SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
MEMBERWORKS INCORPORATED
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
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and the date of its filing.
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MEMBERWORKS INCORPORATED
680 Washington Boulevard
Stamford, Connecticut 06901
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, NOVEMBER 20, 2003
The 2003 Annual Meeting of Stockholders of MemberWorks Incorporated
(the "Company") will be held at the Westin Hotel, 1 First Stamford Place,
Stamford, Connecticut 06902 at 9:00 a.m., local time, to consider and act upon
the following matters:
1. To elect Alec L. Ellison and Marc S. Tesler as Class I Directors,
to serve for a three-year term;
2. To ratify the selection of PricewaterhouseCoopers LLP by the
Board of Directors as the Company's independent auditors for the
fiscal year ending June 30, 2004;
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on September 24, 2003
will be entitled to notice of and to vote at the meeting or any adjournment
thereof. The stock transfer books of the Company will remain open.
By Order of the Board of Directors,
James B. Duffy
Secretary
Stamford, Connecticut
October 2, 2003
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, you may
vote your shares by marking your votes on the enclosed proxy card, signing and
dating it, and mailing it in the enclosed envelope. NO POSTAGE NEED BE AFFIXED
IF THE PROXY IS MAILED IN THE UNITED STATES.
2
MEMBERWORKS INCORPORATED
680 Washington Boulevard
Stamford, Connecticut 06901
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, NOVEMBER 20, 2003
This Statement is furnished in connection with the solicitation of proxies by
the Board of Directors of MemberWorks Incorporated (the "Company") and is to be
mailed on or about October 12, 2003 to holders of record of the Company's Common
Stock, $0.01 par value per share ("Common Stock"), for use at the Annual Meeting
of Stockholders (the "Annual Meeting") to be held on November 20, 2003 and at
any adjournments of that meeting. All proxies will be voted in accordance with
the stockholders' instructions, and if no choice is specified, the proxies will
be voted in favor of the matters set forth in the accompanying Notice of Annual
Meeting. Any proxy may be revoked by a stockholder at any time before its
exercise by delivery of written revocation or a subsequently dated proxy to the
Secretary of the Company or by voting in person at the Annual Meeting.
The Company's 2003 Annual Report to Stockholders and Annual Report on Form 10-K
are being mailed to stockholders concurrently with this Proxy Statement.
Voting Securities And Votes Required
At the close of business on September 24, 2003, the Record Date for the
determination of stockholders entitled to vote at the Annual Meeting, there were
outstanding and entitled to vote an aggregate of 11,571,804 shares of Common
Stock, constituting all of the voting stock of the Company. Holders of Common
Stock are entitled to one vote per share.
The presence or representation by proxy of the holders of a majority of the
number of shares of Common Stock issued, outstanding and entitled to vote at the
Annual Meeting constitutes a quorum for the transaction of business at the
Annual Meeting. Shares of Common Stock represented in person or by proxy
(including shares that abstain or do not vote with respect to one or more of the
matters presented for stockholder approval) will be counted for purposes of
determining whether a quorum is present.
The affirmative vote of the holders of a majority of the shares of Common Stock
present at the Annual Meeting is required for the election of directors and the
ratification of the selection of PricewaterhouseCoopers LLP as the Company's
independent auditors for the fiscal year ending June 30, 2004.
Shares that abstain from voting as to a particular matter, and shares held in
"street name" by brokers or nominees who indicate on their proxies that they do
not have discretionary authority to vote such shares as to a particular matter,
will not be counted as votes in favor of such matter and will also not be
counted as votes cast or shares voting on such matter. Accordingly, abstentions
and "broker non-votes" will have no effect on the voting on matters, such as the
ones presented for stockholder approval at this Annual Meeting, that require the
affirmative vote of a certain percentage of the shares voting on the matter.
3
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information based on the latest available
public information, with respect to the beneficial ownership of the Company's
Common Stock as of September 12, 2003 by (i) each person known by the Company to
beneficially own more than 5% of the outstanding shares of Common Stock, (ii)
each director and each person nominated to become a director of the Company and
(iii) each executive officer of the Company named in the Summary Compensation
Table set forth under the caption "Executive Compensation" below and (iv) all
current directors and executive officers of the Company as a group:
Name and Address of Number of Shares Percentage of Common
Beneficial Owners Beneficially Owned (1) Stock Outstanding (2)
----------------- ------------------------- -------------------------
Thomas W. Smith (3)
323 Railroad Avenue
Greenwich, CT 06830 2,246,089 19.3%
Prescott Investors, Inc.
323 Railroad Avenue
Greenwich, CT 06830 1,546,089 13.3%
Thomas N. Tryforos (4)
323 Railroad Avenue
Greenwich, CT 06830 1,390,308 11.9%
Scott Vassalluzzo (5)
323 Railroad Ave
Greenwich, CT 06830 1,224,760 10.5%
Waddell & Reed Asset Management Co.
6300 Lamar Avenue
Overland Park, KS 66202 1,037,450 8.9%
Strong Capital Management, Inc.
100 Heritage Reserve
Monomonee Falls, WI 53051 947,814 8.1%
Barclays Global Investors
45 Freemont Street
San Francisco, CA 94105 774,662 6.7%
Ashford Capital Management, Inc.
3801 Kennett Pike, Building B
Wilmington, DE 19807 609,800 5.2%
Bridges Investment Council, Inc.
8401 West Dodge Road
Omaha, NE 68114 590,800 5.1%
Directors, Executive Officers and Nominees
Gary A. Johnson (6) 1,028,545 8.5%
James B. Duffy (7) 307,200 2.6%
Vincent DiBenedetto (8) 183,014 1.6%
David Schachne (9) 164,398 1.4%
Alec L. Ellison (10) 53,634 *
Marc S. Tesler (11) 43,093 *
Michael T. McClorey (12) 15,130 *
Edward Stern (13) 14,500 *
Robert Kamerschen 3,000 *
William T. Olson III 2,000 *
Scott N. Flanders 1,000 *
All current directors and executive officers as a group
(11 persons)(6)(7)(8)(9)(10)(11)(12)(13) 1,815,514 14.3%
-------------
* Less than or equal to 1%.
