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 |_|
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|_| 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 ss.240.14a-11(c) or ss.240.14a-12
MARTHA STEWART LIVING OMNIMEDIA, INC.
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[LETTERHEAD OF MARTHA STEWART LIVING OMNIMEDIA]
March 31, 2001
Dear Stockholder:
You are cordially invited to attend the 2001 Annual Meeting of
Stockholders of Martha Stewart Living Omnimedia, Inc., which will be held at our
new offices at 601 West 26th Street, Ninth Floor, New York, New York, on
Wednesday, May 2, 2001, at 4:00 p.m., New York time.
At this year's stockholders meeting, you will be asked to re-elect six
directors to our Board of Directors. Our Board unanimously recommends a vote for
each of the nominated directors.
It is important that your shares be represented and voted at the Annual
Meeting regardless of the size of your holdings. Whether or not you plan to
attend the Annual Meeting, you may vote your shares by using the enclosed proxy
card, by telephone or via the internet, as described in the enclosed materials.
Attendance at the Annual Meeting will be limited to stockholders of record
as of the close of business on March 15, 2001, and to invited guests of the
company. I look forward to greeting those of you who attend the meeting.
Sincerely,
/s/ Martha Stewart
MARTHA STEWART
Chairman and
Chief Executive Officer
MARTHA STEWART LIVING OMNIMEDIA, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 2, 2001
To the Stockholders:
The Annual Meeting of Stockholders of Martha Stewart Living Omnimedia,
Inc., a Delaware corporation, will be held at our new offices at 601 West 26th
Street, Ninth Floor, New York, New York, on Wednesday, May 2, 2001, at 4:00
p.m., New York time, for the following purposes:
1. To re-elect six directors to our Board of Directors, each to hold
office for a one-year term ending on the date of our next succeeding annual
meeting of stockholders or until such director's respective successor shall have
been duly elected and qualified; and
2. To transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.
Only holders of record of our Class A Common Stock and Class B Common
Stock as of the close of business on March 15, 2001, are entitled to notice of,
and to vote at, the Annual Meeting. You may examine a list of the stockholders
of record as of the close of business on March 15, 2001, for any purpose germane
to the meeting, during the 10-day period preceding the meeting at our offices
located at 11 West 42nd Street, New York, New York 10036 during ordinary
business hours.
By order of the Board of Directors,
/s/ Gregory R. Blatt
GREGORY R. BLATT
Executive Vice President,
General Counsel and Secretary
New York, New York
March 31, 2001
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN
PERSON, WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AT YOUR
EARLIEST CONVENIENCE IN THE POSTAGE-PAID ENVELOPE PROVIDED. IN THE ALTERNATIVE,
SHAREHOLDERS MAY VOTE VIA THE INTERNET OR TELEPHONE AS DESCRIBED IN THE ENCLOSED
MATERIALS.
MARTHA STEWART LIVING OMNIMEDIA, INC.
11 West 42nd Street
New York, New York 10036
PROXY STATEMENT
In this proxy statement, the terms "we," "us," "our," and "MSO" refer to
Martha Stewart Living Omnimedia, Inc., a Delaware corporation, and, unless the
context requires otherwise, to Martha Stewart Living Omnimedia LLC ("MSLO LLC"),
the legal entity that prior to October 22, 1999, operated the businesses we now
operate, and their respective subsidiaries.
This Proxy Statement (first mailed on or about March 31, 2001) is being
furnished to holders of our Class A Common Stock and Class B Common Stock in
connection with the solicitation of proxies by our Board of Directors (the
"Board") for use at our Annual Meeting of Stockholders (the "Annual Meeting") to
be held for the purposes described in this Proxy Statement. Each copy of this
Proxy Statement mailed to holders of our Class A Common Stock and Class B Common
Stock is accompanied by a form of proxy for use at the Annual Meeting.
At the Annual Meeting, our stockholders will be asked:
(1) To re-elect six directors to our Board, each to hold office for a
one-year term ending on the date of our next succeeding Annual
Meeting or until such director's respective successor shall have
been duly elected and qualified; and
(2) To transact such other business as may be properly brought before
the Annual Meeting and any adjournments or postponements thereof.
Date, Time And Place Of Meeting
The Annual Meeting will be held on Wednesday, May 2, 2001, at 4:00 p.m.
New York time, at our new offices at 601 West 26th Street, Ninth Floor, New
York, New York.
Record Date; Shares Outstanding And Entitled To Vote
Only holders of record of our Class A Common Stock and Class B Common
Stock at the close of business on March 15, 2001 (the "Record Date") are
entitled to notice of, and will be entitled to vote at, the Annual Meeting. Each
share of our Class A Common Stock entitles its holder to one vote and each share
of our Class B Common Stock entitles its holder to ten votes. Holders of our
Class A Common Stock and Class B Common Stock will vote together as a single
class on all matters to be voted upon at the Annual Meeting. As of the Record
Date, there were 14,664,420 shares of Class A Common Stock, and 33,888,375
shares of Class B Common Stock, outstanding. All of our outstanding shares of
Class B Common Stock are beneficially owned by Martha Stewart, our Chairman and
CEO.
Voting And Revocation Of Proxies
The proxy card accompanying this Proxy Statement is solicited on behalf of
our Board for use at the Annual Meeting. You are requested to complete, date and
sign the accompanying proxy card and promptly return it in the accompanying
envelope or otherwise mail it to us pursuant to the directions on the card. In
the alternative, shareholders may vote via the internet or telephone as
indicated on the enclosed materials. All proxies that are properly executed and
returned to us and that are not subsequently revoked, will be voted at the
Annual Meeting in accordance with the instructions indicated thereon. If no
instructions are indicated, such proxies will be voted FOR the proposal
described in this Proxy Statement.
Our Board does not presently intend to bring any business before the
Annual Meeting other than the specific proposal referred to in this Proxy
Statement and specified in the Notice of the Annual Meeting. So far as is known
to our Board, no other matters are to be brought before the stockholders at the
Annual Meeting. If any other business properly comes before the stockholders at
the Annual Meeting, however, it is intended that proxies, in the form enclosed,
will be voted on such matters in accordance with the judgment of the persons
voting such proxies.
A stockholder who has given a proxy may revoke it at any time before it is
exercised at the Annual Meeting by
o delivering to Mellon Investor Services LLC a written notice, bearing
a date later than that indicated on the proxy, stating that the
proxy is revoked;
o signing and delivering a subsequently dated proxy relating to the
same shares prior to the vote at the Annual Meeting; or
o attending the Annual Meeting and voting in person (although
attendance at the Annual Meeting will not, by itself, revoke a
proxy).
You should send any written notice or new proxy card to Martha Stewart Living
Omnimedia, Inc. c/o Mellon Investor Services LLC, Overpeck Centre, 85 Challenger
Road, Ridgefield, New Jersey 07660. You may request a new proxy card by calling
Mellon Investor Services LLC at 1-800-851-9677.
Quorum; Broker Non-Votes
The required quorum for the transaction of business at our Annual Meeting
is a majority of the collective voting power represented by our Class A Common
Stock and Class B Common Stock issued and outstanding on the Record Date (the
"Total Voting Power"), which shares must be present in person or represented by
proxy at the Annual Meeting. Abstentions, although counted for purposes of
determining whether there is a quorum at the Annual Meeting, will not be voted.
Vote Required
Approval of the proposal requires that a plurality of the votes
represented, in person or by proxy, at the Annual Meeting be voted in favor of
the proposal, assuming that a quorum is present. Since Martha Stewart, our
Chairman and Chief Executive Officer, beneficially owns shares representing a
majority of the Total Voting Power and is expected to vote her shares in favor
of our Board's proposal, we expect such proposal to be approved, regardless of
the vote of any of our other stockholders.
Solicitation Of Proxies And Expenses
We will bear the cost of the solicitation of proxies from our
stockholders. In addition to solicitation by mail, our directors, officers and
employees may solicit proxies from stockholders by telephone, telegram, letter,
facsimile or in person. Following the original mailing of the proxies and other
soliciting materials, we will request brokers, custodians, nominees and other
record holders to forward copies of the proxy and other soliciting materials to
persons for whom they hold shares of common stock and to request authority for
the exercise of proxies. In such cases, we will, upon the request of the record
holders, reimburse such holders for their reasonable expenses. We will not
employ the services of an independent proxy solicitor in connection with our
Annual Meeting.
PROPOSAL: ELECTION OF DIRECTORS
Information Concerning Nominees
At the Annual Meeting, a Board of six directors will be elected, to hold
office until our next Annual Meeting or until their successors are elected and
qualified. Although our management does not anticipate that any of the persons
named below will be unable or unwilling to stand for election, in the event of
such an occurrence, proxies that are not revoked will be voted for a substitute
designated by the Board. All of the Board's nominees are incumbent directors.
Background information about the Board's nominees for election is set
forth below.
Martha Stewart, age 59, is the founder of our company and the author of 14
books on the domestic arts, including Entertaining and Martha Stewart's
Gardening. Ms. Stewart has served as our Chairman of the Board of Directors and
Chief Executive Officer since our creation in 1996. Ms. Stewart is the creator
of Martha Stewart Living magazine and was its Editor-in-Chief and Editorial
Director from 1990 until 1997. Ms. Stewart is a member of the board of directors
of Revlon, Inc., on the professional advisory board of drugstore.com, inc. and
on the board of trustees of Norwalk Hospital, Norwalk, Connecticut.
