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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Hooper Holmes Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Hooper Holmes Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
Please mark your
[X] votes as in this
example.
|9156
----
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR election of
directors, and FOR proposal 2.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Election of Directors and FOR
proposal 2.
- --------------------------------------------------------------------------------
FOR ABSTAIN
1. Election of
Directors: [_] [_]
FOR AGAINST ABSTAIN
2. Approval of [_] [_] [_]
Independent
Auditors.
3. In their discretion, upon other matters as may properly come before the
meeting or any adjournment(s) thereof.
Nominees:
- --------
James M. McNamee
Kenneth R. Rossano
G. Earle Wight
For, except vote withheld from the following nominee(s):
- -----------------
- --------------------------------------------------------------------------------
SIGNATURE(S) DATE
------------------------------------------- ---------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
The signer hereby revokes all proxies heretofore given by the signer to
vote at said meeting or any adjournments thereof.
- --------------------------------------------------------------------------------
PROXY
HOOPER HOLMES, INC.
Proxy Solicited on Behalf of the Board of Directors of
the Company for Annual Meeting, May 19, 1998
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 March 31, 1998, 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
-------------
- --------------------------------------------------------------------------------
<PAGE>
[LOGO OF
HOOPER HOLMES, INC.
APPEARS HERE]
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 19, 1998 at 11:00 a.m. local
time, at the American Stock Exchange, 86 Trinity Place, New York, New York.
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, 1998
<PAGE>
HOOPER HOLMES, INC.
170 Mt. Airy Road
Basking Ridge, New Jersey 07920
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held May 19, 1998
------------------
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 19, 1998 at 11:00 a.m. local time, at the American
Stock Exchange, 86 Trinity Place, New York, New York, for the following
purposes:
1. To elect directors.
2. To ratify the selection of the firm of KPMG Peat Marwick LLP as
auditors for the 1998 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 March 31, 1998, 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, 1998
- --------------------------------------------------------------------------------
Please sign the enclosed proxy and return it promptly in the envelope enclosed
which requires no postage if mailed in the United States.
- --------------------------------------------------------------------------------
<PAGE>
HOOPER HOLMES, INC.
170 Mt. Airy Road
Basking Ridge, New Jersey 07920
---------------
PROXY STATEMENT
---------------
INTRODUCTION
The enclosed proxy is solicited by the Board of Directors of Hooper Holmes,
Inc., (the "Company") for use at the Annual Meeting of Shareholders to be held
on May 19, 1998.
An Annual Report to Shareholders containing the financial statements for the
fiscal year ended December 31, 1997 is enclosed herewith. 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, 13,986,174 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
<PAGE>
ITEM 1--ELECTION OF DIRECTORS
The Board of Directors consists of nine members divided into three classes of
three members each. There are currently two vacancies on the Board, which were
created by the death of Frederick D. King and the retirement of Anne King
Sullivan in 1996. (Their terms were scheduled to expire at the 1999 Annual
Meeting.) 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 2001 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 2001)
The nominees for directors and further information with respect to each
nominee are set forth below.
James M. McNamee
Mr. McNamee, age 53, 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 63, is Senior Vice President, Cassidy & Associates in Boston,
Massachusetts. From 1991 to 1992, he was Vice President, Development,
Massachusetts Higher Education Assistance Corporation in Boston, Massachusetts.
He has been a director of the Company since 1967, and is a member of the
Executive Committee and the Nominating Committee. Mr. Rossano is also a director
of Psy-Ed Corporation and A+ America, Inc.
G. Earle Wight
Mr. Wight, age 64, 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 1999 and 2000 and
further information with respect to each continuing director are set forth
below.
Benjamin A. Currier
Mr. Currier, age 63, was Senior Vice President of Operations for Security Life
of Denver Insurance Company, a subsidiary of ING/Barings, in Denver, Colorado
prior to his retirement in 1997. Mr. Currier was Vice President, Allstate Life
Insurance Company from 1978 to 1995. He has been a director of the Company since
1996, and is a member of the Audit Committee and the Executive Compensation
Committee. (Term expires at the Annual Meeting in 1999).
