<PAGE>
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
[_] Preliminary Information Statement [_] Confidential, for Use of the
Commission Only (as permitted
by Rule 14c-5(d)(2))
[x] Definitive Information Statement
HOMECAPITAL INVESTMENT CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant As Specified In Charter)
Payment of Filing Fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
[_] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
--------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
(1) Amount Previously Paid:
--------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------
(3) Filing Party:
--------------------------------------------------------------------------
(4) Date Filed:
--------------------------------------------------------------------------
Notes:
<PAGE>
[LOGO OF HOMECAPITAL APPEARS HERE]
HOMECAPITAL INVESTMENT CORPORATION
6836 AUSTIN CENTER BOULEVARD
SUITE 280
AUSTIN, TEXAS 87831
__________________
NOTICE OF STOCKHOLDER ACTION
BY WRITTEN CONSENT
__________________
To the Stockholders of
HOMECAPITAL INVESTMENT CORPORATION:
Notice is hereby given that management and affiliates of management (the
"Management Group") of HomeCapital Investment Corporation, a Nevada corporation
("Company"), holding approximately 83% of the voting power of the outstanding
shares of capital stock of the Company, shall on August 16, 1996, elect nine (9)
Directors to the Company's Board of Directors, approve, adopt and ratify the
HomeCapital Investment Corporation 1996 Employee Stock Option Plan and appoint
independent public accountants for the Company. Under Nevada law, no action
will be required by stockholders of the Company other than the Management Group
for election of the Directors, approval of the Stock Option Plan and the
appointment of accountants.
The accompanying Information Statement is furnished pursuant to Section
14(c) of the Securities Exchange Act of 1934, as amended.
Sincerely,
/s/ John W. Ballard
--------------------
John W. Ballard
Chairman of the Board,
President and Chief
Executive Officer
Dated: July 26, 1996
WE ARE NOT ASKING FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
<PAGE>
HOMECAPITAL INVESTMENT CORPORATION
6836 AUSTIN CENTER BOULEVARD
SUITE 280
AUSTIN, TEXAS 87831
__________________
INFORMATION STATEMENT
(PURSUANT TO SECTION 14(C) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED)
__________________
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
This Information Statement, which is first being mailed to stockholders on
or about July 26, 1996, is furnished by HomeCapital Investment Corporation, a
Nevada corporation (the "Company"), in connection with the taking of corporate
action without a meeting by less than unanimous written consent on August 16,
1996.
CORPORATE ACTION AND NOTICE
Subject to special voting rights granted to holders of the Company's
Preferred Stock, Series A, $.01 par value per share ("Series A Preferred
Stock"), holders of the Company's Common Stock, $.01 par value per share
("Common Stock"), and Series A Preferred Stock are entitled to one (1) vote per
share voting as a single class on matters presented to the Company's
stockholders for approval. Management and affiliates of management of the
Company (the "Management Group"), holding the right to vote an aggregate of
6,055,711 shares of Common Stock and 1,166,667 shares of Series A Preferred
Stock, are entitled in the aggregate to 7,222,378 votes or approximately 83% of
the voting power of the outstanding shares of capital stock of the Company
entitled to vote on matters presented to its stockholders. The Management Group
intends to take corporate action by written consent without a meeting on August
16, 1996, by electing the nominees named herein to the Company's Board of
Directors, by approving, adopting and ratifying the HomeCapital Investment
Corporation 1996 Stock Option Plan described herein, and by appointing
independent public accountants for the Company. On July 1, 1996, there were
outstanding 1,500,000 shares of Series A Preferred Stock and 7,225,617 shares of
Common Stock. Only stockholders of record at the close of business on such date
will be entitled to receive a copy of this Information Statement.
ELECTION OF DIRECTORS
Pursuant to such stockholder action without a meeting by less than
unanimous written consent, the nine (9) nominees named below are to be elected
to the Company's Board of Directors, each to hold office for one (1) year and
until his successor is elected and qualified. If any nominee should become
unavailable for election, the Management Group intends to vote its shares for
such substitute nominee as may be proposed by the Board of Directors. No
circumstances are now known, however, that would prevent any of the nominees
from serving.
Pursuant to Preferred Stock Purchase Agreement, dated May 3, 1996, as
amended, between the Company and HCI Equity Partners, L.P. ("HCI"), HCI acquired
1,000,000 shares of the Series A Preferred Stock and became entitled to nominate
two (2) of the nine (9) members of the Company's Board of Directors. Messrs.
Charles R. Leone, III, and Robert R. Neyland identified below are the persons
nominated by HCI for election to the Company's Board of Directors.
The information appearing below with respect to the business experience of
each nominee and other directorships held has been furnished by each nominee as
of the date hereof.
<PAGE>
DIRECTOR NOMINEES
<TABLE>
<CAPTION>
Director
Name Age Since
---- --- -------
<S> <C> <C>
JOHN W.BALLARD..................................................................... 58 1994
President and Chief Executive Officer of the Company since August, 1994,
Chairman of the Board of Directors of the Company since November, 1994, and
a Director, President and Chief Executive Officer of HomeOwners Mortgage &
Equity, Inc., a Delaware corporation ("HOME"), the Company's operating
subsidiary, since June 1993. Prior to assuming these positions, from April
1989 through May 1993, Mr. Ballard was President and Chief Executive
Officer of American Savings Mortgage Corporation (a second lien mortgage
company).