4
(1) Each person has sole investment and voting power with respect to the shares
indicated, except as otherwise noted. The number of shares of Common Stock
beneficially owned is determined under the rules of the Securities and
Exchange Commission and is not necessarily indicative of beneficial
ownership for any other purpose. The inclusion herein of any shares of
Common Stock deemed beneficially owned does not constitute an admission of
beneficial ownership of such shares. Any reference in the footnotes below
to stock options held by the person in question relates to stock options
that are currently exercisable or exercisable within 60 days after
September 12, 2003.
(2) Calculated by taking the named persons' beneficial ownership as disclosed
above as a percentage of the total number of shares outstanding of
11,646,286 as of September 12, 2003, plus any shares subject to options
held by the person in question that are currently exercisable or
exercisable within 60 days after September 12, 2003.
(3) Includes 1,546,089 shares held by Prescott Investors, Inc. which Mr. Smith,
as investment manager for Prescott Investors, Inc., may be deemed to
beneficially own.
(4) Includes 1,355,700 shares held by Prescott Investors, Inc. which Mr.
Tryforos, as investment manager for Prescott Investors, Inc., may be deemed
to beneficially own.
(5) Includes 1,175,700 shares held by certain investment funds which Mr.
Vassalluzzo, as investment manager for certain managed accounts, may be
deemed to beneficially own and 40,000 shares held in family accounts, of
which Mr. Vassalluzzo disclaims beneficial ownership.
(6) Includes 428,545 shares issuable upon the exercise of outstanding options
presently exercisable or exercisable within 60 days after September 12,
2003. Includes 54,000 shares held in trust for the benefit of Mr. Johnson's
children. Mr. Johnson disclaims beneficial ownership of such shares.
(7) Includes 285,897 shares issuable upon the exercise of outstanding options
presently exercisable or exercisable within 60 days after September 12,
2003.
(8) Includes 42,660 shares issuable upon the exercise of outstanding options
presently exercisable or exercisable within 60 days after September 12,
2003.
(9) Includes 164,398 shares issuable upon the exercise of outstanding options
presently exercisable or exercisable within 60 days after September 12,
2003.
(10) Includes 37,500 shares issuable upon the exercise of outstanding options
presently exercisable or exercisable within 60 days after September 12,
2003.
(11) Includes 37,500 shares issuable upon the exercise of outstanding options
presently exercisable or exercisable within 60 days after September 12,
2003.
(12) Includes 12,500 shares issuable upon the exercise of outstanding options
presently exercisable or exercisable within 60 days after September 12,
2003.
(13) Includes 12,500 shares issuable upon the exercise of outstanding options
presently exercisable or exercisable within 60 days after September 12,
2003.
5
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes, with members of
each class holding office for staggered three-year terms. The Board currently
consists of two Class I directors, whose terms expire at the 2003 Annual Meeting
of Stockholders, three Class II directors, whose terms expire at the 2004 Annual
Meeting of Stockholders and two Class III directors whose terms expire at the
2005 Annual Meeting of Stockholders (in all cases subject to the election of
their successors and to their earlier death, resignation or removal).
At this year's meeting the terms of the two Class I directors, Alec L. Ellison
and Marc S. Tesler, will expire. The Board of Directors has nominated Mr.
Ellison and Mr. Tesler for re-election as Class I Directors at the Annual
Meeting, to serve for three-year terms.
The persons named in the enclosed proxy will vote to elect Alec L. Ellison and
Marc S. Tesler as Class I directors, unless authority to vote for the election
of the nominees is withheld by marking the proxy to that effect. The Company has
a Governance and Nominating committee and all nominations are approved by the
Board of Directors. Each nominee has indicated his willingness to serve, if
elected, but if any nominee should be unable to stand for election, proxies may
be voted for a substitute nominee designated by the Board of Directors.
The Board of Directors recommends that stockholders vote "FOR" the nominees.
Set forth below are the name, age and certain other information with respect to
each director and nominee for director of the Company.
Class I Directors
Alec L. Ellison, 40, has been a director of the Company since 1989. Mr.
Ellison has been affiliated with Broadview International LLC, an investment
bank, since 1988 and has served as a Managing Director since 1993 and President
since 2001. Mr. Ellison holds a B.A. from Yale University and an M.B.A. from
Harvard Business School, where he was a Baker Scholar.
Marc S. Tesler, 57, has been a director of the Company since 1996. From
July 1995 to January 2001, he was a general partner of Technology Crossover
Ventures, L.P., a private partnership specializing in information technology
investments. Mr. Tesler received his B.S. from the University of Massachusetts
and his M.B.A. from New York University.
Class II Directors
Scott N. Flanders, 46, has been a director since July 2002. Mr. Flanders
has been the Chairman and Chief Executive Officer of Columbia House since
September 1999. Prior to joining Columbia House, Mr. Flanders co-founded and
served as the Chairman of Telstreet.com, an e-commerce company, from January
1999 to September 1999. Previously, Mr. Flanders served as President of
Macmillan publishing, a unit of Viacom, from January 1993 to December 1998. Mr.
Flanders also serves on the Board of Directors of Freedom Communications and the
Gazelle Fund. Mr. Flanders, a certified public accountant, holds a B.A. from the
University of Colorado and a J.D. from Indiana University.
Michael T. McClorey, 44, has been a director of the Company since 2001. Mr.
McClorey served as President of Health Services Marketing, an operating unit of
Catalina Marketing Corporation, a targeted marketing firm, and as a member of
the Office of the President from February 2000 to August 2002. He also served as
Chief Executive Officer of Health Resource Publishing Company, a subsidiary of
Catalina Marketing Corporation, from April 1995 to August 2002 and as President
from April 1995 to February 2002. Mr. McClorey holds a B.B.A. in finance from
the University of Cincinnati.
