SCHEDULE 14A INFORMATION
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:
(X) Preliminary Proxy Statement.
( ) Definitive Proxy Statement.
( ) Definitive Additional Materials.
( ) Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
( ) Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2)).
HomeGold Financial, Inc.
(Name of Registrant as Specified In Its Charter)
HomeGold Financial, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (check the appropriate box):
(X) No fee required.
( ) Fee computed per Exchange Act Rules 14a-6(i)(1) and 0-11.
( ) 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.
Release Date: The registrant intends to release definitive copies of the proxy
statement, form of proxy, and other solicitation materials to shareholders on
April 15, 1999.
Registration of Shares: Assuming shareholder approval, the registrant will file
a Form S-8 as soon as practicable with respect to the additional shares to be
subject to the 1995 Employee and Officer Stock Option Plan.
<PAGE>
HOMEGOLD FINANCIAL, INC.
3901 PELHAM ROAD
P.O. BOX 17526
GREENVILLE, SOUTH CAROLINA 29606
April 9, 1999
To All Shareholders:
You are cordially invited to attend the Annual Meeting of
Shareholders of HomeGold Financial, Inc. (the "Company"), which will be
held at the Greenville Commerce Club, One Insignia Financial Plaza, 17th
Floor, Beattie Place, Greenville, South Carolina, on Wednesday, May 12,
1999, at 9:00 a.m. All holders of the Company's outstanding Common Stock
of record at the close of business on March 31, 1999 are entitled to
notice of and to vote at the Annual Meeting.
Time will be set aside for discussion of each item of business
described in the accompanying Notice of Annual Meeting and Proxy
Statement. A current report on the business operations of the Company
will be presented at the Annual Meeting and shareholders will have an
opportunity to ask questions.
Upon adjournment of the Annual Meeting, the Directors and officers
will be available to confer informally with shareholders.
We hope that you will attend the Annual Meeting. Whether or not you
plan to attend, please sign, date and return your proxy promptly in the
envelope provided in order to make certain that your shares will be
represented at the Annual Meeting.
The Company's Annual Report for 1998 is included in this package,
and we urge you to read it carefully.
Sincerely yours,
John M. Sterling, Jr.
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
<PAGE>
HOMEGOLD FINANCIAL, INC.
3901 PELHAM ROAD
P. O. BOX 17526
GREENVILLE, SOUTH CAROLINA 29606
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 12, 1999
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of HomeGold Financial, Inc. (the
"Company") will be held at 9:00 a.m. on May 12, 1999, at the Greenville
Commerce Club, One Insignia Financial Plaza, 17th Floor, Beattie Place,
Greenville, South Carolina, for the purpose of considering and acting
upon the following:
1. The election of six Directors to serve for specified terms, or
until the next Annual Meeting of Shareholders, or until their
successors have been elected and qualified;
2. The proposal to amend the Company's 1995 Employee and Officer
Stock Option Plan to increase by 400,000 shares the number of
shares authorized for grant to a total of 1,466,667 shares;
3. The proposal to approve an amendment to the Company's Articles
of Incorporation to effect up to a one-for-four reverse stock
split, providing the Board of Directors determines to do so.
4. The transaction of such other matters as may properly come
before the meeting or any adjournment thereof.
Only those shareholders of record at the close of business on March 31,
1999 will be entitled to notice of the meeting and to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
C. THOMAS WYCHE, SECRETARY
Greenville, South Carolina
April 15, 1999
A form of proxy and the Annual Report of the Company for the
calendar year 1998 are enclosed. You are cordially invited to attend the
meeting in person but, whether or not you plan to attend, you are urged
to SIGN, DATE AND RETURN the proxy in the enclosed, postage-paid,
addressed envelope. If you attend the meeting, you may either vote by
your proxy or withdraw your proxy and vote in person.
<PAGE>
HOMEGOLD FINANCIAL, INC.
3901 PELHAM ROAD
P. O. BOX 17526
GREENVILLE, SOUTH CAROLINA 29606
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF SHAREHOLDERS
May 12, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of HomeGold Financial, Inc. (the "Company") to
be voted at the Annual Meeting of Shareholders of the Company (the "Annual
Meeting") to be held at 9:00 a.m. on Wednesday, May 12, 1999, at the Greenville
Commerce Club, One Insignia Financial Plaza, 17th Floor, Beattie Place,
Greenville, South Carolina. The approximate date of mailing this Proxy Statement
is April 15, 1999.
USE OF PROXIES; MATTERS TO BE VOTED UPON AT THE MEETING. Shares
represented by proxies in the accompanying form, if properly signed and returned
and not revoked before their voting, will be voted at the Annual Meeting and any
adjournment or adjournments thereof in accordance with the specifications made
thereon. If a proxy is signed and returned without indicating any voting
instructions, the shares represented by that proxy will be voted:
(1) FOR the election of the six nominees for Director named in this proxy
statement;
(2) FOR the proposal to amend the 1995 Employee and Officer Stock Option
Plan to increase the shares authorized for grant by 400,000 shares to
1,466,667 shares (the "Option Plan Amendment");
(3) FOR the approval of an amendment to the Company's Articles of
Incorporation to effect up to a one-for-four reverse stock split (the
"Reverse Split Amendment"), providing the Board of Directors
determines to do so; and
(4) in the discretion of the proxy holders on such other matters as may
properly come before the Annual Meeting or any adjournment thereof.
REVOCATION OF PROXIES. Any person signing and mailing the enclosed proxy
may revoke it at any time before it is voted by giving written notice of
revocation to the Secretary of the Company prior to the proxy being voted, by
mailing to the Company a later dated proxy which is received by the Company
prior to the Annual Meeting, or by attending the Annual Meeting and giving
notice of revocation to the Secretary of the Company either prior to the meeting
or in open meeting prior to the proxy being voted (although attendance at the
Annual Meeting will not in and of itself constitute a revocation of a proxy).
Any written notice revoking a proxy should be sent to HomeGold Financial, Inc.,
Post Office Box 17526, Greenville, South Carolina 29606, Attention: Secretary.
1
<PAGE>
WHO IS ENTITLED TO VOTE; VOTING MATTERS. Shareholders of record at the
close of business on March 31, 1999 (the "Record Date") are entitled to notice
of and to vote at the Annual Meeting. As of such date, there were outstanding
9,811,599 shares of the Company's Common Stock, $.05 par value per share
("Common Stock"), each of which is entitled to one vote. An automated system
administered by the Company's transfer agent tabulates the votes. The vote on
each item of business is tabulated separately. Abstentions and broker non-votes
are each included in the determination of the number of shares present for
purposes of determining whether a quorum exists. A majority of the shares
outstanding and represented in person or by proxy will constitute a quorum at
the Annual Meeting.
PERCENTAGE APPROVAL REQUIRED. Abstentions and broker non-votes have no
effect on the election of directors or the vote on the Option Plan Amendment,
however, both abstentions and broker non-votes have the effect of votes against
the Reverse Split Amendment. Directors are elected by a plurality of votes cast
by the shares voting in person or by proxy at the Annual Meeting. The Option
Plan Amendment will be approved if the number of votes cast for the Option Plan
Amendment exceeds the number of votes cast against it. The Reverse Split
Amendment requires the affirmative vote of holders of two thirds of the
outstanding shares of Common Stock as of the Record Date.
