SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
-------------------
NEWMARK HOMES CORP.
-------------------
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] 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:
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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.
<PAGE>
1. Amount Previously Paid:
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2. Form, Schedule or Registration Statement No.:
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3. Filing Party:
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4. Date Filed:
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<PAGE>
[Newmark Homes Corp. Letterhead]
July 7, 1999
Dear Shareholder:
Newmark Homes Corp. will hold its 1999 annual meeting of shareholders in
Houston, Texas on Wednesday, August 4, 1999. At the meeting, shareholders will
elect seven Newmark directors for one-year terms. Detailed information about
the meeting is included in the attached proxy statement.
On behalf of the Board of Directors and employees of Newmark, I cordially
invite all shareholders to attend the annual meeting in person. Whether or not
you plan to attend the meeting, please take the time to vote. As explained in
the proxy statement, you may withdraw your proxy at any time before it is
actually voted at the meeting.
If you plan to attend the meeting in person, please remember to bring a
form of personal identification with you and, if you are acting as a proxy for
another stockholder, please bring written confirmation from the record owner
that you are acting as a proxy. If you will need special assistance at the
meeting, please contact Terry White, Secretary of Newmark at (281) 243-0100.
Sincerely,
Michael K. McCraw,
Chairman
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS 1
GENERAL 2
VOTING SECURITIES AND SECURITY OWNERSHIP 2
I. ELECTION OF DIRECTORS 4
EXECUTIVE COMPENSATION 8
CERTAIN TRANSACTIONS 14
II. OTHER MATTERS 16
</TABLE>
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, AUGUST 4, 1999
The Annual Meeting of Stockholders (the "Meeting") of Newmark Homes Corp.
(the "Company") will be held on Wednesday, August 4, 1999, at 2:00 p.m., at the
Omni Hotel Houston located at Four Riverway - (Woodway & Loop 610), Houston,
Texas 77056, for the following purposes:
1. To elect seven directors to hold office until the 2000 Annual
Meeting of Stockholders and until their respective successors are duly elected
and qualified.
2. To transact such other business as may properly come before the
Meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on June 18, 1999, will
be entitled to vote at the meeting.
Your attention is called to the attached proxy statement and the
accompanying proxy. Please sign and return the proxy in the enclosed envelope;
no postage is required if this proxy is mailed in the United States. If you
attend the meeting, you may withdraw your proxy and vote your own shares.
A copy of the Annual Report of the Company for the fiscal year ended
December 31, 1998 accompanies this Notice.
Terry C. White,
Secretary
July 7, 1999
<PAGE>
NEWMARK HOMES CORP.
1200 Soldiers Field Drive
Sugar Land, Texas 77479
********************************************
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, AUGUST 4, 1999
*********************************************
GENERAL
The Annual Meeting of Shareholders of Newmark Homes Corp., a Nevada
corporation (the "Company"), will be held at the Omni Hotel Houston located at
Four Riverway - (Woodway & Loop 610), Houston, Texas 77056, on Wednesday,
August 4, 1999, at 2:00 p.m., Central Time, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. The approximate mailing
date for this proxy statement and proxy is July 7, 1999.
It is important that your shares be represented at the meeting. If it is
impossible for you to attend the meeting, please sign and date the enclosed
proxy and return it to the Company. The proxy is solicited by the Board of
Directors of the Company. Shares represented by valid proxies in the enclosed
form will be voted if received in time for the Annual Meeting. Expenses in
connection with the solicitation of proxies will be borne by the Company and may
include requests by mail and personal contact by its directors, officers and
employees. The company will reimburse brokers or other nominees for their
expenses in forwarding proxy materials to principals. Any person giving a proxy
has the power to revoke it any time before it is voted.
VOTING SECURITIES AND SECURITY OWNERSHIP
SHARES ENTITLED TO VOTE, REQUIRED VOTE AND QUORUM.
Only holders of record of shares of the Company's common stock, $.01 par
value (the "Common Stock"), at the close of business on June 18, 1999 (the
"Record Date"), are entitled to notice of, and to vote at, the Annual Meeting or
at any adjournment or adjournments of the Annual Meeting. Each share of Common
Stock has one vote. On the Record Date, there were issued and outstanding
11,500,000 shares of Common Stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information as of March 31, 1999
respecting the holdings of: (i) each person who was known to the Company to be
the beneficial owner of more than 5% of the Common Stock; (ii) each director of
the Company and each executive officer named in the Summary Compensation Table
under "Executive Compensation"; and (iii) all directors and executive officers
of the Company as a group. The Common Stock is the only class of stock
outstanding. Each of the persons named in the table below as beneficially
owning the shares set forth therein has sole voting power and sole investment
power with respect to such shares, unless otherwise indicated.
2
<PAGE>
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
---------------------
PERCENT
OF
NAME AND ADDRESS OF COMMON
BENEFICIAL OWNER NUMBER STOCK
- ------------------------------------- ------------ -------
<S> <C> <C>
Pacific USA Holdings Corp.(1) 9,200,000 80%
2740 N. Dallas Parkway
Suite 200
Plano, Texas 75093
Lonnie M. Fedrick 15,000 *
Newmark Homes Corp.