Edward M. Stern, 44, has been a director of the Company since April 2002. Mr.
Stern is the President, Chief Executive Officer and a director of CHI Energy,
Inc., an energy company specializing in renewable technologies and a
wholly-owned subsidiary of Enel S.p.A. of Rome, Italy, the world's largest
publicly held utility company. Mr. Stern also serves on the Board of Directors
of Energy Photovoltaics, Inc., a manufacturer of solar energy products and
systems, and Energia Global International, a renewable energy company focusing
on the Latin American market. Mr. Stern holds B.A., J.D. and M.B.A. degrees from
Boston University.
6
Class III Director
Gary A. Johnson, 48, a co-founder of the Company, has served as President
and Chief Executive Officer and a director of the Company since its inception in
1989. Mr. Johnson received a B.S. from Tufts University and an M.B.A. from
Harvard Business School.
Robert Kamerschen, 67, is retired Chairman and Chief Executive Officer of
DIMAC Corporation, a direct marketing services company. He served as the
Chairman and Chief Executive Officer from September 1999 to February 2002. DIMAC
Corporation filed a voluntary petition for reorganization under the U.S.
bankruptcy laws in April 2000 and successfully emerged from bankruptcy in
February 2001. Prior to joining DIMAC Corporateion, he was the Chairman and
Chief Executive Officer of ADVO, Inc., a leading full-service targeted direct
mail marketing services company, and served in key senior leadership roles in a
number of prominent sales and marketing driven businesses involving significant
turnaround and/or transformation initiatives. Mr. Kamerschen currently serves on
the boards of IMS Health Incorporated, Linens-N-Things, Inc, RadioShack
Corporation, and R.H. Donnelley Corporation. Mr. Kamerschen is a Regent for the
University of Hartford and Trustee of Wadsworth Antheneum Museum. Mr. Kamerschen
received a B.S. and M.B.A from Miami University (Ohio).
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes of
ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission.
Officers, directors and greater-than-ten-percent shareowners are required by
regulations promulgated by the Securities and Exchange Commission to furnish the
Company with copies of all Forms 3, 4 and 5 they file.
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to
the Company during fiscal 2003 and upon a review of Forms 5 and amendments
thereto furnished to the Company with respect to fiscal 2003, or upon written
representations received by the Company from certain reporting persons that no
Forms 5 were required for those persons, the Company believes that no director,
executive officer or greater-than-ten-percent shareholder failed to file on a
timely basis the reports required by Section 16(a) of the Exchange Act during,
or with respect to, fiscal 2003.
Board and Committee Meetings
The Board of Directors held seven meetings during fiscal 2003. No director
attended less than 75% of the meetings of the Board of Directors or committee
meetings on which the director served during the period of his service as a
director. The Board of Directors currently has an Audit Committee, a
Compensation Committee and a Governance and Nominating Committee. The roles,
responsibilities and duties of the Board of Directors and each of its Committees
are formalized in written charters, all of which are available upon written
request. All written requests should be sent to the attention of the Company's
General Counsel.
The Company's Audit Committee is responsible for the appointment of the
Company's independent auditors, discussing and reviewing the scope and the fees
of the annual audit and reviewing the results thereof with the independent
auditors, reviewing and approving non-audit services of the independent
certified public accountants, reviewing compliance with existing major
accounting and financial policies of the Company, reviewing the adequacy of the
financial organization of the Company, and reviewing management's procedures and
policies relative to the adequacy of the Company's internal accounting controls
and compliance with federal and state laws relating to accounting practices. The
Company's consolidated financial statements are currently audited by
PricewaterhouseCoopers LLP. The Audit Committee met six times during fiscal 2003
with representatives from PricewaterhouseCoopers LLP. The current members of the
Audit Committee are Mr. Flanders, Mr. McClorey and Mr. Tesler. The Board of
Directors has reviewed the composition of the Audit Committee and has determined
that all members of the Audit Committee are independent within the meaning of
the applicable rules governing audit committees and contains at least one
financial expert, Mr. Flanders. The Board of Directors has a written Audit
Committee Charter, a copy of which is filed as Annex A to this Proxy Statement.
7
The Company's Compensation Committee provides recommendations to the Board of
Directors regarding compensation programs of the Company and administers and has
authority to grant stock options under the Company's 1996 Stock Option Plan,
1995 Executive Officers Stock Option Plan and the 1995 Non-Employee Directors
Stock Option Plan to all employees, directors and officers of the Company,
including those persons who are required to file reports pursuant to Section
16(a) of the Exchange Act. The Compensation Committee also administers the
Company's Amended 1990 Stock Option Plan and the Company's 1996 Employee Stock
Purchase Plan. The Committee has a policy prohibiting the Company from loaning
money to executive officers and Directors for personal purposes. The
Compensation Committee met two times during fiscal 2003. The current members of
the Compensation Committee are Mr. Ellison, Mr. Kamerschen and Mr. Stern.
The Company's Governance and Nominating Committee is responsible for providing
recommendations to the Board of Directors regarding nominees for director and
membership on the Board of Directors' committees. An additional function of the
Committee is to develop and recommend to the Board of Directors the Company's
Corporate Governance guidelines and to assist the Board of Directors in
complying with these guidelines. The Committee also oversees the evaluation of
the Board of Directors and management and reviews and resolves conflict of
interest situations. The Governance and Nominating Committee met two times
during fiscal 2003. Mr. Kamerschen, Mr. McClorey and Mr. Stern are members of
the Governance and Nominating Committee. Stockholders wishing to recommend
candidates for consideration by the Governance and Nominating Committee may do
so by writing to the Secretary of the Company and providing the candidate's
name, biographical data and qualifications.
