SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant ___
Filed by a Party other than the Registrant _X_
Check the appropriate box:
_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
Health Outcomes Management, Inc.
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(Name of Registrant as Specified in its Charter)
Victor S. Greenstein, Jonathan R. Gordon, Stanford M. Baratz,
Peter J. Zugschwert and Matthew E. Goldberg
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
_X_ No fee required
___ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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):
________________________________________________________________________________
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(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:
________________________________________________________________________________
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IMPORTANT NOTICE AFFECTING YOUR INVESTMENT
IN HEALTH OUTCOMES MANAGEMENT, INC. STOCK
August ____, 1997
Dear Fellow Shareholder:
To quote Ronald Reagan during one of his debates with Jimmy Carter,
"are you better off today than you were four years ago?" If so, it is not due to
the performance of your investment in Health Outcomes Management, Inc. While
other stocks have been zooming to new highs and the market indexes seem to break
records almost daily, Health Outcomes has given new meaning to the term "penny
stock." The price per share has declined to just PENNIES per share and the
trendline just keeps going down.
HEALTH OUTCOMES MANAGEMENT, INC. QUARTERLY STOCK PRICE
[graph]
QUARTERLY PERIOD HIGH BID QUOTATION
---------------- ------------------
1st quarter 1994 $.72
2nd quarter 1994 $.60
3rd quarter 1994 $.58
4th quarter 1994 $.50
1st quarter 1995 $.60
2nd quarter 1995 $.94
3rd quarter 1995 $1.12
4th quarter 1995 $.94
1st quarter 1996 $.69
2nd quarter 1996 $.44
3rd quarter 1996 $.38
4th quarter 1996 $.19
1st quarter 1997 $.16
While the price of our stock languishes in the cellar, executive
management continues to draw fat paychecks. Between fiscal years 1994 and 1996,
the combined annual compensation of Mr. Peters (the President of the company)
and Mr. Frakes (the Vice President of the company) ranged from TWO TO SEVENTEEN
times the net income of the company! In fiscal 1997, when earnings took a 218%
nosedive (resulting in a loss of over $113,000), Peters and Frakes took salary
reductions of only 6%. In short, as the following chart demonstrates, their
compensation appears to bear almost no rational relationship to the earnings
performance of the company.
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COMPENSATION OF PETERS AND FRAKES AS COMPARED TO NET INCOME (LOSS)
[graph]
COMBINED COMPENSATION OF PETERS
YEAR AND FRAKES NET INCOME (LOSS)
---- ---------- -----------------
1994 $188,035 $94,331
1995 $194,145 $10,995
1996 $203,947 $95,615
1997 $192,445 $(113,244)
We submit that Health Outcomes is going nowhere, and indeed, is headed
for insolvency -- at an alarming clip. However, you need not rely solely on our
assessment of the gravity of the situation. You can also read the independent
auditor's report of KPMG Peat Marwick LLP (included as part of the company's
1997 fiscal year end report to the U.S. Securities and Exchange Commission) in
which the independent auditors state:
"[T]he Company's operating loss, net working capital
deficiency and stockholders' deficit raise SUBSTANTIAL DOUBT
about the entity's ability to continue as a going concern."
[1997 Form 10-KSB (emphasis added)].
Fellow shareholders, the time for action is now! We have a hand-picked
team of experienced professionals who are ready, willing and able to replace the
company's current Directors. They welcome the challenge of turning Health
Outcomes around by (i) bringing a renewed sense of purpose and vision to the
management of the Company, (ii) implementing strategies designed to improve the
company's earnings and (iii) more closely linking the compensation paid to
management to earnings performance.
We can no longer tolerate the wasting away of our hard earned
investment dollars. You CAN make a change by electing a new slate of directors.
BUT YOU MUST FILL IN, SIGN AND DATE AND RETURN YOUR GOLD PROXY AND VOTING
AGREEMENT TODAY! If you have any questions, please call me in the Twin Cities at
(612) 591-5016 or toll-free outside of the Twin Cities at (800) 892-3970.
Sincerely,
Victor S. Greenstein
<PAGE>
PROXY AND VOTING AGREEMENT STATEMENT OF
VICTOR S. GREENSTEIN, JONATHAN R. GORDON, STANFORD M. BARATZ,
PETER J. ZUGSCHWERT AND MATTHEW E. GOLDBERG
5500 WAYZATA BOULEVARD, SUITE 1075
MINNEAPOLIS, MINNESOTA 55416
(612) 591-5016
GENERAL MATTERS
SOLICITATION OF PROXY AND VOTING AGREEMENTS
This Proxy and Voting Agreement Statement and the accompanying GOLD
Proxy and Voting Agreement, mailed on or about August _____, 1997, is furnished
to the shareholders of Health Outcomes Management, Inc., 2331 University Avenue
S.E., Minneapolis, Minnesota 55414 (the "Company") in connection with the
solicitation of Proxy and Voting Agreements by Victor S. Greenstein, Jonathan R.