This solicitation of proxies is made by the Company, and the Company
will bear the cost of this proxy solicitation, including the cost of preparing,
handling, printing and mailing the Proxy Statement, Notice of Annual Meeting and
Proxy Card (collectively, the "Proxy Materials"). Proxies will be solicited
principally through these Proxy Materials. However, the Company has also engaged
the firm of Corporate Investor Communications, Inc. ("CIC") as proxy solicitors
to assist the Company in this proxy solicitation. Employees of CIC may contact
shareholders by mail, by telephone or through personal solicitation. The Company
expects to pay CIC approximately $5,000 in connection with such solicitation.
Proxies may also be solicited by telephone or through personal solicitation
conducted by employees of the Company. Employees and officers will be reimbursed
for the actual out-of-pocket expenses incurred in connection with this proxy
solicitation. Banks, brokers and other custodians are requested to forward these
Proxy Materials to their customers where appropriate, and the Company will
reimburse such banks, brokers and custodians for their reasonable out-of-pocket
expenses incurred in sending these Proxy Materials to beneficial owners of the
Common Stock.
ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY)
GENERAL
The Company's Bylaws provide that the number of directors of the Company
shall be determined by the Board of Directors (the "Board"). The Board has, by
resolution, fixed the number of directors at six for 1999. Each director will
serve until the next annual meeting of shareholders or until his successor has
been elected or appointed. Unless otherwise instructed, proxy holders will vote
the proxies received by them for the election of the nominees named below. All
of the nominees for director are currently directors of the Company. If any
nominee becomes unavailable for any reason, it is intended that the proxies will
be voted for a substitute nominee designated by the Board. The Board has no
reason to believe that any of the nominees named will be unable to serve if
elected. Any vacancy occurring on the Board for any reason may be filled by vote
of a majority of the directors then in office until the next meeting of
shareholders.
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<PAGE>
CUMULATIVE VOTING
The Company's Common Stock may not be voted cumulatively in the election
of directors unless a shareholder elects to invoke his or her right to
cumulative voting in accordance with South Carolina law described herein. The
right to vote cumulatively means that each shareholder entitled to vote at the
election of directors shall be entitled to as many votes as shall equal the
number of shares of Common Stock held by the shareholder as of the Record Date,
multiplied by the number of directors to be elected and the shareholder may cast
all such votes for a single candidate or may distribute them among two or more
candidates nominated for director. No shares may be voted in such manner unless
the shareholder intending to vote cumulatively shall either: (1) give separate
written designation to an officer of the Company not less than 48 hours before
the time for the meeting, stating that such shareholder intends to vote his or
her shares cumulatively, which notice will be announced in the meeting before
the voting, or (2) announce his or her intention in the meeting before the
voting for directors shall commence. Instructions with respect to cumulative
voting on the proxy card do not constitute notice of an election that a
shareholder intends to vote his or her shares cumulatively. In the event that
cumulative voting is invoked, the person presiding may, or if requested by any
shareholder shall, recess the meeting for a period not to exceed two hours. If
any shareholder of the Company exercises his or her right to vote cumulatively
in the election of directors, all shares, including those to be voted by proxy
holders, will be voted cumulatively. If there is no designation and cumulative
voting rights are invoked, proxy holders, in their own judgment, will cumulate
votes for directors to secure the election of as many as possible of the Board's
nominees. Directors will be elected by a plurality of votes. Abstentions and
broker non-votes have no effect on the election of directors.
NOMINEES
The names of the nominees for Director, together with their term in
office and certain information about them, are as follows:
<TABLE>
<CAPTION>
DIRECTOR
NAME AND AGE SINCE PRINCIPAL OCCUPATION
------------ -------- --------------------
<S> <C> <C>
JOHN M. STERLING, JR. (61) 1991 Chairman of the Board and Chief
Executive Officer of the Company; President,
Palmetto Seed Capital Corporation (1)
PORTER B. ROSE (57) 1991 President, PBR Incorporated (2)
TECUMSEH HOOPER, JR. (51) 1991 President, Carolinas-Virginia District, IKON
Office Solutions, Inc. (3)
KEITH B. GIDDENS (44) 1992 President and Chief Operating
Officer of the Company (4)
CLARENCE B. BAUKNIGHT (62) 1995 Chairman of the Board,
Enterprise Computer Systems, Inc. (5)
J. ROBERT PHILPOTT, JR. (52) 1997 President, Philpott, Ball & Co. (6)
</TABLE>
(1) Mr. Sterling has served as Chief Executive Officer and Chairman of the Board
of the Company since August 1996. Mr. Sterling also served as President of
the Company from January 1991 to August 1996. Mr. Sterling has served as
President of Palmetto Seed Capital Corporation since November 1993. Palmetto
Seed Capital Corporation is the general partner of Palmetto Seed Capital,
L.P. ("PSC"). PSC invests primarily in early stage South Carolina companies.
Mr. Sterling was Chairman
3
<PAGE>
of the Board and Chief Executive Officer of Modern Office Machines, Inc.
("MOM", now known as IKON Office Solutions), which is engaged in the sale
of office equipment and supplies, from 1981 through August 1992. Mr.
Sterling served as General Partner and Manager of Reedy River Ventures
("RRV"), which Mr. Sterling founded, from 1981 to 1995. In 1995 the Company
became General Partner and Manager of RRV. In 1997, the Company purchased
RRV, and Emergent Equity Advisors, Inc. ("EEA"), a wholly-owned subsidiary
of the Company, became the General Partner of RRV. RRV is a Small Business
Investment Company licensed by the Small Business Administration to invest
in small businesses. RRV and EEA were sold to Transamerica Corp. in
November of 1998. Mr. Sterling also serves on the Board of Directors of
Datastream Systems, Inc. and several private companies.
(2) Mr. Rose established and became president of PBR Incorporated, a private
investment management company, in January 1998. Between August 1997 and
January 1998, Mr. Rose served as Senior Vice President of Philpott, Ball &
Company, which is engaged in the business of providing investment banking
services to small-and mid-size companies. From April 1968 to June 1997, Mr.
Rose served in several senior executive capacities, primarily in investment
management, for The Liberty Corporation. The Liberty Corporation is a
Greenville, South Carolina based holding company with interests in insurance
and broadcasting.
(3) Mr. Hooper has served as President, Carolinas-Virginia District of
IKON Office Solutions, Inc. ("IKON") since 1995 and as President of MOM
since 1982. From October 1994 through September 1995, Mr. Hooper served as
Southeast Regional Director for IKON. From 1981 to 1995, Mr. Hooper also
served as General Partner of RRV.
(4) Mr. Giddens has served as President and COO of the Company since August
1996. Prior to that he was the Executive Vice President and COO of the
Company from November 1995 to August 1996 and Vice President of Operations
of the Company from 1994 to 1995. He also serves as CEO and Vice Chairman of
Carolina Investors, Inc. ("CII"), which is a subsidiary of the Company. Mr.
Giddens was a partner in the public accounting firm of Ernst & Young LLP
prior to joining the Company in 1991.