2
<PAGE>
John E. Nolan
Mr. Nolan, age 70, is a partner in the law firm of Steptoe & Johnson, LLP,
Washington, D.C. and has been engaged in the practice of law since 1956. He has
been a director of the Company since 1971, and is a member of the Audit
Committee and the Executive Committee. Mr. Nolan also serves on the Board of
Directors of Iomega Corporation. (Term expires at the Annual Meeting in 2000.)
Elaine L. Rigolosi
Dr. Rigolosi, Ed.D, J.D., age 53, is Professor, Department of Organization and
Leadership, Teachers College, Columbia University. She has been associated with
Columbia University since 1976, and has maintained a private consulting practice
in management for health care organizations since 1974. Dr. Rigolosi has been a
director of the Company since 1989, and is a member of the Audit Committee and
the Executive Compensation Committee. (Term expires at the Annual Meeting in
2000.)
Quentin J. Kennedy
Mr. Kennedy, age 64, 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 2000.)
3
<PAGE>
Certain Relationships and Related Transactions
Messrs. Wight and Rossano are brothers-in-law.
On July 7, 1992 and September 23, 1993 the Company made loans to Mr. James M.
McNamee, Chairman of the Board, President, CEO and a director, in the amount of
$49,341 and $45,023 respectively, which were due and payable in 36 months from
the date of the loan and subsequently extended 24 and 12 months, respectively,
for the purpose of paying taxes due on stock compensation. The maximum amount
outstanding in 1997 was $22,952. Interest is accrued at the rates of 4.8% and
3.6% respectively and interest and principal were repaid through payroll
deductions. As of March 31, 1998, both loans were paid off.
Mr. John E. Nolan, a director of the Company, is a partner in the law firm of
Steptoe & Johnson, LLP, which performs legal services for the Company.
Compensation of Directors
Each outside director of the Company will receive an annual fee of $12,000 in
1998 plus a $500 fee for each committee meeting attended. In accordance with the
1997 Director Option Plan, each outside director received stock options to
purchase 50,000 shares of common stock pursuant to the Plan. Directors who are
employees of the Company do not receive stock options pursuant to the Plan nor
do they receive director fees. Directors are also reimbursed for out-of-pocket
expenses incurred in attending Board and committee meetings.
In June, 1990, the Company entered into supplemental indemnity agreements with
its executive officers and directors. The indemnity agreements require the
Company to indemnify such person for all expenses actually and reasonably
incurred in defending or settling an action to which such person is a party or
threatened to be made a party or is otherwise involved because of his or her
status as an officer or director of the Company. If the action is brought by or
in the right of the Company, the indemnification must be made only if such
person acted in good faith, for a purpose reasonably believed to be in the best
interest of the Company (or, in the case of service to another entity, not
opposed to the interest of the Company).
Committees of the Board
The Board of Directors has an Audit Committee, an Executive Committee, a
Nominating Committee and an Executive Compensation Committee.
The Audit Committee acts as principal liaison between the Board of Directors
and the independent auditors employed by the Company and reviews the annual
financial statements and the Company's internal accounting systems and controls.
The Committee also recommends to the Board of Directors the selection of
independent auditors to be employed by the Company.
The Executive Committee exercises the authority of the Board of Directors in
certain corporate matters between meetings and exercises specific powers and
authority as may from time to time be lawfully delegated to it by the Board of
Directors.
The Nominating Committee nominates individuals for election or reelection to
the Board of Directors. It will consider nominations recommended by shareholders
who submit written recommendations to the Nominating Committee in care of the
Secretary of the Company.
4
<PAGE>
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 and the 1997 Director 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 three special meetings
during the fiscal year ended December 31, 1997. The Audit Committee met twice,
the Executive Committee met once, the Executive Compensation Committee met three
times, and the Nominating Committee did not meet in 1997. All directors attended
at least 75% of the total number of meetings of the Board of Directors and the
committees to which they belong.
