<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 14A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act 1934
Date of Report April 12, 2000
-----------------------------
(Date of earliest event reported)
HOMESERVICES.COM INC.
---------------------
(Exact name of registrant as specified in its charter)
Delaware 000-27327 41-1945806
- -------------------------------------------------------------------------
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation or
organization)
6800 France Avenue South, Suite 600 Edina, Minnesota 55435
- --------------------------------------------------------------------------------
(Address of principal executive offices) Zip Code
Registrant's Telephone Number, including area code: (612) 928-5900
----------------
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
1
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HOMESERVICES.COM INC.
6800 FRANCE AVENUE SOUTH, SUITE 600
EDINA, MINNESOTA 55435
April 12, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
HomeServices.Com Inc. to be held at the Marriott City Center, 30 South 7th
Street, Minneapolis, Minnesota on May 17, 2000 at 9:00 A.M., local time.
The following matters will be considered and acted upon at the Annual
Meeting: (i) election of two members to the Board of Directors of the Company;
(ii) ratification of the appointment by the Board of Directors of
PricewaterhouseCoopers LLP as auditors of the Company for the 2000 fiscal year;
and (iii) transaction of such other business as may properly come before the
meeting.
Information concerning the matters to be considered and voted upon at the
Annual Meeting is set forth in the attached Notice of Annual Meeting and Proxy
Statement. We encourage you to review the attached material carefully and to
sign, date and return the enclosed proxy card in the enclosed postage-paid
envelope. Each proxy is revocable and will not affect your right to vote in
person if you attend the meeting.
Sincerely,
/s/ David L. Sokol
-----------------------------------
David L. Sokol
Chairman of the Board
<PAGE>
HOMESERVICES.COM INC.
6800 FRANCE AVENUE SOUTH, SUITE 600
EDINA, MINNESOTA 55435
To the Stockholders of HomeServices.Com Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of
HomeServices.Com Inc. will be held at the Marriott City Center, 30 South 7th
Street, Minneapolis, Minnesota on May 17, 2000 at 9:00 A.M., local time for the
following purposes:
1. To elect to the Board of Directors of the Company two Class I Directors
(with terms expiring at the May 2003 annual meeting);
2. To ratify the appointment by the Board of PricewaterhouseCoopers LLP as
auditors of the Company for fiscal year 2000; and
3. To act upon such other matters as may properly come before the meeting.
All Stockholders of record at the close of business on March 24, 2000 are
entitled to vote at the Annual Meeting.
To ensure that your shares are represented, you are urged to please fill
in, sign, date and return the enclosed proxy card promptly in the enclosed
postage-paid envelope. You may revoke your proxy at any time before it is voted
at the Annual Meeting. If you attend the meeting, you may vote your shares in
person.
Please date your proxy card and sign it exactly as your name appears on the
proxy card.
By Order of the Board of Directors
/s/ David L. Sokol
---------------------------------------
David L. Sokol
Chairman of the Board
<PAGE>
HOMESERVICES.COM INC.
6800 FRANCE AVENUE SOUTH, SUITE 600
EDINA, MINNESOTA 55435
------------------
PROXY STATEMENT
------------------
APRIL 12, 2000
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
MAY 17, 2000
SOLICITATION AND VOTING
This Proxy Statement (the "Proxy Statement") is furnished in connection
with the solicitation of proxies on behalf of the Board of Directors (the
"Board") of HomeServices.Com Inc. ("HomeServices.Com or the "Company") to be
voted at the Annual Meeting of Stockholders to be held on May 17, 2000, or any
adjournment thereof (the "Annual Meeting"). This Proxy Statement, the Notice of
Annual Meeting and the accompanying Proxy are being mailed to Stockholders on
or about April 12, 2000.
The Voting Stock of the Company (the "Voting Stock") consists of the
Common Stock of the Company, $0.01 par value (the "Common Stock"), which was
outstanding on the record date. Holders of the Common Stock will vote as a
single class at the Annual Meeting. Each share of Common Stock will be entitled
to one vote on all matters presented at the Annual Meeting.
The close of business on March 24, 2000 is the Record Date (the "Record
Date") for determining the holders of the outstanding Voting Stock (the
"Stockholders") entitled to vote at the Annual Meeting. On the Record Date,
8,922,942 shares of Common Stock were outstanding.
The approval of a plurality of the Voting Stock present in person or by
proxy, and entitled to vote at the Annual Meeting is required for the election
of nominees as Directors of the Company. The approval of a majority of the
Voting Stock present in person or by proxy, and entitled to vote, at the Annual
Meeting is required for approval of Proposal 2 (ratification of selection of
Independent Auditors). A quorum equal to a majority of the outstanding Voting
Stock must be present in person or by proxy at the Annual Meeting in order to
elect Directors and consider Proposal 2.
