<PAGE>
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
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
ADVO, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] 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:*
(4) Proposed maximum aggregate value of transaction:
- --------
* Set forth the amount on which the filing fee is calculated and state how
it was determined.
[_] 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>
(R)
[LOGO OF ADVO, INC.
APPEARS HERE]
December 15, 1994
Dear Stockholder:
You are cordially invited to the Annual Meeting of Stockholders of ADVO,
Inc., to be held on Thursday, January 19, 1995, at the Sheraton Hotel at
Bradley International Airport, Windsor Locks, Connecticut, commencing at 10:30
A.M. (EST). Your Board of Directors and management look forward to greeting
personally those of you who are able to attend.
At the Meeting, you will be asked to elect the members of the Board of
Directors; to approve an amendment to the Company's 1988 Non-qualified Stock
Option Plan and the 1993 Stock Option Subplan, as amended; to approve the
Company's Short-term Corporate Management and Division/Regional Incentive
Plans; to ratify the appointment of independent auditors for the fiscal year
ending September 30, 1995; and to transact such other business as may properly
be brought before the Meeting.
In addition to the specific matters to be acted upon, there will be a report
on the progress of the Company and an opportunity for you to ask questions of
general interest. Important information is contained in the accompanying proxy
statement, which you are urged to read carefully.
It is important that your shares are represented and voted at the Meeting,
regardless of the number you own and whether or not you plan to attend.
Accordingly, you are requested to mark, sign, date and return the enclosed
proxy in the envelope provided at your earliest convenience.
Your interest and participation in the affairs of the Company are greatly
appreciated.
Sincerely,
/s/ Robert Kamerschen
Robert Kamerschen
Chairman and Chief
Executive Officer
<PAGE>
(R)
[LOGO OF ADVO, INC.
APPEARS HERE]
ADVO, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of ADVO, Inc. (the "Company") will be held
at the Sheraton Hotel at Bradley International Airport, Windsor Locks,
Connecticut, on Thursday, January 19, 1995, at 10:30 A.M. (EST), to consider
and take action on the following items:
1. The election of nine Directors, as described in the attached proxy
statement, to serve until the Annual Meeting of Stockholders in 1996;
2. The approval of an amendment to the 1988 Non-qualified Stock Option
Plan and the 1993 Stock Option Subplan, as amended;
3. The approval of the Company's Short-term Corporate Management and
Division/Regional Incentive Plans;
4. The ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending September 30,
1995; and
5. The transaction of such other business as may properly come before
said meeting or any adjournment thereof.
Only holders of Common Stock of record at the close of business on November
30, 1994 are entitled to vote at the Meeting or any adjournment thereof. A list
of the stockholders entitled to vote at the Meeting will be available for
examination by any stockholder for any purpose germane to the Meeting during
ordinary business hours for ten days prior to the Meeting at the Sheraton Hotel
at Bradley International Airport, Windsor Locks, Connecticut.
By Order of the Board of Directors
/s/ David M. Stigler
David M. Stigler, Secretary
Windsor, Connecticut
December 15, 1994
YOUR VOTE IS IMPORTANT. EVEN IF YOU PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE MARK, SIGN AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE AS PROMPTLY AS
POSSIBLE.
<PAGE>
ADVO, INC.
ONE UNIVAC LANE
P.O. BOX 755
WINDSOR, CONNECTICUT 06095-0755
PROXY STATEMENT
This statement is furnished in connection with the solicitation of proxies to
be used at the Annual Meeting of Stockholders of ADVO, Inc., (the "Company" or
"ADVO"), a Delaware corporation to be held at the Sheraton Hotel at Bradley
International Airport, Windsor Locks, Connecticut, on Thursday, January 19,
1995, at 10:30 A.M. (EST).
The solicitation of proxies on the enclosed form is made on behalf of the
Board of Directors of the Company.
The cost of soliciting proxies on the accompanying form has been or will be
borne by the Company. In addition to solicitation by mail, the Company will
request banks, brokers and other custodians, nominees, and fiduciaries to send
proxy material to the beneficial owners and to secure their voting
instructions, if necessary. The Company will reimburse such banks, brokers,
custodians, nominees and fiduciaries for their expenses in so doing. Directors,
officers, and regular employees of the Company, who will receive no
compensation for their services other than their regular salaries, may solicit
proxies personally, by telephone and by telegram from stockholders. The Company
has retained Morrow & Co., Inc. to assist in the solicitation of proxies at an
estimated cost of $20,000, including expenses, which will be paid by the
Company. These proxy materials are first being mailed to stockholders on or
about December 15, 1994.
A stockholder signing and returning a proxy on the enclosed form has the
power to revoke it at any time before the shares subject to it are voted, by
notifying the Secretary of the Company in writing of such revocation, by filing
a duly executed proxy bearing a later date, or by attending the meeting and
voting in person. Properly executed proxies, not revoked, will be voted in
accordance with the instructions contained thereon. Unless a contrary
specification is made thereon, it is the intention of the attorneys named in
the enclosed form of proxy to vote FOR the election of the nominees named
herein as Directors and FOR Proposals 2, 3 and 4.
OUTSTANDING VOTING SECURITIES
Only holders of ADVO Common Stock, par value $.01 per share ("Common Stock"),
of record at the close of business on November 30, 1994 (the "Record Date") are
entitled to notice of and to vote at the Meeting. On the Record Date, there
were 20,858,884 shares of Common Stock outstanding. Each share of Common Stock
is entitled to one vote per share.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of the Record Date, those persons known to the Company who beneficially
owned more than 5% of the Common Stock were as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT
OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
------------------- ------------------ --------
<S> <C> <C>
Warburg, Pincus Capital Partners L.P.(1)
466 Lexington Avenue
New York, New York 10017........................... 5,580,245(2) 23.7%
Howard H. Newman(3)
466 Lexington Avenue
New York, New York 10017........................... 5,580,245 23.7
John L. Vogelstein(3)
466 Lexington Avenue
New York, New York 10017........................... 5,580,245 23.7
T. Rowe Price Associates, Inc.(4)
100 East Pratt Street
Baltimore, Maryland 21202.......................... 1,544,000 7.4
Julian H. Robertson, Jr.
Tiger Management Corporation(4)
101 Park Avenue
New York, New York 10178........................... 1,395,800 6.7
RCM Capital Management(4)
Four Embarcadero Center, Ste. 2900
San Francisco, CA 94111............................ 1,070,350 5.1
</TABLE>
- --------
(1) The sole general partner of Warburg, Pincus Capital Partners, L.P.
("Warburg") is Warburg, Pincus & Co., a New York general partnership
("WP"). Lionel I. Pincus is the managing Partner of WP and may be deemed to
control it. E.M. Warburg, Pincus & Co., Inc. ("E.M. Warburg"), through a
wholly owned subsidiary, manages Warburg. WP owns all of the outstanding
stock of E.M. Warburg and, as the sole general partner of Warburg, has a
20% interest in the profits of Warburg. E.M. Warburg owns 1.5% of the
limited partnership interests in Warburg. Messrs. Newman and Vogelstein,
directors of the Company, are Managing Directors of E.M. Warburg and
general partners of WP. As such, Messrs. Newman and Vogelstein may be
deemed to have an indirect pecuniary interest (within the meaning of Rule
16a-1 under the Securities Exchange Act of 1934) in an indeterminate
portion of the shares beneficially owned by Warburg, E.M. Warburg and WP.
See Note 3 below.
(2) Consists of 2,923,418 shares of Common Stock and 2,656,827 shares of Common
Stock for which ADVO Warrants owned by Warburg are exercisable. Outstanding
ADVO Warrants are exercisable at an exercise price of $2.71 per share. The
number of shares of Common Stock subject to ADVO Warrants and the exercise
price are subject to anti-dilution adjustments in the event the Company
issues any Common Stock or convertible securities convertible into Common
Stock at either below the then-current market price of the Common Stock or
below such exercise price.
2
<PAGE>
(3) All of the shares owned by Messrs. Newman and Vogelstein are owned directly
by Warburg and are included because of Messrs. Newman and Vogelstein's
affiliation with Warburg. Messrs. Newman and Vogelstein disclaim
"beneficial ownership" of these shares within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934. See Note 1.
(4) The information relating to the ownership of the Common Stock by this
entity or individual is based on a statement on Schedule 13D or Schedule
13G filed by such entity or individual with the Securities and Exchange
Commission (the "SEC").
GOVERNANCE OF THE COMPANY
In accordance with the Company's Bylaws, as amended, and the applicable laws
of Delaware, responsibility for the management of the Company is vested in the
Board of Directors. During the fiscal year ended September 24, 1994, the Board
of Directors met nine times. Each Director attended 100% of the aggregate
number of meetings of the Board of Directors and the total number of the
committees on which he served, except John Rockwell who attended 89% of the
meetings, Lawrence Lachman who attended 78% of the meetings and John Vogelstein
who attended 44% of the meetings.
The Board has delegated responsibilities with respect to certain audit
matters to the Audit Committee. The members of the Audit Committee are Messrs.
Fritz (Chairman), Newman and Stowe. The Audit Committee is responsible for
reviewing the adequacy of financial controls and the adequacy and accuracy of
financial reporting. The Audit Committee met three times during the fiscal year
ended September 24, 1994, and no member of the Audit Committee missed a
meeting.
The Board has delegated responsibilities with respect to certain compensation
matters to the Compensation Committee. The members of the Compensation
Committee are Messrs. Newman (Chairman), Fritz, Lachman and Rockwell. The
Compensation Committee has the responsibility to help formulate short and long-
term compensation plans and help develop the Company's compensation philosophy.
The committee also reviews specific proposals regarding executive compensation
and other aspects of the terms of employment of the Company's senior
management. The Compensation Committee did not have any formal meetings during
the fiscal year ended September 24, 1994, but met informally in conjunction
with every Board Meeting and actively participated in all Compensation-related
planning and implementation.
The Company has no executive committee, nominating committee or other
committees, except for the above. Total attendance was 91% for all board and
committee meetings.
Directors, other than those who are full-time employees of the Company or a
subsidiary, each are eligible to receive an annual fee of $15,000 and a fee of
$500 for each Board and committee meeting attended. Directors serving as
chairmen of any committees of the Board of Directors receive an additional
$1,000 per year for each chairmanship held. Directors who are full-time
employees of the Company receive no remuneration for serving on the Board of
Directors or its committees. Messrs. Vogelstein and Newman have declined to
receive compensation as Directors due to their status as beneficial owners of
the Company's Common Stock. (See "Security Ownership of Certain Beneficial
Owners.") Mr. Stowe has declined to receive compensation as a Director due to
Welsh, Carson, Anderson & Stowe IV ("WCAS IV") and WCAS Venture Partners'
("WCAS VP") previous beneficial ownership of the Company's Common Stock. Mr.
Stowe is a general partner of the sole
3
<PAGE>
general partner of each WCAS IV and WCAS VP. All Directors' expenses for
attending Board of Directors' meetings are reimbursed by the Company.
Under the 1990 Non-employee Directors' Restricted Stock Plan restrictions
lapsed in fiscal 1994 on the following number of shares held by the following
directors: 2,500 held by Mr. Fritz and 2,500 held by Mr. Lachman. In addition,
grants were made to Mr. Fritz, Mr. Lachman and Mr. Rockwell of 3,000 restricted
shares each in fiscal 1994. Upon the granting of these restricted shares,
restrictions lapsed immediately on 1,000 of the shares of each grant and the
remaining 2,000 shares of each grant will lapse in annual installments over the
next two years. Restricted shares may not be sold or transferred prior to the
lapse of restrictions. Recipients, however, have the right to vote such shares.
Generally, the restrictions on shares lapse in installments over a period of
three years.
1. ELECTION OF DIRECTORS
The Bylaws of the Company, as amended, provide for a Board of Directors
consisting of not less than three nor more than 15 members, the exact number to
be fixed from time to time by the Board of Directors. The Board of Directors
has determined that the Company will have nine Directors. Each person elected
as a Director of the Company will hold office until the next Annual Meeting of
Stockholders or until his successor is duly elected and qualified.
