<PAGE> 1
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:
<TABLE>
<S> <C>
/X/ Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
MHI GROUP, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
MHI GROUP, INC.
3100 CAPITAL CIRCLE NE
TALLAHASSEE, FLORIDA 32308-3760
July 10, 1995
Dear Shareholder:
You are cordially invited to attend the Company's 1995 Annual Meeting
of Shareholders, which will be held on Thursday, August 24, 1995, at 2:00 p.m.
Eastern Daylight time at the Radisson Hotel, 415 North Monroe Street,
Tallahassee, Florida. Details of the business to be conducted at the Annual
Meeting are provided in the enclosed Notice of Annual Meeting and Proxy
Statement.
We are also pleased to enclose your copy of the Company's Annual
Report to Shareholders detailing events during the fiscal year ended April 30,
1995, as well as important developments since that date.
Your vote is important. Whether or not you expect to attend the Annual
Meeting, please be sure to sign, date and return the enclosed proxy. A prompt
return of your proxy will be appreciated as it will save the expense of future
mailings. If you do attend the Annual Meeting, you may still vote in person if
you desire.
Sincerely,
/s/ W. Fred Lindsey, M.D.
-------------------------
W. Fred Lindsey, M.D.
Chairman of the Board
<PAGE> 3
MHI GROUP, INC.
3100 CAPITAL CIRCLE, N.E.
TALLAHASSEE, FLORIDA 32308-3760
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AUGUST 24, 1995
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of MHI Group,
Inc., a Florida corporation (the "Company"), will be held at the Radisson
Hotel, 415 North Monroe Street, Tallahassee, Florida, on Thursday, August 24,
1995, at 2:00 p.m., Eastern Daylight Time, for the following purposes:
1. To elect six directors to serve until the next Annual Meeting of
Shareholders;
2. To consider and act upon any other matters which may properly come
before the meeting or any adjournment thereof.
In accordance with the provisions of the By-Laws, the Board of
Directors has fixed the close of business on June 26, 1995, as the Record Date
for the determination of the holders of Common Stock entitled to notice of, and
to vote at, the Annual Meeting.
A list of shareholders of the Company as of the Record Date will be
available for examination by the shareholders of the Company for any purpose
germane to the Annual Meeting, at the offices of the Company, 3100 Capital
Circle, N.E., Tallahassee, Florida, on each business day beginning July 5, 1995
to the date of the Annual Meeting, between the hours of 9:00 a.m. and 5:00 p.m.
Your attention is directed to the accompanying Proxy Statement. The
Company's Annual Report to Shareholders for the fiscal year ended April 30,
1995 is enclosed herewith.
Please vote by marking, signing and dating the enclosed Proxy and
mailing it promptly in the stamped return envelope also enclosed. If you attend
this meeting in person you may revoke your Proxy at the meeting and cast your
vote in person.
By Order of the Board of Directors
/s/ J.C. OGIER MATHEWES
-----------------------
J.C. OGIER MATHEWES
Secretary
Tallahassee, Florida
July 10, 1995
<PAGE> 4
PROXY STATEMENT
MHI GROUP, INC.
ANNUAL MEETING OF SHAREHOLDERS
AUGUST 24, 1995
PROXIES
The accompanying Proxy is solicited by the Board of Directors of MHI
Group, Inc. (the "Company") for use at the Annual Meeting of Shareholders (the
"Annual Meeting") to be held at the Radisson Hotel, 415 North Monroe Street,
Tallahassee, Florida, on Thursday, August 24, 1995 at 2:00 p.m., Eastern
Daylight time, or at any and all adjournments thereof, for the purposes set
forth herein and in the accompanying Notice of Annual Meeting. This Proxy
Statement and the accompanying proxy card are being mailed to shareholders of
record as of June 26, 1995 (the "Record Date") for the first time on or about
July 10, 1995. All expenses incident to the preparation and mailing of, or
otherwise making available to the shareholders, the Notice, Proxy Statement and
Proxy are to be paid by the Company. In addition to solicitation by mail,
arrangements will be made with brokerage houses and other custodians, nominees
and fiduciaries to send material to their principals, and the Company may
reimburse them for their expenses in so doing. To the extent necessary and in
order to ensure sufficient representation, officers and regular employees of
the Company may, without additional remuneration, in person or by telephone or
telegram, request the return of Proxies.
The persons named in the accompanying Proxy have advised the Company
of their intention, if no contrary instructions are given, to vote the shares
represented by the Proxies received by them (1) in favor of the election as
Directors of the Company of those persons designated as nominees, (2) in
accordance with their best judgment on any other matters which may properly
come before the meeting. The affirmative vote of the holders of a majority of
the shares of Common Stock present or represented at the Annual Meeting will be
required to elect Directors and to approve any such other matters.
