UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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 (S) 240.14a-11(c) or (S) 240.14a-12
Hooper Holmes, Inc.
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(Name of Registrant as Specified In Its Charter)
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(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:
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(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):
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(5) Total fee paid:
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[_] 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:
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[LOGO] HOOPER
HOLMES(TM)
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 22, 2001 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 16, 2001
HOOPER HOLMES, INC.
170 Mt. Airy Road
Basking Ridge, New Jersey 07920
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held May 22, 2001
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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 22, 2001 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 2001
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 6, 2001, 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 16, 2001
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Please sign the enclosed proxy and return it promptly in the envelope
enclosed which requires no postage if mailed in the United States.
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HOOPER HOLMES, INC.
170 Mt. Airy Road
Basking Ridge, New Jersey 07920
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PROXY STATEMENT
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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 22, 2001.
An Annual Report to Shareholders containing the financial statements for the
fiscal year ended December 31, 2000 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, 65,016,697 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 class with three members and two classes 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
2004 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 three persons.
Nominees for Directors (Term expires 2004)
The nominees for directors and further information with respect to each
nominee are set forth below.
James M. McNamee
Mr. McNamee, age 56, 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.
Kenneth R. Rossano
Mr. Rossano, age 66, is a private investor. From 1992 to 1999, he was a Senior
Vice President of Cassidy & Associates in Boston, Massachusetts. From 1991 to
1992, he was Vice President of 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 Active International,
Inc.
G. Earle Wight
Mr. Wight, age 67, 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.
Directors Continuing in Office
The directors whose terms expire at the Annual Meetings in 2002 and 2003 and
further information with respect to each continuing director are set forth
below.
Benjamin A. Currier
Mr. Currier, age 67, 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 of 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. Mr. Currier is also a director of eNable.com Corporation. (Term
expires at the Annual Meeting in 2002.)
2
Elaine L. Rigolosi
Dr. Rigolosi, Ed.D, J.D., age 56, is Professor in the Department of
Organization and Leadership at the Teachers College of 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.)
Quentin J. Kennedy
Mr. Kennedy, age 67, 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. (Term expires at the Annual Meeting in 2003.)
John E. Nolan
Mr. Nolan, age 73, is a partner in the law firm of Steptoe & Johnson, LLP in
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. Mr. Nolan is also a director of Iomega
Corporation. (Term expires at the Annual Meeting in 2003.)
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 retainer of
$16,000 in 2001 plus a $2,000 fee for each regular or special meeting attended,
a $1,000 fee for each telephone meeting attended, a $1,000 fee for each
committee meeting attended and a $500 fee for each telephone committee meeting
attended. Additionally, each committee Chairperson will receive an annual
retainer of $4,000. In accordance with the 1997 Director Option Plan, each
outside director received stock options to purchase 200,000 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.
The Company has 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 four special meetings
during the fiscal year ended December 31, 2000. The Audit Committee met five
times, the Executive Committee did not meet, the Executive Compensation
Committee met four times, and the Nominating Committee did not meet in 2000. All
directors attended at least 75% of the total number of meetings of the Board of
Directors and the committees to which they belong.
Report of the Audit Committee
On behalf of the Company's Board of Directors, the Audit Committee (Committee)
oversees a comprehensive system of internal controls to ensure the integrity of
financial reports and compliance with laws, regulations and corporate policies.
The Committee consists entirely of directors who meet the independence
requirements of the American Stock Exchange. The Board of Directors has adopted
the Committee charter attached to this Proxy Statement.
KPMG LLP, the Company's independent auditors, issued their unqualified report,
dated February 26, 2001, on the Company's financial statements. Consistent with
its oversight responsibility, the Committee has reviewed and discussed with
management and the independent auditors the audited financial statements for the
year ended December 31, 2000.
The Committee has also discussed with KPMG LLP matters required to be
discussed by AICPA Statement on Auditing Standards No. 61, "Communication with
Audit Committees." The Committee has also received the written disclosures and
the letter from KPMG LLP required by Independence Standards Board Standard No.
1, "Independence Discussions with Audit Committees," has discussed with the
independent auditors their independence in relation to the Company and its
management, and has considered whether KPMG LLP's provision of non-audit
services is compatible with maintaining the auditors' independence.
Based on these reviews and discussions, the Committee has recommended to the
Board of Directors that the Company's audited financial statements for the year
ended December 31, 2000, be included in the Company's Annual Report on Form 10-K
for the fiscal year then ended.