All of the nominees set forth below were elected by the stockholders to their
present terms at the 1994 Annual Meeting. Each nominee has consented to being
named herein and has agreed to serve if elected. In case any such nominee shall
have become, at the time of the meeting, unable or unwilling to serve (an event
which the Board of Directors of the Company has no reason to expect), the
attorneys named in the enclosed form of proxy intend to vote for another person
designated by the Board of Directors.
The affirmative vote of a plurality of the voting power represented at the
meeting is required for a nominee to be elected as a Director of the Company.
"Plurality" means that the nominees who receive the largest number of votes
cast "FOR" are elected as directors up to the maximum number of Directors to be
chosen at the meeting. Broker non-votes are not counted towards the plurality
vote calculation.
NOMINEES FOR ELECTION
ROBERT KAMERSCHEN, age 58. Mr. Kamerschen has been the Chairman of the Board
since January 1989. From November 1988 to February 1989, he was President of
the Company, and he has been Chief Executive Officer and a Director since
November 1988. Mr. Kamerschen is also a Director of Playboy Enterprises, Inc.,
Micrografx, Inc., and Audrey Jones Stores.
JOSEPH P. DURRETT, age 49. Mr. Durrett became President, Chief Operating
Officer and a Director of the Company on September 1, 1992. From February 1990
to August 1992, he was Senior Vice President of Sales of Kraft General Foods
Inc., the food segment subsidiary of Philip Morris Companies Inc. From August
1987 to January 1990, he was President of Sales and Sales Operations of Kraft
Inc. (acquired December 7, 1988 by Philip Morris Companies Inc.), a
multinational food company.
4
<PAGE>
LARRY G. MORRIS, age 56. Mr. Morris has been Senior Executive Vice President
and Chief Administrative and Process Development Officer of the Company since
May 1994 and a Director since October 1989. From August 1989 to April 1994, he
was Executive Vice President, Chief Financial and Administrative Officer.
JACK W. FRITZ, age 67. Mr. Fritz has been a Director of the Company since
March 1984. Until January 1987, Mr. Fritz was President, Chief Executive
Officer and a Director of John Blair & Company, the Company's former parent,
and had held those positions for more than five years. Mr. Fritz serves as a
director on the Warburg, Pincus Funds board, and is also a Director of the
Counsellors Tandem Securities Fund, Inc., Fritz Broadcasting, Inc. and Fritz
Communications.
JOHN R. ROCKWELL, age 66. Mr. Rockwell became a Director on May 5, 1990.
Until April 1, 1990, he was Senior Vice President, Group Executive and a
Director of Booz, Allen & Hamilton, Inc., a management consulting firm, a
position he held for more than five years. Mr. Rockwell is also a Director of
Forum Corporation and Tom's of Maine, Inc.
LAWRENCE LACHMAN, age 78. Mr. Lachman has been a Director of the Company
since December 1987. He is the retired Chairman of the Board and Chief
Executive Officer of Bloomingdale's, a department store. Mr. Lachman is
currently a business consultant. He is also a Director of DFS Group Limited.
HOWARD H. NEWMAN, age 47. Mr. Newman has been a Director of the Company since
August 1986. He has been associated with E.M. Warburg, a specialized financial
services company, since January 1984 and has been a Managing Director since
January 1987. Mr. Newman is also a Director of Marine Drilling Companies, Inc.,
Newfield Exploration Company, Renaissance Holdings Ltd., Comcast UK Cable
Partners Limited and several privately held companies.
RICHARD H. STOWE, age 51. Mr. Stowe has been a Director of the Company since
August 1986. Mr. Stowe is a general partner of the sole general partner of WCAS
IV, WCAS VP and related limited partnerships. WCAS is a specialized investment
firm. He has held these positions for more than the past five years. Mr. Stowe
is also a Director of Medaphis Corporation and Health Management Systems, Inc.
JOHN L. VOGELSTEIN, age 60. Mr. Vogelstein has been a Director of the Company
since November 1988. Mr. Vogelstein was a Director of the Company from August
1986 to December 1987. He has been Vice Chairman of the Board of Directors of
E.M. Warburg for more than the past five years and was appointed President of
E.M. Warburg on January 1, 1994. Mr. Vogelstein is also a director of Magma
Copper Co., Aegis Group plc, Value Health, Inc., Mattel, Inc. and LCI
International.
5
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information with respect to the Common
Stock beneficially owned by the Directors, nominees, the persons named in the
Summary Compensation Table on page 7 of this Proxy statement and by all
Directors and officers as a group, as of the Record Date. Except as otherwise
indicated, each person listed has sole voting and investment powers with
respect to shares beneficially owned.
<TABLE>
<CAPTION>
PERCENT
NUMBER OF SHARES OF
NAME OF INDIVIDUAL OF COMMON STOCK CLASS
- ------------------ ---------------- -------
<S> <C> <C>
Robert Kamerschen................................... 1,013,625(1) 4.8%
Joseph P. Durrett................................... 114,769(2) .5
Larry G. Morris..................................... 105,013(3) .5
Myron L. Lubin...................................... 24,437(4) .1
Frank J. Talz....................................... 69,934(5) .3
Jack W. Fritz....................................... 55,328(6) .3
John R. Rockwell.................................... 19,250(7) .1
Lawrence Lachman.................................... 13,000(7) .1
Howard H. Newman.................................... 5,580,245(8)(9) 23.7
Richard H. Stowe.................................... 10,053 *
John L. Vogelstein.................................. 5,580,245(8)(9) 23.7
All Directors and officers as group (17 persons).... 7,166,540(9)(10) 29.9
</TABLE>
- --------
* Less than .1%
(1) Includes 227,834 shares awarded under the 1986 Employee Restricted Stock
Plan, as amended, and 371,251 shares Mr. Kamerschen has the right to
acquire within 60 days of the Record Date pursuant to the exercise of
options granted under the Company's stock option plans.
(2) Includes 74,269 shares awarded under the 1986 Employee Restricted Stock
Plan, as amended, and 40,000 shares Mr. Durrett has the right to acquire
within 60 days of the Record Date pursuant to the exercise of options
granted under the Company's stock option plans.
(3) Includes 78,033 shares awarded under the 1986 Employee Restricted Stock
Plan, as amended, and 4,688 shares Mr. Morris has the right to acquire
within 60 days of the Record Date pursuant to the exercise of options
granted under the Company's stock option plans.
(4) Includes 9,437 shares awarded under the 1986 Employee Restricted Stock
Plan, as amended, and 15,000 shares Mr. Lubin has the right to acquire
within 60 days of the Record Date pursuant to the exercise of options
granted under the Company's stock option plans.
(5) Includes 50,821 shares awarded under the 1986 Employee Restricted Stock
Plan, as amended, and 2,344 shares Mr. Talz has the right to acquire within
60 days of the Record Date pursuant to the exercise of options granted
under the Company's stock option plans.
(6) Includes shares awarded under the 1990 Non-Employee Directors' Restricted
Stock Plan and 33,347 shares owned by Mr. Fritz's wife which shares Mr.
Fritz disclaims beneficial ownership.
(7) Includes shares awarded under the 1990 Non-Employee Directors' Restricted
Stock Plan.
(8) All of the shares indicated as owned by Messrs. Newman and Vogelstein are
owned directly by Warburg and are included because of Messrs. Newman and
Vogelsteign's affiliation with Warburg. Messrs. Newman and Vogelstein
disclaim "beneficial ownership" of these shares within the meaning of Rule
13d-3 under the Securities Exchange Act of 1934. (See "Security Ownership
of Certain Beneficial Owners.")
(9) Assumes exercise of ADVO Warrants owned by Warburg.
6
<PAGE>
(10) Includes 602,446 shares awarded under the 1986 Employee Restricted Stock
Plan, as amended, and the 1990 Non-Employee Directors' Restricted Stock
Plan, and 447,031 shares all officers as a group have the right to acquire
within 60 days of the Record Date pursuant to the exercise of options
granted under the Company's stock option plans.
SECTION 16 REPORTS
Under the securities laws of the United States, the Company's Directors, its
executive (and certain other) officers and any persons holding ten percent or
more of the Company's Common Stock are required to report their ownership of
the Company's Common Stock and any changes in that ownership to the SEC.
Specific due dates for these reports have been established. In 1994, all
required reports of beneficial ownership of the Company's Common Stock were
timely filed.
EXECUTIVE COMPENSATION
The following table shows compensation paid by the Company and its
subsidiaries for services in all capacities during fiscal 1994, 1993 and 1992
to each of the following named executive officers of the Company, including the
Chief Executive Officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------ ---------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
POSITION YEAR SALARY (1) (2) (3) (#)(4) (5)
- ------------------ ---- -------- -------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert Kamerschen,...... 1994 $462,540 $374,445 $ -- $ -- 488,136 $49,751
Chairman and Chief 1993 448,422 124,756 -- -- -- 38,865
Executive Officer 1992 417,438 271,236 214,189 909,600 -- 31,185
Joseph P. Durrett,...... 1994 325,871 197,719 -- -- 23,700 29,535
President and 1993 319,548 58,786 -- 599,025 35,000 --
Chief Operating Officer 1992 16,601 10,731 -- 1,133,875 62,500 --
Larry G. Morris,........ 1994 240,099 102,757 -- -- 65,434 20,178
Senior Executive Vice
President, 1993 232,386 38,180 -- -- -- 17,208
Chief Administrative
and Process 1992 217,016 85,465 -- -- -- 12,342
Development Officer
Myron L. Lubin,......... 1994 200,490 133,485 -- -- 19,600 19,703
Senior Vice President-- 1993 196,425 92,467 -- -- -- 15,426
President, Western Di-
vision 1992 183,619 89,746 -- -- -- 10,539
Frank J. Talz,.......... 1994 195,626 107,353 -- -- 34,697 17,399
Senior Vice President-- 1993 192,663 24,047 -- -- -- 13,842
President, Central Di-
vision 1992 182,419 68,484 -- -- -- 9,960
</TABLE>
- --------
(1) Amounts for each fiscal year represent bonus compensation earned for that
year payable in the subsequent year.
(2) Amount for Mr. Kamerschen includes a housing allowance of $34,189 and
$180,000 received for the signing of an employment agreement in November
1991.
(3) The number of restricted shares of Common Stock held at fiscal year end and
the value of such holdings, based on the number of restricted shares times
the closing market price at September 24, 1994 are 25,000 shares and
$434,000 for Mr. Kamerschen and 44,167 shares and $767,000 for
7
<PAGE>
Mr. Durrett. Restricted shares vest equally over a three-year period from
the date of grant (one-third on each anniversary date) with the exception of
Mr. Kamerschen's fiscal 1992 grant which vests equally over a four-year
period. Holders of restricted shares are eligible to receive dividends to
the same extent as holders of Common Stock when dividends are declared and
payable.
(4) Includes reload option grants received from surrendering previously owned
shares of ADVO Common Stock to pay the exercise price on option exercises
and shares withheld from option exercises to satisfy income tax withholding
requirements.
(5) Amounts represent contributions made on behalf of the named executives to
the Company's 401(k) plan and non-qualified savings plan.
OPTIONS
Set forth below is certain information concerning stock options granted
during fiscal 1994 by the Company to the named executive officers.
The hypothetical present value on the date of grant of stock options granted
in fiscal 1994 shown below are presented pursuant to the SEC proxy rules and
are calculated under the modified Black-Scholes model for pricing options. The
actual before-tax amount, if any, realized upon the exercise of stock options
will depend upon the excess, if any, of the market price of the Common Stock
over the exercise price per share of the stock option at the time the stock
option is exercised. There is no assurance that the hypothetical present values
of the stock options reflected in this table will be realized.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL OPTIONS EXERCISE GRANT DATE
OPTIONS GRANTED TO EMPLOYEES PRICE EXPIRATION PRESENT
GRANTED(#) IN FISCAL YEAR ($/SHARE) DATE VALUE(3)
---------- -------------------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
GRANTS(1)
Robert Kamerschen....... 27,150 2% $18.625 2/4/2004 $ 255,453
27,150 2 18.625 5/3/2000 198,625
Joseph P. Durrett....... 11,850 1 18.625 2/4/2004 111,496
11,850 1 18.625 5/3/2000 86,692
Larry G. Morris......... 8,300 1 18.625 2/4/2004 78,094
8,300 1 18.625 5/3/2000 60,721
Myron L. Lubin.......... 9,800 1 18.625 2/4/2004 92,208
9,800 1 18.625 5/3/2000 71,695
Frank J. Talz........... 6,750 1 18.625 2/4/2004 63,510
6,750 1 18.625 5/3/2000 49,382
RELOAD GRANTS(2)
Robert Kamerschen....... 433,836 34 18.625 11/14/98 2,813,336
Larry G. Morris......... 29,882 2 18.625 8/21/99 209,767
9,241 1 18.625 1/25/2000 67,412
9,711 1 18.625 1/24/2001 76,757
Frank J. Talz........... 11,837 1 18.625 2/3/98 69,705
4,555 * 18.625 1/25/2000 33,228
4,805 * 18.625 1/24/2001 37,979
</TABLE>
- --------
* less than 1%.