E. JEFF BOMER...................................................................... 60 1994
Secretary of the Company since August 1994, and Chairman of the Board of
Directors of HOME since July 1993. Mr. Bomer has been President of
SynerMark Realty Services, Inc. (a real estate organization), a subsidiary
of SynerMark Holdings, L.P. (a real estate holding company) since July
1995, prior to which he was President and Chief Executive Officer of Austin
Real Estate Services, Inc. (dba Davis & Associates, a real estate services
firm) from September 1985 until its merger in July 1995 into SynerMark
Holdings, L.P.
GARY J. DAVIS...................................................................... 42 1994
Vice Chairman of the Board of Directors of the Company since August 1994 and
consultant to HOME from November 1993 through March 1996. Mr. Davis has
been a general partner of Curtis Davis Realtors (a real estate firm) since
March 1974, and since September 1991 has been President of Investment
Property Advisors, Inc. (a real estate investment and management firm),
prior to which he was consultant to Culpepper Properties (a real estate and
development firm) from September 1990.
CHARLES R. LEONE, III.............................................................. 37 1996
President of Penntex Investments, Inc., since January 1992, a general partner of HCI,
and since October 1990 has been President of Federal Services Corporation
(a loan servicing and venture capital firm).
ROBERT R. NEYLAND................................................................. 43 1996
The sole Manager of HCIE, L.L.C. since May 1996, a general partner of HCI, and
partner of Living Suites (a real estate management firm) from September
1990 to June 1996. Mr. Neyland is also a Director of Capital Communities
Corporation.
PETER A. PYHRR..................................................................... 54 1994
President of Hospital Forms and Systems Corp. (a printing firm) since October
1979, and President of Magnetic Ticket & Label Corp. (a printing firm)
and President of HFS Corp. (a business forms company) since July 1982. Mr.
Pyhrr has also been a Director of HOME since June 1993.
STEPHEN A. PYHRR................................................................... 52 1994
President of SynerMark Investment, Inc. (a real estate investment firm), a
wholly-owned subsidiary of SynerMark Holdings, L.P., since July 1995. Mr.
Pyhrr was Executive Vice President of Austin Real Estate Services dba Davis
&
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
Associates (a real estate services firm) from September 1985 until its
merger into SynerMark Holdings, L.P. in July 1995. Mr. Pyhrr has also been
a Director of HOME since June 1993.
WALTER W. STOEPPELWERTH............................................................ 62 1996
Co-founder of HomeTech Information Systems, Inc. (a construction industry
publisher) since 1965, a nationally recognized remodeling industry
spokesman and educator, and a noted columnist and author of publications on
home remodeling and renovations.
HELEN T. WATKINS................................................................... 43 -
For over fourteen (14) years prior to assuming homemaking opportunities, Ms.
Watkins was employed in professional securities trading and portfolio
management activities by Paragon Associates (Dallas - 1985-1988), Republic
National Bank (Dallas - 1980-1985) and Texas Commerce Bank (Houston -1974-
1980). Ms. Watkins has been engaged as a homemaker and leader in community
parent and charitable organizations since March 1988.
</TABLE>
Messrs. Peter A. Pyhrr and Stephen A. Pyhrr are brothers.
During the fiscal year ended in September 30, 1995, there were four (4)
Board of Director actions taken without meetings and nine (9) actions taken by
means of duly called meetings. The Board does not maintain standing audit,
compensation or nominating committees.
EXECUTIVE OFFICERS
Set forth below is the age, positions held with the Company and its
subsidiary and certain business experience information for each of the Company's
executive officers who are not nominees for election to the Board of Directors.
TOMMY M. PARKER, 47, Executive Vice President and Treasurer of the Company
and Executive Vice President of HOME (Chief Financial Officer and Chief
Operating Officer) since June 1996. Mr. Parker served as Vice President of
Finance and Chief Financial Officer of Whataco, Inc. (a fast food franchisee)
from September 1991 to June 1996, prior to which he was an independent
consultant to the financial services industry from May 1990.
JOANN ODOM, 52, Senior Vice President of HOME since September 1993. Ms.
Odom served as Vice President of American Savings Mortgage Corporation (a second
lien mortgage loan company) from November 1985 to September 1993.
GENE V. MORRISON, 42, Senior Vice President of HOME since August 1995. Mr.
Morrison served as Special Assistant to the U.S. Secretary of Housing and Urban
Development from July 1993 to August 1995, and was owner of The Morrison Company
(a finance and management consulting firm) from 1987 until July 1993.
GLENN R. THERIAC, 59, Senior Vice President of HOME since September 1993.
Mr. Theriac served as a Vice President of American Savings Mortgage Corporation
from October 1992 to July 1993, prior to which he was a Vice President of
Savings of America (a mortgage loan association) from October 1985.
CRAIG H. WITTLER, 48, Regional Vice President of HOME since February 1994.