The outstanding shares of Common Stock, par value $.40 per share, of
the Company (the "Common Stock") as of the Record Date consisted of 6,271,126
shares of Common Stock, which are the only securities of the Company entitled
to vote at the Annual Meeting. The presence in person or by proxy of holders of
record of a majority of such shares shall constitute a quorum for the Annual
Meeting. Holders of Common Stock are entitled to one vote for each share of
stock held on the Record Date. Abstentions and broker "non-votes" will be
counted in determining the number of shares present but will not be voted for
election of directors or on other proposals.
Any shareholder giving the Proxy enclosed with this statement may cast
his vote in person by revoking his Proxy at the meeting. Unless the persons
named in the Proxy are prevented by circumstances beyond their control from
acting, the Proxy will be voted at the Annual Meeting and any adjournments
thereof in the manner specified therein.
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information available to the Company as of June
26, 1995, with respect to the ownership of Common Stock by (i) each person
known to the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock, (ii) each named executive officer designated in the
section of this Proxy Statement captioned "Executive Compensation" who is not a
director of the Company, and (iii) all directors and executive officers as a
group. Information regarding the beneficial ownership of Common Stock by each
director and nominee for director is set forth in the section of this Proxy
Statement captioned "Election of Directors." Except as otherwise indicated,
each person named below has sole investment and voting power with respect to
the securities shown.
<TABLE>
<CAPTION>
AGGREGATE NUMBER PERCENT OF
OF SHARES SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING(1)
---------------- ------------------ --------------
<S> <C> <C>
Heartland Group, Inc.(2) 637,300 10.1
790 N Milwaukee Street
Milwaukee, WI 53202
Kennedy Capital Management(3) 379,200 6.0
425 N New Ballas Road, #181
St. Louis, MO 63141-6821
MH Associates(4) 486,352 7.7
40 Broad Street
New York, NY 10004
J.C. Ogier Mathewes 14,650 *
Douglas I. Kinzer 40,889 *
All Current Directors and Executive 324,937(5) 5.1(5)
Officers as a Group (9 persons)
</TABLE>
- - ------------
* Less than one percent
1 The calculation of percent of class is based on the number of shares of
Common Stock outstanding as of June 15, 1995, excluding shares held by the
Company.
2 In a Schedule 13G filed on March 10, 1995 by Heartland Group, Inc., an
investment adviser ("Heartland"), Heartland reported that as of February 28,
1995 it beneficially owned 637,300 shares of Common Stock (10.1% of the
total shares outstanding as of June 26, 1995). Heartland reported that it
possesses (I) sole dispositive power with respect to 637,300 shares of
Common Stock and (ii) no sole or shared voting power. The Schedule 13G also
states that Heartland has not acquired the Company's shares for the purpose
of changing or influencing the control of the Company.
3 In a Schedule 13G filed on February 15, 1995 by Kennedy Capital Management,
Inc., an investment adviser ("Kennedy"), Kennedy reported that as of
February 13, 1995 it beneficially owned 379,200 shares of Common Stock (6.0%
of the total shares outstanding as of June 26, 1995). Kennedy reported that
it has shared voting and dispositive power over all shares beneficially
owned. The Schedule 13G also states that Kennedy has not acquired the
Company's shares for the purpose of changing or influencing the control of
the Company.
4 MH Associates' beneficial ownership interest consists of the KD Option to
purchase 486,352 shares of Company Common Stock at $2.25 per share. See
"Certain Relationships and Related Transactions -- Transactions with MH
Associates" below.
5 Does not include shares of Common Stock held by (i) Fred O. Drake, Jr., who
died in May 1994, (ii) David J. McLaurin, who resigned as President and
Chief Executive Officer of the Company in April 1995, and (iii) a director
pursuant to the KD Option. See "Certain Relationships and Related
Transactions -- Transactions with MH Associates" below.
Clifford R. Hinkle, age 46, has served as President and Chief Executive Officer
from April 1995. Since 1991, Mr. Hinkle has served, and continues on a
part-time basis to serve, as President of Flagler Capital Corporation
(financial advisory and investment services). He was Executive Director of the
State Board of Administration of Florida from 1987 to 1991 (trust management).
2
<PAGE> 6
Fred O. Drake, Jr., served as Chairman of the Board of Directors from June 1986
and Chief Executive Officer from November 1981, until his death on May 30,
1994. Mr. Drake also served as President of the Company from 1981 to 1989.
David J. McLaurin, age 55, served as President of the Company from September
1993, and as Chief Executive Officer from May 1994 until his resignation in
April 1995. Previously, Mr. McLaurin served as Chief Operating Officer of the
Company from September 1993 until May 1994, as Vice President of Marketing and
Operations from May 1990 until August 1993.
J.C. Ogier Mathewes, age 51, has served the Company since August 1992 as Vice
President and Chief Financial Officer. Prior to that time, Mr. Mathewes was
employed by Brendle's, Inc., as its Vice President and Chief Financial Officer
since 1990.
Glynda Jane Harris, age 58, has been employed by the Company in various
capacities since September 1982 and since April 1985 as Vice President and
Treasurer.