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Charlotte L. Beers, age 65, has served as one of our directors since March
1998. Ms. Beers served as Chairman of the Board of Directors of J. Walter
Thompson Worldwide, an advertising agency, from March 1999 until she retired in
March 2001. Prior to that, she was Chairman Emeritus of Ogilvy & Mather
Worldwide, Inc. from April 1997 to March 1999. She was Chairman of Ogilvy &
Mather from April 1992 to April 1997 and Chief Executive Officer from April 1992
to September 1996. She is also a director of J. Crew Group, Inc.
L. John Doerr, age 49, has served as one of our directors since July 1999.
Mr. Doerr has been a general partner of Kleiner Perkins Caufield & Byers, a
private venture capital firm, since September 1980. In 1974, he joined Intel
Corporation and held various engineering, marketing and management assignments.
Mr. Doerr is also a director of Amazon.com, Drugstore.com, inc., FreeMarkets,
Inc., Handspring, Inc., Homestore.com, Inc., WebMD Corporation, Intuit, Inc. and
Sun Microsystems, Inc., as well as several private companies.
Arthur C. Martinez, age 61, has served as one of our directors since
January 2001. Until December 2000, Mr. Martinez served as Chairman of the Board
of Directors of Sears Roebuck and Co., and was its Chief Executive Officer from
August 1995 until October 2000. Mr. Martinez joined Sears, Roebuck and Co. in
September 1992 as the Chairman and Chief Executive Officer of Sears Merchandise
Group, Sears's former retail arm. From 1990 to 1992, he was Vice Chairman of
Saks Fifth Avenue and was a member of Saks Fifth Avenue's Board of Directors.
Mr. Martinez is currently a member of the Board of Directors of PepsiCo, Inc.,
Liz Claiborne, Inc. and International Flavors & Fragrances, Inc., and is the
Chairman of the Federal Reserve Bank of Chicago.
Sharon Patrick, age 58, has served as our President and Chief Operating
Officer and as one of our directors since 1997. From 1993 until 1997, Ms.
Patrick served as President of The Sharon Patrick Company, a strategic
consulting company, and Sharon Patrick and Associates, a new media venture firm,
during which time she served as a consultant to Martha Stewart Living. From 1990
until 1993, Ms. Patrick was President and Chief Operating Officer of Rainbow
Programming Holdings, the programming company of Cablevision Systems
Development. Prior to that, Ms. Patrick was a Principal at McKinsey and Company
and the Partner in charge of the Media and Entertainment practice.
Naomi O. Seligman, age 62, has served as one of our directors since
September 1999. Ms. Seligman is a co-founder of Cassius Advisers, an e-commerce
consultancy, where she has served as a senior partner since 1999, and is a
co-founder of the Research Board, Inc., an information technology research
group, where she served as a senior partner from 1975 until 1999. Ms. Seligman
currently serves as a director of The Dun & Bradstreet Corporation,
Chemdex/Ventro Corporation, Sun Microsystems, Inc. and Exodus Communications,
Inc.
OUR BOARD RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH OF ITS
NOMINEES FOR DIRECTOR NAMED ABOVE.
MEETINGS AND COMMITTEES OF THE BOARD
Our Board met five times during 2000 and considered matters in connection
with actions taken by unanimous written consent on four additional occasions.
All then-incumbent directors attended at least 75% of the meetings of the Board
and the Board committees on which they served.
Our Board currently has an Audit Committee and a Compensation Committee.
We do not currently have a Nominating Committee.
Audit Committee
Our Audit Committee, currently consisting of Ms. Beers, Mr. Martinez and
Ms. Seligman, is authorized to take the following actions:
o recommend annually to the Board the appointment of our independent
public accountants;
o discuss and review in advance the scope and staffing of our annual
audit and review the results thereof with our independent public
accountants;
o review the fees and other compensation to be paid to our independent
auditors;
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o consider the compatibility of any non-audit services provided by our
independent public accountants with their independence;
o review with our independent public accountants and independently
with management the integrity of our internal and external financial
reporting processes and the quality and acceptability of our
accounting policies;
o review all management letter comments with the independent public
accountants at least annually;
o consider and approve, where appropriate, major changes to our
accounting principles and practices as suggested by the independent
auditors or management;
o review the quality of earnings releases with management; review our
annual and quarterly financial statements; and
o prepare the report required by the Securities and Exchange
Commission to be included in this Proxy Statement under the caption,
"REPORT OF THE AUDIT COMMITTEE".
The Audit Committee met three times during 2000 and considered matters in
connection with actions taken by unanimous written consent on one additional
occasion. The Audit Committee operates pursuant to a charter that was last
amended and restated by our Board of Directors on February 20, 2001, a copy of
which is attached to this proxy statement as Annex A. All of the members of the
Audit Committee are "independent," as independence is defined in Sections
303.01(B)(2)(a) and (3) of the New York Stock Exchange's Listing Standards.
Compensation Committee
The Compensation Committee, currently consisting of Ms. Beers and Mr.
Doerr, is authorized to review and approve annual salaries, bonuses, and grants
of stock options under our 1999 Stock Incentive Plan for all executive officers,
and to review and approve our employee benefit plans generally or material
changes to these plans. The Compensation Committee met twice during 2000 and
considered matters in connection with actions taken by unanimous written consent
on two additional occasions.
COMPENSATION OF OUTSIDE DIRECTORS
We pay our non-employee directors an annual retainer of $20,000 for
serving on our Board, payable quarterly in equal installments. These directors
each also receive a meeting fee of $1,000 for each in-person meeting of our
Board that they attend and a fee of $500 for each committee or telephonic Board
meeting in which they participate. The chairman of a Board committee receives an
additional annual retainer of $5,000. Twenty-five percent of a director's fees
are paid in shares of our Class A Common Stock, and the remaining 75% of such
fees may be paid either in such shares or in cash, at the election of the
director, under our Non-Employee Director Stock and Option Compensation Plan
described below. All directors receive reimbursement of expenses incurred in
connection with participation in our Board and Board committee meetings.
Directors who also are our employees do not receive additional compensation for
their service as a director.
The Non-Employee Director Stock And Option Compensation Plan
The purpose of this plan is to align the interests of our non-employee
directors and our stockholders and to attract and retain highly qualified
individuals to serve as directors.
General
The plan is administered by our Board. 300,000 shares of our Class A
Common Stock are reserved for issuance and available for grants under the plan.
Our Board may adjust the awards under the plan if there is any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as a merger, consolidation, separation, including a spin-off, or other
distribution of our stock or property, any reorganization or any partial or
complete liquidation.
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Common Stock
Each non-employee director receives 25% of his or her annual retainer and
meeting fees in shares of Class A Common Stock. In addition, non-employee
directors may make an annual irrevocable election to receive shares of Class A
Common Stock in lieu of all, or a portion, of such director's remaining fees, in
25% increments. The number of shares of Class A Common Stock granted to a
director is equal to the fees payable in equity to the director, divided by the
fair market value of a share on the last business day of the period for which
payment is being made. We round the number of shares granted to the director
down to the nearest whole share and pay cash for the value of any fractional
share. Each director may defer the receipt of his or her cash payments into an
interest-bearing cash account and/or his or her elected or mandatory shares of
Class A Common Stock into a share account which will be credited with additional
shares having a value equal to the dividends that would be paid on the shares
credited to the share account, if they were outstanding. When the director
leaves our Board or, if earlier, upon a change of control, the amount of cash in
his or her cash account, plus a number of shares of Class A Common Stock equal
to the number of shares in his or her share account, will be delivered to the
director, with cash being paid in lieu of any fractional shares.
Options
Each eligible new director is granted options to purchase 5,000 shares of
Class A Common Stock upon being elected or appointed to our Board. The exercise
price for all options is 100% of the fair market value of a share of Class A
Common Stock on the date of grant. Each of our current eligible directors
participating in the plan received 5,000 options on the date of our initial
public offering at the offering price. Additionally, after each annual meeting
of stockholders, a continuing director is granted options to purchase 2,000
shares of Class A Common Stock.
Each option vests and becomes exercisable on the first anniversary of the
date of grant, if the director remains a member of our Board at that time. Each
vested option will terminate one year after the director's service on our Board
ceases for any reason, other than for cause. If a director is removed for cause,
all vested and unvested options will be forfeited. However, the options will
expire no later than the tenth anniversary of the date of grant. Any unvested
options will terminate and be canceled as of the date a director's service on
our Board ceases for any reason. All options become fully vested and exercisable
upon a change in control.
The foregoing plan summary is subject in all respects to the plan itself,
a copy of which, absent the amendment, is on file with the SEC as an exhibit to
the registration statement on Form S-1 relating to our initial public offering.
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INFORMATION CONCERNING EXECUTIVE OFFICERS
Background information about our executive officers who are not nominees
for election as director is set forth below.
Gregory R. Blatt, age 32, has served as our Executive Vice President,
General Counsel and Secretary since September 1999, and as our Senior Vice
President, General Counsel since May 1999. Prior to that, Mr. Blatt was an
associate with Grubman Indursky & Schindler, P.C., the New York entertainment
and media law firm, from 1997 to May 1999, and an associate at Wachtell, Lipton,
Rosen & Katz, the New York law firm, from 1995 to 1997.
