected on August 22,
1997 and January 8, 1999.
For 1999, Mr. McNamee was awarded a cash bonus of $300,000 in recognition of
the Company's outstanding performance. He had received a cash bonus of $200,000
for 1998. Stock awards for the CEO have been based on continuing satisfactory
performance measured against management objectives established by the Board.
These objectives include corporate growth and development, profitability, total
return to shareholders and management team development. For 1999, the CEO
received a stock award of 10,000 shares. The CEO had received a stock award of
18,000 shares for 1998.Stock bonuses for the CEO are based on sustained
increases in earnings per share.For 1999, the CEO received a stock bonus of
23,000 shares.He had received a stock bonus of 45,600 shares in 1998. In
addition, on December 31, 1999, Mr. McNamee was awarded options to purchase
75,000 shares, of common stock pursuant to the 1992 Option Plan. These options
become exercisable 25% after two years and 25% each year thereafter, at an
exercise price of $25.75 per share.
For 1999 through 2001 the Committee developed a CEO Compensation Plan
utilizing the stock award and stock bonus principals that were established in
the earlier Plans. In addition, the 1996-98 Plan, in order to provide incentive
for the Company to achieve earnings and share price goals over the life of the
Plan, provided for a special 400,000 share option (100,000 shares pre-split) for
the CEO, which was granted in 1997.This option is a variation of the Company's
regular options that become exercisable 20% during the first year and an
additional 20% each of the next four years.It provides, however, that the entire
400,000 share option may be exercised if the Company's earnings exceed $.35 a
share for 1998 and the stock price is at or above $7.50 per share for any period
of thirty consecutive days in the first six months of 1999. The earnings and
stock price requirements have been met and the options are now exercisable at
$4.28 per
11
share which was the fair market value on April 9, 1997, the date the option was
approved by the Board.This option has been adjusted for the 1997 and 1999 stock
splits. This option was submitted to shareholders and approved at the 1997
annual meeting.
Section 162(m) of the Internal Revenue Code, enacted in 1993 and effective for
taxable years beginning after January 1, 1994, generally limits to $1 million
per individual per year the federal income tax deduction for compensation paid
by a publicly-held company to certain executive officers. Compensation that
qualifies as performance-based compensation for purposes of this section is not
subject to the $1 million deduction limitation. The Executive Compensation
Committee will continue to evaluate this provision but presently intends to
qualify compensation as performance-based to the extent feasible and in the best
interest of the Company.
EXECUTIVE COMPENSATION COMMITTEE
Quentin J. Kennedy, Chairman
Elaine L. Rigolosi
Benjamin A. Currier
12
Stock Price Performance Graph
The Stock Price Performance Graph below shall not be deemed to be filed under,
or incorporated by reference into any filing under, the Securities Act of 1933
or the Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this Graph by reference.
The following graph compares the cumulative total shareholder return (assuming
dividends are reinvested) on the Company's Common Stock for the last five years
with the cumulative total return (assuming dividends are reinvested) of the
Standard & Poor's 500 Stock Index and the Russell 2000 Index. The Russell 2000
Index was selected because it represents companies with similar market
capitalization to the Company. The shareholder return shown on this graph is not
necessarily indicative of future performance.
[GRAPH]
- --------------------------------------------------------------------------------
Comparison of Five-Year Cumulative Total Return
Among Hooper Holmes, Inc., S&P 500 Index and Russell 2000 Index
- --------------------------------------------------------------------------------
Measurement Period Hooper S&P 500 Russell 2000
(Fiscal year covered) Holmes, Inc. Index Index
- --------------------- ------------ --------- ------------
BASE $ 100.00 $ 100.00 $ 100.00
FYE 1995 $ 127.85 $ 134.11 $ 126.21
FYE 1996 $ 272.12 $ 161.29 $ 144.84
FYE 1997 $ 456.38 $ 211.30 $ 174.56
FYE 1998 $ 907.15 $ 267.69 $ 168.55
FYE 1999 $1,614.10 $ 319.91 $ 201.61
ASSUMES $100 INVESTED ON DECEMBER 31, 1994
ASSUMES DIVIDENDS REINVESTED
FISCAL YEAR ENDING DECEMBER 31, 1999
13
Employment Contracts and Change-in-Control Arrangements
In 1990, the Company entered into an employee retention agreement, as amended
(the "Agreement") with Mr. McNamee entitling him to certain benefits if his
employment is terminated within two years of a "change of control", as defined
in the Agreement. Following a change of control, Mr. McNamee is entitled to
retain the same position, duties and compensation as he had prior to the change
of control for a period of two years after the date of the change of control.
After a change in control has occurred, if Mr. McNamee's employment is
terminated by the Company or by Mr. McNamee within two years of the date of the
change of control (other than as a result of his death, disability or for cause,
as defined in the Agreement), Mr. McNamee is entitled to receive a lump sum
payment in cash equal to the aggregate of (a) to the extent unpaid, his highest
base salary through the date of termination (as defined in the Agreement), (b) a
pro rata portion of his recent bonus (as defined in the Agreement, generally to
be the highest annual guaranteed bonus to which he was entitled during the last
two full fiscal years prior to the date of the change of control), (c) twice the
sum of his highest base salary and recent bonus, and (d) all amounts of
compensation previously deferred (with accrued interest thereon) and unpaid and
any accrued vacation pay not yet paid by the Company. In addition, he will be
entitled to receive during the two year period after the change of control, all
benefits payable to him (or his family) under welfare benefit programs (such as
medical, dental, disability and life insurance programs) equivalent to those
most favorable immediately preceding the date of the change of control. In the
event that Mr. McNamee would be subject to an excise tax, then he should be
entitled to receive an additional payment such that after Mr. McNamee pays such
excise taxes, including any excise tax imposed on any portion of such additional
payment, Mr. McNamee will retain additional payments equal to the excise taxes
imposed.