Douglas I. Kinzer, age 40, became Vice President and Chief Operating Officer of
the Company on June 1, 1994. Prior thereto, Mr. Kinzer was General Manager of
Star of David Memorial Gardens Cemetery and Funeral Chapel (acquired by the
Company in 1987) from 1980 until June 1, 1994. Mr. Kinzer was elected Vice
President of the Company in August 1990.
3
<PAGE> 7
ELECTION OF DIRECTORS
Pursuant to the Company's Bylaws, the Board of Directors will consist of not
less than three nor more than 15 persons as fixed from time to time by
resolution of the Board of Directors or by the shareholders at the Annual
Meeting. At the Annual Meeting, six Directors (the number fixed by the
resolution of the Board) will be elected to serve for the ensuing year and
until their successors shall be duly elected and shall qualify. The Board of
Directors of the Company is soliciting Proxies for the election of the persons
named below. Should any of these nominees not remain a candidate at the time of
the Annual Meeting (a situation which is not now anticipated), Proxies
solicited hereunder will be voted in favor of those nominees who do remain as
candidates and may be voted for substituted nominees.
The following table sets forth information available to the Company as of June
15, 1995, with respect to the name, the age, the principal occupation for the
last five years, the beneficial ownership of Common Stock and the percentage of
outstanding Common Stock represented by such ownership of each director of the
Company. Unless otherwise indicated, all shares of Common Stock are owned
directly and of record and the director owning such shares has sole voting and
investment power with respect thereto.
<TABLE>
<CAPTION>
Aggregate Number of
Name and Principal Director Shares Percent of
Occupation(1) Age Since Beneficially Owned Outstanding Shares
------------- --- ----- ------------------ ------------------
<S> <C> <C> <C> <C>
W. Fred Lindsey, M.D. 67 1968 49,000 *
Chairman of the Board
of Directors of the Company,
and Chairman of the Board,
Dixie Oil Company(2)
Clifford R. Hinkle 46 1993 16,750 *
President and Chief
Executive Officer(3)
W. Dexter Douglass 65 1968 57,078 *
General Counsel, Governor's
Office, State of Florida and
President, Douglass, Powell
& Rudolph (attorneys)(4)
George A. Kellner 52 1988 515,102(5) 8.1(5)
Managing Partner, Kellner
DiLeo & Co.
Carl R. Pennington, Jr. 64 1991 29,562 *
Member, Pennington &
Haben, P.A. (attorneys)
Benson L. Skelton, Jr. 63 1988 44,150 *
President, Skelton, Ketcham,
von Goeben, Bryant &
Perkins, P.A. (certified public
accountants)
</TABLE>
- - ------------
* Less than one percent
1 There has been no change in principal occupations or employment in the past
five years, except for Dr. Lindsey, Mr. Hinkle and Mr. Douglass as noted
below.
2 Dr. Lindsey was elected Vice Chairman of the Board of Directors of the
Company in 1993 and was elected Chairman of the Board of Directors of the
Company in June 1994. Dr. Lindsey was employed
4
<PAGE> 8
with Radiology Associates from July 1959 until June 1994. From October 1970
until the present, he has been Chairman of the Board of Dixie Oil Company.
3 Mr. Hinkle was named President and Chief Executive Officer of the Company in
April, 1995. Mr. Hinkle has served as President of Flagler Capital
Corporation (financial advisory and investment services) from 1991 until
present. He was Executive Director of the State Board of Administration of
Florida from 1987 to 1991 (trust management).
4 Mr. Douglass was appointed General Counsel to the State of Florida's
Governor's Office in February, 1995.
5 Includes shares held pursuant to the KD Option. See "Certain Relationships
and Related Transactions - Transactions with MH Associates" below.
Meetings and Committees of the Board of Directors
The Board of Directors held 12 meetings during the fiscal year ended
April 30, 1995, and each Director attended at least 75% of the aggregate number
of board meetings held while he was a Director and the total number of meetings
held by all committees of the Board on which he served.
The Company has a standing Audit Committee, which reviews with
management all significant accounting and disclosure matters, selects the
Company's independent certified public accountants, and reviews the scope of
such accountants' examination. The Audit Committee also meets with the
Company's certified public accountants, independent of management, to inquire
as to the Company's adequacy of internal controls and the cooperation of
management and Company personnel. The Audit Committee, for the fiscal year
ended April 30, 1995, held four meetings. The Audit Committee currently
consists of Mr. Douglass (Chairman), Mr. Pennington and Mr. Skelton.
The Company has a standing Nominating Committee, which nominates
individuals for election as Directors of the Company. The Nominating Committee
currently consists of Mr. Kellner (Chairman), Dr. Lindsey and Mr. Pennington.
The Committee's functions were performed in 1995 by the full board of Directors
and, consequently, the Committee held no meetings during the fiscal year ended
April 30, 1995. The Nominating Committee will consider nominees recommended by
shareholders by written notice submitted to the Company no later than April 30,
1996.