Gordon, Stanford M. Baratz, Peter J. Zugschwert and Matthew E. Goldberg (the
"Greenstein Group"). Proxy and Voting Agreements solicited hereby are to be
voted and/or utilized at the Annual Meeting of Shareholders to be held on
Thursday, September 18, 1997, at 3:30 p.m. at the Radisson Hotel Metrodome,
University of Minnesota, 615 Washington Avenue S.E., Minneapolis, Minnesota, or
any adjournment or adjournments thereof, for the purpose of electing a slate of
four directors proposed by the Greenstein Group in opposition to the slate of
four directors proposed by the Company and its Board of Directors pursuant to
the Company's Proxy Statement mailed on or about August 7, 1997 (the "Company's
Proxy Statement").
The cost of this solicitation, which is being made on behalf of the
Greenstein Group, is estimated to be $15,000 and will be borne by Mr.
Greenstein; provided, however, that in the event that the Greenstein Group's
proposed slate of directors is elected, Mr. Greenstein intends to seek
reimbursement of such costs from the Company. As of August 6, 1997, Mr.
Greenstein has incurred total expenditures of approximately $5,200 in connection
with the solicitation of the Company's shareholders.
In addition to solicitation by mail, the Greenstein Group members and
regular clerical employees of the Greenstein Group members may solicit proxies
by telephone, special communications or in person. The Greenstein Group may, but
to date has not, specially engage employees, representatives or other persons to
solicit the Company's shareholders. The Greenstein Group intends also to request
banks and brokers to forward the Greenstein Group's Proxy and Voting Agreement
materials to their customers who have a beneficial interest in the Company's
Common Stock registered in the names of nominees and will reimburse such banks
and brokers for their reasonable out-of-pocket expenses.
INTEREST OF GREENSTEIN GROUP MEMBERS IN THIS SOLICITATION
The Proxy and Voting Agreement to which this Statement relates is being
solicited by the Greenstein Group. Mr. Greenstein is the beneficial owner of
107,000 shares of the Company's Common Stock. He owns no shares of record. Mr.
Greenstein is a registered representative with R.J. Steichen & Company, an
investment banking firm ("Steichen"). As of August 1, 1997, Mr. Greenstein's
clients beneficially owned an aggregate of 670,150 shares of the Company's
Common Stock through accounts
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maintained under his direction at Steichen. However, Mr. Greenstein does not
exercise voting or investment discretion with respect to shares of the Company's
Common Stock beneficially owned by such clients. Mr. Greenstein's business
address is 5500 Wayzata Boulevard, Suite 1075, Minneapolis, Minnesota 55416.
Mr. Gordon is the beneficial owner of 60,000 shares of the Company's
Common Stock. He owns no shares of record. Mr. Gordon is President of Vault,
Inc., a document storage company. His business address is 7300 France Avenue
South, Edina, Minnesota 55435.
Mr. Baratz is the beneficial owner of 41,000 shares of the Company's
Common Stock. He owns no shares of record. Mr. Baratz is President of Baratz
Financial, Inc., a private investment firm. His business address is the same as
that of Mr. Greenstein.
Mr. Zugschwert owns no shares of the Company's Common Stock
beneficially or of record. Mr. Zugschwert is Senior Vice President of Operations
for Baratz Financial, Inc. His business address is the same as that of Mr.
Greenstein.
Mr. Goldberg owns no shares of the Company's Common Stock benefically
or of record. Mr. Goldberg is President of In-Sight Optical, Inc. dba InVision,
a retail optical store chain. His business address is 119 North Fourth Street,
Minneapolis, Minnesota 55401.
During the past two years, none of the Greenstein Group members
purchased and/or sold shares of the Company's Common Stock or any other Company
securities.
Except in connection with the arrangements relating to this Proxy and
Voting Agreement, no Greenstein Group member (including the director-nominees)
is, or within the past year was, a party to any contract, arrangement or
understanding with any person with respect to any securities of the Company,
including, but not limited to, joint ventures, loan or option arrangements, puts
or calls, guarantees against loss or guarantees of profit, division of losses or
profits or the giving or withholding of proxies. No Greenstein Group member
(including the director-nominees) is, or since the beginning of the Company's
last fiscal year was, a party to or has or had a direct or indirect material
interest in any transaction or series of transactions in which the Company or
any of its subsidiaries was or is to be a party and in which the amount involved
exceeded $60,000.