Dora Braschi Cardinale, age 44, has served as our Executive Vice
President, Print Production since May 1999 and prior to that as our Senior Vice
President, Print Production from 1997 until 1999. Previously, Ms. Cardinale
served as Production Director of Martha Stewart Living from 1992 until 1997. Ms.
Cardinale has an additional 15 years of experience in the publishing industry,
including positions with Art & Antiques, Geo, Viva and Omni magazines.
James Follo, age 41, has served as our Executive Vice President, Chief
Financial Officer since March 2001. Prior to that, he served as our Senior Vice
President, Finance and Controller from March 1999 to March 2001 and, previously,
as our Vice President, Finance and Controller from July 1998. Prior to that, Mr.
Follo held various financial positions at General Media International, Inc., a
magazine publisher, from 1994 to July 1998, most recently as Vice President,
Chief Financial Officer and Treasurer.
Margaret Roach, age 46, has served as our Executive Vice President,
Internet/Direct Commerce since March 2001. Prior to that, she was Senior Vice
President, Internet Production and Operations from October 2000 to March 2001.
From January 1, 2000 to October 2000, she was Senior Vice President, Garden
Editor of Martha Stewart Living Omnimedia. From 1998 until 1999, she served as
Vice President, Gardening. From 1995 to 1998, Ms. Roach was Garden Editor of
Martha Stewart Living, and a contributing editor for Martha Stewart Living from
1993 to 1994. Ms. Roach was Fashion and Garden Editor of New York Newsday from
1985 to 1995, and also has an additional 12 years of experience in the
publishing business, including with The New York Times. Ms. Roach won the 1998
Best Written Book Of The Year award from the Garden Writers of America for A Way
to Garden.
Suzanne Sobel, age 44, has served as our Executive Vice President,
Advertising Sales since January 1999 and as our Senior Vice President,
Advertising Sales & Marketing during 1998. Additionally, Ms. Sobel has served as
Publisher of Martha Stewart Living since 1997 and as its Associate Publisher
from 1996 to 1997. Prior to that, Ms. Sobel served as our Advertising Director
from 1995 to 1996, as New York Advertising Sales Manager from 1993 to 1995 and
as Advertising Sales Manager from 1991 to 1993. Ms. Sobel has an additional 14
years of experience in advertising sales, including with Town & Country
magazine, Bob Bernbach & Associates and Ogilvy & Mather.
Lauren Stanich, age 39, has served as our Executive Vice President,
President, Publishing since October 2000, and prior to that as our Executive
Vice President, Consumer Marketing from January 1999 until October 2000, and as
our Senior Vice President, Consumer Marketing from 1997 until 1999. Ms. Stanich
worked as our Consumer Marketing Director and Book Publisher from 1995 to 1997,
and as Consumer Marketing Director for Martha Stewart Living from 1991-1995. Ms.
Stanich has an additional seven years of experience in marketing and publishing
with Time Warner.
Gael Towey, age 49, has served as our Executive Vice President, Art and
Style and Creative Director since February 1997. Prior to that, Ms. Towey worked
for Martha Stewart Living as the Design Director from 1996 to 1997, and as Art
Director from 1990 to 1996. Ms. Towey also has an additional 15 years of
experience in the publishing industry, including with House & Garden magazine,
Clarkson N. Potter and Viking Press, Inc.
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EXECUTIVE COMPENSATION
General
The following table sets forth certain information pertaining to
compensation of our Chief Executive Officer and our four other most highly
compensated executive officers for 2000 (the "Named Executives"). The following
table presents information concerning total compensation earned by the Named
Executives for services rendered to us during 1998, 1999 and 2000.
Annual Compensation Long Term Compensation
-------------------------------------- --------------------------
Securities
Underlying LTIP All Other
Fiscal Salary Bonus Option Payments(1) Compensation
Year ($) ($) Awards(#) ($) ($)
------ ---------- --------- ------------- ---------- ---------------
Martha Stewart 2000 900,000 1,770,000 150,000(2) -- 2,322(3)
Chairman and Chief 1999 1,055,044 300,000 -- -- 2,270(3)
Executive Officer 1998 2,975,000 1,695,717 -- -- 4,050(3)
Sharon Patrick 2000 580,288 696,400 152,000(2) -- 2,322(3)
President and Chief 1999 580,288 696,400 362,022(2) 11,000 3,524(3)
Operating Officer 1998 493,755 518,443 -- -- 4,050(3)
Helen Murphy(4) 2000 480,000 540,000 70,000(2) -- 5,736(5)
Chief Financial and 1999 134,469(6) 607,500(7) 335,795(8) -- --
Administrative Officer 1998 -- -- -- -- --
Gael Towey 2000 375,000 337,500 38,000(2) -- 49,181(9)
Executive Vice President, 1999 375,000 337,500 333,333(2) 11,000 49,440(10)
Creative Director 1998 300,000 305,000 -- -- 6,507(11)
Stephen Drucker(12) 2000 335,000 251,300 38,000(2) -- 6,060(13)
Executive Vice President, 1999 335,000 251,250 215,948(2) 11,000 6,319(14)
Editorial Core and 1998 265,000 198,750 -- -- 4,947(15)
Editor-in-Chief
- ----------
(1) Under our Phantom Performance Unit Plan, all employees other than Martha
Stewart with at least one year of service on January 1, 1998 and/or
January 1, 1999 received a grant of performance units. The plan provided
that upon the occurrence of certain events, participants would receive
cash or stock in exchange for their units. One such event was the
consummation of our initial public offering, which occurred earlier than
we had anticipated and prior to the time at which certain conditions to
payment were targeted to have been achieved. In light of our accelerated
offering schedule, our Board determined to make payouts to the
participants as though certain of these conditions had been satisfied.
Accordingly, this payment represents the issuance of 612 shares of our
Class A Common Stock at the time of our initial public offering in
exchange for phantom units issued as of January 1, 1998 and 1999.
(2) Options granted pursuant to the 1999 Stock Incentive Plan.
(3) Represents the value of certain life insurance premiums paid by us on
behalf of the executive.
(4) Ms. Murphy served as our Chief Financial and Administrative Officer from
September 1999 through March 2001, at which point she voluntarily
terminated her employment with MSO.
(5) Consists of $486 in life insurance premiums paid by us on Ms. Murphy's
behalf and $5,250 in matching contributions made by us to Ms. Murphy's
401(k) account.
(6) Represents the portion of her $480,000 annual salary that accrued from the
time she joined the company in September 1999 through December 31, 1999.
(7) Includes a $200,000 signing bonus, a one-time bonus of $247,500 payable
upon completion of one year's service which was accelerated by action of
our Compensation Committee, and Ms. Murphy's regular year-end bonus for
her service in 1999.
(8) Consists of options granted pursuant to an agreement between Ms. Murphy
and MSO (the "Murphy Option Agreement").
(9) Consists of $810 in life insurance premiums paid by us on Ms. Towey's
behalf, $5,250 in matching contributions made by us to Ms. Towey's 401(k)
account, and $43,121 payable under Time Inc.'s Phantom Equity Plan, for
which Time Inc. reimburses us.
(10) Consists of $1,319 in life insurance premiums paid by us on Ms. Towey's
behalf, $5,000 in matching contributions made by us to Ms. Towey's 401(k)
account, and $43,121 payable under Time Inc.'s Phantom Equity Plan, for
which Time Inc. reimburses us.
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(11) Consists of $1,707 in life insurance premiums paid by us on Ms. Towey's
behalf and $4,800 in matching contributions made by us to Ms. Towey's
401(k) account.
(12) Mr. Drucker served as our Executive Vice President, Editorial Core, and
Editor-in-Chief until March 2001, at which point he resigned this
position.
(13) Consists of $810 in life insurance premiums paid by us on Mr. Drucker's
behalf and $5,250 in matching contributions made by us to Mr. Drucker's
401(k) account.
(14) Consists of $1,319 in life insurance premiums paid by us on Mr. Drucker's
behalf and $5,000 in matching contributions made by us to Mr. Drucker's
401(k) account.
(15) Consists of $1,368 in life insurance premiums paid by us on Mr. Drucker's
behalf and $3,579 in matching contributions made by us to Mr. Drucker's
401(k) account.
Option Grants
The following table presents information with respect to options to
purchase our Class A Common Stock granted to our Named Executives during the
year ended December 31, 2000.
Options Granted in 2000
Individual Grants
----------------------------------------------------------- Potential Realizable Value
Percent of at Assumed Annual Rates
Number Total Options of Stock Price Appreciation
of Securities Granted to for Option Term
Underlying Employees ($)(1)
Options in Fiscal Exercise or Expiration ---------------------------
Name Granted(#) Year Base Price Date 5% 10%
- ----- ----------- -------- --------- --------------- ------------ ------------
Martha Stewart ......................... 150,000(2) 7.46% $26.5625 March 25, 2010 2,505,750 6,350,655
Sharon Patrick ......................... 152,000(2) 7.56% $ 15.00 April 19, 2010 1,433,877 3,633,727
Helen Murphy(3). ....................... 70,000(2) 3.48% $ 15.00 April 19, 2010 660,338 1,673,427
Gael Towey ............................. 38,000(2) 1.89% $ 15.00 April 19, 2010 358,469 908,432
Stephen Drucker ........................ 38,000(2) 1.89% $ 15.00 April 19, 2010 358,469 908,432
- ----------
(1) Potential realizable value is reported net of the option exercise price,
but before taxes associated with exercise. These amounts represent assumed
rates of appreciation only. Actual gains, if any, on stock option
exercises are dependent on the future performance of our Class A Common
Stock, and overall stock market conditions, as well as on the option
holders' continued employment through applicable vesting periods. The
amounts reflected in this table may not necessarily be achieved.