The Company's Compensation and Stock Option Committee reviews and
recommends to the Board of Directors the cash or other compensation, including
any stock options, to be paid to the Board of Directors and management. The
Compensation and Stock Option Committee currently consists of Mr. Pennington
(Chairman), Dr. Lindsey and Mr. Douglass. The Compensation and Stock Option
Committee held four meetings during the fiscal year ended April 30, 1995.
The Company has a standing Investment and Investor Relations Committee
which reviews the investments in the trust accounts of the Company, sets
investment policies and recommends investment criteria to the outside trustee.
The Committee consists of Mr. Skelton (Chairman), Dr. Lindsey, and Mr.
Pennington. The Investment Committee held three meetings during the fiscal year
ended April 30, 1995.
5
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation of the
Company's Chief Executive Officer and its other executive officers for each of
the last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation(1) Long Term Compensation
---------------------- ----------------------
Securities
Name and Underlying All Other
Principal Position(2) Year Salary ($) Bonus ($)(3) Options (#) Compensation ($)(4)
--------------------- ---- ---------- ------------ ----------- -------------------
<S> <C> <C> <C> <C> <C>
Clifford R. Hinkle 1995 31,994(5) - 16,250 -
President & Chief 1994 - - - -
Executive Officer 1993 - - - -
Fred O. Drake, Jr. 1995 15,833 - 2,500 77,400
Former Chairman of 1994 190,000 117,092 8,125 1,932
the Board and Chief 1993 238,500(6) 85,300 12,500 2,340
Executive Officer
David J. McLaurin 1995 180,000(7) 75,000 2,500 2,452
Former President & 1994 97,500 53,000 8,125 2,249
Chief Executive Officer 1993 104,600(7) 45,300 12,500 2,182
J.C. Ogier Mathewes 1995 125,000 62,500 2,500 1,563
Vice President & 1994 97,500 26,500 8,125 1,210
Chief Financial Officer 1993 65,040 22,549 6,250 -
Douglas I. Kinzer 1995 123,586 62,500 2,500 2,695
Vice President & 1994 108,160 52,500 8,125 2,406
Chief Operating Officer 1993 100,000 18,900 12,500 2,317
</TABLE>
1 All compensation required to be disclosed in the column "Other Annual
Compensation" such as perquisites and other personal benefits received by
each named executive officer (including car use allowance) in each instance
aggregated less than the lesser of $50,000 or 10% of each officer's annual
salary and bonus.
2 See page 2 of this proxy statement for a description of the changes in
management through June 1995.
3 Cash awards are made to executives based upon the individual's contribution
to the attainment of overall company objectives and individual goals. Cash
awards are paid annually during the year following the year-end performance
review.
4 Except with respect to Mr. Drake, these figures reflect the Company's
contribution to the Company 401-K Plan on behalf of the named executive.
Under the 401-K Plan, the Company contributes to each participant's account
25% of the participant's contribution limited to not more than 2% of
participant's earnings. The $77,400 paid to Mr. Drake represents a severance
payment on account of his termination of employment with the Company and was
paid to his beneficiary subsequent to his death in May 1994.
5 Mr. Hinkle was named President and Chief Executive Officer in April 1995,
with an annual salary of $150,000. Of the $31,994 Mr. Hinkle received in
fiscal 1995, $21,705 represents fees for services as a director prior to his
employment with the Company.
6 Includes $50,000 deferred compensation for the year 1993. The Company had
accrued amounts annually to a deferred compensation account for Mr. Drake.
On April 15, 1994 the Company and Mr. Drake entered into an agreement
whereby the Company satisfied its obligation for the payment of
6
<PAGE> 10
deferred compensation by the payment of the present value of the deferred
compensation in the amount of $463,000.
7 Includes $30,000 and $17,500 in deferred compensation for the years 1993 and
1995, respectively. Mr. McLaurin's deferred compensation plan provided for
deferred compensation of $30,000 per year for a two-year period, with
10-year vesting at 10% per year. The Company and Mr. McLaurin agreed in
March 1994 to terminate this agreement effective April 30, 1994. It was
further agreed that the previously deferred compensation would be fully
vested and a payment of $47,500 in May 1994 satisfied the Company's
obligation for payment of Mr. McLaurin's deferred compensation.
The following table sets forth information regarding grants of stock options
made during fiscal year 1995 to each of the named executive officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (10 YRS.)*
----------------- --------------------------
Number of % of Total
Securities Options
Underlying Granted to Grant
Options Employees Exercise Date
Granted(2) in Price Market Expiration
(#) Fiscal Year ($/sh) ($/sh) Date 0% $ 5% $(3) 10% $(3)
----- ----------- ------ ------ ---- ---- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Clifford R. Hinkle 16,250 12.7 8.475 8.625 9/15/2004 -0- 86,694 219,456
Fred O. Drake, Jr. 2,500 2.0 9.800 9.750 6/15/2004 -0- 15,410 39,053
David J. McLaurin 2,500 2.0 9.800 9.750 6/15/2004 -0- 15,410 39,053
J.C. Ogier Mathewes 2,500 2.0 9.800 9.750 6/15/2004 -0- 15,410 39,053
Douglas I. Kinzer 2,500 2.0 9.800 9.750 6/15/2004 -0- 15,410 39,053
</TABLE>
* The dollar gains under these columns result from calculations assuming 0%, 5%
and 10% growth rates as set by the Securities and Exchange Commission and are
not intended to forecast future price appreciation of the Common Stock. The
gains reflect a future value based upon growth at these prescribed rates.