If the Greenstein Group director-nominees are elected as the members of
the Board of Directors, it is expected that Mr. Zugschwert may be engaged to
assist the Company in attempting a turnaround of its business and financial
affairs. The terms and conditions of such proposed engagement have not been
agreed upon as of the date hereof.
VOTING, EXECUTION AND REVOCATION OF PROXY AND VOTING AGREEMENTS
According to the Company's Proxy Statement, only stockholders of record
at the close of business on July 22, 1997, will be entitled to vote. As of that
date according to the Company's Proxy Statement, the Company had 8,499,029
shares of Common Stock outstanding and entitled to vote and each share is
entitled to one vote. The presence in person or by proxy of the holders of a
majority of the shares of stock entitled to vote at the Annual Meeting of
Shareholders, or 4,249,515 shares, constitutes a quorum
<PAGE>
for the transaction of business. Directors of the Company are elected by a
plurality of the votes cast by the shareholders entitled to vote at the meeting,
assuming a quorum is present. A plurality means that the nominees with the
largest number of votes are elected as directors up to the maximum number of
directors to be chosen at the meeting. Therefore, election of the Greenstein
Group director-nominees requires the affirmative vote of a plurality of the
votes cast in the election at the Annual Meeting, assuming a quorum is present
or otherwise represented at the Annual Meeting. All other matters submitted at
the Annual Meeting will be determined by a majority of the votes cast.
Each properly executed and timely returned GOLD Proxy and Voting
Agreement will be, under Section 302A.455 of the Minnesota Business Corporation
Act, an irrevocable agreement on the part of the signing shareholder with the
Greenstein Group members and the other signing shareholders to have his, her or
its shares voted in favor of the election of the Greenstein Group
director-nominees to the exclusion of the director-nominees proposed by the
Company and its Board of Directors. Accordingly, shareholders of the Company
desiring to vote against election of the Greenstein Group director-nominees or
to abstain therefrom, or to vote for one or more of the director-nominees
proposed by the Company and its Board of Directors, should not execute or return
a Proxy and Voting Agreement. Shareholders of the Company not giving a Proxy and
Voting Agreement solicited hereby may vote for or against election of the
Greenstein Group director-nominees, and for or against election of the
director-nominees proposed by the Company and its Board of Directors, in person
or by another proxy of their choice. Each properly executed and timely returned
GOLD Proxy and Voting Agreement also will be deemed to grant discretionary
authority to vote upon any other matters properly coming before the meeting.
The Greenstein Group has been informed that because the Greenstein
Group seeks election of its slate of director-nominees in opposition to the
candidates offered by the Company and its Board of Directors, broker-dealers,
banks and other entities holding securities for the beneficial ownership of
their customers will not be permitted to vote shares of the Company's Common
Stock for which they have not received voting instructions from the beneficial
owners thereof. Accordingly, shares beneficially owned by persons who abstain
from voting also will not count toward the quorum required for the Annual
Meeting.
PRINCIPAL SHAREHOLDERS
According to the Company's Proxy Statement, the following table sets
forth as of July 1, 1997, the number of shares of Common Stock beneficially
owned by each person known to the Company to be the beneficial owner of more
than 5% of the outstanding shares of the Company's capital stock, by each
director and certain executive officers and by all directors and executive
officers as a group. Information with respect to the Greenstein Group's
director-nominees as of August 6, 1997, is also included in the table. Shares
not outstanding but deemed beneficially owned by virtue of the right of an
individual to acquire them within 60 days of the applicable date are treated as
outstanding only when determining the amount and percentage owned by such
individual. Except as otherwise indicated, the persons listed possess all of the
voting and investment power with respect to the shares listed for them.
<PAGE>
DIRECTORS, DIRECTOR-NOMINEES, EXECUTIVE OFFICERS, AND NUMBER PERCENT
5% SHAREHOLDERS OF SHARES OF CLASS
--------------- --------- --------
William A. Peter, Jr.