All shares of Voting Stock represented by properly executed proxies which
are returned and not revoked will be voted in accordance with the instructions,
if any, given therein. If no instructions are provided in a proxy, it will be
voted FOR the Board's nominees for Director, FOR the approval of Proposal 2 and
in accordance with the proxy-holders' best judgment as to any other matters
raised at the Annual Meeting. Abstentions and broker non-votes will be counted
as shares present for purposes of establishing a quorum with respect to the
proposals with respect to which they apply. Abstention votes will be counted as
voted AGAINST the proposals with respect to which they apply. Broker non-votes
will not be considered as either FOR or AGAINST votes with respect to the
proposals to which they apply. The proxy is revocable and any Stockholder who
executes a proxy may revoke it at any time before it is voted by delivering to
the Secretary of the Company a written statement revoking the proxy, by
executing and delivering to the Secretary of the Company a later dated proxy or
by voting in person at the Annual Meeting.
Expenses in connection with this solicitation of proxies will be paid by
the Company. Upon request, the Company will reimburse brokers, dealers, banks
or similar entities acting as nominees for reasonable expenses incurred in
forwarding copies of these proxy materials to the beneficial owners of shares
which such persons hold of record. The Company has engaged MacKenzie Partners,
Inc. to solicit proxies for the
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Annual Meeting for a fee of approximately $15,000, plus reimbursement of
reasonable expenses. In addition, solicitation of proxies may be made through
the mail, in person and by facsimile and telephone by certain directors,
officers and regular employees of the Company.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board currently consists of eight members serving three year terms.
Class I Nominees. The Board has unanimously nominated Greg E. Abel and
Jack W. Frost for election at the Annual Meeting as Class I Directors with
terms expiring at the May 2003 annual meeting of Stockholders.
Messrs. Abel and Frost have consented to serve if elected. If a nominee
becomes unable to serve if elected, proxies will be voted for such other
person, if any, as the Board may nominate, or the Board may be reduced in size
accordingly. The Board knows of no reason why any nominee will be unable to
serve if elected.
The approval of a plurality of the Voting Stock present in person or by
proxy, and entitled to vote, at the Annual Meeting is required for election of
the nominees as directors. A quorum equal to the majority of the outstanding
Voting Stock must be present in person or by proxy at the Annual Meeting in
order to elect directors. If no instructions are provided in a proxy, it will
be voted FOR the Board's nominees for directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ABOVE-NAMED
NOMINEES.
BOARD OF DIRECTORS
In addition to the above-named current and nominated Directors, the Board
includes the following six persons, each having a term expiring at the annual
meeting in the year indicated:
YEAR OF
NAME CLASS EXPIRATION OF TERM
- ---- ----- ------------------
Ronald J. Peltier .......... Class II 2001
R. Michael Knapp ........... Class II 2001
W. David Scott ............. Class II 2001
David L. Sokol ............. Class III 2002
Steven A. McArthur ......... Class III 2002
Richard R. Jaros ........... Class III 2002
During 1999, the Board met two times and took action by unanimous written
consent three times.
The Board has an Audit Committee, a Compensation Committee, and an
Executive Committee.
AUDIT COMMITTEE
The Audit Committee (Messrs. McArthur, Jaros and Scott) is empowered to
recommend to the Board independent public accounting firms for selection as
auditors of the Company; to make recommendations to the Board on auditing
matters; to examine and make recommendations concerning the scope of audits;
and to review the terms of transactions between the Company and related
entities. The Audit Committee met one time during 1999.
COMPENSATION COMMITTEE
The Compensation Committee (Messrs. Sokol, McArthur, Jaros and Scott) is
authorized to make recommendations to the Board with respect to executive
salaries and bonuses, directors' compensation and employee benefits matters.
The Compensation Committee met one time during 1999.
2
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Sokol is Chairman of the Board of Directors of the Company. Mr.
McArthur is Senior Vice President, General Counsel and Secretary of the
Company. Messrs. Jaros and Scott have not been employees of the Company or
otherwise participated in activities constituting compensation committee
interlocks or insider participation requiring disclosure under this caption.
EXECUTIVE COMMITTEE
The Executive Committee (Messrs. Sokol, Peltier, McArthur and Jaros) was
established to act for the Board in between regularly scheduled Board meetings.
The Executive Committee did not meet during 1999.
INFORMATION REGARDING NOMINEES FOR ELECTION AS DIRECTORS
AND DIRECTORS IN OFFICE
DAVID L. SOKOL, 43, has been Chairman of HomeServices since its inception
in July 1999. He has also been the Chairman of MidAmerican Energy Company since
March 1999. Mr. Sokol has been Chairman of MidAmerican Energy Holdings Company
("MidAmerican Holdings") since May 1994 and Chief Executive Officer of
MidAmerican Holdings since April 1993. He has been a director of MidAmerican
Holdings since 1991 and served as President of MidAmerican Holdings from April
1993 to January 1995. Before his service with MidAmerican Holdings, Mr. Sokol
held a variety of senior executive positions in the independent power industry.