(5) Mr. Bauknight has served since 1978 as Chairman of the Board of Enterprise
Computer Systems, Inc., which is engaged in the development of computer
software for the building supply industry. Mr. Bauknight also served as
Chairman of the Board and CEO of Builderway, Inc. from 1976 to 1996 and on
the board of Pelican Companies, Inc. from 1996 to 1999, both of which are
building supply companies. Mr. Bauknight also serves on the Board of
Directors of Builder Marts of America, Inc., which is a building supply
company. Mr. Bauknight was a founder of Builderway, Inc., Enterprise
Computer Systems, Inc., and Builder Marts of America, Inc.
(6) Mr. Philpott has been President of Philpott, Ball & Company since 1991.
Philpott, Ball & Company, which Mr. Philpott founded in 1991, is engaged in
the business of providing investment banking services to small- to mid-size
companies. Mr. Philpott was Managing Director of the Capital Markets Group
for Interstate/Johnson Lane Corporation, an investment banking firm ("IJL"),
from 1989 to 1990. From 1985 to 1989, Mr. Philpott served as Senior Vice
President and Manager of IJL's Corporate Finance Department. From 1981 to
1985, he served as Vice President in the Corporate Finance Department of
J.C. Bradford & Company, an investment banking firm. Mr. Philpott also
served as a regional corporate lending officer for Wachovia Bank and Trust
Company, N.A., from 1972 to 1981. Mr. Philpott serves on the Board of
Directors of Pluma, Inc.
Mr. Blackwell has decided not to stand for reelection due to other business
pressures.
Section 16(a) Beneficial Ownership Reporting Compliance
4
<PAGE>
Based solely upon a review of Forms 3, 4 and 5 and amendments thereto
furnished to the Company during and with respect to its most recent fiscal year,
and written representations that no Form 5 was required, the Company believes
that all of its executive officers, Directors and persons who may have been
deemed to be greater than 10% shareholders during the year have made all filings
required to be made under Section 16(a) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") except as follows: Mr. Keegan made a late filing
of a Form 3 disclosing his initial beneficial ownership.
MEETINGS AND COMMITTEES
During fiscal 1998, the Company's Board met 4 times. Each Director
attended more than 75% of the total number of meetings of the Board and all
committees on which he served.
The Board has an Executive Committee, the function of which is to make
decisions between meetings of the Board of Directors pursuant to authority
delegated by the Board. The current members of the Executive Committee are
Messrs. Sterling, Rose, Hooper and Philpott. The Executive Committee met one
time during 1998.
The Board also has an Audit Committee, which is responsible for
reviewing and making recommendations regarding the Company's engagement of
independent auditors, the annual audit of the Company's financial statements and
the Company's internal accounting practices and policies. The current members of
the Audit Committee are Messrs. Rose, Philpott and Blackwell. The Audit
Committee met two times during 1998.
The Board also has a Compensation Committee, the function of which is
to make recommendations to the Board as to the salaries, bonuses and stock
option awards of the officers and employees of the Company. The current members
of the Compensation Committee are Messrs. Hooper, Bauknight, and Philpott. The
Compensation Committee met one time during 1998.
The Board has a Risk Oversight Committee, the function of which is to
review the operations of the Company with a view toward assessing various
Company risks, including asset/liability risk, interest rate risk, credit risk
and liquidity risk. The current members of the Risk Oversight Committee are
Messrs. Bauknight, Blackwell, Rose and Hooper. The Risk Oversight Committee met
one time during 1998.
The Board does not have a Nominating Committee. The functions of a
Nominating Committee are performed by the Board as a whole.
DIRECTORS' FEES
Each nonemployee Board member (an "Outside Director") receives a cash
Director's fee of $15,000 per year. In 1998, each Outside Director also received
a grant of 2,233 of shares of Common Stock with a fair market value of $12,000
on the date of grant. The Outside Directors received this Common Stock grant in
lieu of compensation in the form of options and rights to purchase restricted
shares of Common Stock that they normally receive under the Company's Director
Stock Option Plan and the Company's Restricted Stock Agreement Plan. Under the
Director Stock Option Plan, each Outside Director normally receives on December
15 of each year options covering 666 shares of Common Stock. Under the
Restricted Stock Agreement Plan, each Outside Director normally receives an
annual grant agreement on or about January 31 of each year entitling him/her to
purchase Common Stock with a fair market value as of grant date of $12,000, at a
price of $0.05 per share.
5
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information regarding the current
executive officers of the Company, all of whom are serving for an indefinite
term of office until their successors are elected by the Board:
<TABLE>
<CAPTION>
NAME AND AGE POSITION
------------ --------
<S> <C>
John M. Sterling, Jr. (61) Chairman of the Board and Chief Executive Officer
(1)
Keith B. Giddens (44) President and Chief Operating Officer (1)
Kevin J. Mast (38) Executive Vice President, Chief Financial Officer
and Treasurer (2)
Robert S. Davis (52) Executive Vice President - Administration (3)
Mark S. Keegan (47) Executive Vice President-Quality Management and
Group General Counsel (4)
</TABLE>
(1) See information under "Election of Directors; Nominees."
(2) Mr. Mast has served as Executive Vice President, Chief Financial Officer &
Treasurer of the Company since December 1998, as Vice President, Chief
Financial Officer & Treasurer of the Company since December 1998, as
President-Administration since August 1996, as Vice President & Treasurer of
the Company since November 1995, Treasurer of Carolina Investors, Inc.
("CII") since April 1995, Executive Vice President, Chief Financial Officer
and Treasurer of CII since December 1997, Executive Vice President, Chief
Financial Officer & Treasurer of HomeGold, Inc. since December 1997, and
Treasurer of HomeGold, Inc. since its inception in 1995. Prior to their
sales in 1998, Mr. Mast has also served as Executive Vice President, Chief
Financial Officer and Treasurer of Emergent Business Capital since April
1992, Executive Vice President, Chief Financial Officer and Treasurer of The
Loan Pro$, Inc. and Premier Financial Services, Inc. since April 1995. From
June 1991 to October 1992, Mr. Mast served as Executive Vice President and
Chief Financial Officer of Citizens Bank & Trust Co. and its parent company
Business Banc of America. Prior to that time, Mr. Mast was an audit Senior
Manager at Ernst & Young where he specialized in the audits of financial
institutions.
(3) Mr. Davis has served as Executive Vice President-Administration of the
Company since December 1998, as Vice President-Administration since August
1996, as Vice President and Chief Financial Officer of the Company from
January 1991 to August 1996, as Treasurer of the Company from 1992 to 1995,
as Vice President of Finance of the Company from November 1989 through June
1990, as President and Treasurer of the Company from June through December
1990, and as Corporate Controller of the Company from 1986 through November
1989. Prior to 1986, Mr. Davis was Chief Financial Officer and Treasurer of
Alexander's Wholesale Distributors, Inc., a catalog retailer of consumer
goods.