Compensation Committee
For 1997, Dr. Elaine L. Rigolosi and Messrs. Quentin J. Kennedy and Benjamin
A. Currier served on the Executive Compensation Committee.
Executive Officers
Set forth below are the executive officers of the Company who are not
Directors. Executive officers serve at the pleasure of the Board of Directors.
Information is not included in this Proxy Statement for that portion of any
period for which information is required during which any executive officer did
not hold such position.
Robert William Jewett
Mr. Jewett, age 45, 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.
Paul Kolacki
Mr. Kolacki, age 55, has served as Executive Vice President and Chief Operating
Officer of the Company's Portamedic Health Information Services Division since
1991, and has been an employee of the Company since 1964.
Fred Lash
Mr. Lash, age 52, has served as Senior Vice President of the Company since
1993, as Chief Financial Officer since 1989 and as Treasurer since 1987.
Francis A. Stiner
Mr. Stiner, age 64, has served as Vice President, Administrative Group of the
Company since 1990 and has been an employee of the Company since 1959.
5
<PAGE>
Stock Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of February 27, 1998, the beneficial
ownership of the Company's issued and outstanding Common Stock (on the basis of
13,981,949 shares outstanding), including the stock ownership of each person
who, to the Company's knowledge, owns over 5% of the Company's outstanding
Common Stock, each of the directors of the Company, each executive officer named
in the Summary Compensation Table which follows, and the directors and officers
of the Company as a group, and the percentage which the shares owned constitute
of the total shares outstanding.
<TABLE>
<CAPTION>
Amount & Nature Percent of Class
of Beneficial (based on # of
Name, Position & Address Ownership of shares outstanding
of Beneficial Owners Common Stock (1) 2/27/98)
-------------------------- ------------------ --------------------
Directors
- ---------
<S> <C> <C>
G. Earle Wight 368,262 (2) 2.63%
John E. Nolan 10,000 .07%
Kenneth R. Rossano 378,188 (3) 2.70%
James M. McNamee 569,854 (4) 4.07%
Quentin J. Kennedy 7,000 .05%
Elaine L. Rigolosi 2,100 (5) .01%
Benjamin A. Currier 5,380 .03%
Other Most Highly Paid Executive Officers
- -----------------------------------------
Paul W. Kolacki 91,474 (6) .65%
Fred Lash 82,984 (7) .59%
Robert William Jewett 21,354 (8) .15%
All officers and directors as a group (11 total) 1,564,360 (9) 11.18%
</TABLE>
- --------------------
(1) Includes shares, if any, held by or for a spouse or minor children or as a
trustee. Unless otherwise indicated, the director or 5% stockholder
possesses sole investment and voting power in respect of these shares.
(2) Includes 270,286 shares held by the Lucile K. Wight Trust, of which Mr.
Wight is trustee with sole voting and dispositive power, and 88,590 shares
held by 874367 Ontario, Inc., a corporation of which Mr. Wight and his
spouse Sonia are sole shareholders.
(3) Includes 128,363 shares held by Mr. Rossano's spouse, Cynthia, and 229,301
shares held by The Cynthia W, Rossano 1991 Trust, of which Mr. and Mrs.
Rossano are trustees with sole voting and dispositive power.
6
<PAGE>
(4) Includes 120,802 shares held by Mr. McNamee and his spouse Patricia as joint
tenants, 24,020 shares held by Mr. McNamee's spouse, Patricia, 3,532 shares
held by Mr. McNamee's spouse Patricia as custodian for Sean McNamee, their
minor child, and 18,000 shares held by the Trust under the will of Eileen
Rooney FBO Kevin Rooney, of which Mr. McNamee is Trustee with sole voting
and dispositive power. Also includes 403,500 shares underlying currently
exercisable options.
(5) Includes 900 shares held by Ms. Rogolosi's spouse, Robert.