RONALD J. PELTIER, 50, has been President and Chief Executive Officer of
HomeServices since its inception in July 1999. He was Chairman, President and
Chief Executive Officer of Edina Realty from 1992 to May 1999. Mr. Peltier also
serves as a director for the National Association of Realtors, a director for
the RELO Network and is a founder and director for the Realty Alliance, a trade
group consisting of the nation's leading brokers. Mr. Peltier joined Edina
Realty in 1977, became General Sales Manager in 1983, and became Senior Vice
President and General Manager in 1991, where he was responsible for all sales
operations and long-range planning for Edina Realty.
STEVEN A. MCARTHUR, 42, has been Senior Vice President, General Counsel,
Secretary and a director of HomeServices since its inception in July 1999. He
has been Senior Vice President, Mergers and Acquisitions of MidAmerican
Holdings since March 1999 and had previously served as Executive Vice President
and General Counsel of MidAmerican Holdings from February 1991 to March 1999.
From 1988 to 1991, he was an attorney in the Corporate Finance Group at
Shearman & Sterling in San Francisco. From 1984 to 1988, Mr. McArthur was an
attorney in the Corporate Finance Group at Winthrop, Stimson, Putnam & Roberts
in New York.
JACK W. FROST, 66, has been a director of HomeServices since its inception
in July 1999 and President and Chief Executive Officer of J.C. Nichols since
February 1, 1990. In 1978, he sold Hardin Stockton, a residential real estate
brokerage firm, to Coldwell Banker and, five years later, became the Executive
Vice President and National General Manager for Coldwell Banker Residential
Group serving in that capacity until 1988. In 1990, Mr. Frost purchased the
75-year-old residential brokerage operation of the J.C. Nichols Company. Mr.
Frost is a former Commissioner and Chairman of the Kansas Real Estate
Commission.
R. MICHAEL KNAPP, 48, has been a director of HomeServices since its
inception in July 1999 and President and Chief Executive Officer of Iowa Realty
since 1991. Prior to 1991, Mr. Knapp held numerous positions at Iowa Realty
including General Sales Manager of the residential division and Senior Vice
President. Mr. Knapp is an active member of Pacesetters and the Vision Group,
two organizations comprised of the top real estate brokers and owners from
across the nation.
GREGORY E. ABEL, 37, has been a director of HomeServices since its
inception in July 1999. He has been Chief Executive Officer of MidAmerican
Energy Company since March 1999. Mr. Abel held various executive positions at
MidAmerican Holdings from 1992 to March 1999, including responsibility for
engineering, construction, accounting and various administrative functions. He
has been President and Chief Operating Officer of MidAmerican Holdings since
March 1998.
3
<PAGE>
RICHARD R. JAROS, 48, has been a director of HomeServices since its
inception in July 1999. Mr. Jaros has also been a director of MidAmerican
Holdings since March 1991. Mr. Jaros served as President and Chief Operating
Officer of MidAmerican Holdings from January 8, 1992 to April 19, 1993 and as
Chairman of the Board from April 19, 1993 to May 1994. Until July 1997, Mr.
Jaros was Executive Vice President and Chief Financial Officer of Peter Kiewit
Sons' Inc. and President of Kiewit Diversified Group, Inc., which is now Level
3 Communications. From 1990 until January 8, 1992, Mr. Jaros served as a Vice
President of Peter Kiewit Sons' Inc. Mr. Jaros serves as a director of
Commonwealth Telephone, RCN Corporation and Level 3.
W. DAVID SCOTT, 38, has been a director of HomeServices since its
inception in July 1999. Mr. Scott formed Magnum Resources, Inc., a commercial
real estate investment and management company, in October 1994 and has served
as its President and Chief Executive Officer since its inception. Before
forming Magnum Resources, Mr. Scott worked for America First Companies,
Cornerstone Banking Group and the Kiewit Companies. Mr. Scott has been a
director of America First Mortgage Investments, Inc., a mortgage REIT, since
1998.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Proposal 2 is to ratify the appointment of PricewaterhouseCoopers LLP as
the Company's independent auditors for the 2000 fiscal year.
The Board, upon the recommendation of the Audit Committee, has unanimously
appointed PricewaterhouseCoopers LLP as the independent accounting firm engaged
to audit the financial statements of the Company for the 2000 fiscal year. A
representative of PricewaterhouseCoopers LLP is expected to be present at the
Annual Meeting and will be available to respond to appropriate questions and
will have an opportunity to make a statement if desired.
