SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the registrant [ ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
HOMEOWNERS GROUP, INC.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
HOMEOWNERS GROUP, INC.
-------------------------------------------
(Name of Persons(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on the 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 transactions apply:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0 -11:
(4) Proposed maximum aggregate value of transaction:
[ ] 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>
HOMEOWNERS GROUP, INC.
6365 Taft Street
Hollywood, Florida 33024
Telephone (305) 983-0350
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------
November 17, 1995
To the Stockholders of Homeowners Group, Inc.:
The Annual Meeting of Stockholders of Homeowners Group, Inc. will be held
at the Sheraton Design Center Hotel, 1825 Griffin Road, Dania, Florida, on
December 22, 1995 at 2:00 p.m., for the following purposes as described in the
attached proxy statement:
1. The election of two nominees to the Board of Directors to serve until
the 1998 Annual Meeting of Stockholders and until a successor is
elected and qualified; and
2. The transaction of such other business as may properly come before
the meeting and any postponements or adjournments thereof.
The Board of Directors has fixed the close of business on November 10, 1995
as the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting.
By order of the Board of Directors
MICHAEL F. JONES
Secretary
YOU ARE URGED TO DATE, SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY IN THE
ENCLOSED ADDRESSED ENVELOPE, WHICH REQUIRES NO POSTAGE IN THE UNITED STATES.
<PAGE>
HOMEOWNERS GROUP, INC.
6365 Taft Street
Hollywood, Florida 33024
Telephone (305) 983-0350
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 22, 1995
November 17, 1995
PROXIES
The enclosed proxy is solicited by and on behalf of the Board of Directors
of Homeowners Group, Inc., a Delaware corporation (the 'Company'). If the
enclosed form of proxy is properly executed and returned, it will be voted in
the manner directed therein, but may be revoked at any time prior to its
exercise by written notification to the Secretary of the Company, or by signing
and delivering a proxy which is dated later, or, if the stockholder attends the
meeting in person, by giving notice of revocation to the inspectors of election
at the meeting. The form of proxy vests in the persons named therein as proxies
discretionary authority to vote on any matters not now known to management which
may come before the meeting.
The solicitation is being made by use of the mails and the cost thereof
will be borne by the Company. In addition to solicitation by mail, officers,
directors and regular employees of the Company may solicit proxies by telephone,
telegraph or in person. The Company may also request banks and brokers to
solicit their customers who have a beneficial interest in the Company's Common
Stock registered in the names of nominees and upon request, will reimburse such
banks and brokers for their reasonable out-of-pocket expenses.
The Annual Report of the Company for the fiscal year ended December 31,
1994 accompanies this Proxy Statement.
VOTING SECURITIES
The Company had 5,558,350 shares of Common Stock (par value $.01 per share)
outstanding as of the record date, November 10, 1995. Holders of record of stock
at the close of business on that date will be the only persons to receive notice
of and to vote at the Annual Meeting. Holders of Common Stock are entitled to
one vote for each share. The quorum necessary to conduct business at the Annual
Meeting consists of one-third of the outstanding shares of the Common Stock of
the Company. Directors are elected by plurality vote. Other proposals require
the affirmative vote of the majority of shares present in person or represented
by proxy at the meeting and entitled to vote. Under the Company's Certificate of
Incorporation, By-laws and applicable Delaware law, abstentions and broker
non-votes will not have the effect of votes in opposition to the election of a
director.