8
<PAGE>
(1) Stock options granted in fiscal 1994 will become exercisable in 25%
increments at one-year intervals from the date of grant. The grants with
expiration dates of May 3, 2000 also stipulate that the market value of the
Company's Common Stock must reach specified levels in order to become
exercisable in addition to the time vesting provisions. These options
become exercisable six years from the grant date if the market price
provision is not met and expire ninety days later. All options are a
subject to the reload feature of the 1988 Non-qualified Stock Option Plan
and the 1993 Stock Option Sub-Plan. See Exhibit A attached hereto.
(2) Represent reload option grants received upon the exercise of previously
outstanding exercisable options (the "original options"). The number of
reload options awarded upon the exercise of original options is equal to
the number of previously held shares an optionee tenders to pay the
exercise price of the original options and the number of shares an optionee
elects to have withheld from the exercise of the original options to pay
statutory tax withholding requirements. The reload options retain the
expiration date of the original options and have an exercise price equal to
the fair market value of the Common Stock on the date of exercise of the
original options. Reload options must be held for one year from the date of
grant before they become exercisable and vest.
(3) The present values on grant date are calculated under the modified Black-
Scholes model, which is a mathematical formula used to value options traded
on stock exchanges, modified for pricing employee stock options. This
formula considers a number of factors in order to estimate the option's
present value, including the stock's historical volatility (31%), the
stock's dividend rate (.54%), the exercise period of the option and the
risk free rate of return (5.5%).
Set forth below is certain information concerning the named executive
officers and the number and amounts realized on stock option exercises during
fiscal 1994 and the number and value of specified options at September 24,
1994. The value of exercised and unexercised in-the-money stock options at
September 24, 1994 shown below are presented pursuant to SEC rules. The actual
before-tax amount, if any, realized upon exercise of stock options will depend
upon the excess, if any, of the market price of the Common Stock over the
exercise price per share of the stock option at the time the stock option is
exercised. There is no assurance that the values of unexercised in-the-money
stock options reflected in this table will actually be realized.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SECURITIES VALUE OF UNEXERCISED
SECURITIES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
UNDERLYING OPTIONS AT YEAR-END(#) AT YEAR-END(1)
OPTIONS VALUE ------------------------- -------------------------
NAME EXERCISED(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert Kamerschen....... 950,000 $14,558,750 361,563 497,824 $4,750,930 $72,414
Joseph P. Durrett....... -- -- 40,000 81,200 2,144 6,431
Larry G. Morris......... 79,062 856,316 -- 70,122 -- 35,039
Myron L. Lubin.......... -- -- 13,125 21,475 113,859 14,016
Frank J. Talz........... 37,967 466,541 -- 37,041 -- 17,521
</TABLE>
- --------
(1) Value is calculated by determining the difference between the fair market
value at September 24, 1994 of the securities underlying the options
($17.375) and the exercise price of the options.
9
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The role of the Compensation Committee of the Board of Directors is to act as
a liaison between the Board of Directors and management in all matters of
executive compensation, balancing the interest of shareholders and the needs of
management. As such, the governance and administration of executive
compensation programs and development of compensation policy and philosophy are
the domain of the Compensation Committee. The Compensation Committee undertakes
this role by reviewing and approving governing plan documents and individual
compensation issues for certain executives. The Compensation Committee's policy
regarding Section 162(m) of the Internal Revenue Code of 1986, as amended, (the
"Code") is that any compensation above the threshold specified in that Section
be based on performance objectives in order to retain the Company's Federal tax
deduction as permitted under the Code. The Compensation Committee is composed
entirely of non-employee Directors.
Compensation Philosophy:
ADVO's compensation programs are designed to:
. Provide a fair, competitive and dynamic compensation program.
. Attract, retain, and develop a highly skilled and motivated work force.
. Tie compensation directly to the accomplishment of superior Company
performance, creation of long-term shareholder value and attainment of
specific strategic initiatives by emphasizing variable rather than fixed
compensation.
. Align stockholders and management interests.
To accomplish this philosophy, ADVO's executive compensation program is
composed of base salary, short-term incentives and long-term incentives, which
taken together provide a competitive compensation package that is highly
leveraged toward the attainment of superior Company performance.
Base Salary:
ADVO's philosophy is to pay competitive base salaries as compared with a
broad spectrum of organizations. To assess its competitive position, ADVO
participates in and reviews salary surveys with participant companies from
multiple industry segments. These companies represent a cross section of
organizations in all industries and are of similar size and scope. These
companies may or may not be included in the peer group analysis under "Company
Financial Performance", since many of the Company's competitors for executive
talent are outside the Company's business competitor peer group of companies or
are privately held companies. The surveys are professionally administered by
third parties and represent the different functional areas of ADVO's
organization, e.g., marketing, finance, and information systems. In general,
ADVO's salary position is approximately at the median of the marketplace. Based
on these surveys, ADVO annually reviews its salary structure and adjusts it as
necessary to reflect the market.
Individual base pay is determined by considering:
. The individual's background, experience and current salary in relation to
the market (as represented by the salary range assigned to the
individual's position).
. Accomplishments as determined by the individual's performance appraisal.
. The financial spending guidelines of the Company.
10
<PAGE>
Short-Term Incentive:
ADVO's philosophy is to provide significant financial incentives for key
managers to attain and exceed the Company's financial objectives as well as
individual performance objectives. Executives at ADVO are primarily eligible to
participate in either the Corporate Management Incentive Plan or the
Division/Regional Management Incentive Plan. Both of these plans provide a
competitively benchmarked target award based on the level of the individual's
job. These targets range from 10% to 75% of salary. To realize the target
award, certain Company financial performance objectives must be attained. ADVO
annually establishes operating income goals at the corporate, divisional and
regional levels. The corporate performance objective is based on consolidated
operating income and is measured in terms of actual operating income achieved
versus the annually established plan. Additionally, the Division/Regional
Incentive Plan incorporates divisional and regional operating income
objectives. A minimum threshold of plan attainment is in place, below which no
payout is made. The specific objective targets are considered confidential and
disclosure of such could competitively jeopardize ADVO's business. The
corporate, divisional and regional results are evaluated independently and
yield a combined payout percentage that ranges from 0% to 200% of target
awards. To determine actual awards, the target award amounts are factored by
these payout percentages. These awards are further modified up to +/-25% based
on individual performance as measured by the attainment of individual
objectives as defined at the beginning of the award cycle for each participant.
The CEO's bonus is based solely on financial results as defined above.
The Company's financial performance for fiscal 1994 was above its operating
income target. This resulted in adjusted corporate awards which were, on
average, greater than the target awards. Division and regional performance
varied, with results both above and below target levels set under the plan.
After adjusting for corporate, divisional and regional financial results and
individual performance, individual award payouts ranged from 24% to 205% of
target awards. Approved awards for those disclosed in the Summary Compensation
Table ranged from 110% to 145% of target awards.
Certain changes are being made to the plan beginning in fiscal 1995 including
the elimination of the maximum bonus payout cap, the elimination of the
individual performance criterion, and a shift in the weightings of corporate,
divisional and regional results. Included in this proxy is a proposal for
stockholder approval of the short-term incentive plans. These plans are
discussed more thoroughly in Proposal 3.
Long-Term Incentive:
The 1988 Non-qualified Stock Option Plan, as amended, and the 1993 Stock
Option Subplan are the primary vehicles for long-term incentives. The plans
allow for the granting of:
. Options with service requirements for vesting.
. Options with performance requirements as well as service requirements for
vesting.
. Reload options which require the purchase and retention of ADVO Common
Stock.
All three types of options were granted this year. This mix of option types
is meant to:
. Link compensation opportunities to Company achievements.
. Balance annual results with ADVO's long-term performance.
. Strengthen the partnership between ADVO's executives and stockholders.
11
<PAGE>
Participation in this plan is limited to key management and executives in the
corporation. Long-term compensation targets vary by the level of the
individuals' position and were established based on market analysis provided
from third party external consultants. Periodically these targets will be
reviewed. These targets are expressed as a percentage of base pay. The
resulting target values are translated into shares based on the fair market
value of the shares. In fiscal 1994, of the resulting number of shares granted
as options, 50% were granted as service based vesting non-qualified options and
50% were granted with a performance criterion in addition to the service
requirement. The performance criterion is achieved only when the stock has
appreciated to $25.00 per share and remained at or above that price for 90 out
of 180 consecutive days. If this criterion is not met, the options vest in 6
years and expire 90 days later.
Our executives were also given the opportunity to receive reload options. To
do so, the plan requires executives to exercise their options by tendering
mature shares of stock to "pay" for the underlying cost of the options and
mandatory federal tax obligations. In return, they receive reload options in
the same number as the number of mature shares they tendered for payment. Any
profit that resulted from the exercise was returned to the executive in the
form of stock, which is to be retained for two years.
Service based options are also used for employment, promotion and retention
situations and are determined in the same manner as described above.
In addition, ADVO has a restricted stock plan. While the governing plan
allows for broader usage, historically this plan has been used for employment,
promotion and retention situations. When these situations arise, the number of
shares granted is based upon the level of the job.
For fiscal years 1992 and 1993, executives had the opportunity to participate
in a long-term cash incentive plan. The plan is based on a three-year
performance cycle with established performance measurement criteria. Each year
a new three-year cycle started. The criteria include the three-year average
growth in pre-tax earnings per share (EPS) and adjusted return on assets (ROA).
At the beginning of each cycle, goals for these criteria were established. The
specific goals are considered confidential and disclosure of such could
adversely impact ADVO's business. Participants have a competitive target award
scaled to the level of their responsibilities. These target levels range from
18% to 100% of salary. At the close of the performance cycle, actual awards are
adjusted to reflect achievement versus the established goals for the above
stated criteria.
The final year of the 1992 cycle was fiscal 1994, and the final year of the
1993 cycle is fiscal 1995. The plan will be discontinued at the conclusion of
the existing payout cycles. No new cycles will begin. Performance criteria for
the first three-year cycle was evaluated at the close of fiscal year 1994,
which resulted in no payout for any participant.
Company Performance and CEO Compensation:
As discussed on page 15, the Company and Mr. Kamerschen entered into an
employment agreement on November 14, 1991. Under this agreement, Mr.
Kamerschen's salary is reviewed annually, and may be increased, but not
decreased by the Compensation Committee. Although the annual increase is to be
no less than the amount of the increase of the United States City Average
Consumer Price Index for all Urban Consumers for all Items (CPI-U), Mr.
Kamerschen voluntarily agreed to an amount less than this. Accordingly, the
Compensation Committee approved an increase of $8,900 per year for Mr.
Kamerschen, or 2.0%
12
<PAGE>
As provided in the Agreement, Mr. Kamerschen's short-term incentive is
determined under the Corporate Management Incentive Plan. Under this plan, the
CEO's bonus is determined based solely on financial results and is awarded at
the discretion of the Board of Directors. Consistent with the plan as described
previously, as measured by Company performance, Mr. Kamerschen was granted an
incentive award of $374,445, representing 110% of his target award.
There was no payout under the first cycle on the Long-Term Incentive Plan.
Mr. Kamerschen was awarded 54,300 options in fiscal 1994 using the approach
described above, of which 27,150 were options with performance requirements. In
addition, Mr. Kamerschen exercised previously held options and in accordance
with the plans, received 433,836 reload options during fiscal 1994.