The approval of a majority of the Voting Stock present in person or by
proxy, and entitled to vote, at the Annual Meeting is required for approval of
Proposal 2. A quorum equal to the majority of the outstanding Voting Stock must
be present in person or by proxy at the Annual Meeting in order to vote on
Proposal 3. If no instructions are provided in a proxy, it will be voted FOR
the approval of Proposal 2.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
OTHER MATTERS
The Board knows of no other matters which are likely to be brought before
the Annual Meeting. However, if any other matters are brought before the Annual
Meeting, the proxy-holders will vote proxies granted by Stockholders in
accordance with their best judgment.
4
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SECURITY OWNERSHIP OF SIGNIFICANT STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information with respect to all
Stockholders known by the Company to beneficially own more than 5% of either
class of the Voting Stock, and certain information with respect to the
beneficial ownership of each director and the five most highly compensated
executive officers of the Company (and all directors and executive officers of
the Company, as a group) of Common Stock. All information is as of March 31,
2000, unless otherwise indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME (AND ADDRESS IF REQUIRED) BENEFICIALLY PERCENTAGE OF
OF BENEFICIAL OWNER OWNED (1) CLASS (1)
- ------------------- --------- ---------
<S> <C> <C>
COMMON STOCK:
MEHC ....................................................... 6,779,100 75.97%
Ronald J. Peltier .......................................... 303,036 3.32%
R. Michael Knapp ........................................... 162,396 1.81%
W. David Scott ............................................. 100,000 1.11%
David L. Sokol ............................................. 50,000 0.56%
Steven A. McArthur ......................................... 51,000 0.57%
Richard E. Jaros ........................................... 75,000 0.84%
Gregory E. Abel ............................................ 50,000 0.56%
Jack W. Frost .............................................. 58,360 0.65%
George Gans III ............................................ 8,560 0.10%
Stephen E. Quinlan ......................................... 30,360 0.34%
Arne M. Rovick ............................................. 108,036 1.21%
Joseph J. Valenti .......................................... 8,860 0.10%
All directors and executive officers as a group (14 persons) 1,025,448
</TABLE>
- ------------
(1) Includes shares which the listed beneficial owner is deemed to have the
right to acquire beneficial ownership under Rule 13d-3(d) under the
Securities Exchange Act, including, among other things, shares which the
listed beneficial owner has the right to acquire within 60 days.
(2) On January 12, 2000, the Company issued 1,500 shares of its Series A
Non-Voting Convertible Preferred Stock (the "Preferred Stock") to U.S.
Bancorp Piper Jaffray Inc. ("Piper Jaffray") in exchange for 1,500,000
shares of the Registrant's common stock. The exchange of Preferred Stock
for common stock enables Piper Jaffray, which is an affiliate of U.S.
Bancorp, to satisfy the Bank Holding Company Act of 1956 requirements
that a bank holding company and its affiliates own less than 5% of the
voting stock of a publicly traded corporation. Each share of Preferred
Stock is convertible into 1,000 shares of common stock at any time at
Piper Jaffray's option and is also subject to automatic conversion upon
transfer by Piper Jaffray to any person that is not a bank holding
company or an affiliate thereof and upon the liquidation of the
Registrant the Preferred Stock does not have any voting rights (except as
required by law).
COMPENSATION COMMITTEE REPORT
The Company's executive compensation is determined by the Compensation
Committee of the Board. The Compensation Committee usually meets from time to
time during the year as may be required and at least once a year in December,
at which time salaries with respect to the next fiscal year, and bonuses with
respect to the nearly completed year are determined, as well as making
recommendations to the Stock Option Committee for stock option or, if
applicable, restricted stock grants as long-term incentive compensation and
making other determinations or recommendations with respect to employee benefit
plans and related matters.
The Compensation Committee believes that compensation of the Company's key
executives should be sufficient to attract and retain highly qualified and
productive personnel and also to provide meaningful incentives for enhanced
productivity and superior performance. It is the policy of the Company that the
three primary components of the Company's total compensation package (salary,
bonuses and grants of stock options or, if applicable, restricted stock) will
be considered in the aggregate in determining the amount of any one component.
The Company seeks to reward achievement of long and short-term individual
performance goals, viewed in the context of both individual realty company and
overall Company performance. The Compensation Committee's criteria for
assessing executive performance in any year is inherently subjective and not
subject to specific enumeration of factors, relative
5
<PAGE>
weighting or formulae calculations. The Company did not specifically use any
companies in the same industry as a basis for comparison when establishing
executive compensation.