<PAGE>
PRINCIPAL HOLDERS
The following table sets forth information concerning beneficial ownership,
as of November 10, 1995, by persons known to the Company (based upon filings on
Schedules 13G filed pursuant to the Securities Exchange Act of 1934) to own more
than 5% of the Company's outstanding voting securities. The table also shows
information concerning beneficial ownership by all directors and nominees, by
each of the executive officers named in the Summary Compensation Table and by
all directors and executive officers as a group. The number of shares
beneficially owned by each director or executive officer is determined under
rules of the Commission, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which the individual has the sole or shared
voting power or investment power and also any shares which the individual has
the right to acquire within 60 days of November 10, 1995 through the exercise of
any stock option or other right. Unless otherwise indicated, each person has
sole investment and voting power (or shares such powers with his or her spouse)
with respect to the shares set forth in the following table.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------
SHARES PERCENT
------- -------
<S> <C> <C>
Carl Buccellato........................................................................ 402,603(2) 7.1%
Melvin Stewart......................................................................... 315,375(3) 5.7%
C. Gregory Morris...................................................................... 30,000(4) .5%
Diane M. Gruber........................................................................ 15,050(5) .3%
Gary D. Lipson......................................................................... 58,500(6) 1.0%
Michael A. Nocero, Jr., M.D............................................................ 135,500(7) 2.1%
Sandra Stewart Bernstein............................................................... 406,862(8) 7.3%
2810 North 46th Avenue
Hollywood, Florida 33021
Dimensional Fund Advisors, Inc. ....................................................... 359,400(8) 6.5%
1299 Ocean Avenue
Santa Monica, California 90401
Wanger Asset Management, Ltd. ......................................................... 350,000(8) 6.3%
227 West Monroe, Suite 3000
Chicago, Illinois 60606
T. Rowe Price Associates, Inc. ........................................................ 305,000(8) 5.5%
100 E. Pratt Street
Baltimore, Maryland 21202
Acorn Investment Trust, Series Designated Acorn Fund .................................. 297,000(8) 5.3%
227 West Monroe Street, Suite 3000
Chicago, Illinois 60606
All Directors and Executive Officers
as a Group (6 persons)............................................................... 957,028(9) 16.5%
<FN>
- ------------------------
(1) The address of all executive officers and directors is 6365 Taft Street,
Hollywood, Florida 33024.
(2) Includes 14,297 shares of Common Stock held by Carl Buccellato as Trustee
of the Renee Buccellato Trust, the Lori Ann Buccellato Trust and the
Matthew Buccellato Trust. Includes presently exercisable options to
purchase 135,000 shares of common stock.
(3) Includes 243,701 shares of Common Stock held by Melvin Stewart as Trustee
of the Melvin Stewart Trust. Also includes 15,788 shares of Common Stock
held by Mitchell Stewart as Trustee of the Bari
2
<PAGE>
Udell Trust, as to which trust Melvin Stewart has the power to direct the
voting and investment of such shares as trust advisor and as to which
beneficial ownership is disclaimed by Mr. Stewart.
(4) Consists of options to purchase 30,000 shares of common stock.
(5) Includes presently exercisable options to purchase 5,000 shares of common
stock. The total does not include 1,000 shares owned by Gayle N. Gruber,
Mrs. Gruber's daughter, as to which beneficial ownership is disclaimed by
Mrs. Gruber.
(6) Includes 25,000 exercisable warrants and options to purchase 17,500 shares
of common stock.
(7) Includes 70,000 shares of Common Stock owned under a retirement plan for
the benefit of Michael A. Nocero, Jr., M.D. and indirect ownership of
24,000 shares owned by his daughters. Includes presently exercisable
options to purchase 17,500 shares of common stock.
(8) Ownership shares and percentage based upon Schedules 13G as provided to the
Company.
(9) Includes an aggregate of 230,000 shares which the officers and directors
have the right to acquire within (60) days of November 10, 1995 through the
exercise of options and warrants.
</FN>
</TABLE>
ELECTION OF DIRECTORS
The persons named as proxies in the enclosed proxy card(s) intend to vote
all valid proxies received in favor of the election of Diane M. Gruber and
Melvin Stewart whose terms expire at the Annual Meeting of Stockholders (see
table that follows). The term of each director elected will expire at the 1998
Annual Meeting of Stockholders and upon the election and qualification of his or
her successor. If any nominee refuses or is unable to serve as a director, the
proxies will be voted for the other nominees and for such substitute nominee(s)
as may be designated by the present Board of Directors. The Board knows of no
reason why any nominee will be unavailable or unable to serve.