6650 Vernon Hills Road
Edina, Minnesota 55436............................... 1,508,850(1) 17.5%
Steven C. Wolf
820 S. 59th Street
Belleville, Illinois 62223........................... 550,000 6.5%
Sandra F. Pessin
c/o Neuberger & Berman, LLC
605 Third Avenue
New York, New York 10158-3698........................ 436,000 5.1%
Michael J. Frakes
3712 Chatham Circle
Arden Hills, Minnesota 55112......................... 381,549(2) 4.4%
Robert J. Cipolle
14721-80th Place North
Maple Grove, Minnesota 55369......................... 64,250(3) 0.8%
Jerry L. Hoganson
1742 Lark Avenue
Maplewood, Minnesota 55109........................... 19,000(4) 0.2%
Jonathan R. Gordon
7300 France Avenue South
Edina, Minnesota 55435............................... 60,000 0.7%
Stanford M. Baratz
5500 Wayzata Boulevard, Suite 1075
Minneapolis, Minnesota 55416......................... 41,000 0.5%
Peter J. Zugschwert
5500 Wayzata Boulevard, Suite 1075
Minneapolis, Minnesota 55416......................... --- ---%
Matthew E. Goldberg
119 North Fourth Street
Minneapolis, Minnesota 55401......................... --- ---%
<PAGE>
NUMBER PERCENT
OF SHARES OF CLASS
--------- --------
All executive officers and directors as a group
(5 persons) .......................................... 1,980,899(5) 22.4%
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(1) Includes 115,000 shares which may be purchased pursuant to warrants and
21,250 shares which may be purchased pursuant to stock options which
will become exercisable within 60 days of July 7, 1997.
(2) Includes 30,000 shares which may be purchased pursuant to warrants and
121,250 shares which may be purchased pursuant to stock options which
will become exercisable within 60 days of July 7, 1997.
(3) Includes 20,000 shares which may be purchased pursuant to stock options
which will become exercisable within 60 days of July 7, 1997.
(4) Includes 15,000 shares which may be purchased pursuant to stock options
which will become exercisable within 60 days of July 7, 1997.
(5) Includes 329,750 shares which certain directors and officers have the
right to purchase pursuant to warrants and stock options which will
become exercisable within 60 days of July 7, 1997.
ELECTION OF DIRECTORS
GREENSTEIN GROUP NOMINEES FOR ELECTION AS DIRECTORS
According to the Company's Proxy Statement, the Board of Directors
currently consists of four persons. Each director will be elected to serve until
the Annual Meeting of Shareholders to be held in 1998 or until a successor is
elected and qualified.
The Greenstein Group submits for election in opposition to management
the four persons named below. Proxy and Voting Agreements cannot be voted for a
greater number of persons than the number of nominees named below. The
Greenstein Group recommends a vote FOR all such nominees, and it is intended
that, unless contrary written instructions are provided, Proxy and Voting
Agreements accompanying this Proxy and Voting Agreement Statement will be voted
at the 1997 Annual Meeting FOR the election to the Board of all of the
Greenstein Group nominees named, to the exclusion of the candidates nominated by
the Company and its Board of Directors. The Greenstein Group believes that each
nominee will be able to serve, but should any nominee be unable to serve as a
director, the persons named in the Proxy and Voting Agreements have advised that
they will vote for the election of such substitute nominee as Mr. Greenstein may
propose.
The names, ages and respective positions of the Greenstein Group
nominees, their occupations and other information is set forth below, based upon
information furnished to the Greenstein Group by the nominees.
<PAGE>
JONATHAN R. GORDON, age 46, has been President of Vault, Inc., an
Edina, Minnesota-based document storage company, since 1988. Mr. Gordon is a
Certified Public Accountant.
STANFORD M. BARATZ, age 41, has been the President of Baratz Financial,
Inc., a Minneapolis-based private investment firm, since founding the company in
1994. Between 1985 and 1994, Mr. Baratz served in various capacities with the
Welsh Companies, a Minneapolis-based real estate firm, most recently as
Executive Vice President.
PETER J. ZUGSCHWERT, age 31, has been Senior Vice President of
Operations for Baratz Financial, Inc. since June 1995. Between 1993 and 1995,
Mr. Zugschwert was private business consultant in Chicago and Minneapolis.
MATTHEW E. GOLDBERG, age 30, has been President of In-Sight Optical,
Inc. dba InVision, a retail optical store chain, since 1996. Between 1992 and
1996, Mr. Goldberg was an account manager with Campbell-Mithun Esty, a
Minneapolis-based advertising agency.
None of the above director-nominees is party to any legal proceedings
adverse to the Company or any of its subsidiaries or has a material interest
adverse to the Company or any of its subsidiaries, other than the interest in
opposing the Company and its Board of Directors as to their election. None of
the above director-nominees has received any compensation or other remuneration
of any kind from the Company or any of its subsidiaries during the Company past
three fiscal years.