During 1999, the Company's executive compensation generally included a
base salary, cash bonuses and long-term incentive compensation in the form of
stock options awarded under the Company's Equity Incentive Plan, all dependent
on subjective evaluations of performance as noted above. The cash bonus
compensation of executives is designed to compensate executives for the
Compensation Committee's assessment of superior performance and meritorious and
diligent individual efforts, and such assessments usually relate to individual
and unique goals and, in part, also recognize the individual executive's level
of commitment (demonstrated by subjective factors) to the Company's long-term
success. The long-term incentive option grants recommended by the Compensation
Committee and implemented by the Stock Option Committee are intended to align
the interests of employees and Stockholders and thereby to motivate executives
as equity owners to contribute at superior levels in the future and to allow
them to share in increased value developed for Stockholders generally.
The Company's President and Chief Executive Officer, has an existing
employment agreement with the Company which has a term of five years (ending
May 2003 unless extended). Mr. Peltier's employment agreement provides for a
base salary of $350,000 per annum and is also eligible to receive a target
award of 30% of base salary, with a maximum award equal to 45% of base salary
for each of the fiscal years during which he is employed. The employment
contract also provides for the payment of three years base salary and target
awards equal to the average annual target awards made to him under the
agreement prior to the event of termination without cause.
At its December 16, 1999 meeting, the Compensation Committee determined to
award Mr. Peltier a cash bonus of $200,000 in order to reflect Mr. Peltier's
superior performance and significant accomplishments during the year. In
addition, at the Compensation Committee's December 16, 1999 meeting, the
Compensation Committee authorized salary increases, cash bonuses and, if
applicable, recommendations for stock option grants to other executives
commensurate with the Compensation Committee's subjective assessment of their
relative individual performance.
In reviewing Mr. Peltier's compensation, the Compensation Committee
subjectively considered Mr. Peltier's significant contribution to the
management of the Company during the year, including: successfully negotiating,
structuring and executing the acquisitions of the Long Realty, Paul Semonin
Realtors and Champion Realty companies, successfully implementing the IPO and
initiating E-commerce activities. Mr. Peltier contributed very significantly to
these achievements, and the Compensation Committee believes his overall
compensation was wholly justified. Section 162(m) of the Internal Revenue Code,
enacted in 1993, generally disallows a tax deduction to public companies for
compensation over $1 million paid to the chief executive or any of the four
other most highly compensated executive officers. However, certain compensation
meeting a tax law definition of "performance-based" is generally exempt from
this deduction limit. The Company does not currently intend to qualify cash
compensation paid to executive officers for deductibility under Section 162(m).
Further, in general, the Company does not currently have a policy that requires
or encourages the Committee to qualify other types of compensation awarded to
executive officers for deductibility under Section 162(m). However, the Company
has included provisions in the Employee Stock Option Plan designed to enable
option grants made to executive officers affected by Section 162(m) to qualify
as "performance-based" compensation if the Committee determines that it is
appropriate to make such qualifying grants.
COMPENSATION COMMITTEE
David L. Sokol
Steven A. McArthur
Richard R. Jaros
W. David Scott
6
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PERFORMANCE GRAPH
The following performance graph shall not be deemed to be incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Company specifically
incorporates such information by reference, and shall not otherwise be deemed
filed under such Acts.
The following graph compares the yearly percentage change in the
cumulative weighted average total return on the Company's Common Stock with the
cumulative total return assuming reinvestment of dividends of (1) the Russell
2000 Index and (2) an index of comparable peer issuers constructed by the
Company. The index of comparable peer issuers is composed of DeWolfe Companies,
Grubb & Ellis Company, and Insignia Financial Group, Inc. during the period the
Company started trading publicly. In compliance with Securities and Exchange
Commission regulations, the returns of each of the comparables have been
weighted according to capitalization as of the beginning of the period.
HOMESERVICES.COM, INC.
Cumulative Total Return
------------------------
10/8/99 12/31/99
HOMESERVICES,COM INC. 100.00 100.00
PEER GROUP 100.00 94.94
RUSSELL 2000 100.00 102.44
Begin: 10/8/99
Period End: 12/31/99
HOMESERVICES COM INC End: 12/31/99
<TABLE>
<CAPTION>
Beginning
Transaction Closing No. Of Dividend Dividend Shares Ending Cum. Tot.
Date* Type Price** Shares*** per Share Paid Reinvested Shares Return
<S> <C> <C> <C> <C> <C> <C> <C> <C>
8-Oct-99 Begin 15.000 6.67 6.667 100.00
31-Dec-99 End 15.000 6.67 6.667 100.00
</TABLE>
* Specified ending dates or ex-dividends dates.
** All Closing Prices and Dividends are adjusted for stock splits and stock
dividends.
*** 'Begin Shares' based on $100 investment.
7
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SUMMARY COMPENSATION TABLE
The following table sets forth the compensation of the Company's five most
highly compensated executive officers who were employed as of the last day in
1999. Information is provided regarding these individuals for the last three
fiscal years during which they were executive officers of the Company, if
applicable.