Submitted by,
AUDIT COMMITTEE
John E. Nolan, Chair
Benjamin A. Currier
Elaine L. Rigolosi
5
Compensation Committee Interlocks and Insider Participation
For 2000, 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.
Mario L. Cavezza
Mr. Cavezza, age 53, was elected an executive officer of the Company in July
2000. He has served as Senior Vice President and General Manager of Operations
of the Company since April, 2000. Mr. Cavezza was Senior Vice President and
Regional Manager of the Northern Region from 1997 until April, 2000 and has been
in various field supervisory positions since 1977. He has been an employee of
the Company since 1968.
David J. Goldberg
Mr. Goldberg, age 44, was elected an executive officer of the Company in July
2000. He has served as Senior Vice President of Sales and Marketing of the
Company since 1997. He was Vice President and National Sales Manager from 1993
to 1997. He has been an employee of the Company since 1979.
Robert William Jewett
Mr. Jewett, age 48, 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.
Steven A. Kariotis
Mr. Kariotis, age 44, was elected an executive officer of the Company in July
2000. He has served as Senior Vice President and Regional Manager of the
Company's Northern Region since April 2001. He was Vice President and Regional
Manager from April 2000 to April 2001 and Vice President and Zone Manager of the
Company's Great Lakes Zone from 1988 to 2000. He has been an employee of the
Company since 1982.
Fred Lash
Mr. Lash, age 55, has served as Senior Vice President of the Company since
1993, as Chief Financial Officer since 1989 and as Treasurer since 1987. He has
been an employee of the Company since 1987.
Joseph A. Marone, Jr.
Mr. Marone, age 45, was elected an executive officer of the Company in July
2000. He has served as Vice President of the Company since 1999 and as
Controller since 1992. He has been an employee of the Company since 1990.
Raymond A. Sinclair
Mr. Sinclair, age 54, was elected an executive officer of the Company in July
2000. He has served as Senior Vice President and Regional Manager of the
Company's Southern Region since 1990. He has been an employee of the Company
since 1976.
6
Alexander Warren
Mr. Warren, age 55, was elected an executive officer of the Company in July
2000. He has served as Senior Vice President and Regional Manager of the
Company's Western Region since 1991. He has been an employee of the Company
since 1982.
Stock Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of March 1, 2001, the beneficial ownership
of the Company's issued and outstanding Common Stock (on the basis of 65,171,910
shares outstanding on that date), 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) 3/01/01)
------------------------------ ------------------- ---------------------
Kayne Anderson Rudnick Investment
Management, LLC 6,351,339 (2) 9.74%
1800 Avenue of the Stars, Second Floor
Los Angeles, CA 90067
Directors
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G. Earle Wight 976,348 (3) 1.49%
Kenneth R. Rossano 1,442,752 (4) 2.21%
James M. McNamee 3,598,486 (5) 5.52%
Quentin J. Kennedy 188,000 (6) *
Elaine L. Rigolosi 128,400 (7) *
Benjamin A. Currier 81,520 (8) *
John E. Nolan 200,000 (6) *
Other Most Highly Paid Executive Officers
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Mario L. Cavezza 139,904 (9) *
David J. Goldberg 76,666 (10) *
Fred Lash 391,136 (11) *
Alexander Warren 107,403 (12) *
All officers and directors as a group (15 total) 7,852,228 (13) 12.05%
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* 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.
7
(2) Kayne Anderson Rudnick Investment Management, LLC ("Kayne Anderson"), a
registered investment advisor, filed a statement on Schedule 13G dated
February 9, 2001, disclosing that on December 31, 2000, it beneficially
owned 6,351,339 shares of Common Stock of the Company, representing
approximately 9.62% of the Common Stock outstanding on that date. On
Schedule 13G, Kayne Anderson 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.
(3) Includes 593,344 shares held by the Lucile K. Wight Trust, of which Mr.
Wight is trustee with sole voting and dispositive power, and 345,460 shares
held by 874367 Ontario, Inc., a corporation of which Mr. Wight and his
spouse Sonia are the sole shareholders.
(4) Includes 222,976 shares held by Mr. Rossano's spouse, Cynthia, and 967,680
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
160,000 shares underlying options that are currently exercisable or which
will become exercisable within 60 days.