(6) Includes 800 shares held by Mr. Kolacki and his spouse, Sandra, as joint
tenants. Also includes 88,000 shares underlying currently exercisable
options.
(7) Includes 600 shares held by Mr. Lash and his spouse, Suzanne, as joint
tenants. Also includes 81,550 shares underlying currently exercisable
options.
(8) Includes 19,250 shares underlying currently exercisable options.
(9) 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 618,900 shares underlying currently exercisable
options.
Compliance with Section 16(a)
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors of the Company and persons who beneficially own more than
ten percent of the Company's Common Stock to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC") and the
American Stock Exchange. Based solely on a review of reports and written
representations furnished to the Company, the Company believes that all Section
16(a) filing requirements applicable to its executive officers, directors and
shareholders were complied with, except for three Form 4s reporting sales of
stock which were filed late by Mr. G. Earle Wight, two Form 4s reporting
acquisitions of stock which were filed late by Mr. James M. McNamee, one Form 4
reporting the purchase of stock which was filed late by Mr. Benjamin A. Currier,
one Form 4 reporting a bona fide gift of stock which was filed late by Mr.
Kenneth R. Rossano, one Form 4 reporting the acquisition of stock which was
filed late by Dr. Elaine L. Rigolosi and one Form 4 reporting the purchase of
stock which was filed late by Mr. Quentin J. Kennedy.
7
<PAGE>
Compensation of Executive Officers
The following table provides certain summary information concerning
compensation paid or accrued for the last three complete fiscal years to or on
behalf of the Company's Chief Executive Officer and the three other most highly
paid executive officers of the Company whose total annual salary and bonus
exceeded $100,000 in 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------------------------------
Long term compensation
----------------------
Annual compensation Awards Payouts
------------------- ---------- ---------
Securities
Name and underlying LTIP All other
principal Salary Bonus options payouts compensation
position Year ($)(1) ($)(2) (#)(3) ($)(4) ($)(5)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
James M. McNamee 1997 358,000 283,910 280,000 283,124 62,827
Chairman, President and 1996 276,500 42,000 0 - 63,244
Chief Executive Officer 1995 265,000 83,000 100,000 - 62,806
Paul W. Kolacki 1997 192,500 80,000 44,000 - 43,845
Executive Vice President 1996 172,500 75,000 0 - 44,135
and Chief Operating Officer 1995 159,500 42,500 66,000 - 43,419
Fred Lash 1997 170,500 55,000 40,000 - 24,105
Senior Vice President, 1996 155,000 55,000 0 - 24,055
Chief Financial Officer 1995 142,800 40,000 52,600 - 23,580
and Treasurer
Robert William Jewett 1997 133,400 20,000 16,000 - 13,951
Senior Vice President, 1996 127,006 17,500 0 - 13,598
General Counsel and Secretary 1995 120,800 15,000 30,400 - 12,673
</TABLE>
- -----------------
(1) Includes directors fees paid to Mr. McNamee in 1995 and 1996.
(2) For Mr. McNamee, includes stock awards with a fair market value of $133,910
and $48,000, in 1997 and 1995 respectively. Perquisites fall below the
thresholds required for disclosure and, accordingly, have been omitted.
(3) Includes the effect of a two for one stock split of the Company's Common
Stock in 1997.
(4) 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.
(5) The amounts disclosed in this column include:
(a) Company contributions of the following amounts in 1997, 1996, and 1995
respectively, under the Company's Salary Reduction Plan, a defined
contribution plan, on behalf of Mr. McNamee ($2,375, $2,792 and
$2,354), Mr. Kolacki ($2,375, $2,665 and $1,949), Mr. Lash ($2,375,
$2,325 and $1,850) and Mr. Jewett ($2,208, $1,855 and $930).
(b) Payment by the Company in 1997, 1996 and 1995 of premiums on
whole-life insurance policies in the following annual amounts for Mr.