It is important to note that since the exercise price of the options granted
was approximately equal to the fair market value of the Common Stock on the
date of grant, the options will have value to the listed executives and to all
option recipients only if the stock price advances beyond the exercise price
shown in the table during the effective option period.
1 No SARs were awarded in the 1995 fiscal year.
2 These awards were made pursuant to the 1989 Plan. Under this plan, the
option exercise price is the average daily per share closing price for the
five consecutive trading days immediately preceding the date of grant. The
1989 Plan is currently open to participation by officers and employees of
the Company and its subsidiaries who are selected by the Compensation and
Stock Option Committee appointed by the Company's Board of Directors. The
Committee determines the dates after which options granted under this plan
may be exercised. All options granted in fiscal 1995 were available for
exercise at date of grant. The 1989 Plan also provides for an annual
automatic grant to non-employee directors of the Company. The options
granted to Mr. Hinkle represent options automatically granted to him as a
non-employee director. The grant to Mr. Drake was earned by him during his
tenure as Chief Executive Officer during fiscal 1995 and paid to his
beneficiary subsequent to his death.
3 The assumed annual rates of appreciation of five and ten percent would
result in the price of the Company's Common Stock increasing to $13.81 and
$21.98, respectively for Mr. Hinkle and $15.964 and $25.421, respectively
for the remaining named executives.
7
<PAGE> 11
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table provides information regarding the exercise of options
during the Company's last fiscal year and the number and value of unexercised
options held at year end by each of the named executive officers.
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Shares Unexercised In-the-Money
Acquired on Value Options/SAR's Options/SAR's
Name Exercise (#) Realized ($) at FY-End (#)(1) at FY-End ($)(1)
---- ------------ ------------ ---------------- ----------------
<S> <C> <C> <C> <C>
Clifford R. Hinkle -0- -0- 16,250 -0-
Fred O. Drake, Jr. 91,563 233,568 2,500 -0-
David J. McLaurin -0- -0- 31,875 43,826
J.C. Ogier Mathewes -0- -0- 13,750 3,494
Douglas I. Kinzer -0- -0- 34,375 87,469
</TABLE>
1 All options listed in this table are currently exercisable.
COMPENSATION OF DIRECTORS
Each Director who is not a Company employee, other than the Chairman of the
Board, is entitled to a fee of $2,000 per quarter, regardless of attendance at
meetings, a fee of $1,000 for each Directors' meeting attended and a fee of
$500 for each committee meeting attended. The Chairman of the Board receives an
annual fee of $20,000. The Company paid a total of $117,952 in Directors' fees
during fiscal 1995. In addition, Directors who are not officers of the Company
receive, as part of their annual compensation as Directors, options to purchase
10,000 shares of Common Stock ("Directors' Options"). The Directors' Options
are awarded effective upon each Director's election or reelection to the Board,
expire ten years from the date of grant and have an exercise price equal to the
average daily per share closing price for the five consecutive trading days
immediately preceding the date of grant.
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
On February 19, 1991, the Company entered into an employment agreement with
Fred O. Drake, Jr., for a period of three years commencing on November 16, 1991
and ending on November 17, 1994. This agreement provided for a minimum annual
compensation of $190,000 plus an annual bonus equal to five percent of pre-tax
net profits of the Company that exceeds $1,200,000. Following Mr. Drake's death
in May 1994, the annual bonus for fiscal 1995 due under this agreement was
payable to his estate. In addition, under a predecessor employment agreement,
Mr. Drake's estate is entitled to receive deferred compensation in an amount
equal to $60,000 per year for ten years following Mr. Drake's death.
In April 1994, the Company and Mr. Drake agreed to amend his 1991 employment
agreement. The amendment provided for the Company to satisfy its obligation
under the predecessor employment agreement for the payment of deferred
compensation and to extinguish the Company's liability by the payment of the
present value of the deferred compensation in the amount of $463,000. The
payment was made and the Company's liability was extinguished in April 1994.
The amended agreement also provided for $77,400 additional compensation upon
retirement or other termination of Mr. Drake. After Mr. Drake's death in May
1994, the $77,400 additional compensation was paid to Mr. Drake's wife, Roberta
Drake, in June 1994. The amendment also provided for the Company to loan
Roberta Drake, upon request, the sum of $136,000 bearing interest at the rate
of 6.25% payable in 120 equal consecutive monthly installments, including both
principal and interest. The request for such loan was made in April, 1995. The
purpose of this loan was to aid Roberta Drake in the payment of income taxes
resulting from the death of Mr. Drake. The largest aggregate amount of debt
outstanding at any point in time to
8
<PAGE> 12
the date hereof was $136,600. As of June 15, 1995 the amount outstanding under
the loan agreement was $135,778.