In 1996, the Company entered into employee retention agreements ("Agreement")
with the Executive Officers of the Company (exclusive of Mr. McNamee), entitling
them to certain benefits if their employment is terminated within two years of a
change in control, as defined in the Agreement. Following a change in control,
each Executive Officer is entitled to retain the same position, duties and
compensation as he had prior to the change of control for a period of two years
after the date of the change in control. After a change in control has occurred,
if the Executive Officer's employment is terminated by the Company or by the
Executive Officer within two years of the date of the change in control (other
than as a result of his death, disability or for cause as defined in the
Agreement), the Executive Officer is entitled to receive a lump sum payment in
cash equal to the aggregate of (a) to the extent unpaid, his highest base salary
through the date of termination (as defined in the Agreement), (b) a pro rata
portion of his recent bonus (as defined in the Agreement, generally to be the
highest guaranteed bonus to which he was entitled during the last three full
fiscal years prior to the date of the change of control), (c) twice the sum of
his highest base salary and recent bonus, and (d) all amounts of compensation
previously deferred (with accrued interest thereon) and unpaid and any accrued
vacation pay not yet paid by the Company. In addition, the Executive Officer
will be entitled to receive during the two year period after the change in
control, all benefits payable to him (or his family) under welfare benefit
programs (such as medical, dental, disability and life insurance programs)
equivalent to those most favorable immediately preceding the date of the change
in control. In the event that the Executive Officer would be subject to an
excise tax, then he should be entitled to receive an additional payment such
that after the Executive Officer pays such excise taxes, excluding any excise
tax imposed on any portion of such additional payment, he will retain additional
payments equal to the excise taxes imposed.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES IDENTIFIED HEREIN.
14
ITEM 2--RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the firm of KPMG LLP, independent public
accountants, to serve as auditors for the fiscal year ending December 31, 2000,
subject to ratification by the shareholders. This firm (and its predecessors)
has served as the Company's auditors since 1980.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THIS
SELECTION.
If the appointment is not approved, the Board will select other independent
accountants. It is expected that a member of the firm of KPMG LLP will be
present at the Annual Meeting, will have an opportunity to make a statement if
so desired, and will be available to respond to appropriate questions.
Shareholder Proposals for the 2001 Annual Meeting
Proposals of shareholders intended for inclusion in the Proxy Statement for
the Annual Meeting of Shareholders to be held in 2001, must be received at the
Company's executive offices not later than December 20, 2000. Proponents should
submit their proposals by Certified Mail--Return Receipt Requested.
A shareholder who wishes to make a proposal at the 2001 Annual Meeting of
Shareholders without including the proposal in the Company's proxy statement
must notify the Company of such proposal by March 5, 2001. If a shareholder
fails to give notice by this date, the proxy solicited by the Company for use in
connection with the 2001 Annual Meeting will confer discretionary authority on
the persons named as proxies to vote in their discretion on such proposal
without any discussion in the proxy statement of either the proposal or how the
proxies intend to exercise their voting discretion.
Other Matters
The Company is not aware of any business which will be presented at the 2000
Annual Meeting of Shareholders other than those matters set forth in the
accompanying Notice of Annual Meeting of Shareholders. If any other matters are
properly presented at the 2000 Annual Meeting for action, it is intended that
the persons named in the accompanying proxy and acting thereunder will vote in
accordance with their best judgment on such matters.
Solicitation of Proxies
The solicitation of proxies will be made primarily by mail. Proxies may also
be solicited personally and by telephone or telegraph by regular employees of
the Company, without any additional remuneration and at minimal cost. The cost
of soliciting proxies will be borne by the Company.
BY ORDER OF THE BOARD OF DIRECTORS
HOOPER HOLMES, INC.
/s/ Robert William Jewett
Robert William Jewett
Secretary
April 19, 2000
15
PROXY
HOOPER HOLMES, INC.
Proxy Solicited on Behalf of the Board of Directors of
the Company for Annual Meeting, May 23, 2000
The undersigned hereby constitutes and appoints James M. McNamee and Robert
William Jewett and each of them, the true and lawful attorneys, agents and
proxies of the undersigned, with full power of substitution, to vote with
respect to all the shares of Common Stock of Hooper Holmes, Inc., standing in
the name of the undersigned at the close of business on April 7, 2000, at the
Annual Meeting of Shareholders and all adjournments thereof, with all powers
that the undersigned would possess if personally present.
(Change of address)
------------------------------
------------------------------
------------------------------
------------------------------
You are encouraged to specify your choice by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any box if you wish to vote in accordance
with the Board of Directors' recommendations. The Proxy Committee cannot vote
your shares unless you sign and return this card.
SEE REVERSE SIDE
FOLD AND DETACH HERE
Please mark your
[X] votes as in this
example.
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR election of
directors, and FOR proposal 2.
The Board of Directors recommends a vote FOR Election of
Directors and FOR proposal 2.
FOR WITHHELD
1. Election of [_] [_]
Directors: Nominees:
--------
John E. Nolan
Quentin J. Kennedy
For, except vote withheld from the following nominee(s):
2. Approval of FOR AGAINST ABSTAIN
Independent [_] [_] [_]
Auditors.
FOR AGAINST ABSTAIN
3. In their discretion,
upon other matters as [_] [_] [_]
may properly come
before the meeting
or any adjournment(s)
thereof.
SIGNATURE(S) DATE
--------------------------------------------- -------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
The signer hereby revokes all proxies heretofore given by the signer to vote at
said meeting or any adjournments thereof.
FOLD AND DETACH HERE