<TABLE>
<CAPTION>
ALL OTHER
YEAR ENDED SALARY BONUS (1) COMPENSATION (2)
NAME AND PRINCIPAL POSITIONS (1) DECEMBER 31, ($) ($) ($)
- ---------------------------------- -------------- --------- ----------- -----------------
<S> <C> <C> <C> <C>
Ronald J. Peltier, 1999 350,000 200,000 140,705
President and Chief Executive 1998 325,000 174,988 132,032
Officer of the Company (3) 1997 325,000 129,214 N/A
R. Michael Knapp 1999 230,166 200,000 142,392
President and Chief Executive 1998 225,000 200,250 162,588
Officer of Iowa Realty 1997 200,250 203,242 N/A
Jack W. Frost, 1999 255,750 100,000 4,969
President and Chief Executive 1998 250,000 100,000 2,457
Officer of J.C. Nichols 1997 250,000 N/A N/A
Arne M. Rovick, 1999 255,750 100,000 141,517
Vice Chairman and General 1998 250,000 114,242 132,849
Counsel of Edina Realty 1997 250,000 133,048 N/A
Joseph J. Valenti, 1999 179,025 144,900 5,000
President and Chief Executive 1998 250,000 100,435 5,000
Officer of CBSHOME 1997 129,569 N/A N/A
</TABLE>
- ----------
(1) Each of the executive officers listed earned their 1998 compensation in
their capacities as executive officers of subsidiaries of MidAmerican
Realty Services, the predecessor to HomeServices.
(2) Amounts consist of (a) HomeServices' matching contributions to a defined
contribution plan of $4,188, $2,457 and $7,344 and $4,188, $4,969 and
$5,875 for Messrs. Peltier, Frost and Knapp, for 1998 and 1999
respectively, and $5,000 for each of Messrs. Rovick and Valenti for 1998
and 1999 respectively; and (b) long-term compensation earned in the form
of a $127,849 and $136,517 credit towards payment of a promissory note
for each of Messrs. Peltier, Knapp and Rovick for 1998 and 1999
respectively. In addition, the amount for Mr. Knapp includes
HomeServices' contributions totaling $18,886 and $11,314 to a
supplemental executive retirement plan in 1998 and 1999 respectively, a
$6,400 contribution to a defined contribution plan in 1998 and premiums
on his behalf totaling $2,109 for long-term disability insurance in 1998.
(3) Mr. Peltier received compensation in his capacity as Chairman, President
and Chief Executive Officer of Edina Realty, the position he held from
1992 to May 1999.
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth options granted to each of the named
executive officers of the Company during 1999:
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE AT
% OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(1)
OPTIONS EMPLOYEES EXERCISE PRICE EXPIRATION -------------------------------------
NAME GRANTED IN FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($) 0% ($)
- ------------------- ------------ ---------------- ---------------- ----------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald J. Peltier 900,000 40.61% 15.00 10/13/09 8,487,000 21,519,000
50,000 2.26% 5.89 10/13/09 471,500 1,195,500 455,500
R. Michael Knapp 50,000 2.26% 15.00 10/13/09 471,500 1,195,500
50,000 2.26% 5.89 10/13/09 471,500 1,195,500 455,500
Jack W. Frost 50,000 2.26% 15.00 10/13/09 471,500 1,195,500
50,000 2.26% 5.89 10/13/09 471,500 1,195,500 455,500
Arne M. Rovick 30,000 1.35% 15.00 10/13/09 282,900 717,300
Joseph J. Valenti 50,000 2.26% 15.00 10/13/09 471,500 1,195,500
</TABLE>
- ----------
(1) As required by the Securities and Exchange Commission ("SEC"), potential
values stated are based on the prescribed assumption that the Company's
Common Stock will appreciate in value from the date of grant to the end
of the option term (ten years from the date of grant) at annualized rates
of 5% and 10% (total appreciation of 63% and 159%), respectively, and
therefore are not intended to forecast possible future appreciation, if
any, in the price of the Company's Common Stock. The total of all stock
options granted to employees, including executive officers, during fiscal
1999 was approximately 21% of total shares outstanding during the year.