OTHER BUSINESS
According to the Company's Proxy Statement, the Board of Directors of
the Company does not intend to present any matters before the meeting other than
the election of directors. However, the enclosed GOLD Proxy and Voting Agreement
gives discretionary authority in the event that any additional matters should be
presented.
<PAGE>
[GOLD COLORED PAPER]
PROXY AND VOTING AGREEMENT SOLICITED ON BEHALF OF
VICTOR S. GREENSTEIN, JONATHAN R. GORDON, STANFORD M. BARATZ,
PETER J. ZUGSCHWERT AND MATTHEW E. GOLDBERG
IN OPPOSITION TO MANAGEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS OF
HEALTH OUTCOMES MANAGEMENT, INC. TO BE HELD ON SEPTEMBER 18, 1997
The undersigned hereby constitutes and appoints Victor S. Greenstein
and Peter J. Zugschwert as attorneys and proxies (each with the power to act
alone and with the power of substitution and revocation) to attend the Annual
Meeting of Shareholders of Health Outcomes Management, Inc. ("HOM") to be held
on Thursday, September 18, 1997 at 3:30 p.m., Central Time, and any and all
adjournments thereof, and there to act for and to vote all of the shares of
Common Stock held in the name of the undersigned, in the manner specified below,
upon the following matters:
1. Election of four directors, each to serve until the earlier of the
election of his successor, his resignation, removal, disqualification
or death:
JONATHAN R. GORDON; STANFORD M. BARATZ; PETER J. ZUGSCHWERT; AND
MATTHEW E. GOLDBERG
___FOR all nominees listed above (except ___WITHHOLD AUTHORITY to
as indicated to the contrary below) vote for all nominees listed above
(INSTRUCTION: To withhold authority to vote for one or more nominees, write the
full name(s) of such nominees in the space provided below.)
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IF THIS PROXY IS EXECUTED IN SUCH MANNER AS NOT TO WITHHOLD AUTHORITY TO VOTE
FOR THE ELECTION OF ANY NOMINEE, IT SHALL BE DEEMED TO GRANT AUTHORITY TO VOTE
FOR THE ELECTION OF ANY SUCH NOMINEE.
2. In their discretion on any other matter that may properly come before
the meeting or any adjournment or adjournments thereof.
Signature of the undersigned below shall also constitute an irrevocable
shareholder voting agreement under Section 302A.455 of the Minnesota Business
Corporation Act by and among those shareholders granting Proxy and Voting
Agreements for the election of the four Greenstein Group director-nominees set
forth above.
PLEASE FILL IN, SIGN, AND DATE AND MAIL IN THE ENCLOSED ENVELOPE.
THIS PROXY AND VOTING AGREEMENT WHEN PROPERLY EXECUTED WILL BE VOTED FOR THE
ELECTION OF THE NOMINEES AS TO WHICH THE UNDERSIGNED SHAREHOLDER HAS NOT
WITHHELD AUTHORITY TO VOTE AND WILL BE VOTED IN THE MANNER DEEMED APPROPRIATE
WITH RESPECT TO ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING.
<PAGE>
Dated: ______________________________, 1997
___________________________________________
Signature
___________________________________________
Signature
IMPORTANT: This Proxy and Voting Agreement
should be signed exactly as your name
appears on your HOM stock certificate. In
the case of joint tenants, both should
sign. Fiduciaries should indicate full
title and authority. Corporations should
sign in full corporate name by the
President or other authorized officer.
Partnerships should sign in partnership
name by an authorized person.
THIS PROXY AND VOTING AGREEMENT, IF GIVEN, IS IRREVOCABLE AND IT REVOKES ANY
PRIOR PROXY OR PROXIES GIVEN. HOM SHAREHOLDERS WHO DO NOT WISH TO VOTE FOR ANY
DIRECTOR-NOMINEES PROPOSED BY THE GREENSTEIN GROUP, OR WHO WISH TO VOTE FOR ANY
DIRECTOR-NOMINEES PROPOSED BY HOM'S MANAGEMENT, SHOULD NOT EXECUTE OR RETURN
THIS PROXY AND VOTING AGREEMENT. HOM SHAREHOLDERS WHO DO NOT GIVE THIS PROXY AND
VOTING AGREEMENT CAN VOTE FOR OR AGAINST THE ELECTION OF THE GREENSTEIN GROUP'S
DIRECTOR-NOMINEES IN PERSON OR THROUGH ANOTHER PROXY OF THEIR CHOICE.