(5) Includes 746,058 shares held by Mr. McNamee and his spouse Patricia as
joint tenants, 139,300 shares held by Mr. McNamee's spouse, Patricia, and
13,128 shares held by Mr. McNamee's spouse Patricia as custodian for Sean
McNamee. Also includes 2,700,000 shares underlying options that are
currently exercisable or which will become exercisable within 60 days.
(6) Includes 160,000 shares underlying options that are currently exercisable
or which will become exercisable within 60 days.
(7) Includes 3,600 shares held by Ms. Rigolosi's spouse, Robert. Also includes
120,000 shares underlying options that are currently exercisable or which
will become exercisable within 60 days.
(8) Includes 60,000 shares underlying options that are currently exercisable or
which will become exercisable within 60 days.
(9) Includes 135,600 shares underlying options that are currently exercisable
or which will become exercisable within 60 days.
(10) Includes 64,200 shares underlying options that are currently exercisable or
which will become exercisable within 60 days.
(11) Includes 2,400 shares held by Mr. Lash and his spouse, Suzanne, as joint
tenants. Also includes 365,400 shares underlying options that are currently
exercisable or which will become exercisable within 60 days.
(12) Includes 89,600 shares underlying options that are currently exercisable or
which will become exercisable within 60 days.
(13) 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 4,524,507 shares underlying options
that are currently exercisable or which will become exercisable within 60
days.
8
Section 16(a) Beneficial Ownership Reporting Compliance
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 on a timely basis.
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 four other most highly
paid executive officers of the Company whose total annual salary and bonus
exceeded $100,000 in 2000.
SUMMARY COMPENSATION TABLE
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Long term compensation
----------------------
Annual compensation Awards Payouts
------------------- ------ -------
Securities
Name and underlying LTIP All other
principal Salary Bonus options payouts compensation
position Year ($) ($)(1) (#)(2) ($)(3) ($)(4)
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James M. McNamee 2000 500,000 641,200 -- 316,160 113,131
Chairman, President and 1999 425,000 607,500 150,000 707,250 62,652
Chief Executive Officer 1998 408,000 430,580 280,000 584,136 62,932
Mario L. Cavezza 2000 144,103 75,000 -- -- 24,603
Senior Vice President and 1999 110,040 50,000 30,000 -- 13,279
General Manager, Operations 1998 98,700 35,000 80,000 -- 13,256
David J. Goldberg 2000 134,520 60,000 -- -- 12,198
Senior Vice President 1999 110,100 50,000 30,000 -- 9,293
1998 100,500 35,000 72,000 -- 9,328
Fred Lash 2000 200,000 110,000 -- -- 36,483
Senior Vice President, 1999 183,480 100,000 40,000 -- 24,130
Chief Financial Officer 1998 176,500 70,000 100,000 -- 24,210
and Treasurer
Alexander Warren 2000 118,080 70,000 -- -- 26,647
Senior Vice President 1999 114,616 50,000 30,000 -- 19,296
1998 110,200 35,000 80,000 -- 19,352
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(1) For Mr. McNamee, includes stock awards with a fair market value of $291,200,
$307,500 and $230,580 in 2000, 1999 and 1998 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 1999 and 2000.
(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.
9
(4) The amounts disclosed in this column include:
(a) Company contributions of the following amounts in 2000, 1999, and 1998
respectively, under the Company's Salary Reduction Plan, a defined
contribution plan on behalf of Mr. McNamee ($2,400, $2,200 and $2,480),
Mr. Cavezza ($2,400, $1,900 and $1,877), Mr. Goldberg ($2,400, $1,901
and $1,936), Mr. Lash ($2,400, $2,400 and $2,480) and Mr. Warren
($2,309, $1,958 and $2,014).
(b) Payment by the Company in 2000, 1999 and 1998 respectively of premiums
on whole-life insurance policies in the following annual amounts for Mr.
McNamee ($106,156, $55,877 and $55,877), Mr. Cavezza ($22,203, $11,379
and $11,379), Mr. Goldberg ($9,798, $7,392 and $7,392), Mr. Lash
($34,083, $21,730 and $21,730) and Mr. Warren ($24,338, $17,338 and
$17,338).
(c) Payment by the Company in 2000, 1999 and 1998 of premiums on a
disability insurance policy for Mr. McNamee of $4,575 per year.