Director Compensation and Stock Options
The Company's directors do not receive any compensation for their services on
the Board of Directors or any committee thereof. However, they are reimbursed
for expenses incurred in connection with their attendance at Board or committee
meetings. All directors, except for Mr. Johnson, are non-employee directors and
are eligible to receive options to purchase shares of Common Stock pursuant to
the 1995 Non-Employee Director Stock Option Plan and the 1996 Stock Option Plan.
Options granted under these plans have a term of 10 years and vest over 4 years.
During fiscal 2003, Mr. Kamerschen received stock options in connection with
becoming a member of the Company's Board of Directors.
8
Executive Compensation
Summary of Compensation
The following table sets forth certain compensation information for the fiscal
years indicated, of (i) our Chief Executive Officer and (ii) the four other most
highly compensated executive officers for 2003 who were serving as our executive
officers on June 30, 2003 (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
Annual Long-Term
Compensation Compensation
--------------------------------------- ------------------
Securities
Other Annual Underlying All Other
Fiscal Salary Bonus Compensation Options Compensation
Name and Principal Position Year ($) ($) ($) (1) (shares) (2) ($) (3)
--------------------------- ----- ----------- ----------- ------------ ------------ -------------
Gary A. Johnson 2003 $ 579,400 $ 1,242,300 - 120,000 $ 375
President and Chief 2002 550,000 935,000 - 103,796 375
Executive Officer 2001 446,200 67,500 - 73,070 -
James B. Duffy 2003 $ 404,600 $ 433,800 - 60,000 $ 1,500
Executive Vice President 2002 385,000 327,250 - 49,427 1,388
and Chief Financial Officer 2001 372,300 37,000 - 47,590 -
Vincent DiBenedetto 2003 $ 400,400 $ 142,500 - 30,000 $ 1,125
Executive Vice President, 2002 400,400 83,300 - 20,320 (4) -
Health and Insurance Services
David Schachne 2003 $ 385,000 $ 154,000 - 20,000 $ 1,500
Executive Vice President, 2002 385,000 154,000 - 34,049 1,388
Business Development 2001 372,300 37,500 - 47,590 -
William T. Olson III 2003 $ 335,000 $ 127,300 - 20,000 $ 1,500
Executive Vice President, 2002 335,000 120,600 - 8,512 1,388
Sales and Client Services 2001 78,800 50,000 - 100,000 (5) -
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted because such perquisites and other personal benefits
constitute less than the lesser of $50,000 or ten percent of the total
salary and bonus reported for the Named Executive Officer during the fiscal
years ended June 30, 2003, 2002, and 2001.
(2) The Company did not grant any restricted stock awards or stock appreciation
rights during the year ended June 30, 2003, 2002 and 2001. The Company does
not have any long-term incentive plans.
(3) The amounts reported in this column consist solely of the Company's
matching contributions under the 401(k) Profit Sharing Plan.
(4) Mr. DiBenedetto joined the Company in October 2000 and was elected as an
executive officer during fiscal 2002.
(5) Mr. Olson joined the Company in March 2001 and was elected as an executive
officer during fiscal 2001.
9
Option Grants
The following table sets forth certain information concerning option grants
during the fiscal year ended June 30, 2003 to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
---------------------------------------------------------- Potential Realizable Value at
Number of Assumed Annual Rates of Stock
Securities Percent of Total Price Appreciation for Option
Underlying Options Granted to Exercise Term (1)
Options Employees in Price Expiration -----------------------------
Name Granted (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
---- ------------ ----------- ------ ---- ------ -------
Gary A. Johnson 120,000 14.1% $ 13.05 7/23/12 $ 984,849 $ $ 2,495,801
James B. Duffy 60,000 7.1% $ 13.05 7/23/12 $ 492,424 $ 1,247,900
Vincent DiBenedetto 30,000 3.5% $ 13.05 7/23/12 $ 246,212 $ 623,950
David Schachne 20,000 2.4% $ 13.05 7/23/12 $ 164,141 $ 415,967
William T. Olson III 20,000 2.4% $ 13.05 7/23/12 $ 164,141 $ 415,967
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. The assumed rates of appreciation are mandated by the
rules of the Securities and Exchange Commission and do not represent the
Company's estimate or projection of future stock prices. This table does
not take into account any appreciation or depreciation in the price of the
Common Stock to date. Actual gain, if any, on stock option exercises will
depend on future performance of the Common Stock and the date on which the
options are exercised. Values shown are net of the option exercise price,
but do not include deductions for tax or other expenses associated with
the exercise. These options generally become exercisable over a four-year
period (25% per year) and expire at the earlier of termination of
employment or ten years from date of grant. In the event of a change in
control of the Company, the Board has the discretion to provide that all
options become exercisable in full immediately prior to such event.
Option Exercises and Holdings
The following table sets forth certain information concerning each exercise of a
stock option during the fiscal year ended June 30, 2003 by each of the Named
Executive Officers and the number and value of unexercised options held by each
of the Named Executive Officers on June 30, 2003:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Securities Underlying Value of Unexercised
Unexercised Options At Fiscal In-the-Money Options at
Shares Acquired Value Realized Year-End (#) Fiscal Year-End ($)(1)
Name on Exercise (#) ($) Exercisable/Unexercisable Exercisable/ Unexercisable
----- ---------------- --- ------------------------- --------------------------
Gary A. Johnson - $ - 336,510 / 258,866 $2,340,756 / $850,601
James B. Duffy - $ - 286,783 / 130,724 $2,451,196 / $406,200
Vincent DiBenedetto - $ - 30,080 / 70,240 $- / $203,100
David Schachne - $ - 179,129 / 79,190 $767,187 / $135,400
William T. Olson III - $ - 52,128 / 76,384 $56,625 / $248,650
(1) The per share value of unexercised in-the-money options is calculated by
subtracting the per share option exercise price from the last per share
sale price of the Company's Common Stock on the Nasdaq National Market on
June 30, 2003 ($19.82) for those options which have an exercise price below
the Company's stock price on June 30, 2003.