Accordingly, the potential value of such options for all optionees under
the prescribed assumptions is approximately 21% of the potential
realizable value of all shareholders for the same period under the same
assumptions. As an alternative to the assumed potential realizable values
stated above, SEC rules would permit stating the present value of such
options at the date of grant. Methods of computing present value
suggested by different authorities can produce significantly different
results. Moreover, since stock options granted by the Company are not
transferable, there are no objective criteria by which any computation of
present value can be verified. Consequently, the Company's management
does not believe there is a reliable method of computing the present
value of such stock options and that all assumptions as to annualized
appreciation rates are inherently speculative.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table sets forth the option exercises and the value of
in-the-money unexercised options held by each of the named executive officers
of the Company at December 31, 1999, calculated as being equal to the
difference between the exercise price of the options and the closing price of
the Company's Common Stock on the NASDAQ Stock Market of $15 per share on
December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS HELD AT FY END IN-THE-MONEY OPTIONS AT FY END
ACQUIRED VALUE ------------------------------- ------------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------- --------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Ronald J. Peltier 0 0 106,250 843,750 $455,500 $0
R. Michael Knapp 0 0 53,155 46,845 455,500 0
Jack W. Frost 0 0 53,155 46,845 455,500 0
Arne Rovick 0 0 1,875 28,125 0 0
Joseph J. Valenti 0 0 3,155 46,845 0 0
</TABLE>
9
<PAGE>
COMPENSATION OF DIRECTORS
For 2000, directors who are not employees of the Company will be paid an
annual retainer fee of $10,000 and a fee of $500 per day for attendance at
Board and Committee meetings. Directors who are employees of the Company will
not receive such fees.
Each director of HomeServices has received, as compensation for agreeing
to serve as a director, fully vested options to purchase 50,000 shares of
common stock at an exercise price equal to $5.89, which was the book value of
the common stock on June 30, 1999, after giving effect to the issuance of
approximately 677.87 shares of HomeServices' common stock in exchange for each
share of common stock of MidAmerican Realty Services Company, which merger
occurred on the date of this prospectus.
TERMINATION OF EMPLOYMENT ARRANGEMENTS
If the employment of Messrs. Peltier, Knapp, Frost, Rovick or Valenti is
terminated by the Company for reasons other than good cause or if any of them
should resign for good reason, they will be entitled to receive until the third
anniversary of the termination date (1) their base salary as in effect as of
the termination date at the Company's normal payroll intervals and (2) target
awards equal to the average target awards made to them under their respective
employment agreements prior to their termination. If such persons were
terminated without cause, Messrs, Peltier, Knapp, Frost, Rovick and Valenti
would currently be entitled to be paid approximately $1.6 million, $1.3
million, $1.1 million, $1.1 million and $.9 million, respectively, pursuant to
thier employment agreements, without giving effect to any tax related
provisions.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
LEASES WITH RELATED PARTIES
HomeServices has certain leases with its directors or executive officers,
or their affiliated entities. HomeServices believes that the terms of such
leases are no less favorable than the terms that could be obtained from
non-affiliated parties, though there can be no assurance that this in fact is
the case.
Pursuant to a registration rights agreement, HomeServices has granted to
MidAmerican Holdings certain "demand" and "piggyback" registration rights for
the registration under the Securities Act of 1933 of the shares of common stock
MidAmerican Holdings owns as described below. Under the registration rights
agreement, upon MidAmerican Holdings' request, HomeServices is required to use
its best efforts to register the shares.
MidAmerican Holdings is be entitled to request two demand registrations
per year of all or any portion of its common stock for so long as it owns at
least 5.0% of the common stock of HomeServices. In addition, for so long as
MidAmerican Holdings owns at least 5.0% of the common stock of HomeServices,
MidAmerican Holdings may request HomeServices to use its reasonable efforts to
register shares of common stock held by it in other registrations initiated by
HomeServices on its own behalf or on behalf of any other stockholder of
HomeServices. All reasonable out-of-pocket costs and expenses, other than
underwriting discounts and commissions, of any registration under the
registration rights agreement will be paid by HomeServices. The registration
rights agreement also contains customary provisions with respect to
registration procedures, underwritten offers and indemnification and
contribution rights in connection with the registration of common stock on
behalf of MidAmerican Holdings.
HomeServices and MidAmerican Holdings are parties to a services agreement
under which MidAmerican Holdings will provide management, advisory, financial,
accounting, legal, employee benefit plan and insurance administration and other
services to HomeServices. In consideration for these services, HomeServices is
required to pay MidAmerican Holdings a monthly fee in an amount equal to
$50,000, plus an amount for the reimbursement for all reasonable employee and
out-of-pocket costs and expenses incurred by MidAmerican Holdings in connection
with providing these services. Out-of-pocket costs and expenses reimbursable to
MidAmerican Holdings do not include any mark-up or profit factor for
MidAmerican Holdings but do include all indirect costs and an appropriate
allocation for overhead
10
<PAGE>
costs associated with performing these services. The services agreement will
terminate on the earlier to occur of (a) the date HomeServices and MidAmerican
Holdings mutually agree to terminate the agreement and (b) the 180th day after
MidAmerican Holdings notifies HomeServices that it no longer owns at least 5%
of the HomeServices common stock.