(2) Options granted pursuant to the 1999 Stock Incentive Plan.
(3) The options granted to Ms. Murphy in 2000, none of which were vested,
expired when her employment with MSO ended in March 2001.
Aggregated Option Exercises In Last Fiscal Year And Fiscal Year-End Option
Values
The table below presents information concerning the exercise of stock
options by the Named Executives during the year ended December 31, 2000 and the
fiscal year-end value of all their unexercised options.
Aggregated Option Exercises in 2000 and Option Values as of December 31, 2000
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at 12/31/00 (#) at 12/31/00($)(1)
-------------------------- ------------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ----- ------------ ------------ ----------- ------------- ----------- -------------
Martha Stewart ............... -- -- -- 150,000(2) -- 0
Sharon Patrick ............... 27,080 673,445 117,586(3) 504,759(4) 713,743 2,910,683
Helen Murphy ................. 83,000 1,352,293 949(5) 321,846(6) 7,531 2,353,405
Gael Towey ................... 38,000 1,154,612 428,115(7) 288,000(8) 6,882,195 707,999
Stephen Drucker .............. 6,529 168,969 60,515(9) 219,550(10) 238,427 907,643
- ----------
(1) Calculated using the closing price of a share of our Class A Common Stock
on December 31, 2000, $20.0625.
8
(2) Consists of options to acquire 150,000 shares of Class A Common Stock
issued under the 1999 Stock Incentive Plan.
(3) Consists of options to purchase 27,082 shares of Class A Common Stock
issued under The Martha Stewart Living Omnimedia LLC Nonqualified Class A
LLC Unit/Stock Option Plan (the "1997 Plan") and 90,506 options issued
under the 1999 Stock Incentive Plan.
(4) Consists of options to acquire 81,242 shares of Class A Common Stock
issued under the 1997 Plan, and options to acquire 423,516 shares issued
under the 1999 Stock Incentive Plan.
(5) Consists of 949 options issued under the Murphy Option Agreement.
(6) Consists of 251,846 options issued under the Murphy Option Agreement and
70,000 issued under the 1999 Stock Incentive Plan.
(7) Consists of options to acquire 344,782 shares of Class A Common Stock
issued under the 1997 Plan, and options to acquire 83,333 shares issued
under the 1999 Stock Incentive Plan.
(8) Consists of options to acquire 288,000 shares issued under the 1999 Stock
Incentive Plan.
(9) Consists of options to acquire 6,528 shares of Class A Common Stock issued
under the 1997 Plan, and options to acquire 53,987 shares issued under the
1999 Stock Incentive Plan.
(10) Consists of options to acquire 19,589 shares of Class A Common Stock
issued under the 1997 Plan, and options to acquire 199,961 shares issued
under the 1999 Stock Incentive Plan.
Pension Plan
Our subsidiary, Martha Stewart, Inc., sponsors The Martha Stewart, Inc.
Defined Benefit Pension Plan. The plan was "frozen" as of June 26, 1995, and no
benefits have accrued since that date. Ms. Stewart is the only Named Executive
who participates in the Plan. If Ms. Stewart had begun to receive benefits at
year-end 2000, her annual straight life annuity would have been $81,816.
EMPLOYMENT ARRANGEMENTS
Employment Agreement With Martha Stewart
Prior to completion of our initial public offering, we entered into an
employment agreement with Ms. Stewart. The employment agreement replaced an
existing agreement between us and Ms. Stewart. The employment agreement provides
for Ms. Stewart's employment as our Chairman of the Board and Chief Executive
Officer through October 22, 2004. Under the employment agreement, Ms. Stewart
receives an annual base salary of $900,000 and annual bonus payments based upon
our performance, with a guaranteed annual bonus of $300,000. Our Compensation
Committee determines the relevant performance goals, which include targets based
on our profitability as well as other performance measures, and the amount of
the bonus payment.
During the employment period, Ms. Stewart receives employee benefits no
less favorable than those provided to our other executive officers and receives
perquisites and fringe benefits consistent with past practice.
The employment agreement provides that if Ms. Stewart resigns with "Good
Reason" or if we terminate her employment other than for "Cause" or disability,
then she will be entitled to receive an immediate lump sum cash payment equal to
the sum of:
o accrued, but unpaid, base salary and vacation through the date of
termination
o three times her annual base salary, and
o the higher of $5,000,000 or three times the highest annual bonus
paid for any fiscal year during the employment period
She will also receive continued welfare benefits and perquisites for the
longer of three years and the remainder of the employment period. If Ms.
Stewart's employment is terminated due to disability, or in the event of death,
Ms. Stewart or her estate will receive continued payments of the base salary for
the remainder of the scheduled term of the employment agreement less any
disability benefits. If Ms. Stewart's employment is terminated for any other
reason, she will be entitled to receive her accrued, but unpaid, base salary and
vacation through the date of termination.
Under the employment agreement, "Good Reason" generally means the
occurrence of any of the following events without Ms. Stewart's written consent:
9
o an assignment of duties or responsibilities, or a change in title or
authority, inconsistent with her position as Chairman and Chief
Executive Officer
o any failure by us to comply with the employment agreement's
compensation provisions
o a requirement for Ms. Stewart to relocate
o the failure of a successor entity to assume the employment agreement
o any other material breach of the employment agreement
"Cause," for purposes of the employment agreement, means:
o Ms. Stewart's willful and continued failure to perform her duties
after written notice from our Board specifying the actions to be
performed, unless such failure is due to her good faith belief that
to take such action would be materially harmful to us, or
o Ms. Stewart's conviction of a felony or willful gross misconduct,
which in either case results in material and demonstrable damage to
our business or reputation
Under the employment agreement, Ms. Stewart cannot compete with us, or
solicit our employees, during her term of employment. In addition, if Ms.
Stewart terminates employment without Good Reason during the employment period
or is terminated by us for Cause, the noncompetition and nonsolicitation
restrictions continue for 12 months after the termination of employment.
Severance Agreement With Sharon Patrick
In September 1999, we entered into a four-year severance agreement with
Ms. Patrick. Under the agreement, if Ms. Patrick resigns within 30 days
following a "Change in Control," or if we terminate her employment without
"Cause," each as defined in the severance agreement, she will be entitled to
receive a lump sum payment equal to the sum of:
o accrued but unpaid base salary, vacation and expense reimbursements
and vested benefits under our benefit plans through the date of
termination
o a pro rata bonus at a rate equal to her target bonus for the year of
termination, and, with respect to the prior year, any declared but
unpaid bonus, or if such bonus was not yet declared, a bonus equal
to her target bonus, and
o an amount equal to her annual base salary and target bonus
The agreement also provides that if Ms. Patrick terminates her employment
for "Good Reason," she will receive the above lump sum payment. "Good Reason"
generally occurs if Ms. Patrick terminates her employment with us shortly after
we diminish her salary or title as President or if her responsibilities are
diminished or modified in a manner that is materially inconsistent with her
position as our President. In addition, in the case of a termination without
Cause or a Good Reason termination, any unvested options which would become
vested within four years of the termination date will become vested as of her
termination date and, in the case of termination without cause following a
Change in control, will be exercisable for one year and in other cases as
provided in the relevant option agreement.
EQUITY COMPENSATION PLANS
The 1999 Stock Incentive Plan
The plan is administered by the Compensation Committee of our Board and
their designees and provides for the grant of non-qualified and incentive stock
options and other types of equity-based awards. Our executives, employees and
consultants, as well as those of any subsidiaries, are eligible to receive
awards under the plan. Our non-employee directors are not eligible to
participate. The plan, as amended, provides that the maximum number of shares of
Class A Common Stock available for grant under the plan is 10,000,000.
10
The term of options granted under the plan may not exceed 10 years. Unless
otherwise determined by our Compensation Committee, options granted under the
plan vest ratably on each of the first four anniversaries of the grant date and
have an exercise price equal to the fair market value of the Class A Common
Stock on the date of grant.
A participant exercising an option may pay the exercise price in cash or,
if approved by our Compensation Committee, with previously acquired shares of
our Class A Common Stock or in a combination of cash and stock. Our Compensation
Committee, in its discretion, may allow the cashless exercise of options.
Options are nontransferable other than by will or the laws of descent and
distribution or, at the discretion of our Compensation Committee, by a written
beneficiary designation and, in the case of a nonqualified option, by a gift to
members of the holder's immediate family. The gift may be made directly or
indirectly or by means of a trust or partnership or limited liability company
and, during the participant's lifetime, may be exercised only by the
participant, any such permitted transferee or a guardian, legal representative
or beneficiary.