10
Equity Compensation Plan Information
Number of securities
remaining available for
Number of securities future issuance under
to be issued upon Weighted-average equity compensation plans
exercise of exercise price of (excluding securities
Plan category outstanding options outstanding options reflected in (a))
------------- ------------------- ------------------- -----------------
(a) (b) (c)
Equity compensation plans
approved by security holders 2,838,000 $ 21.90 685,000
Equity compensation plans not
approved by security holders (1) 1,695,000 $ 16.50 215,000
----------------------- --------------------- ----------------------------
Total 4,533,000 $ 19.88 900,000
======================= ===================== ============================
(1) These shares represent an increase in the share reserve during fiscal 2002
under the 1996 Stock Option Plan. These options have an exercise price per
share that is equal to or greater than the fair market value at the date of
grant and they generally become exercisable over a four to five year period
and expire at the earlier of termination of employment or between five to
ten years from the date of grant.
Certain Relationships and Related Transactions
As of the closing of the Company's initial public offering in October 1996, the
Company adopted a policy that all material transactions between the Company and
its officers, directors and other affiliates must (i) be approved by a majority
of the members of the Company's Board of Directors and by a majority of the
disinterested members of the Company's Board of Directors and (ii) be on terms
that are no less favorable to the Company than could be obtained from
unaffiliated third parties. However, the policy does not allow for the grant of
any personal loans to or for any director or executive officer.
For a description of option grants to certain executive officers of the Company,
see "Executive Compensation -- Option Grants."
11
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors reviews the Company's financial
reporting process on behalf of the Board of Directors and operates under a
written charter adopted by the Board of Directors. A copy of the Audit Committee
charter, as amended, is filed as Annex A to this Proxy Statement. The adequacy
of the charter is evaluated annually.
The Audit Committee consists of Mr. Flanders, Mr. McClorey and Mr. Tesler. None
of the members are officers or employees of the Company and all members of the
Audit Committee are independent within the meaning of the applicable rules
governing audit committees. The Board of Directors has determined that Mr.
Flanders is both independent and an audit committee financial expert, as defined
by SEC guidelines.
Management is responsible for the financial reporting process, including the
system of internal controls, and for the preparation of the Company's
consolidated financial statements in accordance with accounting principles
generally accepted in the United States of America. The independent auditors are
responsible for performing an independent audit of the Company's consolidated
financial statements in accordance with accounting principles generally accepted
in the United States of America and to issue a report thereon. The Audit
Committee is responsible for appointing, monitoring and managing the independent
auditors.
In carrying out its duties, the Audit Committee has reviewed and discussed the
Company's audited consolidated financial statements for the fiscal year ended
June 30, 2003, with the Company's management and its independent auditors.
Management represented to the Audit Committee that the Company's consolidated
financial statements were prepared in accordance with accounting principles
generally accepted in the United Sates. The Audit Committee also discussed with
the independent auditors matters required to be discussed by Statement on
Auditing Standards No. 61, "Communication with Audit Committees, as amended."
In addition, the Committee has discussed with the independent auditors, the
auditor's independence from the Company and its management, including the
matters in the written disclosures required by the Independence Standards Board
Standard No. 1, "Independence Discussion with Audit Committees."
The Audit Committee discussed with the Company's independent auditors the
overall scope and plans for its audit. The Audit Committee meets with the
independent auditors, with and without management present, to discuss the
results of its examination, the evaluation of the Company's internal controls
and the overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board has approved,
that the audited financial statements be included in the Company's Annual Report
on Form 10-K for the year ended June 30, 2003, for filing with the Securities
and Exchange Commission. The Audit Committee and the Board of Directors also
have recommended, subject to shareholder approval, the selection of
PricewaterhouseCoopers LLP as the Company's independent auditors.
Audit Committee
Scott N. Flanders
Michael T. McClorey
Marc S. Tesler
12
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors is currently composed
of three independent non-employee directors, Mr. Ellison, Mr. Kamerschen and Mr.
Stern. The Compensation Committee is responsible for establishing and
administering the policies that govern both annual compensation and
performance-based equity ownership of the Company's executive officers.
This report is submitted by the Compensation Committee and addresses the
Company's policies for 2003 as they apply to the Company's executive officers,
including the Named Executive Officers.
Compensation Philosophy
The objectives of the executive compensation program are to (i) align
compensation with business objectives, individual performance and the interests
of shareholders, (ii) motivate and reward high levels of performance, (iii)
recognize and reward the achievement of Company goals and (iv) enable the
Company to attract and retain key executives.
In evaluating both individual and corporate performance for purposes of
determining salary and bonus levels and stock option grants, the Compensation
Committee places significant emphasis on the extent to which strategic and
business plan goals are met, including the progress and success of the Company
with respect to matters such as achieving operating budgets, establishing
strategic marketing, distribution and development alliances, product development
and enhancement of the Company's strategic position, as well as on the Company's
overall financial performance.
Executive Compensation in Fiscal 2003
The compensation programs for the Company's executives established by the
Compensation Committee consist of four elements based upon the foregoing
objectives: (i) base salary and benefits competitive with the marketplace; (ii)
bonus grants based on individual and Company performance; (iii) stock-based
equity incentive in the form of participation in the 1996 Stock Option Plan, the
1995 Executive Officers' Stock Option Plan and the 1996 Employee Stock Purchase
Plan and (iv) perquisites that in total do not exceed $50,000 in value. The
Compensation Committee believes that providing a base salary and benefits to its
executive officers that are competitive with the marketplace enables the Company
to attract and retain key executives. In addition, the Compensation Committee
believes that bonuses based on both corporate and individual performance provide
incentives to its executive officers that align their interests with those of
the Company and its shareholders. The Compensation Committee generally provides
executive officers discretionary stock option awards to reward them for
achieving specified business objectives and to provide them with long-term
ownership opportunities. In evaluating the salary level, bonuses and equity
incentives to award to each current executive officer, the Compensation
Committee examines the progress which the Company has made in areas under the
particular executive officer's supervision, such as development or sales, and
the overall performance of the Company. In addition, the Compensation Committee
has retained an independent outside compensation consulting firm, with whom the
Compensation Committee meets at least annually.