1200 Soldiers Field Drive
Sugar Land, Texas 77479
J. Eric Rome 9,000 *
Newmark Home Corporation
5910 Courtyard Drive, Suite 230
Austin, TX 78731
B. Coleman Bradley 2,500 *
17505 West Catawba Avenue,
Suite 350
Cornelius, NC 28031
Terry C. White 6,500 *
Newmark Homes Corp.
1200 Soldiers Field Drive
Sugar Land, Texas 77479
Michael K. McCraw 5,000 *
Pacific USA Holdings Corp.
2740 N. Dallas Parkway, Suite 200
Plano, Texas 75093
All directors and executive officers 38,000(2) *
as a group (5 persons)
- -------------------------------------
<FN>
_____________________
* less than one percent.
(1) Pacific USA is a subsidiary of Pacific Electric Wire & Cable Co., Ltd.,
which directs the voting and investment of its indirect holdings of Pacific
USA's Common Stock. No natural person owns greater than five percent of the
outstanding stock of Pacific Electric Wire and Cable. All of the Company's
outstanding shares of Common Stock are held of record by Pacific Realty
Group, Inc., a direct subsidiary of Pacific USA. Pacific USA directs the
voting and investment of its indirect holdings of the Company's Common
Stock.
(2) The Board of Directors, after reviewing the functions of all of the
Company's officers, both in terms of designated function and functions
actually performed, has determined that, for purposes of Section 16 of the
Securities Exchange Act of 1934 and the rules thereunder and Regulation
S-K, only the President and Chief Executive Officer, the Executive Vice
President, the Executive Vice President - Homebuilding, the Executive Vice
President - Land Acquisition and Development, and the Senior Vice
President/Chief Financial Officer are deemed to be officers or executive
officers of the Company for reporting purposes under such provisions,
respectively.
</TABLE>
3
<PAGE>
CHANGES IN CONTROL.
The Company has been advised that Pacific Realty Group, Inc., the holder of
80% of the Company's Common Stock, has pledged those shares in support of a
commercial loan. Pacific Realty Group, Inc., a Nevada corporation ("PRG"), is
a wholly owned subsidiary of Pacific USA Holdings Corp., a Texas corporation
("Pacific USA"). Pacific USA is a wholly owned subsidiary of Pacific Electric
Wire & Cable Co., Ltd. On December 17, 1998, Pacific USA and a sister
corporation entered into an $85 million loan agreement with a commercial bank
(the "Bank"), in the ordinary course of their business and, in connection
therewith and in support of the obligation of its parent corporation and the
sister corporation, PRG pledged as collateral the 80% of the Company's Common
Stock it owns, to the Bank.
I. ELECTION OF DIRECTORS
The Board of Directors proposes that Messrs. Michael K. McCraw, Bill C.
Bradley, Larry D. Horner, Lonnie M. Fedrick, James M. Carr, Jon P. Newton, and
William A. Hasler be elected as directors of the Company to hold office until
the Annual Meeting of the Shareholders in 2000 or, in each case, until his
successor is elected and qualified.
The persons named in the accompanying proxy intend to vote all valid proxies
received by them for the election of the foregoing nominees, unless such proxies
are marked to the contrary. Abstentions, withheld votes and broker non-votes
will not be deemed votes cast in determining which nominees receive the greatest
number of votes cast, but they will be counted for purposes of determining
whether a quorum is present. Each nominee receiving a plurality of the votes
present and entitled to vote shall be elected a director. If a nominee is
unable or declines to serve, which is not anticipated, it is intended that the
proxies will be voted in accordance with the best judgment of the proxy holder.
4
<PAGE>
The nominees for election as the directors to be elected at the Meeting,
together with certain information about them, are set forth below:
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME AGE SINCE EXPIRES POSITION
- -------------------- -------- ----- ------- --------------------------
<S> <C> <C> <C> <C>
Michael K. McCraw 47 1998 1999 Chairmand of the Board
Larry D. Horner 64 1998 1999 Director
Bill C. Bradley 65 1994 1999 Director
William A. Hasler 57 1998 1999 Director
Jon P. Newton 57 1998 1999 Director
Lonnie M. Fedrick 54 1998 1999 President, Chief Executive
Officer and Director
James M. Carr 48 1998 1999 Executive Vice President
and Director
</TABLE>
Michael K. McCraw, Chairman of the Board, has served as Chief Financial
Officer of Pacific USA since 1992. He is also the President and Chief Operating
Officer of PRG, the immediate parent of the Company. From 1989 to 1992, Mr.
McCraw served as Chief Financial Officer of Pacific Southwest Bank, an affiliate
of the Company. He was formerly associated with KPMG LLP for 15 years. He is a
certified public accountant and a graduate of Texas A & I University.
Larry D. Horner, a director of the Company, has served as Chairman of
Pacific USA since 1994. He is also Chairman of the Board and Chief Executive
Officer of Asia Pacific Wire & Cable Corporation Limited, a Bermuda corporation
with operations in Southeast Asia, which is publicly traded on the New York
Stock Exchange, and a director of American General Corp., Phillips Petroleum
Company, Atlantis Plastics, Inc., Biological & Popular Cultures, Inc. and
Laidlaw Holdings Inc., an affiliated company. Mr. Horner was formerly associated
with KPMG LLP for 35 years, retiring as Chairman and Chief Executive Officer of
both the U.S. and International firms. He is a certified public accountant and a
graduate of the University of Kansas and the Stanford Executive Program.