Our Board may at any time amend or terminate the plan and may amend the
terms of any outstanding option or other award, except that no termination or
amendment may impair the rights of the participants as they relate to
outstanding options or awards. However, no such amendment to the plan will be
made without the approval of our stockholders to the extent such approval is
required by law or stock exchange rule.
The foregoing plan summary is subject in all respects to the plan itself,
a copy of which, absent the amendment, is on file with the SEC as an exhibit to
the registration statement on Form S-1 relating to our initial public offering.
MSLO LLC Nonqualified Class A LLC Unit/Stock Option Plan
We adopted and made grants under the MSLO LLC Nonqualified Class A LLC
Unit/Stock Option Plan in November 1997. In connection with our initial public
offering, the 509,841 LLC unit options then outstanding were converted into
options to purchase 1,997,374 shares of our Class A Common Stock. Options
granted under the 1997 Plan generally vested 10% on December 31, 1998, 10% on
December 31, 1999 and 20% on December 31, 2000, with 20% and 40% vesting on
December 31 of each of the next two years if the optionee continues to be
employed by us, or to otherwise render us services. Each option expires 10 years
after the date of grant, subject to earlier termination upon termination of
employment. Options granted under the plan are not assignable or transferable by
the optionee, other than by will or the laws of descent and distribution. Upon a
"Change in Control," as defined in the plan, each outstanding option will become
immediately and fully exercisable, and will either remain exercisable under the
terms of the plan or be terminated upon no less than 30 days' written notice. No
additional options may be granted under this plan.
In connection with the plan, Ms. Stewart will periodically return to us a
number of shares of our common stock owned by the Martha Stewart Family Limited
Partnership, or another entity controlled by her, corresponding, on a net
treasury basis, to the option exercises under this plan during the relevant
period. Under the net treasury method, we will subtract from the number of
shares resulting from each option exercise the number of shares we could
purchase, at the then-current market price, with the option proceeds from such
exercise. Ms. Stewart has agreed to return to us a number of shares of our
common stock equal to the sum of the results of these calculations for the
relevant period. We may or may not use the option proceeds to repurchase shares
of our Class A Common Stock in the market. If we do so, the net effect will be
no change in the number of shares of our Class A Common Stock outstanding as a
result of option exercises under the 1997 Plan (other than temporary increases
prior to Ms. Stewart's share returns).
The foregoing plan summary is subject in all respects to the plan itself,
a copy of which is on file with the SEC as an exhibit to the registration
statement on Form S-1 relating to our initial public offering.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board, currently consisting of Ms. Beers
and Mr. Doerr, neither of whom is employed by MSO, furnished the following
report on executive compensation for the 2000 fiscal year.
11
Compensation Philosophy
MSO's executive compensation program is designed to encourage and reward
exceptional performance and to align the financial interests of its senior
executives and key employees with those of our stockholders. To achieve this
end, MSO has developed and implemented a compensation program designed to
attract and retain highly skilled executives and key employees with the business
experience and creative talent necessary for MSO to achieve its long-term
business objectives.
MSO's executive compensation consists of three components: base salary, an
annual performance-based bonus and equity-based compensation. MSO's compensation
goal is to target its executives to be paid at competitive levels when
performance expectations are met and above competitive levels when expectations
are exceeded. MSO periodically utilizes outside consultants to perform
competitive market-matching analyses on a position-by-position basis against
companies in businesses similar to those of MSO and with comparable revenue
levels. Once the market-matching analyses has been completed, an executive's
salary, bonus and/or equity-based compensation may be adjusted upward or
downward based on a number of subjective factors, including past performance,
prior experience, differences in job responsibilities from the jobs against
which the match was performed, and tenure. Additionally, although the
market-matching study is periodically updated, individual compensation levels
may be adjusted from time to time based upon, among other factors, past
performance and increases in responsibilities.
MSO's Chairman and CEO, Ms. Stewart, is compensated pursuant to an
employment agreement with the company which is discussed below under the caption
"COMPENSATION OF CHIEF EXECUTIVE OFFICER".
Base Salaries and Annual Bonuses
MSO believes that compensation should be weighted toward bonuses and
equity-based compensation. Accordingly, base salaries paid to MSO's executives
tend to constitute a smaller percentage of total compensation than they do for
many comparable executives of MSO's competitors. Each executive is assigned a
bonus target, which is set as a percentage of annual base salary. Depending on
MSO's performance against its growth objectives and the individual performance
of a particular executive, such executive's actual bonus can range from 50% to
150% of the relevant bonus target, as set by the Compensation Committee with
input from senior management.
Equity-Based Compensation
In 1997, MSO executives who had, in the view of the Board of Directors of
MSLO LLC, played a significant role in the company's development received
options to purchase MSLO LLC equity under the 1997 Plan. Individual grants were
made taking into account years of service, level of responsibility, contribution
to the enterprise and other factors. At the time of MSO's initial public
offering, new option grants, with an exercise price equal to the initial public
offering price, were made to executives and most of our employees under the 1999
Stock Incentive Plan. Individual grants were determined using the
market-matching system discussed above, subject to adjustment upward or downward
based on a number of factors, including the size of previous option grants under
the 1997 Plan, tenure, past performance, responsibility levels and other
relevant factors. In April 2000, MSO engaged an independent consulting firm to
perform a study on ongoing equity compensation programs of companies comparable
to MSO. Based on the results of this study and other factors deemed relevant by
the Committee, the Committee made grants of options under the 1999 Stock
Incentive Plan to all MSO employees, with the size of grants linked
predominantly to executive levels and compensation levels. Although the
Committee has no obligation to make similar awards in the future, it intends to
consider such grants on an annual basis. Since that time, new executives have
received grants of options under the 1999 Stock Incentive Plan at the time they
began employment with MSO and current MSO executives have received grants of
options under the 1999 Stock Incentive Plan in connection with promotions, with
the size of the grant being determined using a similar methodology, in each case
with an exercise price equal to the fair market value of MSO's Class A Common
Stock at the time of grant.
12
Chief Executive Officer Compensation
Ms. Stewart is compensated pursuant to her employment agreement with MSO.
The employment agreement became effective prior to the time of MSO's initial
public offering and provides for an annual salary of $900,000, as well as
bonuses payable upon the achievement of performance targets established by the
Committee, with a guaranteed payment of $300,000. The terms of Ms. Stewart's
employment agreement were established based on a number of considerations,
including Ms. Stewart's contribution to the company as its founder, her services
as on-air talent for MSO's television and radio programs, and her ongoing
services as MSO's Chairman and Chief Executive Officer. Under the employment
agreement, the Committee awarded Ms. Stewart a bonus of $1,770,000 for her
services in 2000. Additionally, Ms. Stewart received an award of 150,000 stock
options under the 1999 Stock Incentive Plan. These options have an exercise
price of $26.5625 per share, the fair market value on the date of grant, and
vest ratably on the first four anniversaries of the date of grant. In
determining Ms. Stewart's compensation, the Committee considered Ms. Stewart's
multi-faceted contributions to MSO described above, compensation levels for
other executives of MSO and MSO's performance in 2000, including its revenue and
earnings growth. The Committee believes that Ms. Stewart's compensation under
her employment agreement and her considerable ownership of MSO equity provide
her with significant incentives to maximize stockholder value.
Tax Matters
Based upon MSO's present compensation levels and the current
inapplicability of Section 162(m) of the Internal Revenue Service Code of 1986,
as amended, to certain compensation arrangements of MSO, the Committee does not
believe it is necessary to adopt a policy at this time with respect to Section
162(m). However, the Committee will continue to monitor MSO's compensation
levels and adopt necessary policies as it deems appropriate.
Summary
The Committee believes that the present compensation structure is one that
is well-designed to attract and retain talented executives and key employees,
align these individuals' interests with those of our stockholders, and maximize
stockholder value, and believes that the actions of the Committee with respect
to 2000 executive compensation were consistent with that focus. The Committee
shall periodically review MSO's compensation policies for executives and other
employees, including the equity compensation policies and performance
objectives, to ensure that they continue to serve these objectives.
Members of the Compensation Committee
Charlotte Beers
L. John Doerr
Compensation Committee Interlocks And Insider Participation
The Compensation Committee is composed of Ms. Beers and Mr. Doerr, each of
whom is a non-employee director.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents, as of the Record Date, information relating
to the beneficial ownership of our common stock by (1) each person known by us
to own beneficially more than 5% of the outstanding shares of either class of
our common stock, (2) each of our directors, (3) each of the Named Executives,
and (4) all of our executive officers and directors as a group.
Unless another address is indicated, beneficial owners listed here may be
contacted at our corporate address. Under the rules of the SEC, a person is
deemed to be a beneficial owner of a security if that person has or shares
voting power, which includes the power to vote or to direct the voting of such
security, or investment power, which includes the power to dispose of or to
direct the disposition of such security. A person is also deemed to be the
beneficial owner of any securities with respect to which that person has the
right to acquire beneficial ownership
13
within 60 days. Under these rules, more than one person may be deemed to be
beneficial owner of the same securities. For each listed person or entity, the
information listed assumes the exercise of any options exercisable by such
person or entity on or prior to May 14, 2001, but not the exercise of any
options held by any other parties. Additionally, shares of Class B Common Stock
are assumed to be converted into shares of Class A Common Stock for purposes of
listing Ms. Stewart's ownership of Class A Common Stock, but for no other
purpose. Shares of Class B Common Stock may be converted on a one-for-one basis
into shares of Class A Common Stock at the option of the holder.