Mr. Wittler served as Senior Vice President of Mortgage Concepts (a mortgage
banking company) from October 1991 until January 1994, prior to which was a Vice
President of Progressive Bank (a savings bank) from September 1985.
4
<PAGE>
REBECCA F. BLANCHARD, 36, Assistant Treasurer of the Company since
September 1994, and Controller of HOME since August 1993. Ms. Blanchard served
as Controller of American Savings Mortgage Corporation from April 1988 to August
1993.
ANNA M. WALKER, 53, Assistant Secretary of the Company since September
1995, and Secretary of HOME since July 1993. Ms. Walker served as Corporate
Secretary of American Savings Mortgage Corporation from June 1987 to July 1993.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF EXECUTIVE OFFICERS
The executive officers of the Company are compensated by HOME and do not
receive compensation for their services from the Company as such, except for
compensation that may be paid in securities or options to purchase securities of
the Company. No securities of the Company were issued and no options to
purchase securities of the Company were granted as compensation for services,
and no outstanding options were exercised, during the fiscal year ended
September 30, 1995.
The following table summarizes the annual and long-term compensation of
the Company's chief executive officer for the fiscal years ended September 30,
1995, 1994 and 1993. No other executive officers received compensation in the
excess of $100,000 during any of the periods covered.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Stock
Name and Options
Principal Fiscal (Common Other
Position Year Salary Shares) Compensation/(3)/
- - ---------------------- ------ -------- ------------- -----------------
<S> <C> <C> <C> <C>
JOHN W. BALLARD/(1)/ 1995 $150,000 - 14,384
Chairman of the 1994 150,000 409,668/(2)/ 18,655
Board, President 1993 55,769 - /(2)/ 24,364/(4)/
and Chief Executive
Officer
</TABLE>
/(1)/ Salaries and other compensation to Mr. Ballard were paid by HOME as
compensation for his services as President and Chief Executive Officer
of HOME. See "Executive Contracts" below. Additionally, HOME provides
and maintains an automobile and mobile telephone, and provides health
and group life insurance and reimbursement of business-related expenses
to Mr. Ballard. Mr. Ballard received no additional compensation for
serving as Chairman of the Board and President of the Company.
/(2)/ In June, 1993 Mr. Ballard was granted a restricted stock option to
purchase 555 shares of HOME common stock in connection with his
employment agreement ("Ballard HOME option"). In August, 1994, in
connection with the reverse acquisition of the Company's predecessor by
former stockholders of HOME (the "HOME Transaction"), the Ballard HOME
option was canceled, and Mr. Ballard was granted a fully-vested, seven-
year option to acquire 409,668 shares of Company Common Stock at an
exercise price of $.1626 per share. Mr. Ballard was neither granted nor
exercised any options during the 1995 fiscal year, and at September 30,
1995, the unexercised options held by Mr. Ballard had a determined value
of approximately $189,430 based upon the closing bid price of $.625 per
share of Common Stock on the OTC Bulletin Board of the National
Association of Securities Dealers, Inc. at such date.
5
<PAGE>
/(3)/ Includes $4,984, $6,700 and $2,000 for fiscal years 1995, 1994 and 1993,
respectively, representing the value of insurance premiums paid by HOME
for Mr. Ballard; $8,789, $11,845 and $2,687 for fiscal years 1995, 1994
and 1993, respectively, representing the cost to HOME of providing and
maintaining an automobile and mobile phone for Mr. Ballard; and $611 and
$110 for fiscal years 1995 and 1994, respectively, for country club
membership fees paid by HOME for Mr. Ballard.
/(4)/ Includes $19,677 for fiscal year 1993 representing amounts paid to Mr.
Ballard for moving expenses and signing bonus.
EXECUTIVE CONTRACTS
Effective June 21, 1993, HOME entered into a five (5)-year employment
agreement with John W. Ballard as President and Chief Executive Officer of HOME
("Ballard Employment Agreement") providing for (i) an annual base salary of
$150,000, and (ii) an annual incentive bonus equal to 25% of his base salary if
the operating results of HOME exceed certain earnings projections. If earned
the incentive bonus is payable in common stock or cash at the election of the
employee. Mr. Ballard was granted a restricted stock option for the purchase of
555 shares of HOME common stock vesting over the term of the Ballard Employment
Agreement ("Ballard HOME option"). The Ballard HOME option was cancelled and
converted into a fully-vested option to purchase 409,668 shares of Company
Common Stock at $.1626 per share on August 26, 1994 in connection with the HOME
Transaction. Pursuant to the Ballard Employment Agreement, Mr. Ballard also
purchased 555 shares of HOME common stock, which were subsequently converted to
409,671 shares of Company Common Stock in connection with the HOME Transaction,
in consideration for the $55,500 five (5)-year promissory note of Mr. Ballard,
bearing interest at 6% per annum and payable interest only until maturity. In
the event that Mr. Ballard is terminated for "cause" (as defined in the Ballard
Employment Agreement) he is not entitled to receive any further compensation
other than that which is earned prior to the termination date. In the event
that Mr. Ballard is terminated by HOME other than for "cause," or in the event
that Mr. Ballard terminates the Ballard Employment Agreement for "good reason"
(as defined in the Ballard Employment Agreement), then he is entitled to receive
all compensation to which he would be entitled during the remaining term of the
Ballard Employment Agreement, including his annual base salary of $150,000. Mr.