McNamee ($55,877 per year), Mr. Kolacki ($41,470 per year), Mr. Lash
($21,730 per year) and Mr. Jewett ($11,743 per year).
(c) Payment by the Company in 1997, 1996 and 1995 of premiums on a
disability insurance policy for Mr. McNamee of $4,575 per year.
8
<PAGE>
Option Grants in Last Fiscal Year
OPTION GRANTS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Individual grants
- -----------------------------------------------------------------------------------
Number of % of total
securities underlying options granted Grant date
options to employees in Exercise Expiration present
Name granted (#) fiscal year price ($/Sh) date value ($)(3)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
James M.McNamee
Chairman, President and 80,000(1) 14.6% 8.13 1/2007 364,000
Chief Executive Officer 200,000(2) 36.5% 8.56 4/2007 994,000
Paul W. Kolacki
Executive Vice President 44,000(1) 8.0% 8.13 1/2007 200,200
and Chief Operating
Officer
Fred Lash
Senior Vice President, 40,000(1) 7.3% 8.13 1/2007 182,000
Chief Financial Officer
and Treasurer
Robert William Jewett
Senior Vice President, 16,000(1) 2.9% 8.13 1/2007 72,800
General Counsel and
Secretary
</TABLE>
(1) The Stock Option Plan grants become 25% exercisable commencing 24 months
after grant date and 25% become exercisable on each successive anniversary
of that date, with full vesting occurring on the fourth anniversary date.
The options terminate upon termination of employment for any reason other
than death, disability or retirement. Further, to be eligible to exercise
the options, an optionee must remain in the employment of the Company for a
period of 24 months from the date of grant (or retirement, if earlier).
Options that are not fully vested and exercisable as of the date the
optionee terminates employment because of death, disability or retirement,
or as of the date of an actual or threatened change in control of the
Company, become vested and exercisable in full on such date.Similarly, the
vesting of options may be accelerated in connection with certain mergers,
consolidations, sales or transfers by the Company of substantially all of
its assets. These options were granted under the 1994 Option Plan on
January 28, 1997.
(2) These options were granted under the 1997 CEO Stock Option Agreement on
April 9, 1997. 20% were immediately exercisable and 20% become exercisable
on each successive April 9th, with full vesting occurring on April 9,
2001.If the Company's earnings per share are at least $0.70 for the year
ending December 31, 1998 and the Company's closing stock price is at least
$15 per share for any 30 day period during the six months ending June 30,
1999, then the options will become fully vested at that time.
9
<PAGE>
(3) The values shown were calculated using the Black-Scholes option pricing
model and are presented solely for the purposes of comparative disclosure
in accordance with certain regulations of the SEC. The Black-Scholes model
is a mathematical formula widely used to value traded stock price
voluntarily and dividend yield. The actual value that an executive officer
may realize, if any, depends on the amount by which the stock price at the
time of exercise exceeds the exercise price (fair market value of the stock
at the time of the grant). There is no assurance that the value realized by
an executive officer will be at or near the value estimated by the
Black-Scholes model. In calculating the grant date present values set forth
the table, the Company used the following assumptions: (a) expected
volatility of 39%; (b) discount rate of 6.125%; (c) dividend yield of .4%;
and (d) exercise at the end of 9 year period from the date of grant. No
adjustments have been made for non-transferability or risk of forfeiture.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table provides certain information on options exercised in 1997
and the value of certain unexercised options at December 31, 1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
- ----------------------------------------------------------------------------------------------------------------------
Value of
Number of securities unexercised
underlying in-the-money
unexercised options options at
at FY-end (#)(2) FY-end ($)(3)
Shares
acquired Value Exercisable/ Exercisable/
Name on exercise(#) realized ($)(1) Unexercisable Unexercisable
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
James M. McNamee 22,500 228,925 343,500/387,500 2,873,844/2,770,219
Paul W. Kolacki 11,250 157,500 73,000/113,000 619,425/964,475
Fred Lash 11,250 153,281 70,650/98,950 586,310/829,645
Robert William Jewett 41,000 299,239 15,800/44,000 146,643/389,397
- --------------------
</TABLE>
(1) Amount represents the difference between the exercise price and the fair
market value on the date of exercise, multiplied by the number of options
exercised.