Bill C. Bradley, a director of the Company, has served as Chief Executive
Officer and a director of Pacific USA since 1991. Mr. Bradley was formerly
associated with KPMG LLP for 23 years and also served as a member of its board
of directors. He is a graduate of the University of Texas.
William A. Hasler, a director of the Company, has served as Co-Chief
Executive Officer of Aphton Corporation since July 1998. Aphton Corporation is
a biopharmaceutical company. From August 1991 to July 1998, Mr. Hasler served
as Dean of the Haas School of Business at the University of California at
Berkeley. Prior to that, he was Vice Chairman and director of KPMG LLP. Mr.
Hasler also serves on the boards of Mission West, TCSI, Walker Interactive,
Aphton Corporation, Solectron Corp. and Asia Pacific Wire and Cable Corporation
Limited, and is a member of the board of governors of the Pacific Stock
Exchange. In addition, he serves on the Visiting Board of the Hong Kong
University of Science and Technology School of Business and the Advisory Board
of the Critical Technologies Institute, a Congressionally mandated advisor to
the President's Office of Science and Technology. Mr. Hasler is a member of The
Berkeley Foundation Board and a trustee of Pomona College. He is a graduate of
Pomona College and the Harvard Business School.
5
<PAGE>
Jon P. Newton, a director of the Company, has worked for American General
Corp., one of the nation's largest diversified financial services company, since
1993, and is currently its Vice Chairman and a director. From 1979 to 1993, he
was engaged in the practice of law as a partner with the law firm of Clark,
Thomas, Winters & Newton in Austin, Texas. Mr. Newton also served as a
Commissioner of the Texas Railroad Commission from 1977 to 1978 and as a member
of the Board of Regents the University of Texas System from 1979 to 1985, and
was Chairman of the Board of Regents from 1983 to 1985. He is a graduate of the
University of Texas at Austin, the University of Texas Law School and the
Harvard University Advanced Management Program.
Lonnie M. Fedrick has served as President and Chief Executive Officer of
the Company since 1997. Mr. Fedrick has also been President and Chief Executive
Officer of Newmark Home Corporation since 1994 and was Executive Vice President
of Newmark Home Corporation from 1984 to 1994. Mr. Fedrick co-founded Newmark
Home Corporation in 1983 and has more than 31 years experience in the
homebuilding industry. Mr. Fedrick began his career with Norwood Homes in 1967,
most recently serving as the Vice President of Construction. From 1974 to 1983,
he served as Vice President of Operations of Monarch Homes. He is a member of
the board of directors of the Greater Houston Builders Association.
James M. Carr became Executive Vice President and a Director of the Company
upon the closing of the acquisition of Westbrooke Communities, Inc.
("Westbrooke") by the Company in January 1998. Mr. Carr founded Westbrooke in
1976, and has served as Chairman, Chief Executive Officer and President of
Westbrooke since its inception. Mr. Carr is a graduate of the University of
Miami. He is also the Chairman of the Baptist Hospital Foundation and a director
of Baptist Health Systems.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS.
The Board of Directors held three meetings during the Companys last fiscal
year and also took 23 actions by written consent of the members in lieu of a
meeting.
The Board of Directors currently has an Audit Committee, a Compensation
Committee, an Investment Committee and a Special Committee.
Each director attended more than 75% of the meetings of the Board of
Directors and the committees on which he served.
6
<PAGE>
The members of the Audit Committee are Directors McCraw, Newton and Hasler.
Messrs. Newton and Hasler are the Company's independent directors. The Audit
Committee generally has responsibility for recommending independent auditors to
the Board for selection, reviewing the plan and scope of the accountants' audit,
reviewing the Company's audit and control functions and reporting to the full
Board regarding all of the foregoing. The Audit Committee held no formal
meetings during the last fiscal year.
The members of the Compensation Committee are Hasler and Newton. The
Compensation Committee focuses on executive compensation, the administration of
the Company's stock option plans and making decisions on the granting of
discretionary bonuses. During the Companys last fiscal year, the Compensation
Committee did not meet formally, but took one action by written consent of the
members in lieu of a meeting.
The members of the Investment Committee are Directors Horner, McCraw, Fedrick
and Carr, and Coleman Bradley, the non-director management representative. The
Investment Committee generally has responsibility for considering and approving
land acquisitions by operating subsidiaries of the Company (excluding lot option
contracts) in excess of $500,000 and making reports to the full Board regarding
such actions. During the Company's last fiscal year, the Investment Committee
did not meet formally, but took 3 actions by written consent of the members in
lieu of a meeting.
The members of the Special Committee, which is an independent committee, are the
two independent directors, Messrs. Hasler and Newton. The Special Committee
generally has responsibility for considering and acting on any proposed
transaction (a) between the Company and PRG or any affiliate of PRG other than
the Company (PRG and any such affiliate called the "Affiliate") and (b) by an
Affiliate which may affect or involve the Company, in which one or more of the
directors may have an actual or perceived transaction. During the Company's
last fiscal year, the Special Committee did not meet formally, but took 2
actions by written consent of the members in lieu of a meeting.
Bill C. Bradley, a director of the Company, and B. Coleman Bradley, an executive
officer of the Company, are father and son. There are no other familial
relationships among the executive officers and directors of the Company.
COMPENSATION OF DIRECTORS.