Ballard also serves as Chairman of the Board, President and Chief Executive
Officer of the Company for no additional compensation.
HOME has entered into an employment agreement with Tommy M. Parker who
serves as an Executive Vice President of HOME with the functions of Chief
Operating Officer and Chief Financial Officer of HOME for a term of three (3)
years commencing June 1, 1996, that is automatically renewable from year to year
unless terminated on 90-days notice ("Parker Employment Agreement"). Mr. Parker
is entitled to (i) a base salary of $125,000 for the first year increasing by
$25,000 each year for the next two (2) years and thereafter during any renewal
term at the discretion of the Board of Directors, but not less than the base
salary of the previous year; (ii) an annual incentive bonus equal to twenty-five
percent (25%) of the aggregate bonus pool under an incentive bonus plan to be
established by the Board of Directors of HOME based upon the consolidated net
income of the Company; (iii) performance bonuses equal to one-half percent (
1/2%) of the net proceeds to the Company from its next public offering of
securities for cash, and two percent (2%) of net savings to the Company each
year of income taxes resulting from tax planning strategies introduced by Mr.
Parker, and (iv) a one-time grant of options to purchase 150,000 shares of
Common Stock under the Company's 1996 Stock Option Plan. Mr. Parker is also
entitled to participate in group health, life insurance and other employee
benefit plans, reimbursement of business-related expenses, an automobile
allowance of $500.00 per month and mobile telephone, reimbursement for expenses
of maintaining his certificate and license with the Texas State Board of Public
Accountancy, and a signing or relocation bonus of $5,000 plus moving expenses
(and an amount equal to federal income taxes payable on such payments) and
closing costs of the purchase of a residence in Austin, Texas. Mr. Parker also
serves as Executive Vice President and Treasurer of the Company for no
additional compensation.
6
<PAGE>
COMPENSATION TO DIRECTORS
During the fiscal year ended September 30, 1995, Directors of the Company
did not receive any compensation for their services as Directors. Directors are
reimbursed for travel expenses incurred in attending meetings.
Mr. Gary J. Davis, a Director of the Company, served as a full-time
consultant to HOME on marketing and new business development from November, 1993
through March 31, 1996 at a monthly consulting fee of $6,000, of which $78,000
was received during the 1995 fiscal year. While serving as consultant, Mr. Davis
was provided health insurance and reimbursement of business-related expenses.
Messrs. Charles R. Leone, III, and Robert R. Neyland, Directors of the
Company, have been engaged as financial and business development consultants to
the Company for a one-year period for annual fees of $20,000 each pursuant to an
agreement effective April 12, 1996, and have been designated as the nominees of
HCI to the Board of Directors of the Company pursuant to the HCI Agreement more
fully described under "Management Relationships and Transactions" below.
The Board of Directors of the Company has approved a three (3) year
incentive plan to encourage and compensate Directors of the Company or HOME for
developing customer relationships on behalf of HOME with home improvement
contractors, suppliers, distributors and home improvement retailers that result
in new sources of loan production for HOME. A Director will be entitled to be
compensated in the amount of one percent (1%) for the first two years and one-
half percent (1/2%) for the third year of loans funded by HOME during each year
from sources initiated by the Director. In order to be eligible for incentive
compensation with respect to loans generated through suppliers and distributors
of goods and services to the home remodeling industry, such as lumber yards and
home improvement product chain stores, a Director must have participated with
HOME in producing training seminars and workshops for employees of the customer.
HOME has agreed to compensate Walter W. Stoepplewerth for featuring or
promoting home improvement loan products of HOME at seminars and workshops for
home improvement contractors and industry suppliers of goods and services. Mr.
Stoepplewerth will receive $2,000 plus expenses for each event.
401(K) PROFIT SHARING PLAN
HOME sponsors a 401(k) plan, a savings and investment plan intended to be
qualified under Section 401 of the Internal Revenue Code of 1986, as amended
(the "Code"). All employees of HOME (including officers and directors who are
employees of HOME) who are at least 20 1/2 years of age may participate in the
plan. Participating employees may make pre-tax contributions, subject to
limitations under the Code, of a percentage (not to exceed 15%) of their total
annual compensation and such amounts (and the investment earnings thereon) will
be fully vested at all times. HOME, in its sole discretion, may make matching
contributions (the amount, if any, to be determined by its Board of Directors
with respect to each year) for the benefit of all participants who make pre-tax
contributions, as well as discretionary contributions (in such amounts, if any,
as may be determined by the Board of Directors of HOME) for the benefit of all
participants regardless of whether they elect to make pre-tax contributions to
the 401(k) plan. Any such matching or discretionary contributions (and the
investment earnings thereon) will vest 20% after two (2) years of service and an
additional 20% per year of service thereafter until fully vested after six (6)
years of service, provided that such contributions become 100% vested upon the
employee's death, disability or retirement. The plan was inaugurated January 1,
1995, and HOME has not authorized or made any contributions to the plan through
December 31, 1995.