(4) Mr. Keegan has served as Executive Vice President-Quality Management and
Group General Counsel since December 1998 and as Vice President-Quality
Management and Group General Group Counsel of the Company since May 1998. He
serves as a director of HomeGold, Inc. Mr. Keegan was a Manager in the
Executive Management Group of Merrill Lynch Credit Corporation from March
1997 through April 1998, during which time he was instrumental in the
winning of the Malcolm Baldrige National Quality Award. From June 1994 until
March 1997, Mr. Keegan was Senior Vice President-Strategic Planning of
Lender's Service, Inc., a national real estate appraisal management, title
agency and closing company. From October 1989 until June 1994, he was
Associate General Counsel and Functional Vice President of The Prudential,
with Prudential Home Mortgage Company, Inc. From February 1984 until its
sale to Prudential in 1989, he was with Merrill Lynch Realty, Inc. and
Merrill Lynch Mortgage Corporation as General Counsel. From 1977 through
1984, Mr. Keegan represented various mortgage lenders in regulatory,
licensing and other matters as well as several major transactions.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid by the Company
or its subsidiaries during fiscal years 1998, 1997 and 1996 to the Company's
Chief Executive Officer and to the executive officers of the Company whose cash
and cash equivalent compensation exceeded $100,000 for services rendered in all
capacities (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR ($) (1) ($) ($) (2) OPTIONS (#) ($) (3)
<S> <C> <C> <C> <C> <C> <C>
John M. Sterling, Jr. 1998 259,616 -- -- 85,000 2,000
Chairman and Chief 1997 250,000 -- -- -- 4,750
Executive Officer 1996 227,312 220,000 -- 50,000 3,234
Keith B. Giddens 1998 228,462 -- -- 70,000 4,788
President and Chief 1997 220,000 -- -- -- 4,486
Operating Officer 1996 196,016 200,000 -- 40,000 2,835
Kevin J. Mast
Executive Vice President, 1998 181,731 100,000 -- 80,000 4,481
Chief Financial Officer 1997 141,154 25,000 -- -- 4,750
and Treasurer 1996 108,263 50,000 -- 25,000 2,007
Robert S. Davis 1998 124,616 -- -- 12,000 3,615
Executive Vice President- 1997 120,000 15,000 -- -- 3,281
Administration 1996 111,652 43,000 -- 10,000 3,145
Mark S. Keegan 1998 103,846 -- 17,894(4) 33,800 2,250
Executive Vice President, 1997 -- -- -- -- --
Chief Legal Counsel 1996 -- -- -- -- --
</TABLE>
(1) A portion of total salary may have been deferred, at the option of the
employee, pursuant to the Company's 401(k) plan. Due to the number of
pay periods in the calendar for 1998, each person in the Company, who
was with the Company for the entire year of 1998, received a total of
twenty-seven bi-weekly pay checks as opposed to the usual twenty-six
bi-weekly pay checks. None of the officers listed received increases in
their salary for the year 1998, except for Mr. Mast.
(2) Certain amounts may have been expended by the Company which may have had
value as a personal benefit to the executive officer. However, the total
value of such benefits is not listed unless it exceeds the lesser of
$50,000 or 10% of the annual salary and bonus of such executive officer.
(3) Amounts shown under "All Other Compensation" consist of contributions
during fiscal 1998, 1997 and 1996 to the Company's 401(k) plan in the
amount shown to match pre-tax elective deferral contributions (included
under salary) made by the executive officers to the plan.
(4) Mr. Keegan was paid for his relocation expenses as a part of his hiring
package.
7
<PAGE>
STOCK OPTIONS
The following table sets forth certain information concerning grants of options
to the Named Executive Offices during fiscal 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
- ---------------------------------------------------------------------------
Potential Realizable Value
at Assumed Annual Rates of
Number of %of Total Stock Price Appreciation for
Securities Options/SARs Option Term (10 Years)
Underlying Granted to Exercise ----------------------------
Options Employees in Price Expiration
Name Granted (#) Fiscal Year ($/Share)(1) Date 5% ($) 10% ($)
---- ----------- ----------- ---------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
John M. Sterling, Jr. 35,000 5% $9.75 03/12/08 $214,610 $543,865
50,000 7% $0.9375 12/02/08 $29,479 $74,707
Keith B. Giddens 30,000 4% $9.75 03/12/08 $183,952 $466,170
40,000 6% $0.9375 12/02/08 $23,584 $59,765
Kevin J. Mast 5,000 1% $9.75 03/12/08 $30,659 $77,695
50,000 7% $6.75 05/26/08 $212,252 $537,888
25,000 4% $0.9375 12/02/08 $14,740 $37,353
Robert S. Davis 2,000 * $9.75 03/12/08 $12,263 $31,078
10,000 1% $0.9375 12/02/08 $5,896 $14,941
Mark S. Keegan 16,900 2% $8.75 04/14/08 $92,998 $235,675
16,900 2% $0.9375 12/02/08 $9,964 $25,251
</TABLE>
The options granted are exercisable, on a cumulative basis, at the rate
of 20 percent at the time of grant and 20 percent for each of the following four
years. The options expire 10 years from the date of grant.
*less than 1%
The following table sets forth certain information with respect to
options to purchase shares of Common Stock held by the Named Executive Officers
and as to the number of shares covered by both exercisable and unexercisable
stock options. Also reported are the values for the "in-the-money" options which
represent the positive spread between the exercise price of any such existing
stock option and the year-end fair market value of the Common Stock.
8
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired Value Underlying Unexercised In-the-Money Options at
Upon Realized Options at 1998 Fiscal 1998
Name Exercise (#) ($) Year-End (#) Fiscal Year-End ($) (1)
Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
John M. Sterling, Jr. -- -- 35,000/74,000 --
Keith B. Giddens -- -- 33,600/70,800 --
Kevin J. Mast -- -- 28,266/68,534 --
Robert S. Davis 6,667 52,749 22,574/16,267 --
Mark S. Keegan -- -- 3,380/13,520 --
</TABLE>
(1) Exercise prices of options range from $1.32 to $9.75 per share. The per
share value of Common Stock on December 31, 1998 was $.50, which
represents the closing market price of a share of the Company's Common
Stock as reported by the Nasdaq National Market. Therefore, no options
were "in-the-money" on December 31, 1998.
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of the Record Date, except as
otherwise noted, certain information regarding ownership of the Company's Common
Stock by (i) each person or group who is known by the Company to own
beneficially more than 5% of the Company's Common Stock, (ii) each of the
Company's Directors and Named Executive Officers, and (iii) all Directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Outstanding Shares (1)
- ------------------ -------------------- ----------------------
<S> <C> <C>
5% Beneficial Owners
- --------------------
The Sterling Family Limited Partnership 847,168(2) 8.63%
P. 0. Box 17526
Greenville, SC 29606
Directors and Named Executive Officers
- --------------------------------------
John M. Sterling, Jr. 1,104,377(3) 11.22%
Clarence B. Bauknight 260,151(4) 2.65%
Tecumseh Hooper, Jr. 230,413(5) 2.35%
Keith B. Giddens 157,278(6) 1.60%
Larry G. Blackwell 92,933 *
Robert S. Davis 89,892(7) *
Mark S. Keegan 43,380(8) *
Porter B. Rose 44,131(9) *
Kevin J. Mast 40,491(10) *
J. Robert Philpott, Jr. 13,233 *
All Executive Officers and Directors 2,076,279(11) 20.87%
as a Group (10 persons)
</TABLE>
10
<PAGE>
(1) Pursuant to Rule 13d-3 under the Exchange Act, shares are deemed
"beneficially owned" if the named person or group has the right to
acquire ownership of such shares within 60 days. The percentage for each
person or group is computed on the assumption that shares subject to
acquisition upon the exercise of options by such person or group are
outstanding, but that no other such shares similarly subject to
acquisition by other persons are outstanding.