Independent directors of the Company receive an annual fee of $15,000 and
$2,000 per board meeting attended and will be reimbursed for out-of-pocket
expenses incurred for attendance at meetings. Additionally, each of the
independent directors received a stock option grant on March 12, 1998 for the
purchase of 5,000 shares of Common Stock under the Company's 1998 Tandem Stock
Option/Stock Appreciation Rights Plan.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE.
The following table sets forth the cash and non-cash compensation for each of
the Company's last three fiscal years awarded to or earned by the Company's
Chief Executive Officer and four other most highly paid executive officers whose
salary and bonus earned in Fiscal Year 1998 for services rendered to the Company
exceeded $100,000.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION (1) LONG-TERM
COMPENSATION ALL OTHER
============================================== =====================
AWARDS PAYOUTS COMPENSATION
=====================
SECURITIES
UNDERLYING
OPTIONS /
OTHER ANNUAL SARS
NAME AND COMPENSATION (# OF LTIP
PRINCIPAL POSITION YEAR SALARY BONUS (1) SHARES) PAYOUTS
====================== ======== ================= =========== ============== ============ ======= ============
<S> <C> <C> <C> <C> <C> <C> <C>
Lonnie M. Fedrick, 1998 $ 400,000 $646,894(3) $ 10,029 134,400 _ _
President, Chief 1997 360,000 432,862 10,589(2) _ _ _
Executive Officer and 1996 325,000 454,862 10,630(2) _ _ _
Director
====================== ======== ================= =========== ============== ============ ======= ============
J. Eric Rome, 1998 $ 250,000 $437,890(3) $ 7,155 100,800 _ _
Executive Vice 1997 225,000 296,307 7,355(2) _ _ _
President - 1996 200,000 290,614 7,744(2) _ _ _
Homebuilding
====================== ======== ================= =========== ============== ============ ======= ============
James Carr, 1998(4) $ 409,500 $ 43,548 $ 11,004 _ _ _
Executive Vice
President & Director
====================== ======== ================= =========== ============== ============ ======= ============
B. Coleman Bradley, 1998 $ 250,000 $100,000 $ _ 80,640 _ _
Executive Vice 1997 225,000 90,000 14,063(2) _ _ _
President - Land 1996 200,000 80,000 9,830(2) _ _ _
Acquisition
Development
====================== ======== ================= =========== ============== ============ ======= ============
Terry C. White, Senior 1998 $ 150,000 $218,820(3) $ 8,525 67,200 _ _
Vice President, Chief 1997 137,500 155,456 7,682(2) _ _ _
Financial Officer and 1996 125,000 152,088 7,492(2) _ _ _
Treasurer
====================== ======== ================= =========== ============== ============ ======= ============
<FN>
(1) Information with respect to certain prerequisites and other personal
benefits has been omitted because the aggregate value of such items does
not meet the minimum amount required for disclosure under the regulations
of the Securities and Exchange Commission.
(2) Includes compensation amounts earned during the fiscal year but deferred
pursuant to Section 401(k) of the Internal Revenue Code under the Company's
401(k) Savings Plan.
(3) Includes payments from the Company's former executive bonus plan earned in
1997 and prior years, and payable in annual installments.
(4) Mr. Carr commenced employment with the Company on January 1, 1998.
</TABLE>
8
<PAGE>
OPTION GRANTS FOR FISCAL YEAR 1998 (1)
<TABLE>
<CAPTION>
=================================================================================================
INDIVIDUAL GRANTS
=========================================================================
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
TOTAL ANNUAL RATES OF STOCK
NUMBER OF OPTIONS/ PRICE APPRECIATION FOR
SECURITIES SARS OPTION TERM
----------------------
UNDERLYING GRANTED TO EXERCISE
OPTIONS / EMPLOYEES OR BASE
SARS GRANTED IN FISCAL PRICE EXPIRATION
NAME (# OF SHARES) YEAR ($/SH) DATE 5% 10%
===================== ============= =========== ========== ========== ========= ===========
<S> <C> <C> <C> <C> <C> <C>
Lonnie M. Fedrick, 134,400 20% $ 10.50 3/12/2008 $887,040 $2,248,512
President, CEO and
Director
===================== ============= =========== ========== ========== ========= ===========
J. Eric Rome,
Executive Vice 100,800 15% $ 10.50 3/12/2008 $665,280 $1,686,384
President -
Homebuilding
===================== ============= =========== ========== ========== ========= ===========
B. Coleman Bradley,
Executive Vice 80,640 12% $ 10.50 3/12/2008 $532,224 $1,349,107
President - Land
Acquisition and
Development
===================== ============= =========== ========== ========== ========= ===========
Terry White, Senior
Vice President, Chief 67,200 10% $ 10.50 3/12/2008 $443,520 $1,124,256
Financial Officer and
Treasurer
===================== ============= =========== ========== ========== ========= ===========
<FN>
(1) All such options were granted on March 12, 1998, pursuant to the Company's
1998 Tandem Stock Option/Stock Appreciation Rights Plan (the "Plan"). These
options vest (subject to acceleration under certain circumstances) as
follows: (a) 50% of the options vest four years from the date of grant, (b)
30% five years from the date of grant, and (c) 20% six years from the date
of grant. As of December 31, 1998, none of the options subject to vesting
provisions had vested. No such option is exercisable before March 12, 2002.
The options expire in February 2008.