1996 STOCK OPTION PLAN
The HomeCapital Investment Corporation 1996 Stock Option Plan was approved
as of March 21, 1996, by the Board of Directors of the Company to provide
options to purchase up to an aggregate of 500,000 shares of Common Stock as
financial incentives to directors, executive officers and other key employees of
the Company and HOME. Reference is made to "Approval of HomeCapital Investment
Corporation 1996 Stock
7
<PAGE>
Option Plan" for a description of the Stock Option Plan and options granted
thereunder. It is expected that the Stock Option Plan will be approved, adopted
and ratified by stockholder action without a meeting by less than unanimous
written consent.
8
<PAGE>
Affiliated Relationships of Certain Directors, Officer & Affiliates of the
Company
<TABLE>
<CAPTION>
GARY J. E. JEFF PETER A. STEPHEN
Affiliated Entities DAVIS BOMER PYHRR A. PYHRR
- - ------------------- ------- ------- ------- --------
<S> <C> <C> <C> <C>
Brownwood Market Place, L.C. 50% Member
JDB Investments, Ltd. General &
Limited Partner
PAP Investments, Ltd. General &
Limited Partner
SDP Investments, Ltd. General &
Limited Partner
Hospital Forms & Systems
Corp. Owner
Austin-Tanglewood Properties,
Ltd. /(1)/ Limited Partner /(2)/
MV WALLSTREET, Ltd. /(1)/ Limited Partner /(2)/
</TABLE>
<TABLE>
<CAPTION>
JOHN W. RICHARD CHARLES R. ROBERT R.
Affiliated Entities BALLARD F. WATKINS LEONE, III NEYLAND
- - -------------------------- -------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
EWMW Limited Partnership General Partner/(3)/ /(3)/
Eaglewood Properties I,
Ltd. Officer and
Director
of General
Partner
Plaza Realty One Limited
Partnership Officer and
Director
of General
Partner
HCI Equity Partners, L.P. Officer & Sole Manager of
Director General Partner
of General
Partner
HCIE, L.L.C./(4)/ Sole Manager
Penntex Investments, Inc./(4)/ Officer &
Director
</TABLE>
- - ----------------------
/ (1)/ JDB Investments, Ltd. is a limited partner
/ (2)/ SDP Investments, Ltd. is a limited partner
/ (3)/ Effective June 30, 1996, Mr. Ballard ceased to be and Mr.
Watkins became the sole general partner of EWMW Limited Partnership
/ (4)/ A general Partner of HCI Equity Partners, L.P.
9
<PAGE>
MANAGEMENT RELATIONSHIPS AND TRANSACTIONS
In addition to transactions described elsewhere in this Information
Statement, the following describes certain relationships and related
transactions during the last two (2) years or proposed transactions of
management and affiliates of management with the Company or HOME.
AFFILIATE RELATIONSHIPS
The accompanying table on page 9 sets forth the affiliation of entities and
individuals described in the transactions discussed herein. References to the
"HOME Transaction" mean the transaction consummated August 26, 1994 in
accordance with the Stock Exchange Agreement, dated June 1, 1994, pursuant to
which the stockholders of HomeOwners Mortgage & Equity, Inc., a Delaware
corporation ("HOME") acquired approximately 83% of the outstanding Common Stock
of the Company and HOME became a wholly-owned subsidiary of the Company.
$180,000 LOAN TO HOME BY DIRECTORS, OFFICERS AND AFFILIATES AND CONVERSION INTO
COMMON STOCK OF THE COMPANY
On April 14, 1994, various directors, officers and affiliates made six
unsecured loans of $30,000 each (an aggregate of $180,000) to HOME to enhance
HOME's capital and liquidity for operations, bearing interest at ten percent
(10%) per annum and maturing October 11, 1994. The loans were made by JDB
Investments, Ltd. ("JDB"), an affiliate of E. Jeff Bomer, PAP Investments, Ltd.
("PAP"), an affiliate of Peter A. Pyhrr, SDP Investments, Ltd. ("SDP"), an
affiliate of Stephen A. Pyhrr, John W. Ballard ("Ballard"), Gary J. Davis,
Trustee ("Davis"), an affiliate of Gary J. Davis, and Eaglewood Properties I,
Ltd. ("Eaglewood"), an affiliate of Richard F. Watkins. At the time the loans
were made to HOME, Messrs. Davis, Peter Pyhrr, Stephen Pyhrr and Watkins were
Directors of HOME, Mr. Ballard was a Director and President of HOME and Mr.
Bomer was Chairman of the Board and Treasurer of HOME.
On September 29, 1994, the loans to HOME were assumed by the Company, and
on October 11, 1994, the Company issued its promissory notes each in the
principal amount of approximately $31,500, the amount of principal and accrued
interest due under each of the six HOME notes, to each of JDB, PAP, SDP,
Ballard, Davis and Eaglewood, bearing interest at ten percent (10%) per annum
and maturing on December 31, 1994. Each of the note holders agreed to extend
these notes at maturity. The Company assumed the HOME loans in order to enhance
the capital of HOME, so that HOME could meet its regulatory net worth
requirement in compliance with its HUD Title I Contract of Insurance. At the
time the Company notes were issued, Messrs. Davis, Peter Pyhrr and Stephen Pyhrr
were Directors of the Company, Mr. Ballard was Chairman of the Board and
President of the Company and Mr. Bomer was a Director, Secretary and Treasurer
of the Company.