The percentage of votes for all classes is based on one vote for each
share of Class A Common Stock and ten votes for each share of Class B Common
Stock.
Beneficial Ownership
Class A Common Stock Class B Common Stock % Total
--------------------------- ---------------------- Voting
Name Shares % Shares % Power
- ---- ---------- ---------- ---------- ---------- ----------
Martha Stewart ............................ 33,930,975(1) 70.0 33,888,375 100 95.9(2)
KPCB Holdings, Inc. ....................... 1,999,403(3) 13.6 -- -- *
c/o Kleiner Perkins Caufield & Byers
2750 Sand Hill Road
Menlo Park, CA 94025
AOL Time Warner Inc.(4) ................... 1,219,597 8.3 -- -- *
75 Rockefeller Plaza
New York, NY 10019
Capital Group International, Inc.(5) 930,100 6.3 *
11100 Santa Monica Blvd .................
Los Angeles, CA 90025
Charlotte Beers ........................... 33,174(6) * -- -- *
John Doerr ................................ 2,007,675(7) 13.7 -- -- *
Arthur Martinez ........................... --(8) -- -- -- --
Sharon Patrick ............................ 2,455,538(9) 16.6 -- -- *
Naomi O. Seligman ......................... 28,153(10) * -- -- *
Stephen Drucker ........................... 70,015(11) * -- -- *
Helen Murphy .............................. 949(12) * -- -- *
Gael Towey ................................ 443,727(13) 2.9 -- -- *
All directors and executive officers
as a group(14 persons) .................. 39,248,332(14) 79.2 33,888,375 100% 97.1%(2)
- ----------
* The percentage of shares or voting power beneficially owned does not
exceed 1%.
(1) Consists of 5,100 shares of Class A Common Stock held by Martha Stewart,
vested options to acquire 37,500 shares of Class A Common Stock and
33,888,375 shares of Class B Common Stock held by The Martha Stewart
Family Limited Partnership, which shares are convertible into Class A
Common Stock on a share-for-share basis, and excludes unvested options to
acquire 112,500 shares of Class A Common Stock.
(2) Assumes no shares of Class B Common Stock are converted into shares of
Class A Common Stock.
(3) Consists of shares held by KPCB Holdings, Inc., a California corporation,
as nominee for KPCB IX Associates, LLC, Kleiner Perkins Caulfield & Byers
IX-A, L.P. ("KPCB IX-A"), Kleiner Perkins Caufield & Byers IX-B, L.P.
("KPCB IX-B"), KPCB VII Associates, L.P. ("KPCB VII Associates") and KPCB
Information Sciences Zaibatsu Fund II, L.P. ("KPCB ZF II").
(4) AOL Time Warner Inc. beneficially owns these shares through its ownership
of Time Publishing Ventures, Inc., a wholly owned indirect subsidiary of
AOL Time Warner Inc. This information is based on information filed with
the Securities and Exchange Commission by AOL Time Warner Inc. as of
January 22, 2001.
(5) Capital Group International, Inc. beneficially owns these shares through
its ownership of Capital Guardian Trust
14
Company, a bank which holds the shares as the investment manager of
various institutional accounts. This information is based upon information
filed with the Securities and Exchange Commission by Capital Group
International, Inc. as of February 9, 2001.
(6) Consists of 26,174 shares of Class A Common Stock and vested options to
acquire 7,000 shares of Class A Common Stock.
(7) Consists of 1,272 shares of Class A Common Stock, vested options to
acquire 7,000 shares of Class A Common Stock, 1,999,403 shares held by
KPCB Holdings, Inc., a California corporation, as nominee for KPCB IX
Associates, LLC, KPCB IX-A, KPCB IX-B, KPCB VII Associates and KPCB ZF II.
Mr. Doerr is a managing director of KPCB IX Associates and a general
partner of KPCB VII Associates. Mr. Doerr disclaims beneficial ownership
of the shares held on behalf of KPCB IX-A, KPCB IX Associates, KPCB IX-B
and KPCB ZF II.
(8) Does not include unvested options to acquire 5,000 shares of Class A
Common Stock.
(9) Consists of 2,299,951 shares of Class A Common Stock and vested options to
acquire 155,587 shares of Class A Common Stock. Does not include unvested
options to acquire 466,759 shares of Class A Common Stock.
(10) Consists of 21,153 shares of Class A Common Stock and vested options to
acquire 7,000 shares of Class A Common Stock.
(11) Consists of vested options to acquire 70,015 shares of Class A Common
Stock. Does not include unvested options to acquire 210,050 shares of
Class A Common Stock.
(12) Consists of vested options to acquire 949 shares of Class A Common Stock.
(13) Consists of 6,112 shares of Class A Common Stock and vested options to
acquire 437,615 shares of Class A Common Stock. Does not include unvested
options to acquire 278,500 shares of Class A Common Stock.
(14) Consists of 38,253,652 shares of our Class A Common Stock (including
33,888,375 shares resulting from assumed conversion of all outstanding
Class B Common Stock) and vested options to acquire 994,680 shares of
Class A Common Stock. Does not include unvested options to acquire
1,826,093 shares of Class A Common Stock.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our executive officers and directors, and persons who own more than 10% of a
registered class of our equity securities, to file initial statements of
beneficial ownership (Form 3) and statements of changes in beneficial ownership
(Forms 4 and 5) of our common stock with the SEC. Such persons are required by
SEC rules to furnish us with copies of all such forms they file. Based solely on
a review of the copies of such forms furnished to us, and/or written
representations that no additional forms were required, we believe that our
officers, directors and greater than 10% beneficial owners filed all such
required forms in 2000.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Transactions with Time Publishing Ventures and Its Affiliates
Agreements Relating to the 1997 Acquisition
In February 1997, Time Publishing Ventures, Inc. ("TPV") contributed all
of its assets primarily relating to its Martha Stewart-related businesses
(including the Martha Stewart Living magazine, television program and books, and
the Martha by Mail mail order business) to MSLO LLC in exchange for a $30
million note (the "TPV Note"), a 6.27% equity interest in MSLO LLC, and certain
contractual management and other rights incident to that equity interest (the
"TPV Rights"). Additionally, TPV received a special income allocation of $18
million from MSLO LLC soon after the consummation of the transaction.
Retirement of TPV Note, Termination of TPV Rights, TPV Share Buyback and Related
Matters
On March 30, 1999, we satisfied all our obligations under the TPV Note
with cash on hand and borrowings under a term loan (which loan was repaid in
full in July 1999). Additionally, on October 19, 1999 we offered to call TPV's
entire equity interest in MSO pursuant to the terms of MSLO LLC's operating
agreement for approximately $42 million. Under the operating agreement, upon our
purchase of TPV's interest or TPV's rejection of our offer, the TPV Rights would
terminate. On February 18, 2000, we entered into an agreement pursuant to which
we purchased 1,366,000 shares of our Class A Common Stock from TPV
(approximately 52% of TPV's total equity interest in MSO), for $23.79 per share,
or an aggregate $32.5 million. Upon our entering into this agreement, the TPV
Rights terminated. As part of this agreement, TPV agreed to extend certain
agreements we had with TPV's affiliates (as described below under "Ongoing
Service Agreements"), to continue, subject to certain
15
limited exceptions, to hold shares of our Class A Common Stock until 2003, and
to allow us to place advertisements in Time Inc. magazines and websites through
2004 at discounted rates, subject to annual limitations.
Ongoing Service Agreements
In February 1997, Time Inc., Time Customer Service, Inc. ("TCS"), Oxmoor
House, Inc. and Time Distribution Services, Inc. ("TDS") (each a TPV affiliate),
entered into agreements with us to provide us with various services. We believe
that the terms of these agreements, in the aggregate, are at least as favorable
to us as we would be able to obtain with unrelated third parties.
Under our newsstand distribution agreement, TDS provides newsstand
distribution services for our magazines. We compensate TDS on the basis of net
sales. This agreement expires in December 2007, but we have the right to
terminate effective December 2001 and December 2004, in each case on one year's
notice. In 2000, we incurred fees of $2.1 million under this agreement.
Under our fulfillment agreements, TCS provides for inventory management,
"back-office processing" and processing of mail and phone orders for our
magazines and our Internet/Direct Commerce businesses. The fulfillment agreement
for our magazines expires in December 2002, but is renewable at our option for
two additional three-year terms. The fulfillment agreement with respect to our
Internet/Direct Commerce businesses continues until either party provides one
year's notice of termination to the other. In 2000, we incurred fees of
approximately $21.5 million under these agreements.
Under a services agreement with Time Inc., we receive administrative,
editing and sales services, as well as purchase our paper. The administrative,
editing and sales services generally expire in February 2001 and are
automatically renewed for successive six-month or one-year periods, depending on
the service, unless a party terminates that service prior to expiration of the
particular term. Subject to certain limited exceptions, Time has agreed to
extend the paper purchasing portion of the agreement through the end of 2004,
provided that we may terminate the service on 180 days written notice. In 2000,
we incurred expenses of approximately $34.7 million, including $34.1 million for
paper purchases, under this agreement.