(2) The Sterling Family Limited Partnership is a limited partnership of
which Mr. Sterling and his wife, Elizabeth H.Sterling, serve as the
general partners.
(3) Includes 137,191 shares of Common Stock owned by Mr. Sterling directly;
847,168 shares of Common Stock owned by The Sterling Family Limited
Partnership; 14,232 shares owned by Mr. Sterling and held in a Keogh
account; and 70,786 shares of Common Stock owned by a trust of which Mr.
Sterling is the trustee, as to which shares Mr. Sterling disclaims
beneficial ownership. Also includes 35,000 shares of Common Stock, which
may be acquired pursuant to currently exercisable stock options.
(4) Includes 6 shares of Common Stock owned by Mr. Bauknight's IRA account;
255,913 shares of Common Stock owned by a partnership whose partners are
Mr. Bauknight, his spouse and his two adult children; 1,332 shares of
Common Stock which may be acquired pursuant to currently exercisable
stock options; and 2,900 shares of Common Stock which may be acquired
pursuant to the Plan.
(5) Includes 221,181 shares of Common Stock owned by Mr. Hooper directly.
Also includes 5,000 shares owned by the children of Mr. Hooper; 1,332
shares of Common Stock which may be acquired pursuant to currently
exercisable stock options; and 2,900 shares of Common Stock which may be
acquired pursuant to the Plan.
(6) Includes 68,266 shares of Common Stock owned by Mr. Giddens directly;
4,416 shares of Common Stock owned by Mr. Giddens' spouse, 15,996 shares
of Common Stock owned by a trust administered by Mr. Giddens' spouse for
his three children; and 35,000 shares of Common Stock owned by the
Giddens Family Limited Partnership, a limited partnership whose general
partners are Mr. Giddens and his spouse and the limited partners of
which are their three children. Also includes 33,600 shares of Common
Stock that may be acquired pursuant to currently exercisable stock
options.
(7) Includes 67,318 shares of Common Stock owned by Mr. Davis directly. Also
includes 22,574 shares of Common Stock which may be acquired pursuant to
currently exercisable stock options.
(8) Includes 40,000 shares of Common Stock owned by Mr. Keegan directly.
Also includes 3,380 shares of Common Stock which may be acquired
pursuant to currently exercisable stock options.
(9) Includes 39,899 shares of Common Stock owned by Mr. Rose directly, 1,332
of Common Stock, which may be acquired pursuant to currently exercisable
stock options, and 2,900 shares of Common Stock which may be acquired
pursuant to the Plan.
(10) Includes 12,225 shares of Common Stock owned by Mr. Mast directly and
28,266 shares of Common Stock which may be acquired pursuant to
currently exercisable stock options.
(11) Excludes the shares described as excluded and includes the shares
described as included in the notes above.
* Less than one percent of the outstanding shares of the class.
11
<PAGE>
RELATED PARTY TRANSACTIONS
Certain officers, Directors and employees of the Company held senior
notes and/or subordinated debentures (collectively, the "Debentures") issued by
CII which at December 31, 1998 had an aggregate outstanding principal amount of
approximately $103,565. These Debentures were purchased on terms which were the
same as those available to purchasers not affiliated with the Company.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board (the "Compensation Committee")
annually submits to the Board recommendations respecting the salaries, bonuses
and stock option grants to be provided to the Company's executive officers and
administers the Company's stock option plan for officers and key employees. The
Compensation Committee provides the following report.
POLICIES FOR COMPENSATION OF EXECUTIVE OFFICERS
The Compensation Committee attempts to act on the shareholders' behalf
in establishing an executive compensation program. The basic policy underlying
the Company's compensation program for executive officers is that their
compensation should vary depending on the Company's success in meeting its
financial and strategic objectives and in creating value for shareholders. In
addition to salary, the compensation program may consist of an annual bonus and
grants of stock options under the Employee and Officer Stock Option Plan.
The Compensation Committee annually reviews the Company's corporate
performance and that of its executive officers and sets levels of compensation
in its discretion. As a result, the executive officers' actual compensation
levels in any particular year may be above or below those of the Company's
competitors, depending upon Company-wide and individual performance.
Based upon the recommendations of Mr. Sterling, the Compensation
Committee did not adjust the salaries of any of the executive officers in 1998,
other than as noted below. Factors considered by Mr. Sterling included operating
losses incurred as well as his perception of individual performance and the
level of individual responsibility. The Compensation Committee determined that
salary adjustments, with the exception of Mr. Mast, were not appropriate in
light of the Company's operating performance during 1998. Mr. Sterling, and the
Compensation Committee, increased Mr. Mast's salary to reflect the outstanding
job in monitoring liquidity, negotiating a new three year credit facility, and
instituting management controls and guidelines.
The Compensation Committee believes that the market value of the Common
Stock as well as the operating performance of the Company are valid criteria for
determining annual bonuses. The Compensation Committee carefully monitors key
Company performance criteria, including change in market value of the Company's
Common Stock, growth in earnings and revenue and financial performance as
compared to budget. Based on these criteria and on the recommendations of Mr.
Sterling, for all executive officers except himself, the Compensation Committee
awarded no bonuses to executive officers, except for Mr. Mast, who was granted a
bonus as shown in the Summary Compensation Table. The bonus awarded to Mr. Mast
was approved based on individual performance accomplishments during the year.
Stock option grants are generally made on an annual basis with exercise
prices set at the market closing price on the day of the stock option grant and
have the purpose of providing the Company's executive officers and key employees
with an equity ownership opportunity in the Company and with incentives to
maximize shareholder values. For the year 1998, the Compensation Committee made
option
12
<PAGE>
grants to the executive officers of the Company in March and in December.
In addition, Mr. Mast was granted options to purchase 50,000 shares of the
Company's common stock in May. This grant to Mr. Mast was approved based on
individual performance accomplishments during the year. Mr. Keegan received an
option grant as part of his hiring package. In determining the size of any stock
option grant, the Compensation Committee considered the following qualitative
factors: the Committee's perception of the Company's overall performance, the
individual's performance and the potential effect which the individual's future
performance may have on the Company.
MR. STERLING'S 1998 COMPENSATION
The Compensation Committee's general approach in setting Mr. Sterling's
annual compensation is to base a significant percentage of his compensation upon
objective strategic performance criteria, and to set total compensation that is
competitive within the industry. This approach may result in some fluctuations
in the actual level of Mr. Sterling's annual compensation increases from year to
year. The Compensation Committee, however, believes that its emphasis upon
objective strategic performance criteria appropriately provides incentives to
Mr. Sterling. The objective performance criteria consist of growth in the market
value of the Company's Common Stock, growth in earnings and financial
performance as compared to budget.
The Compensation Committee did not increase Mr. Sterling's base salary
or award to him any bonus in 1998.
Mr. Sterling's total compensation during 1998 was unchanged from his
total compensation during fiscal 1997, except for the additional pay period
during 1998 as explained in footnote (1) to the Summary Compensation Table on
page 7 herein. The Company's diluted earnings per share from continuing
operations decreased from $1.17 in 1997 to a loss of $7.81 in 1998. The
Company's per share stock price decreased from $13.88 at the end of fiscal 1997
to $.50 at the end of fiscal 1998.