In September, 1995, the Board of Directors of the Company authorized the
issuance of shares of the Common Stock of the Company in discharge and payment
of the notes and accrued interest thereon. Meanwhile, the Company note held by
Davis had been sold and transferred to Eaglewood. Accordingly, effective
September 28, 1995, the holders of the six (6) notes, with an aggregate
principal balance of $188,891 and accrued and unpaid interest of approximately
$18,250, exchanged the notes for an aggregate 331,434 newly issued, restricted
shares of Common Stock of the Company. The exchange price per share of Common
Stock was based on the trailing thirty (30) day average bid price for the
Company's Common Stock on the OTC Bulletin Board. As a result of this conversion
of debt JDB, PAP, SDP and Ballard each received 55,239 shares and Eaglewood
received 110,478 shares of Common Stock.
$300,000 LOAN TO HOME BY AN AFFILIATE OF PETER A. PYHRR
On August 8, 1994, Hospital Forms & Systems Corp. ("HFS"), an affiliate of
Peter A Pyhrr, a Director of the Company, made a $300,000 unsecured loan to
HOME, bearing interest at prime plus one and one-half percent (1 1/2%) per
annum, and maturing September 30, 1994. The Company assumed the loan on
10
<PAGE>
September 8, 1994 and HOME was relieved of liability in order to enhance the
capital of HOME, so that HOME would meet its regulatory net worth requirement
under its HUD Title I Contract of Insurance. The loan was repaid shortly after
maturity from the proceeds of the Horizon Bank loan described herein. Neither
HFS nor Mr. Pyhrr received any compensation for making the loan other than
payment of the stated interest rate.
GUARANTY OF $300,000 HORIZON BANK LOAN
On October 5, 1994, the Company obtained a $300,000 unsecured loan from
Horizon Bank and Trust, SSB ("Horizon Bank"), bearing interest at the Horizon
Bank base rate plus two percent (2%) per annum, requiring monthly payments of
principal and interest, and maturing on demand but no later than April 5, 1998.
The proceeds of the loan were utilized to repay a loan to HOME by HFS, an
affiliate of Peter A. Pyhrr, a Director of the Company.
E. Jeff Bomer, Stephen A. Pyhrr, Peter A. Pyhrr, Gary J. Davis and their
affiliates have pledged personal assets to Horizon Bank to secure the Horizon
Bank loan to the Company: JDB, Peter A. Pyhrr and SDP have pledged a collective
99% limited partner interest in Austin-Tanglewood Properties, Ltd., a Texas
limited partnership which owns an apartment complex in Austin, Texas; JDB, Peter
A. Pyhrr and SDP have pledged a collective 90.5% limited partner interest in MV
WALLSTREET, Ltd., a Texas limited partnership which owns an office service real
estate project in Austin, Texas; Gary J. Davis has pledged a 50% membership
interest in Brownwood Market Place, L.C., a Texas limited liability company
which owns real property in Brown County, Texas; and E. Jeff Bomer has pledged
his 46% limited partner interest and 1% general partner interest in JDB.
Additionally, the loan is jointly and severally guaranteed by E. Jeff Bomer,
Gary J. Davis, Stephen A. Pyhrr, Peter A. Pyhrr, and John W. Ballard. None of
the guarantors will receive any compensation from the Company for their pledge
of assets or guarantees.
$125,000 LOAN BY PETER A. PYHRR AND CONVERSION TO SERIES A PREFERRED STOCK
On January 27, 1995, Peter A. Pyhrr, a director of the Company, made a
$125,000 unsecured demand loan to the Company to enhance its liquidity for
operations, bearing interest at prime plus one and one-half percent (1 1/2%) per
annum. Pursuant to a letter agreement, dated January 27, 1995, among Messrs.
John W. Ballard, Gary J. Davis, Richard F. Watkins in behalf of EWMW and Plaza
Realty One Limited Partnership, E. Jeff Bomer in behalf of JDB, Stephen A. Pyhrr
in behalf of SDP and Peter A. Pyhrr in behalf of PAP (herein collectively,
"loan guarantors"), the Company and Mr. Peter Pyhrr, the loan guarantors agreed
to underwrite repayment of the loan by advancing funds to the Company in amounts
set forth in accordance with the letter agreement in the event that the loan was
not repaid by the Company upon demand. The loan was given priority of payment
over the loan obligations of the Company to Horizon Bank described elsewhere in
this Information Statement, and proceeds from exercise of outstanding Company
warrants were to be applied first in payment of the loan. In addition, if EWMW
had been called upon to advance money under its guaranty, then it would have
been entitled to offset against any such advance up to the amount of $20,000
already owed by the Company to EWMW as the result of a previous advance to the
Company. Messrs. Ballard, Bomer, Davis, Peter Pyhrr and Stephen Pyhrr are
Directors of the Company and Mr. Watkins is an affiliate of the Company. None
of the loan guarantors nor their affiliates received any special compensation
for extending the guaranty, and Mr. Peter Pyhrr did not receive any compensation
other than the stated interest as consideration for the loan.