Benefits:
ADVO offers benefits to its key executives, serving a different purpose than
do the above described elements of compensation. In general, these provide a
level of security against financial misfortune which may result from illness,
disability or death. The benefits are principally those that are offered to the
ADVO employee population, with some variations, and generally promote tax
efficiency and replacement of benefit opportunities afforded other employees,
but which are lost to executives due to regulatory limits.
Compensation Committee
Howard H. Newman (Chair)
Jack W. Fritz
Lawrence Lachman
John R. Rockwell
13
<PAGE>
COMPANY FINANCIAL PERFORMANCE
The following graph compares the performance of the Company's Common Stock
with the S&P 500 Index and a Selected Peer Group Index constructed by the
Company. The comparison of total return for each of the years assumes $100 was
invested on October 1, 1989 in each of the Company, the S&P 500 Index and the
Selected Peer Group Index with investment return weighted on the basis of
market capitalization. The Peer Group is comprised of Acxiom Corp., Catalina
Marketing, R.R. Donnelley & Sons Co., Dunn & Bradstreet, Heritage Media, Inc.,
Information Resources, Inc., Knight-Ridder, Inc., Readers Digest, Scholastic
Corp., Times Mirror Co., Tribune Co., Valassis Communications and the
Washington Post. The Peer Group represents a mix of newspaper, publishing,
database and marketing services companies that ADVO competes with in several of
its major markets.
[GRAPH APPEARS HERE]
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN*
AMONG ADVO, INC., S&P 500 INDEX AND A SELECTED PEER GROUP**
<CAPTION>
PEER
Measurement period S&P 500 GROUP
(Fiscal Year Covered) ADVO, INC. INDEX INDEX
- --------------------- ---------- -------- --------
<S> <C> <C> <C>
Measurement PT -
10/01/89 $ 100.00 $ 100.00 $ 100.00
FYE 9/30/90 $ 104.00 $ 91.00 $ 77.00
FYE 9/30/91 $ 190.00 $ 119.00 $ 97.00
FYE 9/30/92 $ 268.00 $ 132.00 $ 118.00
FYE 9/30/93 $ 218.00 $ 149.00 $ 120.00
FYE 9/30/94 $ 235.00 $ 154.00 $ 123.00
</TABLE>
Assumes $100 Invested on October 1, 1989 in ADVO, Inc. Common Stock, S&P 500
Index & The Peer Group Index.
* Total Return assumes reinvestment of dividends.
** ADVO's fiscal year ends on the last Saturday in September.
14
<PAGE>
EMPLOYMENT AGREEMENTS
On November 14, 1991, the Company entered into an employment agreement with
Mr. Kamerschen pursuant to which he is employed as Chief Executive Officer of
the Company. The employment agreement has a term of five years, and provides
for automatic renewal for a five-year period thereafter unless the Company
gives Mr. Kamerschen six months' notice prior to the expiration of the initial
term that it intends to terminate the agreement. Under the employment
agreement, Mr. Kamerschen receives an annual salary of $425,000 per year,
subject to annual increases as determined by the Board of Directors, and
further to be adjusted annually to reflect increases in the Consumer Price
Index. The employment agreement provides that annual bonuses may be awarded
under the Company's bonus plan. Pursuant to the employment agreement, Mr.
Kamerschen received 50,000 restricted shares of Common Stock under the
Company's 1986 Employee Restricted Stock Plan, as amended (the "Restricted
Stock Plan"). Under the terms of the agreement, the restrictions on such shares
will lapse one-fourth each on November 14, 1992, 1993, 1994, and 1995. In
addition, Mr. Kamerschen received a cash payment of $180,000 upon the signing
of the agreement. The employment agreement also provides that if the Company
terminates Mr. Kamerschen's employment for any reason other than for cause (as
defined), the Company shall continue to pay a salary to Mr. Kamerschen at the
same rate, plus a bonus of 75% of such salary, and allow him to continue to
participate in other benefit programs for the duration of the employment period
or for two years from the date of termination, whichever is greater. If at the
time of termination there are more than two years left in the employment
period, for the period in excess of two years, the severance compensation will
not include any bonus. In addition, Mr. Kamerschen receives a housing allowance
(currently $3,023 per month) as long as he remains employed by the Company.
On July 13, 1992, the Company entered into an employment agreement with Mr.
Durrett, pursuant to which he is employed as President and Chief Operating
Officer of the Company, on September 1, 1992, for a term of two years, at a
salary of $310,000 per year, subject to increases as determined by the Board of
Directors plus bonuses pursuant to the Company's bonus plan. The employee
agreement was renewed for another two years on September 1, 1994. Pursuant to
the employment agreement, Mr. Durrett received 62,500 restricted shares of
Common Stock under the Company's 1986 Employee Restricted Stock Plan, as
amended. Under the terms of the agreement, the restrictions on such shares will
lapse one-third each on September 1, 1993, 1994 and 1995. Mr. Durrett also
received options under the 1988 Non-qualified Stock Option Plan, as amended, to
purchase 62,500 shares of the Company's Common Stock at a price of $18.15 per
share, such options becoming exercisable in installments of one-fourth each on
September 1, 1993, 1994, 1995 and 1996. In addition, Mr. Durrett received
additional grants on the first anniversary date of the commencement of the
agreement of 35,000 shares of Common Stock under the Restricted Stock Plan to
vest over a three year period in equal installments and options to purchase
35,000 shares of Common Stock under the Company's 1988 Non-qualified Stock
Option Plan, as amended, at a price of $17.13 per share and to vest over a
period of four years in equal installments. This agreement provides for
automatic renewal every two years, on the anniversary date of the agreement,
unless the Company gives Mr. Durrett six months' notice prior to a renewal date
that it does not intend to renew the agreement. The employment agreement also
provides that if the Company terminates Mr. Durrett's employment for any reason
other than for cause (as defined), the Company shall continue to pay a salary
to Mr. Durrett at the same rate, plus a bonus of 50% of such salary, and allow
him to continue to participate in other benefit programs for one year after the
date of termination.
On August 21, 1991, the Company entered into an employment agreement with Mr.
Morris, pursuant to which he was employed as Executive Vice President, Chief
Financial and Administrative
15
<PAGE>
Officer. In May 1994 Mr. Morris was promoted to Senior Executive Vice
President, Chief Administrative and Process Development Officer and his
employment agreement was renewed for another three years. The employment
agreement has a term of three years, at an annual salary of $199,100, subject
to increases as determined by the Board of Directors, plus bonuses pursuant to
the Company's bonus plan. The agreement provides for automatic renewal every
three years on the anniversary date of the agreement unless the Company gives
Mr. Morris six months' notice that it does not intend to renew the agreement.
The employment agreement also provides that if the Company terminates Mr.
Morris' employment for any reason other than for cause (as defined), the
Company shall continue to pay a salary to Mr. Morris at his then current level,
plus a bonus of 40% of such salary, and allow him to continue to participate in
other benefit programs for one year after the date of termination.
EXECUTIVE SEVERANCE AGREEMENTS
The Board of Directors has authorized the Company to enter into individual
Executive Severance Agreements (the "Agreements") with Messrs. Kamerschen,
Durrett, Morris, Lubin and Talz (the "Executives"). The structure of the
Agreements is substantially similar, but the terms of the individual Agreements
differ in some important respects as noted below.
The Agreements' provisions become effective upon the occurrence of a Change
of Control (as described below) and continue for the duration of the Severance
Period. With regard to Messrs. Kamerschen, Durrett and Morris, the Severance
Period is two years following a Change of Control. With regard to Messr. Lubin
and Talz, the Severance Period is one and one-half years following a Change of
Control. In all cases, the Severance Period ends with the death of the
Executive. If, during the Severance Period, an Executive's employment is
terminated by the Company for any reason other than death, disability or cause
(as described below), or if the Executive terminates his employment for good
reason (as described below) the Company must pay to the Executive a lump sum
severance payment. With regard to Messrs. Kamerschen, Durrett and Morris, the
severance payment due upon such a termination of employment is equal to two
times the sum of (i) the Executive's annual base pay at the rate in effect
within the 90-day period preceding the date a notice of termination of
employment is given or, if higher, at the highest rate of base pay in effect
within the 90-day period immediately preceding the Change of Control and (ii)
the greatest amount of incentive (bonus) pay received by the Executive for any
year from and including the third year prior to the first occurrence of a
Change of Control. With regard to Messr. Lubin and Talz, the severance payment
is equal to one and one-half times the foregoing sum. Additionally, upon
termination, the Executives will be entitled to receive medical and life
insurance benefits during the Severance Period or cash in lieu thereof.
Under the Agreements, "cause" means the Executive's intentional acts of
fraud, embezzlement, theft, damage to Company property or disclosure of
confidential information. "Good reason" means (i) an adverse change in the
Executive's responsibilities; (ii) a reduction in the Executive's base, bonus
pay, or benefits; (iii) a failure of any successor to the Company to assume the
obligations under the Agreement; (iv) any material breach of the Agreement by
the Company; or (v) any action of the Company requiring the Executive to
relocate.
A "Change of Control" means the occurrence of any of the following events:
(i) A reorganization, merger or consolidation of the Company in which the
Company is not the surviving or resulting
16
<PAGE>
company or pursuant to which the Company's common stock would be converted into
cash, securities or other property (other than a merger in which the holders of
the Common Stock immediately prior to the merger have the same proportionate
ownership in the surviving corporation immediately after the merger), (ii) the
approval by the stockholders of the Company of any plan or proposal for the
dissolution or liquidation of the Company, or (iii) a sale, lease, exchange or
other transfer of all, or substantially all, of the Company's consolidated
assets. However, a reorganization, merger or consolidation described above, or
a reorganization of the Company into a holding company structure including a
reorganization involving a business combination with another corporation or
entity, or a sale or other transfer of all or substantially all of the
Company's assets or a dissolution of the Company pursuant to which the
stockholders receive securities of another entity, will not result in a Change
of Control if (i) the election or appointment of the individuals who
immediately after the effective time of any of those events constitute the
directors of the Board of Directors of the continuing corporation was approved
by a vote of at least two-thirds of the individuals constituting the Board
immediately prior to such effective time, or (ii) a majority of the directors
of any continuing corporation immediately after such effective time were
directors of the Company immediately prior to such effective time. In addition,
a Change of Control will also occur if (i) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended)
other than Warburg, Pincus Capital Partners, L.P. and its affiliates
("Warburg"), become the beneficial owner (within the meaning of Rule 13d-3 of
such Act) of 30% or more of the Company's Common Stock or (ii) individuals who
are "Eligible Directors" cease for any reason to constitute a majority of the
Board. An "Eligible Director" is (i) any individual who was a director of the
Company as of September 27, 1990, (ii) any individual proposed by Warburg and
elected as a director in place of a director described in (i) above, or (iii)
any director elected by, or nominated for election by the Company's
stockholders, by the vote of at least two-thirds of the directors who at the
time of such vote were Eligible Directors.
In the event that any payments or benefits received by Messrs. Kamerschen,
Durrett and Morris in connection with a Change of Control or the subsequent
termination of their employment, would be subject to the excise tax imposed by
Section 4999 of the Code, or to any similar tax imposed by state or legal law,
such Executive(s) will be entitled to receive an additional payment to cover
any excise tax imposed under the agreement.
Benefits under the Agreements are in addition to severance amounts payable
under an Executive's employment agreement.
RELATED PARTY TRANSACTIONS
At November 19, 1994, the Company had $72,150,510 invested in money market
mutual funds and marketable securities managed by Warburg, Pincus Counsellors,
Inc. ("Counsellors"). Income earned on such investments during fiscal 1994
amounted to approximately $1,885,000. Counsellors is controlled by WP, the
general partner of Warburg (see "Security Ownership of Certain Beneficial
Owners"). Mr. Fritz, who is a Director of the Company, is a Director of the
various Counsellors-managed mutual funds. The Company bases all investment
decisions upon the available rates of return, and the investments described
above were made because of the competitive rates available from Counsellors.
17
<PAGE>
Mr. Newman and Mr. Vogelstein, who are Directors of the Company, are Managing
Directors of E.M. Warburg and are general partners of WP. (See "Security
Ownership of Certain Beneficial Owners").