In addition, in March 1998, the Compensation Committee granted Mr.
Sterling options with respect to an aggregate of 35,000 shares of the Company's
Common Stock. Mr. Sterling was also granted options with respect to 50,000
shares of the Company's Common Stock on December 2, 1998. In determining the
size of this grant, the committee considered the following factors: the
Company's overall performance, Mr. Sterling's performance and the potential
effect of his future performance on the Company. At fiscal 1998 year-end Mr.
Sterling had no outstanding exercisable in-the-money stock options. The
Compensation Committee believes that the stock options provide Mr. Sterling with
appropriate incentives to promote long-term shareholder value.
COMPENSATION COMMITTEE
Tee Hooper, Chairman
Clarence B. Bauknight
J. Robert Philpott, Jr.
13
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURNS
AMONG THE COMPANY, NASDAQ MARKET
INDEX AND PEER GROUP INDEX FOR THE FIVE
YEAR PERIOD
ENDING DECEMBER 31, 1998
A line graph comparing the cumulative total shareholder return on the
Common Stock of the Company for the last five fiscal years with the cumulative
total returns of the Nasdaq Market Index and a peer group consisting of publicly
traded companies classified as nontraditional mortgage banks by SNL Securities,
over the same period (assuming a $100 initial investment), is presented below.
The Company will promptly furnish without charge to any shareholder of record on
March 31, 1999, the identity of the companies included in the peer group.
Requests should be directed to the Company, Post Office Box 17526, Greenville,
South Carolina 29606; Attn: Shareholder Relations.
Note: The stock price performance shown on the graph below is not
necessarily indicative of future price performance.
HOMEGOLD FINANCIAL, INC.
Chart appears below for Plot Points of Total Return Performance.
<TABLE>
<CAPTION>
YEAR ENDING
----------------------------------------------------------------
INDEX 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
HomeGold Financial, Inc. 100.00 150.00 638.30 1,117.02 1,476.06 53.19
NASDAQ - Total US 100.00 97.75 138.26 170.01 208.58 293.21
SNL Nontraditional Mortgage Banks 100.00 111.91 234.40 389.91 289.86 103.80
</TABLE>
14
<PAGE>
PROPOSAL TO AMEND THE 1995 EMPLOYEE AND OFFICER
STOCK OPTION PLAN TO INCREASE BY 400,000 THE
NUMBER OF SHARES AUTHORIZED FOR GRANT
(ITEM 2 ON THE PROXY)
GENERAL
The Board has determined that an amendment to the Company's 1995
Employee and Officer Stock Option Plan (the "1995 Plan") to increase by 400,000
the number of shares of the Company's Common Stock authorized for grant (the
"Option Plan Amendment") is in the best interests of the Company.
Under the 1995 Plan, the Board (or a committee thereof) currently has
the discretion to grant options to purchase up to 1,066,667 shares of Common
Stock to certain key employees and officers of the Company. Non-employee
directors do not participate in the 1995 plan. As of the Record Date, the Board
had granted options to purchase a total of approximately 1,230,906 shares of
Common Stock to a total of 76 key employees and officers. As of the record date,
a total of 210,468 options to purchase shares had been forfeited and put back
into the 1995 Plan. The number of shares authorized for grant and not subject to
outstanding options under the 1995 Plan was 62,230 as of the Record Date. During
1998, the Board granted 699,900 options pursuant to the 1995 Plan, while in
1999, prior to the Record Date, the Board granted options to purchase a total of
10,000 shares of Common Stock. The proposed amendment would increase the total
number of shares authorized for grant under the 1995 Plan from 1,066,667 to
1,466,667.
The following table sets forth certain information with respect to the
1995 Plan. The Board has not yet determined how shares covered by options
authorized under the Option Plan Amendment would be allocated.
<TABLE>
<CAPTION>
Shares Covered by Options Shares Covered by Options
Granted Under the 1995 Granted Under the 1995 Plan
Name and Position Plan Since Inception of Outstanding on December 31,
the Plan 1998
<S> <C> <C>
John M. Sterling, Jr. 165,000 109,000
Chairman and Chief
Executive Officer
Keith B. Giddens 184,000 104,400
President and Chief
Operating Officer
Kevin J. Mast 127,668 96,800
Executive Vice President,
Chief Financial Officer,
and Treasurer
Robert S. Davis 55,334 38,841
Executive Vice President-
Administration
Mark S. Keegan 33,800 16,900
Executive Vice
President-Quality
Management and Group
General Counsel
All Current executive 565,802 365,941
officers, as a group
All non-executive officer 612,498 417,234
employees, as a group
</TABLE>
15
<PAGE>
Participation in the 1995 Plan is determined by the Board (or a
committee thereof) and is limited to those key employees and officers of the
Company or its subsidiaries who have the greatest impact on the Company's
long-term performance. In determining the key employees and officers to whom
options shall be granted and the number of shares subject to such options, the
Board (or committee) shall take into account relevant factors such as the level
and responsibility of the key employee's or officer's position, the key
employee's or officer's level of performance and compensation and the potential
of the key employee or officer.
The price at which an option granted under the 1995 plan may be
exercised is determined by the Board (or committee) at the time of grant based
on such criteria as the Board (or committee) may adopt in good faith; provided,
however, that in the case of an option intended to qualify as an incentive stock
option under federal income tax laws, the exercise price per share shall be not
less than the fair market value of a share of the Common Stock at the time of
grant (110% of the fair market value in the case of a recipient who owns stock
representing more than 10% of the combined voting power of all outstanding stock
of the Company or any of its subsidiaries (a "Ten Percent Shareholder")). On
March 22, 1999, the closing price of the Company's Common Stock as reported on
the Nasdaq National Market was $1.31 per share.
The recipient of an option under the 1995 Plan is not required to pay
the Company any amount at the time of receipt. Upon exercising the option, the
recipient must tender (i) the full amount of the exercise price in cash or, if
authorized by the Board (or committee) at the time of grant, in shares subject
to the option being exercised and (ii) payment in full in cash of the amount of
all federal and state withholding or other applicable employment taxes.
In the discretion of the Board (or committee), options granted under the
1995 Plan may be "incentive stock options" for federal income tax purposes. The
Company is not allowed a deduction at any time in connection with, and the
participant is not taxed upon either the grant or the exercise of, an incentive
stock option. The difference between the option price of such an option and the
market value at the date of exercise, however, constitutes a tax preference item
for the participant in the year of exercise for alternative minimum tax
purposes. To qualify as an incentive stock option, the shares acquired by the
recipient must be held for at least two years after the option is granted and
one year after it is exercised. If the recipient satisfies these time
requirements, the recipient will be taxed only upon any gain realized upon
disposition of the stock. The participant's gain will be equal to the difference
between the sales price of the stock sold and the option exercise price. If an
incentive stock option is exercised after the death of the employee by the
estate of the decedent, or by a person who acquired the right to exercise such
option by bequest or inheritance or by reason of the death of the decedent, none
of the time limits described above apply.