Directors are elected at the Company's Annual Meetings of Stockholders and
serve three years or until their successors are elected and qualified. All of
the Company's directors are currently serving three-year terms, except for Diane
M. Gruber who was elected by the Board of Directors on January 28, 1993 to fill
a vacancy created by the death of a former director. Former directors, Richard
L. Abedon and Dean S. Woodman, resigned from the Board of Directors effective
July 14, 1995 and November 8, 1995, respectively. There are no family
relationships among directors or executive officers of the Company. All
non-employee directors are currently compensated at the rate of $3,500 for each
Board meeting attended. The Board met five times in 1994 and all Directors in
office at the time of such meetings attended all of the meetings. The directors
of the Company are as follows:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
- ---- --- -------- --------
<S> <C> <C> <C>
DIRECTORS STANDING FOR ELECTION FOR TERM EXPIRING IN 1998
Diane M. Gruber........................ 55 Director 1993
Melvin Stewart......................... 63 Director 1988
DIRECTOR WHOSE TERM EXPIRES IN 1996
Gary D. Lipson......................... 43 Director 1991
DIRECTORS WHOSE TERM EXPIRES IN 1997
Carl Buccellato........................ 53 Chairman, President, Chief Executive Officer 1988
and Director
Michael A. Nocero, Jr., M.D............ 54 Director 1988
</TABLE>
3
<PAGE>
Ms. Gruber has been in the real estate and insurance industries for more
than thirty years. She is a licensed life, health and property and casualty
insurance broker. Ms. Gruber, along with her spouse, owns 100% of the stock of
the firm that is the Company's franchisee for Rhode Island and Connecticut and
50% of the stock of the firm that is the Company's franchisee for Maine,
Vermont, New Hampshire and Massachusetts. She is Executive Vice President of the
Company's franchisee for New Jersey/New York.
Mr. Stewart served as the Chairman of the Company from May, 1992 to
September, 1994. Mr. Stewart served as President and Chief Executive Officer of
the Company from incorporation until May, 1992. He has served as a Director of
Homeowners Marketing Services, Inc. ('HMS') since its formation in 1980. The
Company was organized to become the holding company for HMS in 1988. Mr. Stewart
has also held various executive positions in HMS and other subsidiaries of the
Company.
Mr. Lipson has been an attorney in the South Florida area for more than
eighteen years. Since 1993 he has served as Chairman of the Board of KMG Fiber
Optics, Inc., a manufacturer and distributor of fiber optic cable. Since
January, 1988, he has served as Chairman of the Board of Spring Water, Ltd., a
distributor of bottled water in South Florida. From November, 1988 to September,
1991, he served as a Vice President of Montenay International Corp., which is
primarily engaged in the design, construction and operation of waste-to-energy
facilities.
Mr. Buccellato has been President and Chief Executive Officer since May,
1992 and Chairman of the Company since September 1994. Prior to May, 1992, he
served as Chief Operating Officer. Mr. Buccellato currently serves as Chairman,
President and Chief Executive Officer of HMS and holds various executive
positions in other subsidiaries of the Company, and was Secretary of the Company
until January, 1993.
Dr. Nocero is a practicing cardiologist with the Central Florida Cardiology
Group in Orlando, Florida, and is a Diplomate of the American Board of Internal
Medicine and Cardiovascular Diseases. Dr. Nocero was the former Chairman of the
Board of The American College of Cardiology and presently serves on its Board of
Trustees.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers, and any persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten-percent shareholders are required by SEC
regulation to furnish the Company with copies of all forms they file pursuant to
Section 16(a). To the Company's knowledge, based solely on review of the copies
of such reports furnished to the Company and written representations that no
other reports were required during the year ended December 31, 1994, all
officers, directors and greater than ten-percent beneficial owners complied with
all applicable Section 16(a) filing requirements.