In April 1995, Mr. Hinkle succeeded Mr. McLaurin as President and Chief
Executive Officer of the Company. In compensation for his services, the Company
has agreed to pay Mr. McLaurin $10,000 per month from the date of his departure
as President and Chief Executive Officer in April 1995 through December 1995 in
his present capacity as Company advisor.
On March 13, 1995, the Board of Directors approved a Severance Benefits Plan
for the Chief Executive Officer, President, Chief Operating Officer, Chief
Financial Officer, Treasurer and Corporate Secretary of the Company. Effective
June 30, 1995, the Company entered into Severance Benefits Agreements with
Messrs. Hinkle, Mathewes, Kinzer and Ms. Harris. The Agreements provide for a
severance payment in the amount of one times the executive's base salary in the
event he or she is terminated by the Company without cause or if the executive
terminates employment with the Company for Good Reason following a Change of
Control. These Agreements have no set termination date.
Change of Control is defined as the first to occur of any of the following: (i)
any consolidation or merger of the Company in which the Company is not the
surviving entity, or any sale, lease, exchange or other transfer of all or
substantially all of the Company's assets, or the liquidation of the Company,
(ii) the acquisition by any entity of a majority of the outstanding voting
securities of the Company, or (iii) during any consecutive twenty-four month
period, individuals who at the beginning of such period constitute the entire
Board of Directors cease for any reason to constitute a majority thereof,
unless approved by the members of the Board of Directors at the beginning of
such period or their successors elected by such Board members.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Mr. Pennington (Chairman), Mr. Douglass
and Dr. Lindsey. None of such members of the Compensation Committee is or has
been an officer or employee of the Company.
Mr. Pennington is a founder of the Pennington & Haben, P.A. law firm which
provides certain legal services for the Company. Mr. Douglass is a partner in
Douglass, Powell & Rudolph, P.A. which provides legal services to the Company
(see "Certain Relationships and Related Transactions"). Executive officers who
participated in the committee meetings during fiscal 1995 include Mr. Hinkle,
Mr. McLaurin and Mr. Mathewes.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee of the Board of Directors, a
committee of outside directors, offers this report regarding compensation
policies for executive officers and the Chief Executive Officer of the Company.
The Company's overall compensation objective is to:
Attract, motivate and retain quality executives which are
critical to achieving corporate objectives and increasing
shareholder value;
Have a compensation structure which will support the Company's
philosophy of moving potential leaders throughout the
organization, exposing them to the many types of markets and
operations;
Reinforce strategic performance objectives through the use of
incentive compensation programs; and
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<PAGE> 13
Create equity based plans which are structured to allow the
executive to share the rewards and risk of strategic decision
making.
From time to time, the committee works with compensation consultants to assist
with the design, communication and implementation of compensation plans.
Fiscal Year 1995 was a time of transition. Mr. Fred O. Drake, Jr. resigned from
his duties as Chief Executive Officer in May 1994 and Mr. David McLaurin
assumed these additional duties. Mr. McLaurin resigned as President and Chief
Executive Officer in April 1995 and Mr. Clifford Hinkle assumed those duties.
Mr. Douglas Kinzer assumed the responsibilities of Chief Operating Officer in
June 1994. Dr. Fred Lindsey assumed the responsibilities of the Chairman of the
Board of Directors in June 1994 after the death of Mr. Drake. The new
leadership team is committed to the same standards of excellence that had been
established.
COMPONENTS OF EXECUTIVE COMPENSATION - There are four primary components of
executive compensation which are: (1) base salary, (2) annual incentive bonus,
(3) stock options and (4) benefits.
BASE SALARY - Base salaries of senior executives are reviewed annually and
increases are based on base salaries of other executives with similar
responsibilities in companies of similar size, business and complexity. It is
the Company's policy to offer base salaries that are generally competitive with
such similar companies. Also taken into consideration is each executive's
experience in his position with the Company and the executive's performance
over a sustained period of time. Increases in base salaries are based on a
subjective determination by the Stock Option and Compensation Committee based
on all of the above factors.
Neither Mr. Drake nor Mr. McLaurin received an increase in base pay for fiscal
1995. Mr. Hinkle assumed the responsibilities of President and Chief Executive
Officer at the same salary level as Mr. McLaurin had received in the same
position.
ANNUAL INCENTIVES - The Company has established an annual incentive plan for
certain executive officers and various members of management through which
bonuses are awarded based on the attainment of various corporate performance
goals. The corporate performance goals such as pre-tax income, total revenues
and other targets are set in the preceding fiscal year. The CEO's input is
considered when setting measures and goals for other executive officers. For
fiscal 1995, bonuses were based on the Company's achievement of target pre-tax
earnings, as set by the Board of Directors "Bonus Target," and awarded as a
percent of base salary with a maximum bonus of 70% of base salary awarded for
attainment of 130% of the Bonus Target and no bonus awarded for less than 90%
attainment.