Under our agreement with Oxmoor House, we granted Oxmoor House an
exclusive license to use the mark Martha Stewart Living in connection with books
and continuity card and binder programs. Under the agreement, we generally
produce two Best of Martha Stewart Living books and one Christmas with Martha
Stewart Living book each year. Oxmoor House also has the right to publish other
materials bearing the mark Martha Stewart Living as mutually agreed by us and
Oxmoor House. We receive production grants on a per page basis for each of these
publications, an annual payment to cover staff costs and receive 50% of the net
profit. We earned approximately $2.3 million in income under this agreement in
2000. This agreement terminates in December 2001, and Oxmoor House has the right
to renew the agreement for an additional three-year term.
Stockholders Agreement and Registration Rights
Immediately prior to our initial public offering, we entered into a
stockholders agreement with the members of MSLO LLC. Under the terms of this
agreement, TPV, Ms. Stewart, Ms. Patrick and Kleiner Perkins Caufield & Byers
have the right to require us to register shares of our Class A Common Stock
owned or controlled by them, subject to customary terms and minimum amounts.
Registration of these shares of common stock will result in such shares becoming
freely tradable without restriction under the Securities Act of 1933. We will
bear all registration expenses, other than any underwriting discounts, incurred
in connection with the above registrations. These registration rights continue
as long as these stockholders continue to hold any of our common stock that they
received in the merger of MSLO LLC into MSO.
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Agreements with Martha Stewart
Location Rental Agreement
We have entered into a location rental agreement with Ms. Stewart relating
to our use of various properties owned by her. The agreement has a five-year
term, provides for annual payments of $2.0 million to MS Real Estate Management
Company, a corporation owned by Ms. Stewart that operates Ms. Stewart's real
estate, and permits us to use the properties currently owned by Ms. Stewart for
any purpose relating to our businesses. We make extensive use of these
properties for television filming, photography, research and development of
content and products and various other commercial purposes. This location rental
agreement became effective at the time of our initial public offering and
replaced an agreement that paid Ms. Stewart an annual rental fee of $1.5
million. The increased fee reflects our access to additional properties,
increased property values and additional usages of these properties since the
acquisition from TPV in February 1997. We believe this rate is at least as
favorable to us as what we would have to pay to locate and use similar
properties owned by a third party. In the event that Ms. Stewart's employment is
terminated without cause, or she terminates employment for good reason, we will
be obligated to pay the remaining amount due under the location rental agreement
and we will lose our access to these properties.
Intellectual Property License Agreement
We have entered into an intellectual property license and preservation
agreement with Ms. Stewart that, as of the time of our initial public offering,
replaced a prior non-perpetual license agreement entered into in February 1997.
Under the terms of this new license agreement, Ms. Stewart granted us an
exclusive, worldwide, perpetual royalty-free license to use her name, likeness,
image, voice and signature for our products and services. We are currently the
owner of the primary trademarks employed in our business and, under the license
agreement, generally have the right to develop and register in our name
trademarks that incorporate "Martha Stewart," such as Martha Stewart Living, and
to use exclusively these marks in our business. If Ms. Stewart ceases to be our
Chairman or Chief Executive Officer and no longer controls our company, we will
continue to have those rights, including the right to use those marks for any
new business as long as such new business is substantially consistent with the
image, look and goodwill of the licensed marks at the time that Ms. Stewart
ceases to be such an officer or to control us.
The term of the license is perpetual; however, Ms. Stewart may terminate
the license if we fail to make the royalty payments described below. In the
event that we terminate Ms. Stewart's employment without cause or she terminates
her employment for good reason, each as defined in her employment agreement, the
license will cease to be exclusive and we would be limited in our ability to
create new marks incorporating her name, likeness, image, publicity and
signature. In these circumstances, Ms. Stewart would receive the right to use
her name in other businesses that could directly compete with us, including our
magazine, television and merchandising businesses. In addition, if Ms. Stewart's
employment terminates under these circumstances, Ms. Stewart would receive in
perpetuity a royalty of 3% of the revenues we derive from any of our products or
services bearing any of the licensed marks. The intellectual property license
agreement contains various customary provisions regarding our obligations to
preserve the quality of the licensed marks and to protect these marks from
infringement by third parties.
Other Relationships
In 2000, we reimbursed MS Real Estate Management Company approximately
$216,000 for various expenses it incurred in connection with our businesses.
We periodically use the services of Emery Cuti Brinckerhoff & Abady, a law
firm of which Ms. Stewart's son-in-law is a partner. In 2000, we paid
approximately $72,000 in fees and expenses in respect of such services.
Ms. Margaret Christiansen, Ms. Stewart's sister-in-law, is a Senior Vice
President, Business Manager of MSO. Mr. Randy Plimpton, Ms. Stewart's
brother-in-law, is our property manager, responsible for MSO property management
and support services. In 2000, each of these individuals received compensation
under our compensation policies and programs described elsewhere in this proxy
statement.
17
PERFORMANCE GRAPH
The following graph compares the performance of our Class A Common Stock
with that of the S & P 500 Index and the stocks included in the Media General
Financial Services database under the Standard Industry Code 2721
(Publishing-Periodicals) (the "Publishing Index") during the period commencing
on October 19, 1999, the date on which our Class A Common Stock began trading on
The New York Stock Exchange, and ending on December 31, 2001. The graph assumes
that $100 was invested in each of our Class A Common Stock*, the S & P 500 Index
and the Publishing Index** at the beginning of the relevant period, is
calculated as of the end of each calendar month and assumes reinvestment of
dividends. The performance shown in the graph represents past performance and
should not be considered an indication of future performance.
MARTHA
STEWART PEER GROUP -
LIVING MEDIA
OMNIMEDIA, S&P 500 GENERAL SIC
INC. INDEX CODE INDEX
---------- --------- ------------
10/19/99 $ 100.00 $ 100.00 $ 100.00
10/29/99 204.86 108.06 96.58
11/30/99 172.22 110.25 100.80
12/31/99 133.33 108.04 119.56
01/31/00 125.00 102.61 121.28
02/29/00 142.71 100.67 116.75
03/31/00 143.75 110.52 122.71
04/30/00 79.17 107.20 105.84
05/31/00 92.01 105.00 101.57
06/30/00 122.22 107.58 126.69
07/31/00 137.85 105.90 120.03
08/31/00 187.50 112.48 126.19
09/30/00 145.83 106.54 114.61
10/31/00 139.24 106.09 121.88
11/30/00 124.65 97.73 114.18
12/31/00 111.46 98.21 132.14
- ----------
* The investment price in our Class A Common Stock is $18.00 per share, our
initial public offering price.
** The Publishing Index consists of companies that are primarily publishers
of periodicals, although many also conduct other businesses, including
owning and operating television stations and cable networks, and is
weighted according to market capitalization of the companies in the index.
The hypothetical investment assumes investment in a portfolio of equity
securities that mirror the composition of the Publishing Index. Since the
Publishing Index is only calculated at the end of each month, we have
interpolated the return on the index from October 19, 1999 through October
31, 1999 on a straight-line basis.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee's purpose is to assist the Board of Directors in its
oversight of MSO's internal controls and financial statements and the audit
process. All members of the Committee are "independent", as required by
applicable listing standards of the New York Stock Exchange, and the composition
of the Committee otherwise meets the standards of the New York Stock Exchange.
The Committee operates pursuant to a Charter that was last amended and restated
by the Board on February 20, 2001; a copy of the current Charter is attached to
this proxy statement as Annex A.
Management is responsible for the preparation, presentation and integrity
of MSO's financial statements, accounting and financial reporting principles and
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. The independent auditors, Arthur
Andersen LLP,
18
are responsible for performing an independent audit of the consolidated
financial statements in accordance with generally accepted auditing standards.
In performing its oversight role, the Audit Committee has, among other
things covered in its charter, reviewed and discussed the audited financial
statements with management and the independent auditors. The Committee has also
discussed with the independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61, Communication with Audit Committees, as
currently in effect. The Committee has received the written disclosures and the
letter from the independent auditors required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees, as currently in
effect. The Committee has also considered whether the provision of information
technology consulting services and other non-audit services by the independent
auditors is compatible with maintaining the auditors' independence and has
discussed with the auditors the auditors' independence.
Based on the reports and discussions described in this Report, and subject
to the limitations on the role and responsibilities of the Committee referred to
in this report and in the Charter, the Audit Committee recommended to the Board
of Directors that the audited financial statements be included in the Annual
Report on Form 10-K for the fiscal year ended December 31, 2000.
The members of the Audit Committee are not professionally engaged in the
practice of auditing or accounting and are not experts in the fields of
accounting or auditing, including in respect of auditor independence. Members of
the Committee rely without independent verification on the information provided
to them and on the representations made by management and the independent
auditors. Accordingly, the Audit Committee's oversight does not provide an
independent basis to determine that management has maintained appropriate
accounting and financial reporting principles or appropriate internal controls
and procedures designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the Audit Committee's
considerations and discussions referred to above do not assure that the audit of
MSO's financial statements has been carried out in accordance with generally
accepted auditing standards, that the financial statements are presented in
accordance with generally accepted accounting principles or that Arthur Andersen
LLP is in fact "independent."