2. APPROVAL OF AMENDMENTS TO THE
1988 NON-QUALIFIED STOCK OPTION PLAN
AND 1993 STOCK OPTION SUBPLAN, AS AMENDED
On September 27, 1994, the Board of Directors approved an amendment to the
Company's 1988 Non-qualified Stock Option Plan and the 1993 Stock Option
Subplan, as amended (the "1988 Plan"), subject to stockholder approval, to
increase the number of shares available for grant under the 1988 Plan from
3,300,000 to 3,800,000 shares. The following discussion is a summary of the
1988 Plan as proposed to be amended, a copy of which is attached hereto as
Exhibit A.
Administration: The 1988 Plan is administered by the Compensation Committee
which is appointed by the Company's Board of Directors. The Committee is
composed of not less than two members of the Board of Directors appointed by
the Board of Directors. Each member of the Committee is a "disinterested
person" within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "Act"). The Committee determines those individuals to
whom options are granted under the 1988 Plan.
Subplans: The Board of Directors or the Committee may establish such subplans
under the Plan as it may deem desirable in order to qualify options thereunder
as "performance-based compensation" as defined in the Code. The Board has
established the 1993 Stock Option Subplan (the "1993 Subplan").
Options: Options granted under the 1988 Plan are non-qualified stock options;
that is, they are not qualified for special tax treatment under the Code.
The 1988 Plan, permits the granting of "reload" options with respect to
options granted under the 1988 Plan (the "original options"). A "reload" option
is an option granted on the date of exercise of an original option to purchase
a number of shares which is equal to the number of shares surrendered to pay
the exercise price of the original option, the number of shares surrendered or
withheld to pay tax withholding due on exercise of the original options or such
other number of shares not to exceed the total number of shares with respect to
which the original option is exercised. The expiration date of a reload option
would be the same as that of the original option unless otherwise determined by
the Committee. "Reload" options may be authorized with respect to options that
are themselves granted as reload options.
Eligibility: One or more options may be granted under the 1988 Plan by the
Committee to such officers or key employees of the Company, or of a parent or
subsidiary of the Company, at such time and in such amounts as the Committee
determines. A member of the Board of Directors is eligible to participate in
the 1988 Plan only if such Board member is also an employee of the Company.
Approximately 99 persons are eligible to participate in the 1988 Plan.
Shares Subject to Options: Currently, the 1988 Plan provides that an
aggregate of 3,300,000 shares of Common Stock, subject to adjustment to prevent
dilution in the event of stock splits, stock dividends or other changes in the
Company's capitalization, may be subject to options under the 1988
18
<PAGE>
Plan. Such shares may be treasury shares or authorized but unissued shares. If
any outstanding option expires or terminates prior to its exercise in full, or
if any option exercise is settled in cash, the shares of Common Stock that are
allocable to the unexercised portion of such option will become available for
the grant of other options. In addition, if in connection with any option
exercises, any shares of Common Stock are tendered to the Company in
satisfaction of tax withholdings obligations or in payment of the option price,
an equal number of shares shall be available for option grants under the Plan.
However, such shares will be available solely for grants of options to persons
who are not subject to Section 16 of the Act. If the Proposal 2 is adopted by
the stockholders, the number of shares that may be subject to options under the
1988 Plan would be increased from an aggregate of 3,300,000 shares to an
aggregate of 3,800,000 shares. As of the Record Date, options to purchase
3,143,815 shares had been issued under the 1988 Plan.
Option Price: The price at which shares may be purchased pursuant to an
option cannot be less than the greater of the par value of the shares of Common
Stock or the fair market value of the Common Stock on the date the option is
granted. Optionees may be granted, in exchange for the surrender and
cancellation of outstanding options, new options having option prices lower
than the option price of the options so surrendered and cancelled.
Exercise of Options: No option may be exercised after the expiration of ten
years from the date it is granted. Currently, the 1988 Plan provides that no
option may be granted under the 1988 Plan after January 31, 1998.
Each optionee to whom an option is granted, who has not already done so, must
agree in writing, as a condition to the granting of the option, not to enter
into a business in direct competition with the Company for one year after the
termination of employment with the Company. Each option shall be exercisable as
determined by the Committee. In addition to vesting based upon future service,
the Plan permits vesting to be conditioned upon the achievement of performance
objectives or other events. Under certain conditions, such as the receipt of
approval from the Committee, or in the event of certain mergers,
consolidations, reorganizations, the approval by the stockholders of the
Company of the liquidation or dissolution of the Company or the sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the consolidated assets of the
Company, the time at which an option is exercisable may be accelerated to allow
the exercise of the option, in whole or in part, at a time earlier than that
otherwise provided at the time of the original grant of the option. In
addition, all or any part of any remaining unexercised options may be exercised
in full, whether or not then exercisable, upon a "Change of Control" as defined
under "Executive Severance Agreements".
The option price for the number of shares with respect to which the option is
exercised shall be paid in full to the Company upon exercise of an option. The
optionee may pay all or part of the option price by delivering shares of the
Company's Common Stock which shall be credited against the option price at the
fair market value of such stock on the date of exercise. In addition, the
optionee may use the shares received upon the exercise of an option to pay the
option price and acquire additional shares. This technique allows optionees to
exercise the option which they have been granted by using any appreciation
present in the shares which they own. The Plan also permits payment to be made
by a full resource promissory note for a term of up to two years for the lesser
of up to 90% of the option price or that portion of the option price which
exceeds par value of the shares at an interest rate equal to or greater than
the applicable federal rate determined under Section 1274(d) of the Code.
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Withholding Tax: Under the 1988 Plan, optionees have the opportunity to
satisfy withholding tax obligations, in whole or in part, either by having the
Company withhold from the shares to be issued upon exercise that number of
shares that would satisfy the withholding amount due or by delivering to the
Company already owned Common Stock to satisfy the withholding amount. Elections
by participants to deliver already owned stock or to have the Company withhold
shares upon exercise of options to satisfy withholding tax obligations: (1)
must be made prior to the Tax Date; (2) are irrevocable; and (3) are subject to
the consent or disapproval of the Board of Directors or the Committee. If the
participant is an officer or director of the Company for purposes of Section
16(b) of the Act, such election must comply with Rule 16b-3 under the Act,
unless otherwise determined by the Committee.
Transfer: Options are not transferable by the optionee other than by will or
under the laws of descent and distribution, or as provided in Rule 16b-3 under
the Act, and are exercisable, during the optionee's lifetime, only by the
optionee.
Termination: Options shall terminate, unless exercised, upon the earlier of
the date of expiration of the option or three months after the date of the
severance of the employment relationship between the optionee and the Company,
or a parent or subsidiary of the Company; provided, however, that all options
held by an optionee shall terminate immediately upon receipt by an optionee of
notice of termination if the optionee is terminated for deliberate, willful or
gross misconduct as determined by the Company.
If, before the date of expiration of the option, the optionee retires from
the employ of the Company, or a parent or subsidiary of the Company, for
reasons of age or for reasons of disability, the option shall terminate on the
earlier of such date of expiration or one year after the date of such
retirement. In the event of such retirement, the optionee shall have the right
prior to the termination of such option to exercise the option to the extent to
which the optionee was entitled to exercise such option immediately prior to
such retirement provided that in the event of retirement due to disability all
options then held by the optionee shall become immediately exercisable. If the
retired optionee shall die before the termination of the option, the optionee's
executors, administrators or any person or persons to whom the option may be
transferred by will or by the laws of descent and distribution shall have the
right, at any time prior to the earlier of the date of the expiration of the
option or the end of the one-year period beginning on the date of the
optionee's death, to exercise the option to the same extent as said retired
optionee.
In the event of the death of the holder of an option while in the employ of
the Company, or a parent or subsidiary of the Company, and before the date of
expiration of such option, such option shall become immediately exercisable.
Such option shall terminate on the earlier of such date of expiration or one
year following the date of such death. After the death of the optionee, the
optionee's executors, administrators or any person or persons to whom the
option may be transferred by will or by the laws of descent and distribution
shall have the right, at any time prior to such termination, to exercise the
option to the same extent to which the deceased optionee was entitled to
exercise such option.
Modification: The Board of Directors may amend, suspend or terminate the 1988
Plan at any time; provided, however, that without the further approval of the
holders of at least a majority of the voting power of the outstanding shares of
Common Stock present in person or by proxy at a meeting of the stockholders,
the Board may not (a) increase the aggregate number of shares which
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may be issued under options pursuant to the provisions of the 1988 Plan (except
for the adjustment provisions), (b) reduce the minimum option price at which
options may be granted, or (c) change the class of employees eligible to
receive options.
Registration of Option Shares: No shares shall be issued and delivered upon
exercise of any option unless a registration statement under the Securities Act
of 1933 with respect to the shares of Common Stock to be reserved for issuance
upon the exercise of options to be granted under the 1988 Plan has become
effective, and unless all other applicable laws and regulations have been
complied with.
Federal Income Tax Consequences: Upon the exercise of an option, an optionee
will recognize ordinary compensation income in an amount equal to the excess of
the fair market value of the Common Stock on the date of exercise over the
option price. Any gain or loss recognized by the optionee on the subsequent
disposition of the stock will be a capital gain or loss.
The Company will generally be entitled to a deduction for Federal income tax
purposes at the same time and in the same amount as an optionee is required to
recognize ordinary compensation income as described above. However, Section
162(m) of the Code provides that no deduction will be allowed for certain
compensation paid to "covered employees", as defined in Section 162(m)(3), to
the extent such compensation exceeds $1,000,000 in a taxable year. It is
intended that this limitation will not apply with respect to options granted
pursuant to the 1993 Subplan by reason of the options constituting "performance
based compensation" as described in Section 162(m)(4)(c) of the Code. However,
due to the recent enactment of Section 162(m) of the Code, and in the absence
of the issuance of any guidance by the Treasury Department under Section 162(m)
of the Code to date, this cannot be assured.
To the extent that an employee recognizes a capital gain as described above,
the Company will not be entitled to a deduction for Federal income tax
purposes.
Market Price: The last sales price on the Record Date of the Company's Common
Stock on the New York Stock Exchange as reported in The Wall Street Journal was
$17 7/8 per share.
Vote Required: The affirmative vote of the holders of a majority of the
voting power of the outstanding shares of Common Stock represented at the
Annual Meeting in person or by proxy is required for approval of the proposed
amendment to the 1988 Plan. Abstaining votes and broker non-votes are counted
as votes cast in tabulating the majority requirement and have the same effect
as a vote cast against this Proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2.
3. APPROVAL OF THE SHORT-TERM CORPORATE MANAGEMENT
AND DIVISION/REGIONAL INCENTIVE PLANS
On December 1, 1994, the Compensation Committee of the Board of Directors
reviewed and recommended for approval the Corporate Management and
Division/Regional Incentive Plans (the "Plans") and recommends their approval
by the stockholders. Compensation under the Plans is meant to be performanced
based to qualify for deduction for Federal tax purposes as permitted under
recent amendments to Section 162(m) of the Code.
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Compensation qualifies as performance based if:
. Performance goals are established by a compensation committee of the
Board of Directors solely comprising at least two "outside directors";
. The material terms of the compensation and the performance goals are
approved by a majority of the shareholders; and
. The compensation committee certifies that the goals were met before the
compensation is paid.
In addition, performance based compensation must be based on preestablished
goals; be based on objective standards; and preclude the exercise of
discretion, except as retained by the committee to decrease or eliminate the
payment, despite the attainment of the goals.
This restriction on the deductibility of compensation applies only to certain
individuals. Those individuals (the "Covered Employees") are generally those
whose compensation must be reported in accordance with the SEC proxy rules and
who are employed on the last day of the year. Typically, these include the
Chief Executive Officer and the four highest paid officers other than the CEO.
The Plans are meant to meet the requirements of the Code as set forth above.
Shareholder approval is required regarding the material terms of the Plans to
make the paid awards deductible to the Company. The principal features of the
Plans are outlined below.
Purpose: ADVO has established the Plans to provide financial incentives for
key managers to attain financial objectives at the divisional, regional and
corporate levels.
Eligibility: Individuals holding key management positions, including the
Covered Employees, are eligible for participation in the Plans. Positions are
reviewed annually to determine eligibility.