COMMITTEES
The Company has a Stock Option and Compensation Committee, an Audit and
Investment Committee, a Nominating Committee and an Executive Committee. The
Stock Option and Compensation Committee is comprised of Messrs. Stewart and
Lipson, Ms. Gruber and Dr. Nocero; the Audit and Investment Committee is
comprised of Dr. Nocero and Mr. Stewart; the Nominating Committee is comprised
of Dr. Nocero, Mr. Lipson and Ms. Gruber; and the Executive Committee is
comprised of Messrs. Buccellato, Lipson and Ms. Gruber. In 1994, the Audit and
Investment Committee met one time, the Stock Option and Compensation Committee
met two times, the Nominating Committee met one time and the Executive Committee
met seven times. All Directors in office at the time of such meetings attended
their respective
4
<PAGE>
committee meetings. Directors are compensated at the rate of $500 for each
committee meeting attended and are entitled to reimbursement for travel expenses
incurred in connection with attending meetings. Mr. Lipson, the non-employee
director on the Executive Committee, was paid $3,500 for each of the seven
Executive Committee meetings he attended.
The function of the Audit and Investment Committee is to review the
investment strategy and performance of the investment portfolio, to recommend
the firm to be appointed as independent certified public accountants to audit
the Company's financial statements, to review the scope and results of the audit
with the independent certified public accountants, to receive reports from the
independent auditors and to review the adequacy of the internal controls and
accounting procedures of the Company.
The function of the Stock Option and Compensation Committee is to
administer the Company's stock option plans (including making awards and
determining the terms and conditions upon which they are granted) and to review
and establish the compensation of the executive officers.
The function of the Nominating Committee is to assist management with
respect to matters of succession, to review the qualifications of candidates for
the position of Director and to recommend candidates to the Board as nominees
for election at the Annual Meeting of Stockholders or to fill such Board
vacancies as may occur during the year. The Nominating Committee will consider
nominees recommended by security holders. Recommendations may be forwarded to
the Nominating Committee at the Company.
Subject to limitations imposed by applicable law, the Executive Committee
is empowered to act for the Board of Directors between meetings of the full
Board. In addition, the Executive Committee reviews Company activity and makes
recommendations to the full Board of Directors.
EMPLOYEE STOCK OPTION PLANS
The Company's incentive stock option plan (the 'ISO Plan') and
non-statutory option plan (the 'Supplemental Plan') (collectively, the 'Option
Plans') were approved by the stockholders on March 15, 1988 and cover an
aggregate of 600,000 shares of Common Stock. The options granted under the ISO
Plan are intended to qualify as 'incentive stock options' within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the 'Code'). The
options granted under the Supplemental Plan are not intended to qualify as
'incentive stock options' within the meaning of Section 422 of the Code.
The ISO Plan provides for the grant of options for 300,000 shares to all
employees of the Company, excluding outside directors. The Supplemental Plan
provides for the grant of options for 300,000 shares to all employees,
consultants and agents of the Company and other persons having business
relationships with the Company, excluding outside directors.
The exercise price of all stock options for Common Stock granted under the
Option Plans must be at least equal to the fair market value of the shares on
the date of grant.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Company's Non-Employee Director Stock Option Plan ('Directors Plan')
was approved by the stockholders on May 21, 1992 and provides for issuance of a
maximum of 300,000 shares.
Directors receive 25,000 options upon initial election to the Board of
Directors. The price for each option will be the closing price of the Company's
stock on the date of the grant. The options are exercisable as follows: 2,500
shares may be purchased after the first anniversary of the date of the grant;
5,000 after the
5
<PAGE>
second anniversary; 10,000 after the third anniversary; 17,500 after the fourth
anniversary; and 25,000 after the fifth anniversary; provided that in each case,
the number of shares which may be purchased is reduced by the number of shares
purchased pursuant to options previously exercised. The options are granted for
a term of ten years. All outstanding options become immediately exercisable to
their full extent upon the occurrence of certain events including a change in
control of the Company.