Members of the Audit Committee
Charlotte L. Beers
Arthur C. Martinez
Naomi O. Seligman
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP acted as our independent public accountants for the
fiscal year ended December 31, 2000. Arthur Andersen LLP has served as our
independent accountants since 1996. A representative of Arthur Andersen LLP is
expected to be present at the Annual Meeting and will be given an opportunity to
make a statement if he or she so chooses and will be available to respond to
appropriate questions.
Audit Fees
The aggregate fees billed by Arthur Andersen LLP for professional services
rendered for the audit of our annual financial statements for the fiscal year
ended December 31, 2000 and for the reviews of the financial statements included
in our Quarterly Reports on Form 10-Q for that fiscal year were $300,000.
Financial Information Systems Design and Implementation Fees
Arthur Andersen LLP billed no fees for professional services rendered to
MSO for information technology services relating to financial information
systems design and implementation for the fiscal year ended December 31, 2000.
19
All Other Fees
The aggregate fees billed by Arthur Andersen LLP for services rendered to
MSO, other than the services described above under "Audit Fees," for the fiscal
year ended December 31, 2000 were $655,023.
ANNUAL REPORTS
Upon written request to the Corporate Secretary, Martha Stewart Living
Omnimedia, Inc., 11 West 42nd Street, New York, New York 10036, we will provide
without charge to each person solicited a copy of our 2000 Annual Report on Form
10-K, including the financial statements and financial statement schedules filed
therewith. We will furnish a requesting securityholder with any exhibit not
contained therein upon specific request.
PROPOSALS OF STOCKHOLDERS
We currently intend to hold our next annual meeting in May of 2002.
Stockholders who intend to have a proposal considered for inclusion in our proxy
materials for presentation at the 2002 Annual Meeting of Stockholders must
submit the proposal to us at our principal executive offices, addressed to the
Corporate Secretary, no later than December 1, 2001. Stockholders who intend to
present a proposal at the 2002 Annual Meeting of Stockholders without inclusion
of such proposal in our proxy materials are required to provide us notice of
such proposal no later than February 14, 2002. We reserve the right to reject,
rule out of order, or take other appropriate action with respect to any proposal
that does not comply with these and other applicable requirements contained in
our by-laws and applicable laws.
OTHER MATTERS
Our Board has no knowledge of any other matters to be presented at the
Annual Meeting other than those described herein. If any other matters should
properly come before the meeting, it is the intention of the persons designated
in the proxy to vote on them according to their best judgment.
YOUR VOTE IS IMPORTANT. OUR BOARD URGES YOU TO MARK, DATE, SIGN AND RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE.
IN THE ALTERNATIVE, SHAREHOLDERS MAY VOTE VIA THE INTERNET OR TELEPHONE AS
DESCRIBED IN THE ENCLOSED MATERIALS.
If you have any questions or need assistance in voting your shares, please
contact Mellon Investor Services LLC at 1-800-851-9677.
New York, New York
March 31, 2001
20
Annex A
MARTHA STEWART LIVING OMNIMEDIA, INC.
AUDIT COMMITTEE CHARTER
I. PURPOSE; AUTHORITY; COMPOSITION
The Board of Directors of Martha Stewart Living Omnimedia, Inc. (the
"Corporation") has established an Audit Committee with authority, responsibility
and specific duties as described below.
The primary function of the Audit Committee is to assist the Board
of Directors in fulfilling its oversight responsibilities by
reviewing: (1) the financial reports of the Corporation; (2) the
Corporation's systems of internal controls regarding finance and
accounting that management and the Board have established; and (3)
the Corporation's accounting and financial reporting processes
generally. Consistent with this function, the Audit Committee should
encourage continuous improvement of, and should foster adherence to,
the Corporation's policies, procedures and practices at all levels.
The Audit Committee's primary duties and responsibilities are to:
o Serve as an independent and objective party to monitor the
Corporation's financial reporting process and internal control
system;
o Review and appraise the audit efforts of the Corporation's
independent auditors; and
o Provide an open avenue of communication among the independent
auditors, financial and senior management, and the Board of
Directors.
The Audit Committee will primarily fulfill these responsibilities by
carrying out the activities enumerated in Section III of this
Charter. The Audit Committee has the authority to investigate any
activity of the Corporation. The Audit Committee is empowered to
retain persons having special competence as necessary to assist the
Audit Committee in fulfilling its responsibilities.
The Audit Committee shall be composed of Directors that meet the
independence, financial literacy and other eligibility requirements
of the New York Stock Exchange.
II. MEETINGS
The Committee shall meet at least two times annually, or more
frequently as circumstances dictate. As part of its job to foster
open communication, the Committee should meet with management and
the independent auditors in separate executive sessions to discuss
any matters that the Committee or each of these groups believe
should be discussed privately. The Audit Committee shall also
regularly communicate its activities and findings to the entire
Board of Directors. In addition, the Committee, or its Chair, if
any, should hold discussions with the independent auditors and
management as needed regarding the Corporation's financial
statements (consistent with III.2., 3. and 4. below).
III. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties, the Audit Committee
shall:
Documents and Reports
1. Review and, if appropriate, update, this Charter periodically,
at least annually, as conditions dictate.
2. Review the Corporation's annual and quarterly financial
statements. The Audit Committee shall have discussions with
management and the independent auditors with respect to
21
financial statements to be included in the Corporation's
Annual Report on Form 10-K to be filed with the United States
Securities and Exchange Commission.
3. Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Corporation's annual
proxy statement.
Independent Auditors
4. Recommend to the Board of Directors the selection of the
independent auditors, considering independence and
effectiveness. The Audit Committee shall review the
performance of the independent auditors and approve any
proposed discharge of the independent auditors when
circumstances warrant. The independent auditors are ultimately
accountable to the Board of Directors and the Audit Committee
shall convey this accountability to the independent auditors.
On a periodic basis, the Committee shall receive written
reports from the independent auditors regarding the auditors'
independence, discuss such reports with the auditors, consider
the compatibility of any non-audit services with the auditors'
independence, and, if so determined by the Audit Committee,
recommend that the Board take appropriate action to satisfy
itself of the continued independence of the auditors. The
Audit Committee shall also review the fees and other
compensation to be paid to the independent auditors.
Financial Reporting Process
5. In consultation with management and the independent auditors,
review the integrity of the Corporation's financial reporting
processes, both internal and external.
6. The independent auditors shall discuss with the Audit
Committee both the quality and the acceptability of the
Corporation's accounting policies.
7. Consider and approve, if appropriate, major changes to the
Corporation's accounting principles and practices as suggested
by the independent auditors or management.
8. Obtain from the independent auditor assurance that the audit:
a) contains procedures designed to provide reasonable
assurance of detecting illegal acts that would have a
direct and material effect on the financial statements;
b) contains procedures designed to identify related party
transactions that are material to the financial
statements or otherwise require financial statement
disclosure; and
c) includes an evaluation of the Corporation's ability to
continue as a going concern during the ensuing fiscal
year.
9. Discuss with the independent auditor the matters required to
be discussed by Statement on Auditing Standards No. 61
relating to the conduct of the audit.
10. Following completion of the audit, review with each of
management and the independent auditors any significant
difficulties encountered during the course of the audit,
including any restrictions on the scope of work or access to
required information.
Other
11. Meet periodically with management to review the Corporation's
major financial risk exposures and the steps management has
taken (or intends to take) to monitor and control such
exposures.
12. Review, with the Corporation's counsel, any legal matter that
could have a significant impact on the Corporation's financial
statements.
13. Perform any other activities consistent with this Charter, the
Corporation's By-laws and governing law, as the Committee or
the Board deems necessary or appropriate.
22
IV. LIMITATION ON RESPONSIBILITY
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Corporation's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. Nor is it the duty of the Audit Committee to conduct investigations
or to assure compliance with laws and regulations and the Corporation's internal
policies.
23
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
MARTHA STEWART LIVING OMNIMEDIA, INC.
The undersigned hereby appoints Gregory Blatt, James Follo and Karl Wachter as
proxies, with power to act without the other and with power of substitution, and
hereby authorizes them to represent and vote, as designated on the other side,
all the shares of stock of Martha Stewart Living Omnimedia, Inc. standing in the
name of the undersigned with all powers which the undersigned would possess if
present at the Annual Meeting of Stockholders of Martha Stewart Living
Omnimedia, Inc. to be held May 2, 2001 or any adjournment thereof.
(Continued, and to be marked, dated and signed, on the other side)
^ FOLD AND DETACH HERE ^
The Board of Directors recommends a vote FOR Proposal 1.
1. Election of Directors
Nominees: 01 Charlotte L. Beers, 02 L. John Doerr, 03 Arthur C. Martinez, 04
Sharon L. Patrick, 05 Naomi O. Seligman, 06 Martha Stewart
FOR WITHHELD
FOR ALL WITHHELD FOR: (Write that nominee's name in the space
|_| |_| provided below.)
- --------------------------------------------------------------------------------
I WILL ATTEND THE MEETING |_|
Signature ______________________ Signature ____________________ Date _________
NOTE: Please sign as name appears 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 ^
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in the same manner as if you marked, signed and returned your proxy card.
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OR
Mail
Mark, sign and date your proxy card and return it in the enclosed postage-paid
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If you vote your proxy by Internet or by telephone,
you do NOTneed to mail back your proxy card.