</TABLE>
9
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998 AND VALUE AT END OF FISCAL YEAR
1998
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
NUMBER OF SHARES OPTIONS ON 12/31/98 MONEY OPTIONS ON 12/31/98 (1)
ACQUIRED VALUE ========================== ===========================
ON REALIZED
EXERCISE OF UPON
NAME OPTION EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
========================== ================ ======== =========== ============= =========== =============
<S> <C> <C> <C> <C> <C> <C>
Lonnie M. Fedrick,
President, Chief Executive
Officer and Director 0 0 0 134,400 0 0
========================== ================ ======== =========== ============= =========== =============
J. Eric Rome,
Executive Vice President -
Homebuilding 0 0 0 100,800 0 0
========================== ================ ======== =========== ============= =========== =============
B. Coleman Bradley,
Executive Vice President -
Land Acquisition and 0 0 0 80,640 0 0
Development
========================== ================ ======== =========== ============= =========== =============
Terry C. White,
Senior Vice President,
Chief Financial Officer, 0 0 0 67,200 0 0
Treasurer and Secretary
========================== ================ ======== =========== ============= =========== =============
<FN>
(1) For purposes of this table, fair market value is deemed to be the closing
sales price of the Company's Common Stock on December 31, 1998, or $7.00,
as reported by the NASDAQ national market.
</TABLE>
EMPLOYMENT AGREEMENTS.
Lonnie M. Fedrick, James Carr, Eric Rome, Coleman Bradley and Terry White
have employment agreements with the Company or a subsidiary of the Company. Mr.
Fedrick's agreement has a five-year term and provides for a base salary of
$400,000 for 1998, increasing to $500,000 for 2002. Mr. Carr's agreement has a
four-year term and provides for a base salary of $409,500 for 1998, subject to
adjustment annually beginning January 1, 1999. Additionally, as part of Mr.
Carr's agreement, should a change in control of the Company occur, Mr. Carr has
the option to terminate his contract within 60 days and, if he elects to
terminate, will be paid an amount equal to double the annual base salary amount
in effect on that date. Mr. Rome's agreement has a five-year term and provides
for a base salary of $250,000 for 1998, increasing to $400,000 for 2002. Mr.
Bradley's agreement has a five-year term and provides for a base salary of
$250,000 for 1998, increasing to $400,000 for 2002. Mr. White's agreement has a
five-year term and provides for a base salary of $150,000 for 1998, increasing
to $220,000 for 2002. Each of these employees is permitted to participate in
such pension, profit-sharing, bonus, life insurance, hospitalization, major
medical, and other employee benefit plans of the Company that may be in effect
from time to time.
10
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
The Compensation Committee of the Board of Directors of the Company in
fiscal year 1998 was composed of William A. Hasler and Jon P. Newton, neither of
whom is an officer or employee of the Company.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.
The Compensation Committee is composed of the Company's two independent
directors. The Compensation Committee, which is responsible for both the
establishment and administration of the policies that govern both annual
compensation and stock ownership programs for the Company, has furnished the
following report of executive compensation. The Compensation Committee was
formed on March 12, 1998, and therefore did not participate in all components of
fiscal year 1998 compensation. Specifically, base salaries were established
pursuant to Employment Agreements with the executive officers entered into in
November 1996, and amended in January 1998. Incentive compensation thresholds
were established at the beginning of fiscal year 1998 prior to formation of the
Compensation Committee. The Compensation Committee did participate in the
determination of stock option grants to executive officers.
DETERMINATION OF EXECUTIVE OFFICER COMPENSATION. In August 1996, a review
of the Company's executive compensation program was performed by Pacific USA,
utilizing information gathered in a compensation survey of peer group
homebuilders as prepared by an independent compensation consultant. The purpose
of the review was to establish compensation policies designed to align the
compensation paid to the executive officers with the Company's overall business
strategy, values and management initiatives. These policies are intended to:
(i) reward executives for long-term strategic management which results in the
enhancement of shareholder values; (ii) support a performance-oriented
environment which rewards achievement of both internal Company goals and
enhanced Company performance compared to performance levels of comparable
companies in the industry; and (iii) attract and retain executives whose
abilities are critical to the long-term success and competitiveness of the
Company. Employment agreements with the executive officers were entered into in
November 1996 as a result of this review.
In the fall of 1997, the review of the executive compensation program was
updated by Pacific USA in preparation for the initial public offering of the
Company. As a result of the review, the employment agreements with the
executive officers of the Company were amended.
COMPONENTS OF EXECUTIVE OFFICER COMPENSATION. For 1998, the executive
compensation program consisted of three key components: (i) a base salary; (ii)
incentive compensation; and (iii) stock option grants.
Base salaries paid to executive officers were paid pursuant to agreements
described in "Employment Agreements" above. Each executive officer's base
salary was established based primarily on the individual officer's level of
responsibility and comparisons to similar positions within the Company as well
as with other companies in the industry.
11
<PAGE>
Incentive compensation includes a performance-based bonus plan. At the
beginning of fiscal year 1998, performance goals were established based
primarily upon the achievement by the Company of certain defined objectives with
respect to net income. These goals were then reviewed at the conclusion of the
year and were used as the basis for determining the amount of incentive bonus
that could be awarded. Minimum threshold performance criteria must be reached
before any bonus awards can be granted. In addition, the individual performance
of executive officers may be taken into consideration in making any awards.
In conjunction with the initial public offering of the Company, stock
option grants were included in the executive compensation program for 1998.