EMPLOYMENT AGREEMENTS
The Company has entered into a five year employment agreement, effective as
of June 1, 1992, with Carl Buccellato at an annual salary of $360,000 plus
annual increases based upon the rise in the Consumer Price Index. Under the
terms of his employment agreement, Mr. Buccellato is entitled to a performance
bonus as determined by the Board of Directors. The Company provides him with the
use of a Company car and reimbursement of medical expenses. The Company also
provides Mr. Buccellato with life insurance in the amount of $1,000,000, and a
lump sum death or permanent disability benefit equal to his annual salary and
bonus for the immediately preceding year.
The employment agreement provides that, in the event of termination of
employment due to a change in control of the Company, Mr. Buccellato is entitled
to a lump sum distribution of compensation in an amount equal to three times the
sum of the annual salary currently provided for in his employment agreement and
the bonus paid to him with respect to the immediately preceding year. Upon a
change of control and termination, all stock options then held by him
immediately become exercisable to the extent otherwise permitted by the Option
Plans, and the non-competition provisions contained in his employment agreement
terminates. The agreement provides that the lump sum distribution will be
limited to the maximum amount which may be deducted by the Company pursuant to
Section 280G of the Internal Revenue Code of 1986. The agreement also provides
for similar payments and vesting of options for termination of employment for
any reason other than disability or death.
Mr. Stewart's employment agreement was terminated effective December 31,
1994. Under the termination agreement Mr. Stewart receives monthly severance
payments of $14,922.00, payment of life and health insurance premiums through
November 30, 1996 and received his Company car. Mr. Stewart relinquished all
stock options then held by him.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table discloses compensation received by the Company's Chief
Executive Officer and the applicable executive officers (the 'Named Officers')
for the three fiscal years ended December 31, 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------
ANNUAL COMPENSATION STOCK
------------------------------ OPTION ALL OTHER
YEAR NAME/TITLE SALARY BONUS OTHER(1) GRANTS COMPENSATION(2)
- ---- ---------- -------- ------- -------- ------ ---------------
<S> <C> <C> <C> <C> <C> <C>
1994 CARL BUCCELLATO, Chairman, $368,359 $ 0 $ 30,319 0 $ 2,772
1993 President, Chief Executive 289,167 50,000 28,665 0 2,480
1992 Officer and Director 255,480 0 47,747 50,000 0
1994 MELVIN STEWART, Director(3) 179,064 0 15,587 0 0
1993 175,000 0 28,442 0 0
1992 257,999 0 29,481 0 2,580
1994 C. GREGORY MORRIS, Vice 152,104 0 6,595 0 2,772
1993 President, Treasurer, Chief 125,761 0 986 0 8,579
1992 Financial Officer 33,562(4) 0 10,966 0 0
<FN>
- ------------------------
(1) Totals in this column reflect the aggregate value of perquisites, including
personal use of Company automobiles, outside financial counseling, executive
health benefits, relocation expenses and payments made on life insurance
policies for their benefit. During 1994, Mr. Buccellato received health
benefits of $17,365, financial counseling of $7,804, use of a Company
automobile valued at $258 and life insurance payments of $4,892; Mr. Stewart
received health benefits of $6,335, financial counseling of $6,098, use of a
Company automobile valued at $1,015 and life insurance payments of $8,474;
and Mr. Morris received $220 of life insurance payments and $6,375 auto
allowance.
(2) These amounts represent the Company's contributions to the Company's 401(k)
plan.
(3) Mr. Stewart served as Chairman of the Company until September 1994.
(4) Mr. Morris' 1992 compensation is for the period October 5, 1992 through
December 31, 1992. Prior to becoming an officer of the Company, Mr. Morris,
age 41, served as Vice President of Finance and Administration of Arby's,
Inc.