Business Criteria: Awards under the Plans are based upon the achievement of
target goals of operating income, defined as income before interest income or
expense, unusual items, and income taxes (local, state or federal). Performance
calculations exclude budgeted and actual bonuses which might be paid under any
ongoing bonus plans of the Company. Annually, operating income goals are
established at the corporate, division and regional levels. The corporate
portion of the Plans is based solely on corporate operating income. The
division/regional portion is based on a weighted combination of corporate,
division and regional (if appropriate) operating income.
Bonuses are paid only when a minimum threshold of performance in the relevant
factors is attained. Below these thresholds, no payouts are made. Payouts are
made solely based on the level of performance attained, with the attainment of
performance goals yielding payout of the individuals' target awards which are
established for each position. Payouts below the performance goals result in
ratably less payouts than target award payouts. For performance above the
performance goals, the individual will receive ratably larger payouts than
target award payouts. Covered Employees have an individual maximum payout of
$2,000,000 dollars.
Discretion: Amounts of awards are based upon formulas set by the Plans. The
Compensation Committee, however, retains the right to adjust individual awards,
other than Covered Employees, either up or down, based on specific, exceptional
individual performance and/or business situations. This approach allows ADVO to
recognize and reward individuals based on performance. Under no circumstances
may the Compensation Committee increase a Covered Employee's award amount
22
<PAGE>
above the amount determined based on the attainment of the specified
performance goal. The Compensation Committee's discretion is limited to
reducing or eliminating a Covered Employee's individual award from its
calculated amount.
Administration: The Compensation Committee has the authority to alter,
suspend or terminate the Plans at any time without notice and without any
liability for making payments under the Plans, with the understanding that any
change in the material terms of the Plans would require shareholder approval
for continued compensation deductibility under the Code. The Compensation
Committee has broad powers to administer and interpret the Plans. It is ADVO's
intention that the Plans be construed and administered in a manner which
maximizes the deductibility of compensation for the Company under the Code. The
Compensation Committee members shall be comprised of a minimum of two "outside
directors" as defined by the Code.
The Compensation Committee will set forth, in writing, the specific goals
upon which a payment under the Plans will be made. These goals will be
established within the time frame prescribed by the Code, and thus while the
actual results are substantially uncertain.
Vote Required: The affirmative vote of the holders of a majority of the
voting power of the outstanding shares of Common Stock represented at the
Annual Meeting in person or by proxy is required for approval of the material
terms of the Plans. Abstaining votes and broker non-votes are counted as votes
cast in tabulating the majority requirement and have the same effect as a vote
cast against this Proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 3.
4. APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors recommends that proxies be voted in favor of the
ratification of the appointment of Ernst & Young LLP, certified public
accountants, as independent auditors for the fiscal year ending September 30,
1995.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting where they will have an opportunity to make a statement if they desire
to do so and are expected to be available to answer appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 4.
OTHER BUSINESS
The Board of Directors does not know of any matters to be presented at the
Annual Meeting other than those set forth in the Notice of Annual Meeting of
Stockholders. However, if any other matters properly come before such meeting,
the persons named in the enclosed form of proxy will have discretionary
authority to vote all proxies on such matters in accordance with their
judgment.
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STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the Annual Meeting of
Stockholders in 1996 must be received by the Company no later than August 10,
1995 in order to be considered for inclusion in the Company's proxy statement
and form of proxy relating to the Annual Meeting of Stockholders in 1996. Any
such proposal must comply with Rule 14a-8 promulgated by the Securities and
Exchange Commission pursuant to the Act.
/s/ David M. Stigler
David M. Stigler
Secretary
December 15, 1994
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EXHIBIT A
The portions of the 1988 Plan as proposed to be amended pursuant to Proposal
2 are underlined.
ADVO, INC.
1988 NON-QUALIFIED STOCK OPTION PLAN AND 1993 STOCK OPTION SUBPLAN
AS AMENDED AND RESTATED EFFECTIVE JANUARY 19, 1995
1. PURPOSES
The purposes of this Stock Option Plan (the "Plan") are (a) to secure for
ADVO, Inc. (the "Company") and its stockholders the benefits arising from
officers and other key employees of the Company, and any parent or subsidiary
of the Company, who will be responsible for its future growth and continued
success, having an ownership interest in the Company and (b) to enable the
Company to attract, retain and motivate top caliber officers and key employees
by providing them with competitive long term equity opportunities under the
terms and conditions and in the manner contemplated by this Plan.
2. ADMINISTRATION
The Plan shall be administered by the Board of Directors. In the alternative,
the Board may appoint a Stock Option Committee (the "Committee"), consisting of
not less than two members of the Board of Directors appointed by the Board of
Directors, who may but are not required to be members of the Board of
Directors. Any Committee so appointed shall have the sole authority to exercise
all of the responsibilities and duties of the Board of Directors under this
Plan, except for the appointment, removal or replacement of members of the
Committee and except as otherwise provided herein. A member of the Committee
may only serve on the Committee if he or she is, at the time of taking any
discretionary action relating to an optionee who is then subject to Section 16
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), a
"disinterested person" within the meaning of Rule 16b-3 under the Exchange Act
(as then applicable to the Plan). Each member of the Committee shall hold
office until his or her successor is designated as a member of the Committee by
the Board of Directors. Any vacancy in the Committee may be filled by a
resolution adopted by a majority of the Board of Directors. Any member of the
Committee may be removed at any time, with or without cause, by a resolution
adopted by a majority of the Board of Directors. Any action of the Committee
with respect to the administration of the Plan shall be taken by majority vote.
In the event the Board of Directors appoints a Committee to administer the Plan
pursuant to this Section 2, then, except to the extent specified in this
paragraph and in Sections 7 and 16 hereof, for purposes of administering the
Plan, the term "Committee" shall be substituted for the term "Board of
Directors" wherever it appears hereinafter. Whether or not the Board of
Directors has appointed a Committee to administer the Plan, the Board of
Directors or the Committee may establish such subplans under the Plan as it may
deem desirable in order to qualify options thereunder as "performance-based
compensation" as defined under Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"), or for any other purpose, provided that
stockholder approval of any such subplan shall be obtained if and to the extent
deemed necessary or advisable by the Board of Directors.
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Subject to the express provisions of the Plan, the Board of Directors shall
have authority to (i) construe and interpret the Plan, (ii) prescribe, amend
and rescind rules and regulations relating to the Plan, (iii) determine the
individuals to whom, and the time or times at which options shall be granted,
the number of shares to be subject to each option, the option price, and the
duration of each option, and (iv) make all other determinations necessary or
advisable for the administration of the Plan. All determinations and
interpretations made by the Board of Directors shall be binding and conclusive
on all participants in the Plan and on their legal representatives and
beneficiaries.
3. MAXIMUM NUMBER OF SHARES SUBJECT TO PLAN
Subject to adjustment as provided in Section 14 hereof, the shares of stock
to be offered under the Plan may be authorized but unissued shares of the
Company's Common Stock, $.01 par value, or issued shares which have been
reacquired. The aggregate amount of Common Stock to be delivered upon exercise
of all options granted under the Plan shall not exceed 3,800,000 shares. If any
---------
option granted hereunder shall expire or terminate for any reason without
having been exercised in full, or if any option exercise is settled in cash
under Section 9, the unpurchased shares subject thereto shall again be
available for the purposes of this Plan. If, in connection with any option
granted hereunder, any shares of Common Stock are tendered to the Company in
payment of the option price under Section 9 or are surrendered to or withheld
by the Company in satisfaction of tax withholding obligations under Section 17
hereof, a number of shares equal to the number of shares tendered, surrendered,
or withheld shall again be available for option grants under this Plan;
provided, however, that such shares shall be available exclusively for options
granted to persons who, at the time of grant, are not subject to Section 16 of
the Exchange Act.
4. NON-QUALIFIED OPTIONS
Options granted under the Plan shall not be incentive stock options for
purposes of Section 422 of the Code.
5. ELIGIBILITY AND PARTICIPATION
Officers and other key employees of the Company or of any parent or
subsidiary of the Company, whether or not directors of the Company, shall be
eligible to participate in the Plan. Directors who are not also employees are
not eligible to participate in the Plan. An individual who has been granted an
option may, if he is otherwise eligible, be granted additional options. Nothing
in the Plan shall be deemed to give any employee any right to participate in
this Plan or to receive an option hereunder.
6. OPTION PRICE
The purchase price per share of Common Stock (the "option price") covered by
each option shall be determined by the Committee, but shall not be less than
the greater of the par value of the Common Stock or the fair market value of
the Common Stock at the time such option is granted (except as provided in
Section 8 with respect to options substituted for options to purchase stock of
other issuers). The fair market value of the Common Stock on a specified date
shall mean the closing price for a share of the Common Stock on the stock
exchange, if any, on which the Common Stock is primarily traded, but if no
shares of Common Stock were traded on such date, then on the last previous date
on which a share was so traded, or, if shares of Common Stock are not primarily
traded on a stock exchange, the average of the high and low sales prices at
which one share of Common
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Stock is traded on the over-the-counter market, as reported on the National
Association of Securities Dealers Automated Quotation System, or, if none of
the above is applicable, the value of a share of Common Stock as established by
the Board of Directors for such date using any reasonable method of valuation.
7. DURATION AND TIME OF EXERCISE OF OPTIONS
Each option and all rights thereunder shall expire on such date as the Board
of Directors may determine, but in no event later than ten (10) years from the
date on which the option is granted, and shall be subject to earlier
termination as provided herein.
Each option shall be exercisable in such installments during the period prior
to its expiration date as the Board of Directors shall determine, or may, if so
determined by the Board of Directors, be exercisable either in whole or in part
at any time prior to its expiration date. If the option is made exercisable in
installments and the optionee shall not in any given installment period
purchase all of the shares which the optionee is entitled to purchase in such
installment period, then the optionee shall have the right cumulatively
thereafter to purchase any shares not so purchased and such right shall
continue until the expiration date or sooner termination of such option. In
addition to vesting based upon future service, the Board of Directors may
condition the right to exercise options upon the achievement of performance
objectives or other events.
Except in the case of an Exempt Reorganization, in the event of:
(a) a reorganization, merger or consolidation of the Company in which the
Company is not the surviving or resulting corporation or pursuant to which
the Common Stock would be converted into cash, securities or other property
(other than a merger or other business combination involving the Company in
which the holders of the Common Stock of the Company immediately prior to
the merger have the same proportionate ownership of the Common Stock of the
surviving corporation immediately after the merger),
(b) the approval by the stockholders of the Company of any plan or
proposal for the dissolution or liquidation of the Company, or
(c) a sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all, or substantially all of the
Company's consolidated assets, then all or any part of the remaining
unexercised options granted to any person shall be exercisable in full,
whether or not then exercisable, during a period commencing on a date fixed
by the Board of Directors prior to the effective time of such
reorganization, merger, consolidation, dissolution, liquidation, sale,
lease, exchange or transfer and continuing to the time which is immediately
prior to such effective time (and upon such effective time any unexercised
options shall expire). For purposes of the preceding sentence:
(1) "Exempt Reorganization" means a Reorganization in which either
(x) the election or appointment of the individuals who immediately
after the effective time of the Reorganization constitute the directors
of the Continuing Corporation was approved by a vote of at least two-
thirds of the individuals constituting the directors of the Company
immediately prior to such effective time (each such individual in
office immediately prior to the effective time, a "Prior Director") or
(y) a majority of the directors of the Continuing Corporation
immediately after such effective time were Prior Directors.
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(2) "Reorganization" means:
(A) a reorganization, merger or consolidation of the Company in
which the Company is not the surviving or resulting corporation or
pursuant to which the Common Stock would be converted into
securities or other property or
(B) a reorganization of the Company into a holding company
structure, including such a reorganization involving a business
combination with another corporation or entity, or
(C) a sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all or substantially all of
the Company's consolidated assets or a dissolution or liquidation of
the Company, in each case pursuant to which the holders of the
Common Stock receive securities of another entity.
(3) "Continuing Corporation" means the entity surviving a
Reorganization.
(4) "Prior Director" shall be deemed to include any individual
proposed by Warburg, Pincus Capital Partners, L.P. ("Warburg") as a
substitute for a Prior Director and elected a director of the
Continuing Corporation.