Option Grants in Last Fiscal Year
OPTION GRANTS IN LAST FISCAL YEAR
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Individual grants
- ------------------------------------------------------------------------------------------
Number of % of total
securities underlying options granted Grant date
options to employees in Exercise Expiration present
Name granted (#) fiscal year price ($/Sh) date value ($)
- -----------------------------------------------------------------------------------------------------------------------------------
James M. McNamee
Chairman, President and 0 -- -- -- --
Chief Executive Officer
Mario L. Cavezza
Senior Vice President and 0 -- -- -- --
General Manager, Operations
David J. Goldberg
Senior Vice President 0 -- -- -- --
Fred Lash
Senior Vice President, 0 -- -- -- --
Chief Financial Officer
and Treasurer
Alexander Warren
Senior Vice President 0 -- -- -- --
10
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table provides certain information on options exercised in 2000
and the value of unexercised options at December 31, 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
- -------------------------------------------------------------------------------------------------------------
Value of
Number of securities unexercised
underlying in-the-money
unexercised options options at
at FY-end (#)(2) FY-end ($)(3)
Shares
acquired Value Exercisable/ Exercisable/
Name on exercise(#) realized ($)(1) Unexercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------
James M. McNamee 244,000 2,108,493 2,590,000/520,000 23,905,659/2,632,817
Mario L. Cavezza 20,000 295,196 115,600/110,000 1,045,859/532,924
David J. Goldberg 0 0 48,200/100,000 390,097/452,574
Fred Lash 128,000 1,770,031 315,400/195,000 2,979,643/1,140,234
Alexander Warren 73,000 1,215,965 63,600/122,000 529,665/641,268
(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 two for one stock splits of the Company's Common
Stock in 1999 and 2000.
(3) Amount represents the difference between the exercise price and the fair
market value on December 31, 2000 ($11.06), multiplied by the number of
options exercisable and unexercisable.
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 2000 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.
11
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, January 8, 1999, and April 12, 2000.
For 2000, Mr. McNamee was awarded a cash bonus of $350,000 in recognition of
the Company's outstanding performance. He had received a cash bonus of $300,000
for 1999. 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 2000, the CEO
received a stock award of 28,000 shares. The CEO had received a stock award of
20,000 shares for 1999. Stock bonuses for the CEO are based on sustained
increases in earnings per share. For 2000, the CEO received a stock bonus of
30,400 shares. He had received a stock bonus of 46,000 shares in 1999.
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 800,000 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 800,000 share option may be exercised if the Company's earnings exceed
$.175 a share for 1998 and the stock price is at or above $3.75 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 $2.14 per 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, 1999 and 2000 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, Chair
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.
Comparison of Five-Year Cumulative Total Return
Hooper Holmes, Inc., S&P 500 Index and Russell 2000 Index
[BAR CHART]
Hooper Holmes, Inc. S&P 500 Index Russell 2000 Index
1995 $ 100.00 $100.00 $100.00
1996 $ 219.50 $120.26 $114.76
1997 $ 364.50 $157.56 $138.31
1998 $ 730.25 $199.60 $133.54
1999 $1298.58 $238.54 $159.75
2000 $1118.55 $214.33 $153.03
ASSUMES $100 INVESTED ON DEC. 31, 1995
ASSUMES DIVIDENDS REINVESTED
FISCAL YEAR ENDING DEC. 31, 2000
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.
The Company has entered into employee retention agreements ("Agreement") with
the other Executive Officers of the Company, 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, 2001,
subject to ratification by the shareholders. This firm (and its predecessors)
has served as the Company's auditors since 1980.
Audit Fees
The aggregate fees billed by KPMG LLP for professional services rendered for
the audit of the consolidated financial statements of the Company for 2000 and
the reviews of the Company's quarterly financial statements during 2000 were
$96,400.
Financial Information Systems Design and Implementation Fees
There were no fees billed by KPMG LLP for information technology services
relating to financial information systems design and implementation rendered to
the Company for 2000.
All Other Fees
The aggregate fees billed by KPMG LLP for other services rendered to the
Company for 2000 were $275,213, primarily for tax services and services
associated with the Company's equity offering completed in February, 2000.
The Company's Audit Committee has considered whether the provision of the non-
audit services provided by KPMG LLP to the Company is compatible with
maintaining KPMG LLP's independence.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 2.
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 2002 Annual Meeting
Proposals of shareholders intended for inclusion in the Proxy Statement for
the Annual Meeting of Shareholders to be held in 2002, must be received at the
Company's executive offices not later than December 17, 2001. Proponents should
submit their proposals by Certified Mail--Return Receipt Requested.