</FN>
</TABLE>
AGGREGATED FISCAL YEAR-END 1994 OPTION VALUES
The following table provides information, with respect to the Named
Officers, regarding unexercised options held as of the end of 1994. No options
were exercised by the Named Officers in 1994.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
------------------------------ ------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Carl Buccellato(2).......................... 90,000 70,000 $ - $ -
Melvin Stewart(3)........................... 80,000 30,000 $ - $ -
C. Gregory Morris........................... 20,000 40,000 $ - $ -
7
<PAGE>
<FN>
- ------------------------
(1) The exercise price of all options exceed the fair market value of the Common
Stock of $.8125, as determined by the closing price December 30, 1994 (last
day of trading in 1994), as reported by the Nasdaq National Market System.
(2) Unexercisable options does not include 100,000 stock options granted
effective January 5, 1995.
(3) Effective January 5, 1995, Mr. Stewart relinquished his right to all
outstanding stock options then held by him.
</FN>
</TABLE>
REPORT OF THE STOCK OPTION AND COMPENSATION COMMITTEE
The Company applies the same compensation philosophy for all employees,
including senior management. This philosophy is based upon the premise that the
achievements of the Company result from the coordinated efforts of all
individuals working toward common objectives. The Company strives to achieve
those objectives through teamwork that is focused on meeting the expectations of
our customers and stockholders.
The Stock Option and Compensation Committee, which consists solely of
non-employee directors of the Company, furnished the following report on
executive compensation for inclusion in the Proxy Statement:
To the Stockholders of Homeowners Group, Inc.:
Compensation for the Company's executive officers, including the Chief
Executive Officer, consists of three elements: base salary, an annual bonus
potential, and stock options. The principal factors in establishing an
executive officer's base salary are the executive's historical salary (how
much did he or she earn last year and in prior years) and the Committee's
subjective determination, based on the personal knowledge and experience of
its members, of what is fair and reasonable compensation in light of the
executive's duties and responsibilities.
The Committee seeks to utilize the bonus potential and stock options to
reward and create incentives for high levels of individual performance and
to promote the interests of the Company and its stockholders. Executive
compensation may be directly linked to the financial performance of the
Company by conditioning the award of incentive compensation, in the form of
bonuses and stock options, on the achievement of specific Company financial
targets. In other situations, the Company may reward outstanding individual
performance, or provide incentives for high levels of individual
performance, by awarding bonus compensation or stock options without regard
to the achievement of specific Company financial targets. Finally, the
Committee believes that the grant of stock options is a useful tool for
attracting and retaining executive officers and aligning their interests
with the financial interests of the Company.
During 1994, the Committee repriced previously issued stock options,
excluding those of the Chairman and Chief Executive Officer and the other
Named Officers, to $2.00 per share. The Committee determined that, because
the exercise price of the options was substantially in excess of the market
price of the Company's common stock, the options no longer provided option
holders with a meaningful incentive to improve the value of the Company's
common stock or to remain as employees of the Company and its subsidiaries.
Therefore, the Committee determined that it was in the best interest of the
Company and its stockholders to reduce the exercise price of the
outstanding options. The adjustment was further warranted because, even at
the adjusted price, the options would not be of significant value unless
the value of the Company's common stock increased above its then present
market value and because the repriced options make it more likely that
experienced employees will remain with the Company.
8
<PAGE>
During 1994, the Company granted a total of 80,000 stock options to
employees of the Company. No Named Officers received additional options in
1994. These options vest over either a two-year or five-year period, and
were granted to retain and incentivize the optionees and to align their
interests with the financial interests of the Company.
The Committee is cognizant of the provisions of the Omnibus Budget
Reconciliation Act of 1993 which provide that a company will not be allowed
a deduction, for federal income tax purposes, for salaries paid to its five
highest paid executive officers in excess of $1,000,000 each. Because
salaries paid to the Company's executive officers are significantly below
the applicable threshold, the Committee has not yet adopted any specific
policies addressing these provisions.