In determining the salary and bonuses of each executive officer, including the
Named Executive Officers, the Compensation Committee and the Board of Directors
consider numerous factors such as (i) the individual's performance, including
the expected contribution of the executive officer to the Company's goals, (ii)
the Company's long-term needs and goals, including attracting and retaining key
management personnel, (iii) the Company's competitive position, including market
data on the compensation of executive officers of comparable companies and (iv)
the Company's financial performance measured against financial targets approved
by the Board of Directors and Compensation Committee. To the extent determined
to be appropriate, the Compensation Committee also considers general economic
conditions and the historic compensation levels of the individual.
Stock option grants made pursuant to the 1995 Executive Officers' Stock Option
Plan and the 1996 Stock Option Plan in the fiscal years ended June 30, 2003,
2002 and 2001 were designed to make a portion of the overall compensation of the
executive officers receiving such awards vary depending upon the performance of
the Company's Common Stock. Such grants, as a result of vesting arrangements
applicable to such stock options, also serve as a means of retaining these
individuals. In making stock option grants to executives, the Compensation
Committee considers a number of factors, including the performance of the
executive, the responsibilities of the executive, and the executive's current
stock or option holdings.
13
Benefits
The Company's executive officers are entitled to receive medical benefits and
life insurance benefits and to participate in the Company's 401(k) Savings Plan
on the same basis as other full-time employees of the Company. The Company's
1996 Employee Stock Purchase Plan, which is available to virtually all
employees, including certain executive officers and directors who are employees,
allows participants to purchase shares at a discount of approximately 15% from
the fair market value at the beginning or end of the applicable purchase period.
Compensation of the Chief Executive Officer in Fiscal 2003
The compensation philosophy applied by the Compensation Committee in
establishing the compensation for the Company's President and Chief Executive
Officer is the same as for the other senior management of the Company - to
provide a competitive compensation opportunity that rewards performance.
During fiscal 2003, Mr. Johnson served as President and Chief Executive Officer
of the Company and was paid a base salary of $579,400 and a bonus of $1,242,300.
The Compensation Committee determined Mr. Johnson's base salary based on the
same market criteria used for other senior officers. The determination of Mr.
Johnson's bonus is based upon the successful attainment of specific financial
goals established by the Compensation Committee twice a year. For fiscal 2003,
the financial goals were based on revenue and operating income targets. Based on
the Company's results, Mr. Johnson's bonus plan provided for a pay out of 107%
of the target amount. Mr. Johnson was also granted options to purchase 120,000
shares of Common Stock at an exercise price of $13.05 per share under the 1996
Stock Option Plan.
Compliance with Section 162(m) of the Code
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
enacted in 1993, generally disallows tax deductions to publicly-traded
corporations for compensation over $1,000,000 paid to the corporation's Chief
Executive Officer or certain of its other highly compensated employees.
Qualifying performance-based compensation will not be subject to this
disallowance if certain requirements are met. The Compensation Committee
believes that it is in the best interests of the Company's stockholders to
comply with such tax law, while still maintaining the goals of the Company's
executive compensation program. Accordingly, where it is deemed necessary and in
the best interests of the Company to continue to attract and retain the best
possible executive talent, and to motivate such executives to achieve the goals
inherent in the Company's business strategy, the Compensation Committee will
recommend, and the Company is expected to pay, compensation to executive
officers which may exceed the limits of deductibility.
COMPENSATION COMMITTEE
Alec L. Ellison
Robert Kamerschen
Edward M. Stern
14
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Common Stock of the Company during the period from June 30, 1998 to June 30,
2003 with the cumulative total return over the same period of (i) the Nasdaq
National Market (U.S. Companies) (the "Nasdaq Composite Index") and (ii) the Dow
Jones Consumer Non-Cyclical Index for the Consumer Services sector (the "Dow
Jones Non-Cyclical Index"). This comparison assumes $100 was invested on June
30, 1998 in the Company's Common Stock, the Nasdaq Composite Index and the Dow
Jones Non-Cyclical Index and assumes dividends, if any, are reinvested.
[GRAPH OMITTED]
COMPARISON OF CUMULATIVE TOTAL RETURN
--------------------------------------------------------------------------------------------------------------
June 30, June 30, June 30, June 30, June 30, June 30,
1998 1999 2000 2001 2002 2003
--------------------------------------------------------------------------------------------------------------
MemberWorks Incorporated $ 100.00 $ 89.92 $ 104.26 $ 71.75 $ 57.46 $ 61.46
--------------------------------------------------------------------------------------------------------------
Nasdaq Composite Index $ 100.00 $ 143.67 $ 212.43 $ 115.46 $ 78.65 $ 87.33
--------------------------------------------------------------------------------------------------------------
Dow Jones Non-Cyclical Index $ 100.00 $ 103.90 $ 90.23 $ 92.70 $ 103.41 $ 102.06
--------------------------------------------------------------------------------------------------------------
15
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, at the recommendation of the Audit Committee, has
selected the firm of PricewaterhouseCoopers LLP as the Company's independent
auditors for the current fiscal year. PricewaterhouseCoopers LLP has served as
the Company's independent auditors since 1990. If this proposal is not approved
at the Annual Meeting, the Board of Directors may reconsider its selection of
PricewaterhouseCoopers LLP.
Representatives of PricewaterhouseCoopers LLP are expected to be present at the
Annual Meeting. They will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
from stockholders.