Mr. McLaurin was granted a $75,000 annual incentive award for fiscal 1995,
based on the Company's achievement of 103% of Bonus Target. Because Mr. Hinkle
assumed the position of Chief Executive Officer so late in fiscal 1995, he
received no annual incentive award.
STOCK OPTIONS - The Company has adopted and maintains the 1989 Stock Option
Plan (the "Stock Option Plan") to provide for the grant of stock options to its
executive officers. Options provide executive officers the opportunity to buy
and maintain an equity interest in the Company and to share in the appreciation
of the value of the stock. Because the exercise price of options granted under
the Stock Option Plan is generally equal to the fair market value of the stock,
stock options only have value for the executive officers if the stock price
appreciates in value from the date the options are granted. The number of stock
options granted executive officers during fiscal 1995 was based upon the
Company's net income for fiscal 1994 and the change in the Company's stock
price compared with the S&P 500 Index.
Mr. McLaurin was awarded 2,500 stock options during fiscal 1995 based upon the
Company's net income for fiscal 1994. Options awarded to Mr. Hinkle for fiscal
1995 were for his services as a non-employee director.
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<PAGE> 14
BENEFITS - Benefits offered executive officers provide protection against
financial catastrophes that can result from illness or death. An additional
benefit offered is in the area of assisting the executives in planning and
providing for retirement income. Benefits offered executive officers are
largely those that are offered to all employees.
The Compensation Committee believes the executive compensation policies serve
the best interest of the shareholders and the Company. This compensation is
intended to be linked to the Company's performance.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
generally disallows corporate tax deductions for compensation in excess of
$1,000,000 paid to the Chief Executive Officer and each of the next four most
highly paid officers of the Company unless such compensation is deemed
performance related within the meaning of Section 162(m). None of the Company's
officers receive compensation from the Company in excess of $1,000,000. For
this reason, the Compensation and Stock Option Committee has not yet adopted
any general policy regarding compliance with Section 162(m) of the Code.
Carl R. Pennington, Jr. (Chairman)
W. Fred Lindsey, M.D.
W. Dexter Douglass
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<PAGE> 15
PERFORMANCE GRAPH
The graph set forth below charts the yearly percentage change in the
Company's cumulative total shareholder return against each of the Standard &
Poor's 500 Index and the Standard & Poor's Miscellaneous Index in each case
assuming an investment of $100 on April 30, 1990 and the cumulation and
reinvestment of dividends paid thereafter through April 30, 1995.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG MHI GROUP, THE S & P 500 INDEX AND THE S & P MISCELLANEOUS INDEX
(Graph)
<TABLE>
<CAPTION>
S & P
MEASUREMENT PERIOD S & P 500 MISCELLANEOUS
(FISCAL YEAR COVERED) MHI GROUP, INC. INDEX INDEX
- - --------------------- --------------- ----- -----
<S> <C> <C> <C>
1990 100 100 100
1991 82 118 112
1992 273 134 129
1993 255 147 152
1994 277 154 159
1995 277 181 184
</TABLE>
* $100 INVESTED ON 04/30/90 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING APRIL 30.
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<PAGE> 16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with MH Associates
MH Associates, the beneficial owners of 7.7% if the Company's Common
Stock as of June 26, 1995, holds an option, granted in 1986 (the "KD Option")
to purchase 486,352 shares of the Company's Common Stock of which 11,352
options shares were granted in December 1993 from the anti-dilution provision
of the KD option as a result of the December 1993 secondary stock offering. The
exercise period extends until April 22, 1996 and the exercise price is
currently at $2.25 per share. The closing market price of the Company's Common
Stock, which is listed on the New York Stock Exchange, was $1.50 per share on
October 26, 1990, the date of the agreement with MH Associates.
Other Transactions and Relationships
Mr. Douglass is a partner in Douglass, Powell & Rudolph, which
received fees of approximately $96,053 from the Company for legal services
during the fiscal ended April 30, 1995.
The Company's executive offices, located at 3100 Capital Circle, N.E.,
Tallahassee, Florida 32308-3760, consisting of approximately 8,375 square feet,
are leased from Nations Bank of Florida, P.A. as trustee under the Company's
Star of David Memorial Gardens Funeral Trust Agreement. The term of the lease
is for ten years ending in June 2002 with the Company having an option to renew
the lease for two additional five-year terms. The rental agreement calls for
base term rent of approximately $80,000 in fiscal 1995. The base term rental
shall be increased annually by three percent for years two through five and an
annual increase of four percent for years six through ten. In the opinion of
management, the terms of the lease are comparable to lease terms available from
unaffiliated third parties.
RECOMMENDATION AND VOTE
The election of Directors requires the affirmative vote of the holders
of a majority of the shares of Common Stock present in person or by proxy at
the Annual Meeting.