STOCK OPTION AND COMPENSATION COMMITTEE
Gary D. Lipson
Michael A. Nocero, Jr., M.D.
Diane M. Gruber
9
<PAGE>
PERFORMANCE GRAPH
NOTE: The stock price performance shown on the graph below is not
necessarily indicative of future price performance.
STOCK PERFORMANCE COMPARISON BETWEEN S & P MIDCAP 400 INDEX,
HOMEOWNERS GROUP, INC. COMMON STOCK AND PEER GROUP COMMON STOCK
Assumes $100 invested on December 31, 1989 in Homeowners Group, Inc. Common
Stock, S&P Midcap 400 and Peer Group and assumes reinvestment of dividends.
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
------ ----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Homeowners Group, Inc............................ 100.00 51.62 92.67 64.10 43.48 10.09
S&P MIDCAP 400................................... 100.00 94.83 142.23 159.14 181.25 174.81
PEER GROUP....................................... 100.00 40.57 42.21 74.75 111.14 86.90
</TABLE>
The peer group presented above includes the following five companies:
Marlton Technologies, Inc., Warrantech, Inc., Alpnet, Inc., First American
Health Concepts, Inc. and Radiation Technology, Inc. The Company does not
believe it can reasonably identify a peer group engaged in the same line of
business and has selected these companies because they have a market
capitalization similar to the Company and, like the Company, supply unique
information business services.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following directors serve on the Stock Option and Compensation
Committee ('Compensation Committee') of the Company's Board of Directors: Gary
D. Lipson, Michael A. Nocero, Jr., M.D. and Diane M. Gruber.
Homeowners Marketing Services International, Inc., ('HMSI'), a wholly-owned
subsidiary of the Company, is party to a franchise agreement with Southwest
Marketing Services, Inc. ('SMS'), a corporation owned 37.5% by Michael A.
Nocero, Jr., M.D., granting such corporation the exclusive right to
10
<PAGE>
market HMS products and services and enroll Member-Brokers in Arizona and New
Mexico. In 1994, the Company paid $701,392 to SMS.
Broker Marketing Services of Texas, Inc. ('BMST'), a corporation owned 100%
by Dr. Nocero, and HMS Texas, Inc., a wholly-owned subsidiary of the Company,
have entered into a partnership agreement for the operation of the Texas
territory. Pursuant to the terms of this partnership agreement, HMS Texas, Inc.
and BMST are each entitled to 45% of the profits and cash distributions from the
partnership, with a third-party manager entitled to the remaining 10%. The
partnership agreement names HMS Texas, Inc. as managing partner with sole
authority to make all major operational decisions, and provides for restrictions
on transferability and rights of first refusal with respect to interests in the
partnership. In 1994, distributions of $285,189 were paid to BMST.
HMS has also entered into a home inspection agreement with Arizona
Inspection Services, Inc. ('AIS'), a corporation owned 12.525% by Dr. Nocero.
The agreement authorizes AIS to perform home inspections in the state of Arizona
in connection with the issuance of HMS warranty plans. In 1994, the Company paid
$26,138 in inspection fees to AIS. Dr. Nocero sold this corporation in 1995.
HMSI is also party to a franchise agreement with O & A Marketing Services
of the West, Inc. ('O & A'), a corporation owned 20% by Dr. Nocero, granting
such corporation the exclusive right to market HMS products and services and
enroll Member-Brokers in Kansas, Missouri and Oklahoma. In 1994, the Company
paid $998,333 to O & A.
The Company and PFE, a partnership in which Dr. Nocero is a 50% partner,
have formed a joint venture to develop and market Internet and World Wide Web
related products and services for the real estate industry. Through October 31,
1995, the Company has invested $65,000 in the joint venture.