Fees Paid to PricewaterhouseCoopers LLP
All of the services rendered by PricewaterhouseCoopers LLP are permissible under
applicable laws and regulations and are pre-approved by the Audit Committee
prior to engaging the auditor. These services are actively monitored by the
Audit Committee to maintain the appropriate objectivity and independence in
PricewaterhouseCoopers' core work, which is the audit of the Company's
consolidated financial statements. The following table sets forth aggregate fees
billed to us related to fiscal years 2003 and 2002 by PricewaterhouseCoopers
LLP:
2003 2002
------------ ------------
Audit fees $ 333,000 $ 245,000
Audit related fees 54,000 28,000
Tax fees 16,000 31,000
All other fees 576,000 1,989,000
------------ -----------
Total fees $ 979,000 2,293,000
============ ============
Audit fees - These are fees for professional services performed by
PricewaterhouseCoopers LLP for the audit of the Company's financial statements
and review of financial statements included in the Company's 10-Q filings and
services that are normally provided in connection with statutory and regulatory
filings or engagements.
Audit related fees - These are fees for assurance and related services performed
by PricewaterhouseCoopers LLP that are related to the performance of the audit
or review of the Company's financial statements. This includes: employee benefit
plans, attestations that are not required by statute or regulation and
consulting on financial accounting/reporting standards.
Tax fees - These fees are for foreign tax compliance, including the preparation
of the tax returns and, and foreign tax advisory services.
All other fees - These fees are fees billed by PricewaterhouseCoopers LLP for
the implementation of Customer Relationship Management systems. As of January
2003, the Company no longer utilized these consulting services provided by
PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP did not bill the Company
during the fiscal year ended June 30, 2003 or 2002 for any financial information
systems design and implementation services.
The Audit Committee has determined the rendering of the information technology
consulting fees and all other non-audit services by PricewaterhouseCoopers LLP
is compatible with maintaining the auditor's independence.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come before
the Annual Meeting. However, if any other matters are properly presented at the
Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote, or otherwise act, in accordance with their judgment on such
matters.
SOLICITATION EXPENSES
All costs of solicitation of proxies will be borne by the Company. In addition
to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews, and the Company reserves the right to retain
outside agencies for the purpose of soliciting proxies. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the owners
of shares held in their names, and the Company will reimburse them for
out-of-pocket expenses incurred on behalf of the Company.
16
STOCKHOLDERS' PROPOSALS
Proposals of stockholders intended to be presented at the 2004 Annual Meeting of
Stockholders must be received by the Company at its principal office in
Stamford, Connecticut not later than June 21, 2004 for inclusion in the proxy
statement for that meeting.
By Order of the Board of Directors,
James B. Duffy
Secretary
October 2, 2003
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING. WHETHER
OR NOT STOCKHOLDERS PLAN TO ATTEND, you may vote your shares by marking your
votes on the enclosed proxy card, signing and dating it, and mailing it in the
enclosed envelope. NO POSTAGE NEED BE AFFIXED IF THE PROXY IS MAILED IN THE
UNITED STATES. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR SHARES
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
17
ANNEX A
MEMBERWORKS INCORPORATED
AUDIT COMMITTEE CHARTER
I. Purpose
The purpose of the Audit Committee is to assist the board of directors in
fulfilling its responsibilities to oversee the Company's financial reporting
process, including monitoring the integrity of the Company's financial
statements and the independence, qualifications and performance of the Company's
external auditors.
II. Responsibilities and Duties
In furtherance of its purpose, the Committee shall have the following authority
and responsibilities:
(i) Recommend to the board for selection and shareholder ratification, the
independent auditors to examine the Company's accounts, controls and
financial statements;
(ii) The Committee shall have the sole authority to approve all audit
engagement fees and terms and the Committee shall pre-approve any
non-audit service provided by the Company's independent auditor.
(iii) Determine whether to recommend to the board that the Company's annual
financial statements and quarterly financial statements, including
matters required to be reviewed under applicable legal, regulatory or
NASDAQ requirements, should be approved. To carry out this
responsibility, the Audit Committee shall:
- review and discuss the audited financial statements with
management and the independent auditors;
- discuss with the independent auditors the matters required by
Statement on Auditing Standards No. 61;
- review and discuss with the independent auditors the written
disclosures required by Independence Standards Board Standard No.
1 regarding their independence and, where appropriate, recommend
that the board of directors take appropriate action in response
to the disclosures to satisfy itself of the independence of the
Company's independent auditors;
- based upon the reviews and discussions, issue its report for
inclusion in the Company's Proxy Statement;
- meet with the independent auditors without the presence of
management to review the Company's accounting practices, internal
accounting controls and such other matters as the Committee deems
appropriate;
- regularly report to the board of directors its conclusions with
respect to the matters that the Committee has considered;
- resolve disagreements between management and the auditor
regarding financial reporting; and
- establish procedures for the receipt, retention, and treatment of
complaints regarding accounting, internal accounting controls or
auditing matters and for establishing the confidential, anonymous
submission by employees of concerns regarding questionable
accounting or auditing matters.
(iv) To review the Company's financial reporting and accounting
standards and principles, significant changes in such
standards or principles or in their application and the key
accounting decisions affecting the Company's financial
statements, including alternatives to, and the rationale for,
the decisions made.
A-1
(v) While the Committee has the duties and responsibilities set
forth in this Charter, the Committee is not responsible for
planning or conducting audits and interim reviews or for
determining whether the Corporation's financial statements are
complete and accurate and in accordance with generally
accepted accounting principles. Similarly, it is not the
Committee's responsibility to ensure that the Corporation
complies with all laws and regulations, policies, procedures
and practices, including conflict of interest policies.
III. Advisors
The Committee shall have the exclusive authority, at the Company's expense, to
retain (including authority to approve fees and other retention terms) such
independent consulting, legal and other advisors as it shall deem appropriate to
fulfill its responsibilities without management or board approval.