If the recipient does not satisfy the aforementioned time limits, the
option will be treated as though it were not an incentive stock option. In the
case of options which are not incentive stock options, the recipient generally
is not taxed upon grant of the option, but upon sale the recipient recognizes
ordinary income equal to the difference between the fair market value of the
shares of stock acquired and the exercise price of the option. Generally, the
Company receives a deduction for the amount the participant reports as ordinary
income arising from the exercise of the option. Upon subsequent sale or
disposition, the holder of the shares recognizes taxable income equal to any
excess of the selling price over the fair market value of the shares at the date
of exercise. If the recipient fails to satisfy the time limits described above
with respect to an option intended to be an incentive stock option, the income
to the recipient and the deduction for the Company shall arise at the time of
the early disposition and shall equal the excess of (i) the lower of the fair
market value of the shares at the time of exercise or such value at the time of
disposition of the shares over (ii) the exercise price.
16
<PAGE>
The 1995 Plan does not meet all the criteria necessary to exempt options
granted under the Plan from the application of Section 162(m) of the Internal
Revenue Code. Section 162(m) limits the corporate tax deduction for compensation
paid to certain employees to $1 million. Nonetheless, the Company anticipates
that none of the compensation payable pursuant to the 1995 Plan will lose its
deductibility by reason of Section 162(m) because no Section 162(m) Covered
Employee who may participate in the Plan is expected to receive annual
compensation that either exceeds $1 million or is not performance-based
compensation exempt from the 162(m) deduction limitation.
Recipients may not transfer options granted under the 1995 Plan except
by will, the laws of descent, or a qualified domestic relations order as defined
under the Internal Revenue Code or Title I of the Employee Retirement Income
Security Act, or the rules promulgated thereunder.
The term of each option is established by the Board (or committee) but
cannot exceed 10 years (or 5 years in the case of a Ten Percent Shareholder) and
options awarded are exercisable according to such schedule as the Board (or
committee) may establish. Any recipient whose employment with the Company, or
any subsidiary of the Company, terminates for any reason other than death or
permanent and total disability cannot exercise any options more than three
months after such termination. If such employment terminates due to the death or
permanent and total disability of the recipient, or the recipient dies within
three months of terminating such employment, the recipient or the recipient's
personal representative may exercise any options granted under the 1995 Plan
during a period not exceeding one year after the recipient's termination of
employment. In no event, however, can an option be exercised past the expiration
of its term.
The Board (or committee) may at any time suspend, amend or terminate the
1995 Plan; provided that the Board may not alter or impair the rights of any
recipient with respect to any option previously granted under the 1995 Plan.
Approval by a majority of shareholders is also required if a proposed amendment
would (i) materially increase the benefits accruing to participants; (ii)
increase the number of securities authorized for grant (other than to reflect
recapitalization of the Company); (ill) change the class of persons eligible to
receive options; or (iv) otherwise materially modify the requirements for
eligibility.
By its terms, the 1995 Plan terminates on the close of business at May
31, 2005. Such termination will not affect any options previously granted under
the 1995 Plan.
The purpose of the 1995 Plan is to promote the growth and profitability
of the Company and its subsidiaries by increasing the personal participation of
key employees and officers of the Company and its subsidiaries in the continued
growth and financial success of the Company and its subsidiaries, while enabling
the Company and its subsidiaries to attract and retain key employees and
officers of outstanding competence and by providing such key employees and
officers with an equity opportunity in the Company. The Board recommends
approval of the Option Plan Amendment because it will provide the Company's
employees who participate in the 1995 Plan with an incentive to maximize
shareholder value. Because the executive officers of the Company will be
eligible to participate in the 1995 Plan (and have previously received grants
thereunder), they may be deemed to have an interest in the outcome of this
proposal. The issuance of shares of Common Stock pursuant to the Option Plan
Amendment will cause some dilution of existing shareholder's voting power and
distributional rights, but should not otherwise have an effect on the rights of
existing shareholders.
The additional shares to be available for grant, if the Option Plan
Amendment is approved, would be subject to the same terms and conditions as are
the shares currently available under the 1995 Plan, which was approved by the
shareholders of the Company at the June 9, 1995 Shareholders' Meeting.
17
<PAGE>
The Company's Annual Report to shareholders for its fiscal year ended
December 31, 1998 (the "Annual Report") is being mailed along with this Proxy
Statement. See "Annual Report." The company's financial statements, management's
discussion and analysis of financial condition and results of operations and
quantitative and qualitative disclosures about market risk contained in items 7,
7A, and 8 thereof are incorporated herein by reference. Information regarding
the Company's auditors and changes in auditors is contained in the section of
this Proxy Statement titled "Auditors" and is incorporated herein by reference.
VOTE REQUIRED
The Option Plan Amendment will be approved if a quorum is present at the
Annual Meeting and the votes in favor of the Option Plan Amendment exceed the
votes against it. Abstentions and broker non-votes have no effect on the vote to
approve the Option Plan Amendment.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE OPTION PLAN AMENDMENT.
18
<PAGE>
PROPOSAL TO ALLOW THE BOARD OF DIRECTOR'S THE DISCRETION
TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION
TO EFFECT UP TO A ONE-FOR-FOUR REVERSE STOCK SPLIT
(ITEM 3 ON THE PROXY)
GENERAL
The Company's Board of Directors has approved a resolution recommending
that the Company's shareholders approve an amendment to the Company's Articles
of Incorporation pursuant to which the Company would effect up to a one-for-four
reverse stock split of the Company's outstanding Common Stock (the "Reverse
Split Amendment") providing the Board of Directors (the "Board") determines to
do so. The Board has approved the Reverse Split Amendment because the Company
could be out of compliance with the listing requirements of the Nasdaq National
Market should the closing price of the stock fall and remain below $1.00 for any
consecutive thirty trading days.
The Nasdaq National Market has a number of requirements which must be
met in order for a company to remain listed on the national market
system. One such requirement is that the closing price of the stock not fall
below $1.00 per share for any consecutive thirty trading days. In the event that
the closing price of the Company's Common Stock should fall below the
$1.00 minimum, the Board desires the authority to effect up to a one-for-four
reverse stock split. Such action would be taken by the Board only in the event
that the closing stock price of the Common Stock would likely result in the
delisting of the stock from the Nasdaq National Market and that the reverse
stock split would increase the stock price to the extent that such delisting
would be prevented.
The Articles of Incorporation presently authorize 100,000,000 shares of
Common Stock. The effecting of the Reverse Split Amendment would reduce the
number of authorized Common shares proportionately depending on the specifics of
the reverse stock split. In the event that the Board determines to effect the
Reverse Split Amendment, the par value of the Common Stock would increase
proportionately depending on the specifics of the reverse stock split. The
maximum reverse split permitted by the amendment would reduce the number of
authorized common shares to 25,000,000.