HomeServices are parties to a tax indemnity agreement with MidAmerican
Holdings that reflects each party's rights and obligations with respect to
payments and refunds of taxes attributable to periods beginning prior to and
including the date of completion of the offering. The tax indemnity agreement
provides for payments between the two companies for certain tax adjustments
made after the offering. HomeServices is required to pay MidAmerican Holdings
the amount of taxes attributable to the business and operations of HomeServices
and its subsidiaries for any taxable year or period ending on or before the
closing of the offering, and MidAmerican Holdings is required to pay
HomeServices the amount of tax benefits, including refunds, attributable to the
business and operations of HomeServices and its subsidiaries for any taxable
year or period ending on or before the closing of the offering, and MidAmerican
Holdings is required to pay HomeServices the amount of tax benefits, including
refunds, attributable to the business and operations of HomeServices and its
subsidiaries for any taxable year or period ending on or before the closing of
the offering. For purposes of calculating the payments required to be made, the
indemnity agreement requires MidAmerican Holdings to compute its tax liability
as if MidAmerican Holdings and HomeServices were two separate tax group filers
and as if they were both one consolidated tax group. If MidAmerican Holdings'
tax liability as one consolidated group was greater than its tax liability if
it were to file separately from HomeServices, then HomeServices would be
required under the tax indemnity agreement to pay the difference to MidAmerican
Holdings. If, however, its tax liability as one consolidated group was less
than its tax liability if it were to file separately from HomeServices, then
MidAmerican Holdings would be required to pay the difference to HomeServices.
HomeServices is unable to estimate at this time the amount of tax liability
that it may be required to pay to MidAmerican Holdings or the amount of tax
benefit that it may be entitled to receive from MidAmerican Holdings under the
actual terms of the tax indemnity agreement.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year, the Company is not aware of any director, officer or other person
subject to Section 16(a) of the Securities Exchange Act in respect of the
Company who failed to file on a timely basis, as disclosed in the above Forms,
reports required by Section 16(a) of the Exchange Act during the Company's most
recent fiscal year or prior fiscal years, except the 1999 late filed Form 4 for
MidAmerican Energy Holdings Company which was inadvertently not reported
earlier due to a clerical error on the part of the Company.
11
<PAGE>
STOCKHOLDER PROPOSALS
Any proposal which a stockholder intends to present at the 2001 annual
meeting of stockholder must be received by the Company not later than December
14, 1999 in order to be considered for inclusion in the proxy statement
relating to such meeting. Any such proposals should be directed to the
Secretary, HomeServices.Com Inc., 6800 France Avenue South, Suite 600 Edina,
Minnesota 55435
By Order of the Board of Directors
/s/ David L. Sokol
---------------------------------------
David L. Sokol
Chairman of the Board
April 12, 2000
Edina, Minnesota
12
<PAGE>
HOMESERVICES.COM INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY FOR THE ANNUAL MEETING MAY 17, 2000
The undersigned hereby appoints David L. Sokol, Ronald J. Peltier and
Steven A. McArthur, or any one of them, with full power of substitution,
attorneys and proxies of the undersigned, to represent the undersigned and vote
all shares of Common Stock par value $0.01, of HomeServices.Com Inc., which the
undersigned would be entitled to vote if personally present at the annual
meeting of Stockholders to be held at the Marriott City Center, 30 South 7th
Street, Minneapolis, Minnesota on May 17, 2000 at 9:00 a.m., local time, and
any adjournments thereof, on all matters coming before said meeting and in the
following manner:
1. ELECTION OF DIRECTORS:
[ ] FOR ALL NOMINEES [ ] WITHHOLD AUTHORITY
TO VOTE FOR ALL NOMINEES
WITHHELD FOR THE FOLLOWING ONLY: [WRITE THE NAME OF THE NOMINEE(S) IN THE SPACE
BELOW.]
Greg E. Abel Jack W. Frost
2. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP, CERTIFIED
PUBLIC ACCOUNTANTS, AS THE COMPANY'S AUDITORS FOR FISCAL YEAR 2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT/ADDRESS BOX ON REVERSE SIDE
(Continued and to be signed on the reserve side)
<PAGE>
[X]
PLEASE MARK
YOUR VOTES
LIKE THIS IN BLUE
OR BLACK INK
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" IN ITEM 1 AND "FOR"
ITEM 2.
Signature(s):
----------------------------
----------------------------
Date:
------------------------------------
Please sign above exactly as your name or
names appear hereon. Joint owners should
each sign personally. Corporate proxies
should be signed in full corporate name by
an authorized officer. Fiduciaries should
give full titles as such. PLEASE MARK,
DATE, SIGN, AND MAIL PROMPTLY IN THE
POSTAGE-PAID ENVELOPE ENCLOSED.