These options were granted commensurate with the executive's level of
responsibility within the Company and comparison to peers in the homebuilding
industry. The stock options were granted at an exercise price equal to the
then-current fair market value.
DETERMINATION OF THE CHIEF EXECUTIVE OFFICER'S COMPENSATION. As Chief
Executive Officer, Mr. Fedrick is compensated pursuant to an employment
agreement described under "Employment Agreements" above. Mr. Fedrick's
compensation is substantially related to the Company's performance because he
receives a nondiscretionary annual bonus, determined pursuant to a specific
formula which is based on the Company's achievement of defined net income
levels, and stock options which were granted at an exercise price equal to the
then-current fair market value.
The foregoing report has been furnished by the members of the Compensation
Committee, Jon P. Newton and William A. Hasler.
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the
Company's Common Stock with the cumulative total return of the Standard and
Poor's 500 Stock Index and the Standard and Poor's Small Cap Homebuilding Index
for the period beginning March 12, 1998 (the date on which the Common Stock
commenced trading on the NASDAQ) through December 31, 1998. The total
shareholder return assumes $100 invested at the beginning of the period in the
Company's Common Stock, the S&P 500, and the S&P Small Cap Homebuilding Index.
It also assumes reinvestment of all dividends.
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[TOTAL SHAREHOLDERS RETURNS GRAPH]
COMPARISON OF CUMULATIVE TOTAL RETURN FOR THE PERIOD BEGINNING MARCH 31, 1998
AND ENDING DECEMBER 31, 1998.
<TABLE>
<CAPTION>
March 12, 1998 December 31, 1998
-------------- -----------------
<S> <C> <C>
Newmark Homes Corp. 100.0 66.67
S&P Small Cap Homebuilding Index 100.0 78.80
S&P 500 Composite 100.0 116.20
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's executive officers and directors and persons who own more
than 10 percent of the Company's stock, as well as certain affiliates of such
person to file the initial reports of ownership and changes of ownership with
the SEC and the NASD. These parties are required to furnish the Company with
copies of such forms they file. Based solely on a review of the copies of the
Section 16(a) forms and amendments thereto received by the Company and on
written representations that no other reports were required, the Company
believes that all reports required pursuant to Section 16(a) for fiscal year
1998 were timely filed by all persons known by the Company to be required to
file such reports with respect to the Company's securities, with the following
exceptions: Each of Messrs. Fedrick, McCraw, Bradley, Rome and White
inadvertently failed to timely file a Form 4 for transactions occurring in March
1998. The Form 4's for these transactions were filed with the SEC approximately
30 days late.
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CERTAIN TRANSACTIONS
TAX ALLOCATION AGREEMENT.
Pursuant to a Tax Allocation Agreement dated April 28, 1992, and amended
on January 1, 1998, among Pacific USA, the Company, and all other subsidiaries
of Pacific USA which are owned at least 80% by Pacific USA, the Company is
included in the consolidated federal income tax returns filed by Pacific USA.
The amount of the Company's liability to (or entitlement to payment from)
Pacific USA under the Tax Allocation Agreement will equal the amount of taxes
that the Company would owe (or refund that it would receive) had it prepared tax
returns on a stand-alone basis. A conflict of interest may arise if Pacific USA
chooses to contest, compromise or settle any adjustment or deficiency proposed
by the relevant taxing authority in a manner that may be beneficial to Pacific
USA and detrimental to the Company. In addition, under federal income tax law,
each member of a consolidated group (as determined for federal income tax
purposes) is also jointly and severally liable for the federal income tax
liability of the consolidated group. Pursuant to the Tax Allocation Agreement,
Pacific USA has agreed to indemnify the Company for any federal income tax
liability for which Pacific USA has already received payment from the Company or
with respect to any tax liabilities of Pacific USA or its affiliated entities
other than the Company. Payments of $3.0 million, $3.9 million and $7.4 million,
respectively, were made by the Company to Pacific USA during 1996, 1997 and 1998
under this agreement.
RISK MANAGEMENT SERVICES.
The Company purchases all of its insurance policies through an affiliated
insurance broker, Pacific Agency, Inc. Pacific Agency, Inc. earned commissions
of $89,000, $93,000 and $152,000 in 1996, 1997 and 1998, respectively, with
respect to such policies. The Company believes that these commissions are
comparable to amounts it would pay to an independent third party for similar
services.
PACIFIC USA GUARANTEES.
In the second quarter of 1998, Pacific USA guaranteed the obligations of
the Company underlying the letters of credit issued by Bank United in favor of
James Carr with respect to the acquisition of Westbrooke. Pacific USA received
no consideration from the Company for this Guaranty.
LOAN FROM RELATED PARTY.
On March 10, 1999, the Company borrowed $1,500,000 from James M. Carr, a
member of the Company's board of directors and an executive vice-president of
the Company. The note is unsecured, bears interest at 9.0% and had a maturity
date of September 10, 1999. The note was repaid in full on March 30, 1999.
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ADMINISTRATIVE SERVICES.
Pacific USA provides certain administrative services for the Company
because the Company believes it can obtain lower costs and achieve greater
efficiencies and reduce expenses for the Company. Functions which are performed
by Pacific USA include payroll and employee benefits administration and the
evaluation and negotiation under national contracts for the purchase of office
supplies, long distance telephone and overnight delivery services. The costs of
these office supplies, long distance and overnight delivery services may differ
from those available to the Company if it were to negotiate these contracts on
its own.