(2) Includes the effect of a two for one stock split of the Company's Common
Stock in 1997.
(3) Amount represents the difference between the exercise price and the fair
market value on December 31, 1997 ($14.5625), multiplied by the number of
options unexercised.
10
<PAGE>
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 1997 was comprised of three
directors who are not present or former employees of the Company. The Committee
establishes compensation policies for the CEO and other executive officers and
administers the Company's programs for cash compensation and stock awards,
bonuses and options.
Essentially, the Committee believes that executive compensation should be
largely determined by management's performance in the shareholders' interests.
This usually means earnings. Sustained growth in earnings will ultimately be
reflected in increased shareholder value and positioning the Company for future
growth in revenues and earnings is an important management function.
The Committee believes that employee stock ownership effectively aligns
employees with the interests of stockholders and looks to stock options to
provide an opportunity for employee stock ownership. The Committee further
believes that compensation is important to attract talented individuals to the
Company, to retain them and to provide incentive.
Compensation includes salary, cash bonuses and stock options. 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 the CEO and, with
the advice and recommendations of the CEO, 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.
For 1997, Mr. McNamee was awarded a cash bonus of $150,000 in recognition of
the Company's outstanding performance. He had received a cash bonus of $42,000
for 1996. 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 1997, the CEO
received a stock award of 7,000 shares. The CEO had received a stock award of
2,500 shares (pre-split) for 1996. Stock bonuses for the CEO are based on
sustained increases in earnings per share. For 1997, the CEO received a stock
bonus of 14,800 shares. No stock bonus was awarded to the CEO for 1994, 1995 or
1996. In addition, on January 28, 1997, Mr. McNamee was awarded options to
purchase 80,000 shares of common stock pursuant to the 1994 Option Plan. These
options become exercisable 25% after two years and 25% each year thereafter, at
an exercise price of $8.125 per share.
For 1996 through 1998 the Committee developed a CEO Compensation Plan
continuing the stock awards and stock bonuses that were features of the earlier
Plan. 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,
provides for a special 200,000 share option (100,000 shares pre-split) for the
CEO. 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 200,000 share option (100,000
shares pre-split) may be exercised if the Company's earnings exceed $.70 a share
($1.40 a share pre-split) for 1998 and the stock price is at or above $15 per
share ($30 per share pre-split) for any period of thirty consecutive days in the
first six months of 1999. The option price is $8.56 per share ($17.125 per share
pre-split), fair market value on April 9, 1997, the date the option was approved
by the Board. This option was submitted to shareholders and approved at the 1997
annual meeting.
11
<PAGE>
Section 162(m) of the Internal Revenue Code, enacted in 1993 and effective for
taxable years beginning after January 1, 1994, generally limits to $1 million
per individual per year the federal income tax deduction for compensation paid
by a publicly-held company to certain executive officers. Compensation that
qualifies as performance-based compensation for purposes of this section is not
subject to the $1 million deduction limitation. The Executive Compensation
Committee will continue to evaluate this provision but presently intends to
qualify compensation as performance-based to the extent feasible and in the best
interest of the Company.