In addition, subject to the foregoing, all or any part of any remaining
unexercised options may be exercised in full whether or not then exercisable,
if (A) any person (as such term is used in Sections 13(d) and 14(d)(2) of the
Exchange Act), other than Warburg and its affiliates, shall become the
beneficial owner (within the meaning of Rule 13d-3 under such Act) of 30% or
more of the Company's Common Stock or (B) at any time Eligible Directors shall
cease for any reason to constitute a majority of the entire Board of Directors
of the Company. An "Eligible Director" shall mean (i) any individual who was a
director at September 27, 1990 (a "1990 Director"), (ii) any individual
proposed by Warburg and elected as a director in place of a 1990 Director, or
(iii) any director elected by, or nominated for election by the Company's
stockholders by, the vote of at least two-thirds of the directors who at the
time of such vote were Eligible Directors. For purposes of clause (B) of this
paragraph the term "Committee" may not be substituted for the term "Board of
Directors".
The Board of Directors may, at any time, in its absolute discretion,
accelerate the time at which an outstanding option can be exercised, in whole
or in part.
8. REPLACEMENT AND SUBSTITUTE OPTIONS: RELOAD OPTIONS
The Board of Directors may, in its absolute discretion, grant to optionees,
in exchange for the surrender and cancellation or their outstanding options to
purchase the Company's Common Stock, new options having option prices lower
than the option price of the options so surrendered and cancelled and
containing such other terms and conditions as the Board of Directors may deem
appropriate, provided that such new options shall comply with all terms and
conditions of the Plan. Options may be granted under the Plan in substitution
for options to purchase stock of other issuers held by persons who become
employees of the Company or any parent or subsidiary of the Company, in which
case the option price per share may be adjusted downward from the minimum
option price specified in Section 6 hereof to reflect the value, as determined
by the Board of Directors, of any options surrendered or forfeited by such
persons.
The Board of Directors may grant "reload" options with respect to options
granted hereunder (the "original options"). A "reload" option shall be an
option, granted on the date of exercise of an
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original option, to purchase a number of shares which may be equal to the
number of shares surrendered to pay the exercise price of the original option,
the number of shares surrendered or withheld to pay tax withholding relating to
the exercise of the original option, or such other number of shares not to
exceed the total number of shares with respect to which the original option is
exercised. The expiration date of a "reload" option shall be the same as that
of the original option, unless otherwise determined by the Board of Directors.
"Reload" options may be authorized with respect to options that are themselves
granted as "reload" options. The terms of "reload" options shall meet all
requirements applicable to options granted under the Plan, including the
requirements of Section 6. In connection with the grant of a reload option, the
Board of Directors may require that a specified number of shares acquired upon
exercise of the original option or prior "reload" option shall be non-
transferable for a period of time that the Board of Directors may specify.
9. EXERCISE OF OPTIONS
Options shall be exercised by the delivery of written notice to the officer
of the Company designated by the Board of Directors setting forth the number of
shares with respect to which the option is to be exercised, and specifying the
address to which the certificates for such shares are to be mailed.
The option price of an option granted hereunder shall be paid in full at the
time of exercise (i) in cash by United States currency, certified check or
money order, (ii) by tendering to the Company shares of Stock having a fair
market value on the date of exercise equal to the option price, (iii) by a full
recourse promissory note for a term of up to two years for the lesser of up to
90% of the option price or that portion of the option price which exceeds par
value of the shares at an interest rate equal to or greater than the applicable
Federal rate determined under Section 1274(d) of the Code, or (iv) a
combination of cash, Stock valued at fair market value and such promissory
note. As promptly as practicable after receipt of such written notification of
the exercise of an option and payment, the Company shall make delivery to the
optionee or as instructed by the optionee of certificates for the number of
transferable shares with respect to which such option has been so exercised,
issued in the optionee's name or as otherwise instructed by the optionee.
The Board of Directors may, in its discretion, in lieu of delivery of any
shares upon option exercise, make a cash payment in an amount equal to the
difference between the fair market value of the Common Stock on the date of
exercise and the option price per share multiplied by the number of shares for
which the option is being exercised for which the Board of Directors has
determined to pay cash.
10. NON-TRANSFERABILITY OF OPTIONS
An option or other right which may constitute a derivative security granted
under the Plan shall, by its terms, be nontransferable by the optionee, either
voluntarily or by operation of law, otherwise than by will or the laws of
descent and distribution and as provided in Rule 16b-3, and shall be
exercisable during the optionee's lifetime only by the optionee, regardless of
any community property interest therein of the spouse of the optionee, or such
spouse's successors in interest.
11. NON-COMPETITION AGREEMENT; CONTINUANCE OF EMPLOYMENT
Each person to whom an option is granted under the Plan, who has not already
done so at the time of such grant, must agree in writing as a condition to the
granting of the option not to enter
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into a business in direct competition with the Company for one year after the
termination of his employment with the Company. Nothing contained in the Plan
or in any option granted under the Plan shall confer upon any optionee any
right with respect to the continuation of employment by the Company or any
parent or subsidiary of the Company, or interfere in any way with the right of
the Company or of any parent or subsidiary of the Company (subject to the terms
of any separate employment agreement to the contrary) at any time to terminate
such employment or to increase or decrease the compensation of the optionee
from the rate in existence at the time of the granting of an option.
12. TERMINATION OF EMPLOYMENT, DISABILITY OR DEATH OF OPTIONEE
Except as may be otherwise expressly provided herein, options shall
terminate, unless exercised, three (3) months after the date of the severance
of the employment relationship between the optionee and the Company, or a
parent or subsidiary of the Company; provided however, that all options held by
an optionee shall terminate immediately upon receipt by an optionee of the
notice of termination if the optionee is terminated for deliberate, willful or
gross misconduct as determined by the Company. Absence on leave approved by the
Board of Directors shall not be considered the severance of employment.
If, before the date of expiration of the option, the optionee shall retire
from the employ of the Company, or a parent or subsidiary of the Company, for
reasons of age pursuant to a defined benefit or defined contribution plan of
the Company, or a parent or subsidiary of the Company, or for reasons of
disability as defined in Section 105(d)(4) of the Code, the option shall
terminate on the earlier of such date of expiration or one year after the date
of such retirement. In the event of such retirement, the optionee shall have
the right prior to the termination of such option to exercise the option to the
extent to which the optionee was entitled to exercise such option immediately
prior to such retirement provided that in the event of retirement due to
disability all options then held by the optionee shall become immediately
exercisable. If the retired optionee shall die before the termination of the
option, the optionee's executors, administrators or any person or persons to
whom the option may be transferred by will or by the laws of descent and
distribution shall have the right, at any time within the earlier of the date
of expiration of the option or the one-year period beginning on the date of the
optionee's death, to exercise the option to the same extent as said retired
optionee.
In the event of the death of the holder of an option while in the employ of
the Company, or a parent or subsidiary of the Company, and before the date of
expiration of such option, such option shall become immediately exercisable.
Such option shall terminate on the earlier of such date of expiration or one
year following the date of such death. After the death of the optionee, the
optionee's executors, administrators or any person or persons to whom the
option may be transferred by will or by the laws of descent and distribution
shall have the right, at any time prior to such termination, to exercise the
option to the same extent to which the deceased optionee was entitled to
exercise such option.
13. PRIVILEGE OF STOCK OWNERSHIP
No person entitled to exercise any option granted under the Plan shall have
any of the rights or privileges of a stockholder of the Company in respect of
any shares of stock issuable upon exercise of such option until such option
shall have been validly exercised and the option price paid. The Company shall
have no obligation to issue or deliver shares upon exercise of any option
unless and
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until, in the opinion of counsel for the Company, any applicable registration
requirements of the Securities Act of 1933, any applicable listing requirements
of any national securities exchange on which stock of the same class is then
listed, and any other requirements of law or of any regulatory bodies having
jurisdiction over such issuance and delivery, shall have been fully complied
with.
14. ADJUSTMENTS
If the outstanding shares of Common Stock of the Company are increased,
decreased, changed into, or exchanged for a different number or kind of shares
or securities of the Company as a result of a reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock split, an
appropriate and proportionate adjustment shall be made in the maximum number
and kind of shares as to which options may be granted under this Plan. A
corresponding adjustment changing the number or kind of shares allocated to
unexercised options or portions thereof, which shall have been granted prior to
any such change, shall likewise be made. Any such adjustment in the outstanding
options shall be made without change in the aggregate purchase price applicable
to the unexercised portion of the option but with a corresponding adjustment in
the price for each share covered by the option.
Adjustments under this Section shall be made by the Board of Directors, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive. No fractional shares of stock shall be
issued under the Plan for any such adjustment.
15. WRITTEN AGREEMENT
Each option granted hereunder shall be embodied in a written Option Agreement
which shall be subject to the terms and conditions prescribed herein, and shall
be signed by the optionee and by an officer of the Company for and on behalf of
the Company. An Option Agreement shall contain such other provisions as the
Board of Directors in its discretion shall deem advisable so long as the same
are not contrary or inconsistent with the terms and provisions of the Plan.
16. AMENDMENT AND TERMINATION OF PLAN
The Board of Directors of the Company may at any time amend, suspend or
terminate the Plan, provided, however, that without the further approval of the
holders of at least a majority of the voting power of the outstanding shares of
the Company's Common Stock present in person or by proxy at a meeting of the
stockholders, the Board may not (i) increase the maximum number of shares which
may be issued upon exercise of the options granted under the Plan, except as
permitted under the provisions of Section 14, (ii) change the minimum purchase
price set forth in Section 6, or (iii) permit the granting of Options to anyone
other than as provided in Section 5. For the purposes of this Section, the term
"Committee" may not be substituted for the term "Board of Directors."
No amendment, suspension or termination of the Plan shall, without the
consent of the optionee, materially impair any rights of such optionee under
any outstanding Option Agreement.
17. WITHHOLDING
Any person exercising an option shall be required to pay in cash to the
Company the amount of any taxes the Company is required by law to withhold with
respect to the exercise of such option. Such payment shall be due on the date
the Company is required by law to withhold such taxes. Such
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payment may also be made at the election of the optionee by the surrender of
shares of Common Stock then owned by the optionee, or the withholding of shares
of Common Stock otherwise to be issued to the optionee on exercise, in an
amount that would satisfy the withholding amount due. Unless otherwise
determined by the Board of Directors, any election so made by optionees subject
to Section 16(b) of the Exchange Act shall be in accordance with the
requirements of Rule 16b-3 under such Act and any interpretations thereof of
the Securities and Exchange Commission. The value of such shares withheld or
delivered shall be equal to the fair market value of such shares on the date of
exercise. In the event that such payment is not made when due, the Company
shall have the right to deduct, to the extent permitted by law, from any
payment of any kind otherwise due to such person from the Company, all or part
of the amount required to be withheld.
18. EFFECTIVE DATE OF PLAN
This Plan shall become effective on January 14, 1988, subject to its approval
by the holders of a majority of the voting power of the outstanding shares of
Common Stock of the Company and the Company's Series A Convertible Preferred
Stock, voting together and without regard to classes, present in person or by
proxy and entitled to vote at the 1988 Annual Meeting of Shareholders. No
option shall be granted pursuant to the Plan after January 31, 1998.
19. CONSTRUCTION
The Plan and options granted hereunder shall be governed by and construed in
accordance with the laws of the State of Delaware and in accordance with such
Federal laws as may be applicable.
It is the intent of the Company that the Plan shall comply in all respects
with applicable provisions of Rule 16b-3 under the Exchange Act, so that any
grant of options to or other transaction by an optionee who is subject to the
reporting requirements of Section 16(a) of the Exchange Act shall not result in
short-swing profits liability under Section 16(b) (except for any transaction
exempted under alternative Exchange Act rules or intended by such optionee to
be a non-exempt transaction). Accordingly, if any provision of this Plan or any
agreement relating to an option does not comply with such requirements of Rule
16b-3 as then applicable to any such transaction so that such an optionee would
be subject to Section 16(b) liability, such provision shall be construed or
deemed amended to the extent necessary to conform to such requirements, and the
optionee shall be deemed to have consented to such construction or amendment.