On June 18, 1996, in connection with the Series A Preferred Stock
Placement (herein described), Mr. Peter Pyhrr tendered the $125,000 principal of
the loan and was issued 83,333 shares of Series A Preferred Stock of the Company
therefor at $1.50 per share.
CONVERSION OF HOME PREFERRED STOCK
Pursuant to the terms of a Conversion Rights Exchange Agreement executed as
a part of the HOME Transaction holders of outstanding shares of preferred stock
of HOME were entitled to convert shares of HOME preferred stock and accrued
divid ends into shares of Company Common Stock in accordance with the
11
<PAGE>
terms of the Certificate of Designation of Preferences and Rights of Preferred
Stock of HOME. Effective January 9, 1995, the holders of all 2,000 outstanding
shares of HOME preferred stock converted the preferred stock having a par value
of $400,000 and accrued and unpaid dividends of $38,953.41 thereon into an
aggregate of 1,619,755 shares of Common Stock of the Company. Various officers,
directors and affiliates of the Company received Company Common Stock as a
result of the conversion: PAP was issued 437,394 shares, SDP was issued 291,596
shares, E. Jeff Bomer was issued 145,798 shares and Plaza Realty One Limited
Partnership was issued 307,796 shares. The balance of the Company Common Stock
issued in the transaction was issued to non-affiliates of the Company.
ISSUANCE AND CONVERSION OF 2,000 SHARES OF COMPANY PREFERRED STOCK
On September 28, 1995, the Company issued 2,000 shares of $.01 par value
nonvoting preferred stock, bearing a dividend rate of 10% per annum, at a
purchase price of $100 per share, of which 500 shares were sold to each of PAP,
SDP, JDB and Eaglewood. The preferred stock was redeemable by the Company at
par prior to January 16, 1996, and thereafter each share was convertible into
160 shares of Company Common Stock. The $200,000 proceeds from the sale of the
preferred stock were utilized by the Company to repay HOME for monies previously
advanced by HOME to the Company to pay expenses of the HOME Transaction and debt
service on the Horizon Bank loan to the Company. In meeting the net worth test
in accordance with HUD regulations applicable to HOME, intercompany advances
such as those from HOME to the Company are not qualified assets. The effect of
the sale of the preferred stock and use of the proceeds to repay the HOME
advances was a $200,000 increase in HOME's net worth for HUD qualification
purposes. Effective April 19, 1996, the holders of all 2,000 outstanding shares
of nonvoting preferred stock converted the preferred stock and accrued and
unpaid dividends thereon into an aggregate of 337,708 shares of Company Common
Stock, with each of PAP, SDP, JDB and Eaglewood receiving 84,427 shares of
Company Common Stock.
$200,000 LOAN BY STOCKHOLDERS
On January 29, 1996, certain stockholders who are directors, officers and
affiliates of the Company made unsecured, non-interest bearing advances to the
Company in the aggregate principal amount of $200,000 which were due to be
repaid upon demand, including advances in the amount of $100,000 from Peter A.
Pyhrr, a Director of the Company, $25,000 each from E. Jeff Bomer, a Director of
the Company, and SDP, an affiliate of Stephen A. Pyhrr, a Director of the
Company, and $50,000 from Eaglewood, an affiliate of the Company. These
advances were utilized by the Company to increase the equity capitalization of
HOME, so that HOME could achieve the level of capitalization required by FHA to
allow HOME to approve new correspondents and dealers, without prior submission
to FHA. As a result of the Series A Preferred Stock Placement, the advances by
Peter Pyhrr and SDP in the principal amount of $100,000 and $25,000,
respectively, were tendered in payment for the issuance of 66,667 shares and
16,667 shares, respectively, of Company Common Stock; and the remaining $75,000
principal amount of the advances by Mr. Bomer and by Eaglewood were repaid out
of the proceeds from sale of shares of Series A Preferred Stock in connection
with the Series A Preferred Stock Placement.
$1,500,000 SERIES A PREFERRED STOCK PLACEMENT
As of June 18, 1996, the Company sold and issued an aggregate of 1,500,000
shares of its Preferred Stock, Series A, $.01 par value per share, for the
purchase price of $1.50 per share or an aggregate gross consideration of
$2,250,000, most of which was purchased by certain directors and officers of the
Company and HOME, and affiliates of such persons ("Series A Preferred Stock
Placement"). An aggregate of 1,000,000 shares of the Series A Preferred Stock
was purchased by HCI pursuant to the Preferred Stock Purchase Agreement, dated
May 3, 1996, as amended ("HCI Agreement"). Messrs. Charles R. Leone, III and
Robert R. Neyland, who are affiliates of the general partners of HCI have been
elected to the Board of Directors of the Company pursuant to director-election
provisions of the HCI Agreement. The HCI Agreement provides that the Board of
Directors of the Company will not exceed nine (9) members and that holders of
the majority of the shares of Series A Preferred Stock purchased by HCI shall be
entitled to designate two (2) nominees to the Company's Board of Directors, as a
separate class, as long as at least fifty percent (50%) of the shares of Series
A Preferred Stock purchased by HCI remain outstanding. In addition, the HCI
Agreement imposes
12
<PAGE>
certain covenants upon the Company, including maintenance of the Company's
eligibility under the Fannie Mae seller/servicer loan purchase program,
maintenance of the Company's FHA insurance for Title I loans (with certain
exceptions), compliance with other material contracts and loans, and delivery of
annual and periodic reports to holders of the shares of Series A Preferred Stock
purchased by HCI, among other things. A total of 150,000 shares of the Series A
Preferred Stock was issued to Peter A. Pyhrr in payment and discharge of an
aggregate of $225,000 principal amount of loans by Mr. Pyhrr to the Company and
an additional 36,495 shares of the Series A Preferred Stock were purchased by or
for the benefit of members of Mr. Pyhrr's family. An aggregate of 16,667 shares
of Series A Preferred Stock were issued to SDP, an affiliate of Stephen A.