The Board of Directors recommends that the shareholders vote FOR the
election of nominees set forth in this Proxy statement.
OTHER BUSINESS
The Company's management knows of no other matters to be brought
before the meeting for a vote. If, however, other matters are presented for a
vote at the meeting, proxy holders will vote the shares represented by properly
executed proxies according to their judgment on those matters.
At the meeting, management will report on the Company's business, and
shareholders will have an opportunity to ask questions.
CERTIFIED PUBLIC ACCOUNTANTS
Upon recommendation of the Audit Committee, the Board of Directors of
the Company selected Price Waterhouse LLP, Post Office Box 2640, Tampa, Florida
33601-2640, as the Company's independent certified public accountants for the
fiscal year ended April 30, 1995. Price Waterhouse has served as the Company's
independent certified public accountants since August, 1993. It is expected
that representatives of Price Waterhouse LLP will attend the Annual Meeting and
will have an opportunity to make a statement and to respond to appropriate
questions.
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<PAGE> 17
On August 16, 1993, the Company dismissed Ernst & Young LLP as its
Independent Certified Public Accountants. The reports of Ernst & Young LLP on
the financial statements for the two fiscal years ended April 30, 1992 and
April 30, 1993 contained no adverse opinion or disclaimer and were not
qualified or modified as to uncertainty, audit scope or accounting principle.
The Company's Audit Committee and Board of Directors participated in and
approved the decision to change independent accountants.
In connection with its audits for the two fiscal years ended April 30,
1992 and April 30, 1993 and through August 16, 1993, there were no
disagreements with Ernst & Young LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of Ernst & Young LLP
would have caused them to make reference thereto in their report on the
financial statements for such years. During the two fiscal years ended April
30, 1992 and April 30, 1993, and through August 16, 1993, there were no
reportable events.
The Registrant requested that Ernst & Young LLP furnish it with a
letter addressed to the Securities and Exchange Commission stating whether or
not it agreed with the above statements. A copy of such letter, dated August
17, 1993, was filed as Exhibit 16(a) to the Company's Form 8-K dated August 19,
1993.
INFORMATION AVAILABLE TO SHAREHOLDERS
The Company's 1995 Annual Report is being mailed to shareholders with
the Proxy Statement. Additional copies of the 1995 Annual Report and Form 10-K
filed with the Securities and Exchange Commission may be obtained without
charge from the Company by writing to: Secretary, MHI Group, Inc., 3100 Capital
Circle, N.E., Tallahassee, Florida 32308-3760. Financial statements are also on
file with the Securities and Exchange Commission, Washington, D.C. 20549, with
the New York Stock Exchange and with the Pacific Stock Exchange.
DATE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholder proposals to be included in the Company's Proxy Statement
with respect to the 1996 Annual Meeting of Shareholders must be received by the
Company at its executive offices located at 3100 Capital Circle, N.E.,
Tallahassee, Florida 32308-2760 no later than March 11, 1996.
SHAREHOLDERS ARE URGED TO DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN
THE ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. YOUR COOPERATION WILL BE APPRECIATED.
By order of the Board of Directors
/s/ J.C. OGIER MATHEWES
-----------------------
J.C. OGIER MATHEWES
Secretary
Tallahassee, Florida
July 10, 1995
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<PAGE> 18
APPENDIX A
MHI GROUP, INC.
3100 CAPITAL CIRCLE, N.E.
TALLAHASSEE, FLORIDA 32308-3760
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints W. Fred Lindsey, or J.C. Ogier Mathewes, or
either of them (with full power to act alone), as Proxies, to act for and in the
name of the undersigned to vote all shares of common stock, $.40 par value (the
"Common Stock"), of MHI Group, Inc., which the undersigned is entitled to vote
at the 1995 Annual Meeting of Shareholders and any adjournments thereof. The
Annual Meeting will be held at The Radisson Hotel, 415 North Monroe Street,
Tallahassee, Florida, at 2:00 p.m. local time on August 24, 1995.
The Board of Directors recommends a vote "FOR" each of the listed proposals
which are more fully described in the Proxy Statement accompanying this card.
<TABLE>
<S> <C> <C> <C> <C>
1. ELECTION OF DIRECTORS / / FOR ALL NOMINEES LISTED BELOW / / WITHHOLD AUTHORITY TO VOTE FOR ALL
(except as marked to the contrary below) NOMINEES LISTED BELOW
</TABLE>
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE STRIKE A
LINE THROUGH THE NOMINEE'S NAME LISTED BELOW.)
William Fred Lindsey, M.D., W. Dexter Douglass, Clifford R. Hinkle, George
A. Kellner, Carl R. Pennington, Jr., Benson L. Skelton, Jr.
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND ANY ADJOURNMENTS
THEREOF.
PLEASE VOTE, SIGN AND RETURN AS SOON AS POSSIBLE IN RETURN ENVELOPE
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSALS SET OUT ON
THIS PROXY.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
DATED: , 1995
------------------
------------------------------
Signature
------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