1993 STOCK OPTION SUBPLAN
1. PURPOSE OF SUBPLAN
This 1993 Stock Option Subplan (the "Subplan") is implemented under the 1988
Non-Qualified Stock Option Plan (the "Plan") of ADVO, Inc. (the "Company") in
order to promote the purposes of the Plan while ensuring that, with respect to
options granted hereunder to persons who constitute "covered employees" within
the meaning of Section 162(m)(3) of the Internal Revenue Code of 1986, as
amended (the "Code"), the Company will be entitled to fully deduct for tax
purposes any remuneration to such covered employees arising under the Plan.
Capitalized terms used in the Subplan but not defined herein shall have the
same meanings as defined in the Plan.
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2. ADMINISTRATION
The Subplan shall be administered by the Committee or, if the Committee
should at any time not consist solely of "outside directors" within the meaning
of Section 162(m)(4)(C)(i) of the Code, by a subcommittee of the Committee
consisting of all members of the Committee who are such "outside directors;"
provided, however, that, if such subcommittee would not have at least two
members, the Board of Directors shall designate additional directors who are
both such "outside directors" and "disinterested persons" within the meaning of
Rule 16b-3 under the Exchange Act (as then applicable to the Subplan) to serve
on such subcommittee, so that the subcommittee has at least two members.
References in the Plan and the Subplan to the "Committee" shall be deemed to
mean such subcommittee, operating pursuant to delegated authority, at any time
it is administering the Subplan. The Committee shall have all authority under
the Subplan as it has under the Plan, except that terms of options granted
hereunder may not be inconsistent, with the express terms set forth in the
Subplan. Any reference to the Board of Directors in a Plan provision applicable
to the Subplan shall mean the Committee.
3. STOCK SUBJECT TO SUBPLAN; LIMITATIONS ON INDIVIDUAL GRANTS
Subject to adjustment as provided in Section 14 of the Plan, the total number
of shares of the Company's common stock, $.01 par value (the "Stock"), that may
be delivered upon exercise of all options granted under the Subplan shall be
3,800,000. The shares of Stock reserved and available for issuance hereunder
- ---------
represent an allocation of the shares reserved and available for issuance under
the Plan. Accordingly, no option may be granted hereunder if sufficient shares
for such grants are not then available under both the Subplan and the Plan, and
grants of options may be made under the Plan even though the effecting of such
grants will be to reduce the number of shares remaining available for issuance
hereunder. Likewise, shares issued hereunder shall be counted against the
number of shares reserved and available under the Plan. Shares subject to an
option that is forfeited or otherwise terminated without a distribution of
shares will again be available for grants of options under the Subplan and the
Plan (to the extent specified in the Plan). Except as modified by this Section
3, the provisions of Section 3 of the Plan shall apply equally to the Subplan.
Subject to adjustment as described below, the total number of shares of Stock
that may be subject to options that any one person may receive under the
Subplan shall not exceed 150,000 during any calendar year under the Subplan.
The number of shares set forth in the preceding sentence shall be adjusted
proportionately with any adjustment (made in accordance with Section 14 of the
Plan) to the number of shares reserved and available for issuance under the
Plan.
4. ELIGIBILITY
Any person eligible to be granted an option under the Plan will likewise be
eligible for option grants under the Subplan.
5. SPECIFIC TERMS OF OPTION GRANTS
(a) Option Grants. The Committee is authorized to grant non-qualified
stock options to persons eligible to participate hereunder ("Optionees"),
including grants of "reload" options to the extent specified in Section 8
of the Plan, on the terms and conditions set forth in this Section 5.
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(b) Option Price. The option price per share of Stock purchasable under
an option granted hereunder shall be the greatest of (i) 100% of the fair
market value of a share on the date of grant of such option, determined by
the Committee in accordance with Section 6 of the Plan, (ii) 100% of the
"fair market value" of Stock determined in such manner as is necessary to
qualify the option as "performance-based compensation" under Section
162(m)(4)(C) of the Code, or (iii) par value of the Stock.
(c) Term. Options granted hereunder shall expire ten years after the date
of grant by the Committee, unless earlier terminated under Section 5(e)
below; provided, however, that, unless otherwise determined by the
Committee, any option granted as a "reload" option hereunder shall expire
not later than the expiration date of the original option, the exercise of
which results in the grant of such "reload" option or options.
(d) Payment of the Option Price; Exercise Procedures. The option price of
an option granted hereunder shall be paid in full at the time of exercise
(i) in cash by United States currency, certified check or money order, (ii)
by tendering to the Company shares of Stock having a fair market value on
the date of exercise equal to the option price, (iii) by a full recourse
promissory note for a term of up to two years for the lesser of up to 90%
of the option price or that portion of the option price which exceeds par
value of the shares at an interest rate equal to or greater than the
applicable Federal rate under Section 1274(d) of the Code, or (iv) a
combination of cash, Stock valued at fair market value, and such promissory
note. Options granted hereunder shall be exercised by the delivery of
written notice to the officer of the Company designated under Section 9 of
the Plan, setting forth the number of shares with respect to which the
option is to be exercised, and specifying the address to which the
certificates for such shares are to be mailed. As promptly as practicable
after receipt of such written notification of the exercise of an option and
payment, the Company shall make delivery to the Optionee or as instructed
by the Optionee of certificates for the number of transferable shares with
respect to which such option has been so exercised, issued in the
Optionee's name or as otherwise instructed by the Optionee.
(e) Vesting and Termination of Employment. Any option granted hereunder
shall be exercisable only as follows (in addition to any condition on
exercisability imposed under Section 5(f) hereof):
(i) on or after the first anniversary of the date of grant, the
option may be exercised for up to one-fourth (1/4) of the shares
subject thereto;
(ii) on or after the second anniversary of the date of grant, the
option may be exercised for up to one-half (1/2) of the shares subject
thereto, reduced by the amount of any shares with respect to which the
option has previously been exercised;
(iii) on or after the third anniversary of the date of grant, the
option may be exercised for up to three-fourths (3/4) of the shares
subject thereto, reduced by the amount of any shares with respect to
which the option has previously been exercised; and
(iv) on or after the fourth anniversary of the date of grant, the
option may be exercised for all shares subject thereto with respect to
which the option has not previously been exercised; provided, however,
that options shall be subject to all other terms and conditions,
including without limitation terms providing for accelerated
exercisability, set forth in the third and fourth paragraphs of Section
7 of the Plan, but shall not be subject to the discretionary
acceleration of exercisability under the fifth paragraph of Section 7
of the Plan; and provided further, that options may be exercised only
for whole shares. In the event
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the employment relationship between the Optionee and the Company, or a
parent or subsidiary of the Company, is severed, options granted
hereunder shall be exercisable only for such periods, and only to the
extent, provided under Section 12 of the Plan. At any time options
granted hereunder cease to be exercisable by operation of the
provisions of Section 12 of the Plan, such options shall terminate.
(f) Performance Conditions on Vesting. One-half of the options granted to
any Optionee during the 1994 calendar year shall, in addition to any
vesting requirements imposed under Section 5(e) hereof, not become
exercisable until the following performance condition has been satisfied:
During any period of 180 consecutive trading days on which actual trades in
the Stock are reported on the composite tape for the New York Stock
Exchange-listed securities, the closing price of Stock on any 90 of such
trading days equals or exceeds $25.00 per share. Options subject to the
foregoing performance condition shall be subject to accelerated
exercisability in accordance with the terms of the third or fourth
paragraph of Section 7 of the Plan.
(g) Non-Transferability. An option or other right which may constitute a
derivative security granted under the Subplan shall, by its terms, be non-
transferable by the Optionee, either voluntarily or by operation of law,
otherwise than by will or the laws of descent and distribution, and shall
be exercisable during the Optionee's lifetime only by the Optionee,
regardless of any community property interest therein of the spouse of the
Optionee, or such spouse's successors in interest.
6. APPLICABLE PLAN PROVISIONS
The provisions of Sections 11 (including the requirement that the agreement
evidencing options contain a non-competition covenant), 13, 14, 15, 17, and 19
of the Plan shall apply equally to the Subplan.
7. EFFECTIVE DATE, TERMINATION, AND AMENDMENT OF SUBPLAN
This Subplan shall become effective on January 20, 1994; provided, however,
that the Subplan shall be approved by the vote of stockholders of the Company
sufficient to meet the applicable requirements of Section 162(m)(4)(C)(ii) of
the Code, Rule 16b-3(b) under the Exchange Act, the rules of the New York Stock
Exchange, and any other applicable law, regulation, or contractual provision
imposing a stockholder approval requirement; and provided further that such
approval shall be obtained in such manner as will satisfy such requirements
(including a separate vote if required to meet the requirements of Section
162(m)(4)(C)(ii)). The Subplan shall terminate at such time as no shares remain
available for issuance pursuant to Section 3 and the Company has no further
obligation with respect to any previously granted option; provided, however,
that no options may be granted hereunder at any time after the Plan has been
terminated. The Board of Directors of the Company may at any time amend,
suspend, or terminate the Subplan; provided, however, that any such amendment
shall be approved by vote of stockholders of the Company if and to the extent
required to meet the requirements of any applicable law, regulation, or
contractual provision, including without limitation those specified in the
first sentence of this Section 7.
8. STATUS OF OPTIONS AS "PERFORMANCE-BASED COMPENSATION"; SAVINGS PROVISION
It is the intention of the Company that options granted under the Subplan
constitute "performance-based compensation" under Section 162(m)(4)(C) of the
Code, so that the Company will
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be allowed a full deduction for any remuneration relating to such option
without restriction under Section 162(m) of the Code. Accordingly, any term,
condition, or provision of the Subplan, the Plan, or any agreement relating to
an option granted hereunder that would cause the Company, by operation of
Section 162(m) of the Code, to not be able to fully deduct remuneration
relating to an option granted hereunder shall be inapplicable to such option or
shall be deemed modified and amended to the extent necessary to preserve such
full deductibility under Section 162(m). To the extent that any provision of
the Subplan, whether or not rendered inapplicable or modified by operation of
this Section 8, is inconsistent with the express grant of rights or other
provisions of the Plan, the Plan shall be deemed amended insofar as such
provisions would otherwise apply to the Subplan and options awarded hereunder.
As a condition to his or her receipt of options hereunder, each Optionee shall
be deemed to have consented to any modification or amendment resulting from
this Section 8 and shall be deemed to have waived any rights under the Plan
that may be inconsistent with the provisions of the Subplan.
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PROXY PROXY
ADVO, INC.
ONE UNIVAC LANE, P.O. BOX 755, WINDSOR, CONNECTICUT 06095-0755
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints David M. Stigler and Robert S. Hirst, and
each of them, with full power of substitution, the proxies of the undersigned to
vote all the shares of the Common Stock of ADVO, Inc. which the undersigned is
entitled to vote at the Annual Meeting of Stockholders to be held on January 19,
1995 or any adjournment thereof.
In their discretion the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" ALL NOMINEES FOR DIRECTOR AND WILL BE VOTED "FOR" PROPOSALS 2, 3
AND 4.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders and the related Proxy Statement.
(PLEASE VOTE, SIGN AND DATE ON REVERSE SIDE)
FOLD AND DETACH HERE
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" ITEMS 1, 2, 3 AND 4.
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK.
I plan to attend the meeting.
[ ]
1. Election of Directors:
FOR all nominees listed to the right (except as marked to the contrary)
[ ]
WITHHOLD AUTHORITY to vote for all nominees listed to the right
[ ]
Nominees for election by holders of Common Stock: Joseph P. Durrett, Jack W.
Fritz, Robert Kamerschen, Lawrence Lachman, Larry G. Morris, Howard H.
Newman, John R. Rockwell, Richard H. Stowe, John L. Vogelstein.
INSTRUCTION: To withhold your vote for any nominee(s), write that nominee's
name on the line below.
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2. Approval of an Amendment to the 1988 Non-Qualified Stock Option Plan and 1993
Stock Option Subplan as Amended, as described in the Proxy Statement.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Approval of the Short-term Corporate Management and Division/Regional
Incentive Plans.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Ratification of the appointment of Ernst & Young as the Company's Independent
Auditors for fiscal 1995.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Dated: , 199
-------------------------------------------- -
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Signature
--------------------------------------------------------
Signature if held jointly
Please sign exactly as name appears at left. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES"
FOLD AND DETACH HERE