19
<PAGE>
THE REVERSE SPLIT AMENDMENT
If the Reverse Split Amendment is approved by the shareholders and is
activated by the Board, each share of Common Stock outstanding at the time of
activation of this amendment will be void. Each shareholder of Common Stock at
that time will be entitled to receive a certificate for the whole number of
shares of Common Stock representing the proportionate number of shares of Common
Stock determined by the reverse split ratio chosen by the Board. The Company
will not issue fractional shares. Cash will be paid in lieu of any fractional
shares at a price per share equal to the closing sales price of the shares as
quoted on the on the Nasdaq National Market on the first day after the
activation of the Reverse Split Amendment by the Board of Directors. Each
outstanding certificate representing Common Stock at the time of effecting of
the Reverse Split Amendment would be void. Following the effecting of the
Reverse Split Amendment, the Company would mail to each holder of Common Stock a
certificate for the whole number of shares representing the proportionate number
of shares of Common Stock held by such shareholder following the activation of
the Reverse Split Amendment.
VOTE REQUIRED
The affirmative vote of the holders of two-thirds of the outstanding
shares of Common Stock as of the Record Date is required for approval and
adoption of the Reverse Split Amendment. Abstentions and broker non-votes have
the same effect as votes against the Reverse Split Amendment.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE
REVERSE SPLIT AMENDMENT.
20
<PAGE>
ANNUAL REPORT
THE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS FOR ITS FISCAL YEAR ENDED
DECEMBER 31, 1998 (THE "ANNUAL REPORT") IS BEING MAILED WITH THIS PROXY
STATEMENT. ADDITIONAL COPIES MAY BE OBTAINED FROM THE COMPANY. IN ADDITION, THE
COMPANY WILL PROVIDE WITHOUT CHARGE TO ANY SHAREHOLDER OF RECORD AS OF MARCH 31,
1999, WHO SO REQUESTS IN WRITING, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10K FOR THE YEAR ENDED DECEMBER 31, 1998 (WITHOUT EXHIBITS). ANY SUCH REQUEST
SHOULD BE DIRECTED TO THE COMPANY, P. O. BOX 17526, GREENVILLE SOUTH CAROLINA
29606, ATTENTION: ROBERT S. DAVIS, EXECUTIVE VICE PRESIDENT-ADMINISTRATION.
AUDITORS
The Board of Directors has appointed the accounting firm of Elliott,
Davis & Company L.L.P. ("Elliott Davis") as independent auditors for the
Company's 1998 fiscal year. Representatives of Elliott Davis are expected to be
present at the Annual Meeting and will have the opportunity to make a statement
if they so desire and will be available to respond to appropriate questions.
On September 25, 1998, the Company determined to dismiss KPMG Peat
Marwick, LLP ("KPMG") and to engage Elliot Davis as the Company's independent
auditors for the 1998 fiscal year. KPMG had served as the Company's principal
accountants since 1996. The change in auditors resulted from the Company's
decision that Elliott Davis would better serve the Company's auditing needs in
terms of service level and cost. The Audit Committee of the Board and the Board
approved the change of accounting firms.
In connection with KPMG's audit completed for the fiscal year ending
December 31, 1997, there were no disagreements between the Company and KPMG on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of the auditors, would have caused it to make reference to
the subject matter of the disagreement in connection with its report. Moreover,
KPMG's report as principal auditor of the financial statements of the Company
for such period did not contain an adverse opinion or a disclaimer of opinion,
nor were they qualified or modified as to uncertainty, audit scope or accounting
principles. The Company filed a Current Report on Form 8-K dated September 25,
1998, with the Commission on September 30, 1998, regarding the change in the
Company's independent auditors and containing KPMG's statement regarding the
Company's explanation of the change. (File No. 000-08909).
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
If you would like to have a proposal considered at the Company's 2000
annual shareholder's meeting (the "2000 Meeting") and you would like your
proposal included in the Company's 2000 proxy statement and proxy card (the
"2000 Proxy Materials"), your proposal must be in writing, and the Company must
receive your proposal at its principal offices no later than December 16, 1999.
You should send your proposal to the Company's Secretary at: HomeGold Financial,
Inc., Post Office Box 17526, Greenville, South Carolina 29606. Even if you
timely submit your proposal, the Company may exclude it from the 2000 Proxy
Materials if it does not comply with rules and regulations of the U.S.
Securities and Exchange Commission pertaining to shareholder proposals.
If you would like a proposal considered at the 2000 Meeting, but do not
want your proposal included in the 2000 Proxy Materials or you miss the deadline
for inclusion in the 2000 Proxy Materials, the Company must receive your
proposal on or between January 15, 2000, and February 16, 2000. Your proposal
must be in writing and must meet certain requirements contained in the Company's
Bylaws. The Company will provide you with a copy of its Bylaws free of charge at
your request if you write to the address in the preceding paragraph or if you
call the Company's shareholder relations department at 864-289-5315. Proposals
should be submitted to the Company's Secretary at the address in the preceding
paragraph.
21
<PAGE>
OTHER MATTERS
The Board does not know of any matters to be presented for consideration
other than the matters described in the Notice of Annual Meeting, but if any
matters are properly presented, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors,
C. Thomas Wyche, Secretary
Dated: April 15, 1999
22
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APPENDIX A
HomeGold Financial, Inc.
3901 Pelham Road
P. O. Box 17526 (Zip 29606)
Greenville, SC 29615
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF HOMEGOLD
FINANCIAL, INC. (THE "COMPANY") The undersigned hereby appoints C. T. Wyche and
Robert S. Davis or either of them as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as designated
below, all of the shares of Common Stock of the Company held of record by the
undersigned on March 31, 1999, at the annual meeting of Shareholders to be held
May 12, 1999 or any adjournment thereof. The Company makes all the following
proposals. No proposal below is conditioned on any other proposal.
Proxy for Common Stock
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1. ELECTION OF DIRECTORS
FOR the six nominees listed below (except as marked to the contrary below)
WITHHOLD AUTHORITY to vote for any of the six nominees listed below:
Clarence B. Bauknight, Keith B. Giddens, Tecumseh Hooper, Jr., J. Robert
Philpott, Jr., Porter B. Rose, John M. Sterling, Jr.
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW. IF YOU DESIRE TO
CUMULATE YOUR VOTES FOR ANY PARTICULAR NOMINEE(S), IN THE EVENT
CUMULATIVE VOTING IS ELECTED, WRITE YOUR INSTRUCTIONS AS TO THE NUMBER
OF VOTES CAST FOR EACH IN THE SPACE PROVIDED BELOW.
- --------------------------------------------------------------------------------
2. PROPOSAL TO AMEND THE COMPANY'S 1995 EMPLOYEE AND OFFICER STOCK OPTION
PLAN TO INCREASE THE NUMBER OF SHARES AUTHORIZED FOR GRANT BY 400,000.
FOR [_] AGAINST [_] ABSTAIN [_]
3. PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION TO EFFECT UP
TO A ONE-FOR-FOUR REVERSE STOCK SPLIT, PROVIDING THE BOARD OF DIRECTORS
DETERMINES TO DO SO.
FOR [_] AGAINST [_] ABSTAIN [_]
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
<PAGE>
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholders. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED IN FAVOR OF PROPOSALS 1 THROUGH 3 AND IN THE DISCRETION OF THE PROXIES
UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Please sign exactly as name appears herein. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
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DATE
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SIGNATURE
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SIGNATURE IF HELD JOINTLY
PLEASE MARK, SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
THE ABOVE SIGNATURE HEREBY ACKNOWLEDGES
RECEIPT OF THE NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS DATED APRIL 15, 1999, AND
THE PROXY STATEMENT FURNISHED THEREWITH.