HMSI is also party to a franchise agreement with HMS New Jersey/New York
('HMSNJNY') of which Diane M. Gruber is Executive Vice President. HMSNJNY has
the exclusive right to market HMS products and services and enroll
Member-Brokers in New Jersey and New York. In 1994, the Company paid $638,786 to
HMSNJNY. HMSI has also entered into an agreement with a firm that is the
Company's franchisee for Rhode Island and Connecticut of which Diane Gruber,
with her spouse, owns 100% of the stock. This firm has the exclusive right to
market HMS products and services and enroll Member-Brokers in Rhode Island and
Connecticut. In 1994, the Company paid $46,980 to this firm. HMSI, in 1995,
entered into an agreement with Maple Avenue Enterprises, Inc., pursuant to which
they were granted the exclusive right to market HMS products and services and
enroll Member-Brokers in Maine, Vermont, New Hampshire and Massachusetts. Diane
Gruber, with her spouse, owns 50% of the stock of Maple Avenue Enterprises, Inc.
The purchase price was $100,000.
The Company believes that the terms and provisions of the foregoing
agreements are comparable to those entered into with non-affiliated third
parties.
The Company has a consulting arrangement with Gary D. Lipson pursuant to
which the Company pays Mr. Lipson an hourly fee for certain legal and consulting
services he provides when, as and if requested by management. In 1994, the
Company incurred approximately $46,050 in fees and reimbursable expenses for
consulting services rendered by Mr. Lipson, which fees and expenses the Company
believes are comparable to those which would have been paid to an unrelated
party.
11
<PAGE>
REQUIRED DATE OF RECEIPT OF STOCKHOLDER PROPOSALS
Any stockholder proposals which are requested to be included in the proxy
materials of the Company at its next annual meeting must be received by July 20,
1996 to be eligible for consideration. Such a proposal must comply with
requirements as to the form and substance established by applicable laws and
regulations in order to be included in the proxy statement.
ADDITIONAL INFORMATION
Management is not aware of any matters to be presented at the meeting other
than the matters above mentioned and does not intend to bring any other matters
before the meeting. However, if any other matters should come before the
meeting, it is intended that the proxies will be voted thereon in the discretion
of the persons named in the enclosed proxy card. If you cannot attend the
meeting, kindly date, sign and return the enclosed proxy card(s).
By order of the Board of Directors
MICHAEL F. JONES,
Secretary
12
<PAGE>
HOMEOWNERS GROUP, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE STOCKHOLDERS MEETING ON DECEMBER 22, 1995
The undersigned hereby appoints Carl Buccellato and Gary D. Lipson, and each
or both of them, as true and lawful agents and proxies with full power of
substitution in each, to represent the undersigned in all matters coming before
the 1995 Annual Meeting of Stockholders of Homeowners Group, Inc. to be held at
the Sheraton Design Center Hotel, 1825 Griffin Road, Dania, Florida at 2:00 p.m.
Dania, FL time, and any postponements or adjournments thereof, and to vote as
follows:
(1) ELECTION OF DIRECTORS (to serve until the 1998 Annual Meeting)
Nominees: Diane M. Gruber and Melvin Stewart
[ ] VOTE FOR all nominees listed above, except vote withheld from following
nominees (if any):
---------------------------------------------------------------------------
OR [ ] VOTE WITHHELD from all nominees listed above.
(2) OTHER MATTERS
In their discretion, to vote with respect to any other matters that may come
before the Meeting and any postponements or adjournments thereof, including
matters incident to its conduct.
PLEASE DATE AND SIGN ON THE REVERSE SIDE
<PAGE>
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER SPECIFIED ABOVE
BY THE STOCKHOLDER. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR
THE NOMINEES LISTED IN ITEM 1 AND FOR THE PROPOSAL LISTED IN ITEM 2.
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW
-------------------------------
(Signature)
-------------------------------
(Signature)
Dated: __________________, 1995
Joint Owners Should Each Sign.
Executors, Administrators,
Custodians or Corporation
Officers Should Give Full Title
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES.