LEASE AGREEMENT. In November 1998, Newmark Homes L.P. leased from Franklin
Realty Investors, LLC approximately 2,400 square feet of space in a building
located in Franklin, Tennessee, for a term of 24 months expiring on January 1,
2000. The monthly rent is $2,000 in the first year and $2,200 in the second
year. Franklin Realty Investors, LLC is an affiliate of PRG, the Company's
majority shareholder.
12 STONES, PHASES III -V.
On September 19, 1997, Pacific United, L.P., a subsidiary of the Company,
purchased approximately 228.52 acres planned for a golf course community
consisting of an 18 hole golf course and 184 one-third acre single-family lots
in Sumner County, Tennessee (just north of downtown Nashville) to be developed
in five phases (Twelve Stones, Phases I-V). The purchase price was $3,037,000.
The land for the golf course, 145 acres, was immediately conveyed to Twelve
Stones Golf, L.L.C, an affiliate of the Company wholly-owned by PRG, for no cash
consideration. Twelve Stones Golf, L.L.C. is the developer of the golf course,
which enhances the value of the residential community of Twelve Stones, Phases
I-V.
Phases I and II of the residential community are currently being developed
by Pacific United, L.P., and Newmark Homes is the builder in Phases I and II.
Phases III, IV and V consist of 39.58 acres planned for 90 one-third acre lots.
Pacific Acquisitions and Land Corp. ("PALC"), an affiliate of the Company which
is wholly owned by Pacific Realty Group, Inc., has contracted to purchase Phases
III, IV and V and three model lots in Phase I from Pacific United, L.P. for a
purchase price of $2,015,946. This transaction occurred after the Board of
Directors of the Company approved a decision to sell Phases III, IV and V to
PALC so the Company would not take the development risk due to the extended
absorption period. The Investment Committee of the Board approved the
transaction and determined that the purchase price was at an independently
determined fair market price.
The following is a breakdown of the $2,015,946 purchase price:
(a) The purchase price for the land in Phases III, IV and V is
$1,494,406.00, which is the book value of the property on the Company's books.
The appraised value of the property is approximately $800,000.
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(b) The purchase price for the three model lots in Phase I is $65,000, which
is equivalent to the appraised value.
(c) The buyer will pay a sum of $261,540.00 (or $2,906.00 per lot in Phases
III, IV and V) for the Company's allocated subdivision costs pertaining to entry
features, amenities, bridges, landscaping and offsite utilities.
PALC intends to develop Phases III, IV and V into single-family lots. The
Company has contracted with PALC to purchase improved lots in Phases III, IV and
V from PALC in two bulk closings. This structure allows the Company to avoid
holding unimproved land on balance sheet and keeps a majority of the land in the
transaction off the balance sheet for two years. The contract also gives the
Company a right of first refusal on approximately 180 lots in an adjacent
subdivision to be developed by PALC, the Villages of Twelve Stones.
The Company's purchase price for the improved lots is at a discount from
appraised value, as follows:
Phase III - 44 lots (39 golf lots, 2 non-golf lots, and 3 model lots)
Purchase Price of $2,861,000 ($66,000 per golf lot, $46,000 per non-golf
lot, $65,000 per model lot)
Appraised Value of $ 3,191,154
Discount of $330,154.
Closing Date: Summer 1999
Phases IV and V - 49 lots (43 golf lots, 6 non-golf lots)
Discounted Purchase Price of $3,065,000 ($65,000 per golf lot, $45,000 per
non-golf lot)
Discounted Appraised Value of $3,301,295.
Discount of $236,295
Closing Date: Summer 2001
Note: The discounted purchase price and discounted appraised value of
Phases IV and V represents the present value of both the purchase price and
appraised value, discounted from the scheduled closing of 2001.
The terms and conditions of the contracts related to Phases III, IV and V were
negotiated by Lonnie Fedrick, Chief Executive Officer of the Company, and
approved by the Investment Committee of the Board of the Company.
II. OTHER MATTERS
RELATIONSHIP WITH INDEPENDENT AUDITOR
BDO Seidman, LLP ("BDO") is the independent auditor for the Company and its
subsidiaries and has reported on the Company's consolidated financial statements
included in the Annual Report of the Company which accompanies this proxy
statement. The Company's independent auditor is appointed by the Board of
Directors. The Board of Directors has reappointed BDO to serve as the Companys
independent auditors for the current fiscal year ending December 31, 1999. A
representative of BDO is expected to be present at the Meeting, will have the
opportunity to make a statement, if such representative desires to do so, and
will be available to respond to appropriate questions of Stockholders.
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KPMG LLP ("KPMG") acted as the Company's independent auditors for fiscal
years 1994 through 1997. The Company dismissed KPMG as its certifying
accountants on January 27, 1999, and engaged BDO as its new certifying
accountants for fiscal year 1998. BDO presently prepares consolidated financial
statements for a consolidated group, which includes the Company. For previous
fiscal years, BDO has relied on financial statements prepared by KPMG in
preparing the Company's consolidated financial statements. In an effort to
reduce the amount of time and expense for duplicative work, the Company
dismissed KPMG and engaged BDO.