A shareholder who wishes to make a proposal at the 2002 Annual Meeting of
Shareholders without including the proposal in the Company's proxy statement
must notify the Company of such proposal by March 5, 2002. If a shareholder
fails to give notice by this date, the proxy solicited by the Company for use in
connection with the 2002 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 2001
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 2001 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.
15
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 16, 2001
16
HOOPER HOLMES, INC.
Audit Committee Charter
-----------------------
The audit committee is comprised of three independent members of the board of
directors. The committee's purpose is to enable the board to fulfill its
oversight responsibilities by reviewing: (1) the financial information provided
to shareholders and the public, (2) the company's systems of internal controls,
and (3) the audit process.
The committee will meet at least quarterly. This charter will be reviewed
annually and updated as necessary.
The audit committee will provide an open channel of communication between the
internal and external auditors and the board.
In carrying out its responsibilities, the committee will perform the following
specific functions:
Independent Accountants. Recommend independent accountants to the board of
-----------------------
directors, approve their compensation, and recommend and approve successor
independent accountants.
Internal Auditor. Review and concur in the appointment, replacement,
----------------
reassignment, or dismissal of the internal auditor.
Review and Fees. Confirm and assure the independence of the internal auditor
---------------
and the independent accountants, including a review of management consulting
services and related fees provided by the independent accountant.
Risk Assessment. Question management, the director of internal auditing, and
---------------
the independent accountants about the company's significant risks or exposures
and assess the steps management has taken to minimize such risks.
Audit Scope. Consider, in consultation with the independent accountants and
-----------
the internal auditor, the scope of plans for audits to be conducted by each.
Internal Controls; Audit Recommendations. Consider and review with the
----------------------------------------
independent accountants and the internal auditor:
a. Adequacy of the company's internal controls, including computerized
information systems and security.
b. Significant findings and recommendations of the independent
accountants and internal auditor together with management's responses
thereto.
Annual Audit. Review with management and the independent accountants at the
------------
completion of the annual examination:
a. The company's annual financial statements and related footnotes.
b. The independent accountants' audit of the financial statements and
report.
c. Any significant changes required in the independent accountants'
audit plan.
d. Any serious difficulties or disputes with management encountered
during the course of the audit.
17
Review of Internal Auditor. Consider and review with management and the
--------------------------
internal auditor:
a. Significant findings during the year and management's responses.
b. Any difficulties encountered in the course of internal audits,
including scope of the internal auditor's work and access to required
information.
c. Any changes required in the planned scope of the internal audit plan.
d. The internal auditor's charter, budget and staffing.
e. The internal auditor's compliance with the IIA's Standards for the
Professional Practice of Internal Auditing (Standards).
Financial Statements. Review filings with the SEC and other published
--------------------
documents containing the company's financial statements and consider whether
the information contained in these documents is accurate and consistent with
the financial statements.
Legal & Regulatory Matters. Review legal and regulatory matters and company
--------------------------
policies that may have a material impact on the financial statements; review
reports received from regulators.
Executive Sessions. Meet with the internal auditor, the independent
------------------
accountants, and management in separate executive sessions to discuss any
matters that the committee or these groups believe should be discussed
privately with the audit committee.
Reports to Board. Report, generally at each board meeting, to the board of
----------------
directors with such recommendations as the committee deems appropriate.
18
[X] Please mark your 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.
- --------------------------------------------------------------------------------
1. Election of FOR WITHHELD Nominees: 2. Approval of FOR AGAINST ABSTAIN
Directors: [_] [_] James M. McNamee Independent [_] [_] [_]
Kenneth R. Rossano Auditors.
G. Earle Wight
For, except vote withheld from the following nominee(s): 3. In their discretion, the proxies are authorized to
vote upon such other matters as may properly
- -------------------------------------------------------- come before the meeting or any adjournment(s)
thereof.
SIGNATURE(S) DATE The signer hereby revokes all proxies heretofore
-------------------- ------- given by the signer to vote at
NOTE: Please sign exactly as name appears said meeting or any adjournments thereof.
hereon. Joint owners should each sign.
When signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
P R O X Y
HOOPER HOLMES, INC.
Proxy Solicited on Behalf of the Board of Directors of the Company for Annual
Meeting, May 22, 2001
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 6, 2001, 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