EXECUTIVE COMPENSATION COMMITTEE
Quentin J. Kennedy, Chairman
Elaine L. Rigolosi
Benjamin A. Currier
12
<PAGE>
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 a peer group index consisting of the Mediq
Inc. and Policy Management Systems Inc. In preparing the peer group index, the
returns of each component issuer in the group were weighted according to its
stock market capitalization. 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 Peer Group
-------------------------------------------------
Measurement Period Hooper S&P 500 Peer Group
(Fiscal year covered) Holmes, Inc. Index Index
- --------------------- ------------ --------- ----------
BASE $ 100.00 $ 100.00 $ 100.00
FYE 1993 $ 77.30 $ 107.06 $ 38.60
FYE 1994 $ 44.27 $ 105.41 $ 50.89
FYE 1995 $ 55.74 $ 141.37 $ 57.62
FYE 1996 $ 119.61 $ 170.01 $ 58.12
FYE 1997 $ 201.19 $ 222.73 $ 89.34
ASSUMES $100 INVESTED ON DEC. 31, 1992
ASSUMES DIVIDEND REINVEST
FISCAL YEAR ENDING DEC. 31, 1997
13
<PAGE>
Employment Contracts and Change-in-Control Arrangements
In 1990, the Company entered into an employee retention agreement, as amended
(the "Agreement") with Mr. McNamee entitling him to certain benefits if his
employment is terminated within two years of a "change of control", as defined
in the Agreement. Following a change of control, Mr. McNamee is entitled to
retain the same position, duties and compensation as he had prior to the change
of control for a period of two years after the date of the change of control.
After a change in control has occurred, if Mr. McNamee's employment is
terminated by the Company or by Mr. McNamee within two years of the date of the
change of control (other than as a result of his death, disability or for cause,
as defined in the Agreement), Mr. McNamee is entitled to receive a lump sum
payment in cash equal to the aggregate of (a) to the extent unpaid, his highest
base salary through the date of termination (as defined in the Agreement), (b) a
pro rata portion of his recent bonus (as defined in the Agreement, generally to
be the highest annual guaranteed bonus to which he was entitled during the last
two full fiscal years prior to the date of the change of control), (c) twice the
sum of his highest base salary and recent bonus, and (d) all amounts of
compensation previously deferred (with accrued interest thereon) and unpaid and
any accrued vacation pay not yet paid by the Company. In addition, he will be
entitled to receive during the two year period after the change of control, all
benefits payable to him (or his family) under welfare benefit programs (such as
medical, dental, disability and life insurance programs) equivalent to those
most favorable immediately preceding the date of the change of control. In the
event that Mr. McNamee would be subject to an excise tax, then he should be
entitled to receive an additional payment such that after Mr. McNamee pays such
excise taxes, including any excise tax imposed on any portion of such additional
payment, Mr. McNamee will retain additional payments equal to the excise taxes
imposed.
In 1996, the Company entered into employee retention agreements ("Agreement")
with the Executive Officers of the Company (exclusive of Mr. McNamee), entitling
them to certain benefits if their employment is terminated within two years of a
change in control, as defined in the Agreement. Following a change in control,
each Executive Officer is entitled to retain the same position, duties and
compensation as he had prior to the change of control for a period of two years
after the date of the change in control. After a change in control has occurred,
if the Executive Officer's employment is terminated by the Company or by the
Executive Officer within two years of the date of the change in control (other
than as a result of his death, disability or for cause as defined in the
Agreement), the Executive Officer is entitled to receive a lump sum payment in
cash equal to the aggregate of (a) to the extent unpaid, his highest base salary
through the date of termination (as defined in the Agreement) (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.
14
<PAGE>
ITEM 2--RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the firm of KPMG Peat Marwick LLP,
independent public accountants, to serve as auditors for the fiscal year ending
December 31, 1998, subject to ratification by the shareholders. This firm (and
its predecessor, KMG Main Hurdman) has served as the Company's auditors since
1980.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THIS SELECTION.
If the appointment is not approved, the Board will select other independent
accountants. It is expected that a member of the firm of KPMG Peat Marwick 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 1999 Annual Meeting
Proposals of shareholder intended for inclusion in the Proxy Statement for
the Annual Meeting of Shareholders to be held in 1999, must be received at the
Company's executive offices not later than December 17, 1998. Proponents should
submit their proposals by Certified Mail--Return Receipt Requested.
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.
BY ORDER OF THE BOARD OF DIRECTORS
HOOPER HOLMES, INC.
/s/ Robert William Jewett
Robert William Jewett
Secretary
April 16, 1998
15