During the past two years, the Company's financial statements did not contain
any adverse opinions or disclaimers of opinion and were not qualified or
modified as to uncertainty, audit scope, or accounting principles. The
dismissal of KPMG was approved by the Company's audit committee of the board of
directors. The Company and KPMG do not have any disagreements with regard to
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure. During the Company's two most
recent fiscal years and during the interim period prior to the dismissal of
KPMG, the Company did not experience any reportable disagreement with KPMG on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure.
On January 27, 1999, the Company engaged BDO of Houston, Texas, to be the
Company's certifying accountant. BDO reviewed the past financial statements for
the Company in making its determination to accept the engagement with the
Company. The Company did not have any disagreements with KPMG and therefore did
not discuss any past disagreements with BDO.
In a letter filed as Exhibit 16.1 to the Company's Current Report on Form
8-K dated February 3, 1999, as amended, KPMG confirmed its concurrence with the
disclosures made above.
OTHER PROPOSALS
Neither the Company nor the members of its Board of Directors intends to
bring before the Annual Meeting any matters other than those set forth in the
Notice of Annual Meeting of Shareholders, and they have no present knowledge
that any other matters will be presented for action at the meeting by others.
If any other matters properly come before such meeting, however, it is the
intention of the persons named in the enclosed form of proxy to vote in
accordance with their best judgment.
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Stockholder proposals intended to be presented at the 2000 Annual Meeting
of Stockholders must be received by the Company at its principal executive
offices, 1200 Soldiers Field Drive, Sugar Land, Texas 77479, Attention:
Secretary, by March 9, 2000, to be considered for inclusion in the Company's
proxy statement and form of proxy relating to that meeting. Such proposals
should be sent by certified mail, return receipt requested.
The Company must receive notice of any proposals of shareholders that are
intended to be presented at the Company's 2000 Annual Meeting of Shareholders,
but that are not intended to be considered for inclusion in the Company's proxy
statement and proxy related to that meeting, no later than June 1, 2000, to be
considered timely. Such proposals should be sent to the Company's Secretary at
the Company's principal executive offices, 1200 Soldiers Field Drive, Sugar
Land, Texas 77479 by certified mail, return receipt requested. If the Company
does not have notice of the matter by that date, the Company's form of proxy in
connection with that meeting may confer discretionary authority to vote on that
matter, and the persons named in the Company's form of proxy will vote the
shares represented by such proxies in accordance with their best judgment.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING
SOLICITED BY THIS PROXY STATEMENT, ON THE WRITTEN REQUEST OF ANY SUCH PERSON, A
COPY OF THE COMPANYS ANNUAL REPORT ON FORM 10-K (INCLUDING THE FINANCIAL
STATEMENTS AND SCHEDULES THERETO) AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR ITS MOST RECENT FISCAL YEAR. SUCH WRITTEN REQUESTS SHOULD BE
DIRECTED TO TERRY C. WHITE, SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND
SECRETARY, AT THE ADDRESS OF THE COMPANY APPEARING ON THE FIRST PAGE OF THIS
PROXY STATEMENT.
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NEWMARK HOMES CORP.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
Annual Meeting of Stockholders - August 4, 1999
The undersigned stockholder of Newmark Homes Corp. (the "Company"), revoking all
previous proxies, hereby appoints Michael K. McCraw, Larry D. Horner and Bill C.
Bradley, and each of them individually, as the attorney and proxy of the
undersigned, with full power of substitution, to vote all shares of common
stock, $.01 par value, of the Company, which the undersigned would be entitled
to vote, if personally present at the Annual Meeting of Stockholders of the
Company, to be held at the Omni Hotel Houston located at Four Riverway -
(Woodway & Loop 610), Houston, Texas 77056, on Wednesday, August 4, 1999, and
at any adjournment or postponement thereof.
This proxy is solicited on behalf of the Board of Directors. This proxy, when
properly executed, will be voted in the manner directed herein by the
undersigned. Unless otherwise specified, the shares will be voted "FOR" the
election of the seven directors. This proxy also delegates discretionary
authority to vote with respect to any other business which may properly come
before the meeting or any adjournment of postponement thereof.
1. Proposal to elect seven directors to serve until their respective
successors are duly elected and qualified. The Board of Directors recommends a
vote for the following nominees: (1) Michael K. McCraw, (2) Larry D. Horner,
(3) Bill C. Bradley, (4) William A. Hasler, (5) Jon P. Newton, (6) Lonnie M.
Fedrick, and (7) James M. Carr.
FOR ALL NOMINEES [ ] WITHHOLD ALL NOMINEES [ ]
WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, WRITE NUMBER(S) OF NOMINEE(S) BELOW [ ]
USE NUMBER ONLY: ___________________
2. In their discretion, the proxies are authorized to vote on any
other business that may properly come before the meeting.
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THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING,
PROXY STATEMENT AND 1998 ANNUAL REPORT ON FORM 10-K OF NEWMARK HOMES CORP.
Dated:___________________________________, 1999
_______________________________________________________
Signature of Stockholder
_______________________________________________________
Signature of Stockholder
NOTE: Please sign this Proxy exactly as name(s) appear(s) in address. When
signing as attorney-in-fact, executor, administrator, trustee or guardian,
please add your title as such. If the stockholder is a corporation, please sign
by full corporate name by duly authorized officer or officers and affix the
corporate seal. Where shares are held in the name of two or more persons, all
such persons should sign.
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
20
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