IV. Meetings
The Committee shall meet at least four times annually, or more frequently if
circumstances dictate. Any member of the Committee may call a meeting of the
Committee upon due notice to each other member at least seventy-two hours prior
to the meeting. Two members shall constitute a quorum. If a quorum is present, a
majority of the members present shall decide any question brought before the
Committee.
V. Minutes
The Committee will keep minutes of each meeting. The minutes will be kept by the
Chief Financial Officer or by a member of the Committee.
VI. Committee Chair
The Committee chair will be a director appointed by the board on the
recommendation of the Corporate Governance Committee. If the Committee chair is
absent from a meeting, another member of the Committee will act as chair.
VII. Term
Members will be appointed by the board for a one-year term or until a successor
is appointed and qualified upon the recommendation of the Corporate Governance
Committee. The Board will fill vacancies on the Committee and may remove a
Committee member from the Committee at any time without cause.
VIII. Number of Members
The Committee shall consist of at least three members as the board shall from
time-to-time determine.
IX. Membership
All of the members of the Committee shall be independent as determined by the
board applying the definition of (i) "independent director" as established by
the Nasdaq Stock Market, Inc. ("NASDAQ"); (ii) "non-employee directors" within
the meaning of Rule 16b-3 of the Securities Exchange Act of 1934 and the rules
promulgated thereunder as well as the Sarbanes-Oxley Act of 2002; and (iii)
"outside director" under Section 162(m) of the Internal Revenue Code of 1986 and
the rules promulgated thereunder, all as amended from time-to-time. Further,
each member shall meet all applicable requirements of the Audit Committee Policy
of the New York Stock Exchange with respect to independence and financial
expertise and at least one member shall be an audit committee financial expert
as defined by rules promulgated by the Securities Exchange Commission.
X. Subcommittees
The Committee may delegate authority and responsibilities to subcommittees as it
deems proper.
A-2
XI. Non-member Attendance
The Chief Financial Officer will be invited to each meeting; however, the
Committee will meet at least twice a year without executive or senior management
participation. Attendance may be by telephone as provided in the Company's
bylaws.
XII. Amendment and Revision
Not less than annually, the Committee will review this charter and recommend to
the board any changes it deems advisable. The board may, at any time (acting on
its initiative, or on recommendation of the Committee), amend this charter.
XIII. Agenda
The agenda for each meeting will be set by the Committee chair after conferring
with the other Committee members and with the appropriate members of management.
XIV. Board Reports
The Committee will inform the board from time-to-time and when appropriate of
the actions it has taken in fulfillment of the Committee's responsibilities
under this charter.
XV. Performance Review
The Committee will annually review its performance, which will include eliciting
input from management and the board on the performance of the Committee. The
Committee will report the results of such self-assessment to the board.
A-3
MEMBERWORKS INCORPORATED
PROXY FOR THE 2003 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, NOVEMBER 20, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY AND
SHOULD BE RETURNED AS SOON AS POSSIBLE
The undersigned having received notice of the 2003 Annual Meeting of
Stockholders and the Board of Directors' proxy statement therefor, and revoking
all prior proxies, hereby appoint(s) Gary A. Johnson and James B. Duffy, and
each of them, attorneys or attorney of the undersigned (with full power of
substitution in them and each of them) for and in the name(s) of the undersigned
to attend the 2003 Annual Meeting of Stockholders of MemberWorks Incorporated
(the "Company") to be held on Thursday, November 20, 2003 at 9:00 a.m. local
time at the Westin Hotel, 1 First Stamford Place, Stamford, Connecticut 06902,
and any adjournments thereof, and to vote and act upon the following matters in
respect of all shares of stock of the Company which the undersigned may be
entitled to vote or act upon, with all the powers the undersigned would possess
if personally present.
In their discretion, the proxy holders are authorized to vote upon such other
matters as may properly come before the meeting or any adjournments thereof. The
shares represented by this proxy will be voted as directed by the undersigned.
If no direction is given with respect to any election to office or proposal,
this proxy will be voted as recommended by the Board of Directors. Attendance of
the undersigned at the meeting or at any adjournment thereof will not be deemed
to revoke this proxy unless the undersigned shall revoke this proxy in writing.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
Please Detach and Mail in the Envelope Provided
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
FOR ALL NOMINEES
(EXCEPT AS MARKED BELOW) WITHHOLD
1. To elect the following nominees for
director (except as marked below): [ ] [ ]
Nominees: Alec L. Ellison
Marc S. Tesler
(Instruction: To withhold a vote for an individual nominee, write the name
of such nominee in the space provided below. Your shares will be voted for the
remaining nominees.)
FOR AGAINST ABSTAIN
2. To ratify the appointment of
PricewaterhouseCoopers LLP as the
Company's
independent auditors
for the current year. [ ] [ ] [ ]
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO OTHER INDICATION IS MADE, THE PROXIES SHALL
VOTE "FOR" ALL DIRECTOR NOMINEES AND "FOR" PROPOSAL NUMBER 2.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, you may
vote your shares by marking your votes on the enclosed proxy card, signing and
dating it, and mailing it in the enclosed envelope. NO POSTAGE NEED BE AFFIXED
IF THE PROXY IS MAILED IN THE UNITED STATES.
A VOTE "FOR" ALL DIRECTOR NOMINEES AND A VOTE "FOR" PROPOSAL NUMBER 2 IS
RECOMMENDED BY THE BOARD OF DIRECTORS.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND ANY ADJOURNMENT THEREOF.
MARK HERE FOR ADDRESS MARK HERE IF YOU PLAN TO
CHANGE AND NOTE AT LEFT [ ] ATTEND THE MEETING [ ]
Signature __________________ Signature if held jointly _________________
Dated ________________, 2003.
NOTE:PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
OWNERS, 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 AUTHORIZED OFFICER,
GIVING FULL TITLE. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON, GIVING FULL TITLE.