Pyhrr, in payment and discharge of $25,000 principal amount of a loan by SDP to
the Company, and an additional 24,833 shares of the Series A Preferred Stock
were purchased by members of Mr. Stephen Pyhrr's family. An aggregate of 90,333
shares of the Series A Preferred Stock were purchased by or in behalf of
officers and employees of the Company and HOME and members of their families.
The Series A Preferred Stock has a cumulative annual preferred dividend of
$.18 per share, payable quarterly before any distribution to holders of Common
Stock, with mandatory payment of dividends required for the first year after
issue, and shares of Series A Preferred Stock are convertible at any time into
Common Stock at a conversion rate, subject to certain adjustments, of one (1)
share of Common Stock for each share of Series A Preferred Stock. The Series A
Preferred Stock is redeemable at par plus accrued, unpaid dividends, at the
option of the Company, at any time after one (1) year from the date of issuance,
and holders of a majority of the outstanding shares of Series A Preferred Stock
may require redemption at any time after three (3) years at par plus any
accrued, unpaid dividends. Each share of Series A Preferred Stock is entitled
to one (1) vote with respect to all matters submitted to a vote of the
stockholders of the Company, and holders of Series A Preferred Stock are
entitled to vote as a class as provided by law in connection with any amendment
to the Articles of Incorporation or Bylaws of the Company, or any other
corporate action that would adversely affect the holders of Series A Preferred
Stock. Shares of Series A Preferred Stock are entitled to a liquidation
preference of $1.50 per share, plus any accrued, unpaid dividends, before any
distribution to holders of Common Stock upon dissolution of the Company.
Holders of all shares of Series A Preferred Stock purchased in the Series A
Preferred Stock Placement were granted conjunctive or "piggyback" registration
rights covering the shares of Common Stock into which the Series A Preferred
Stock is convertible after nine (9) months from the date of issuance of the
Series A Preferred Stock which rights terminate after three (3) years from the
date of issuance of the Series A Preferred Stock. No fees, commissions or other
special compensation was paid for placement of the shares in connection with the
Series A Preferred Stock Placement. The Company has entered into a consulting
agreement with representatives of HCI providing for fees aggregating $60,000
over a one (1)-year period, including $20,000 to each of Messrs. Leone and
Neyland, Directors of the Company.
INSPECTION SERVICES ARRANGEMENT
Since April, 1994 HOME has engaged HomeSpec of Texas ("HomeSpec"), a
proprietorship of David W. Ballard, son of John W. Ballard, Chairman of the
Board and President of the Company and Director and President of HOME, to
provide or arrange for inspections of home improvement contract work financed by
loans funded by HOME. All Title I loans in excess of $7,500 are required by
applicable regulations to have a physical inspection of the improvements
financed, and HOME currently collects an inspection fee of $75 with respect to
each such loan funded by HOME. HOME has made arrangements with HomeSpec to
provide the necessary inspection services, directly or through a network of
appraisers or realtors in other locations, for fees that do not exceed $75 for
each inspection. In fact, inspection fees by HomeSpec have generally ranged
from $35 to $55 per loan depending upon the location, although it may be
expected that in connection with direct loans where HOME advances funds prior to
commencement of construction, the inspection may require more effort and
approach or be equal to the $75 fee collected by HOME. During the fiscal years
ended September 30, 1995 and 1994, HOME paid HomeSpec an aggregate of $60,745
and $20,245, respectively, for inspection services. David W. Ballard is a
licensed appraiser regularly engaged in making residential appraisals for the
City of Austin and Travis County, Texas.
13
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
On July 1, 1996, the Company had 7,225,617 shares of Common Stock and
1,500,000 shares of Series A Preferred Stock outstanding. The following table
sets forth certain information as of July 1, 1996, with respect to the shares of
the Company's capital stock beneficially owned by (i) each person who, as of
July 1, 1996, was known by the Company to own beneficially more than 5% of any
class of its capital stock, (ii) the individual Directors and certain named
executive officers of the Company, and (iii) the Directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
Name and address of Title of Number of Percent
Beneficial Owner Class Shares of Class/(1)/
- - ----------------------------- --------- --------------- --------------
<S> <C> <C> <C>
John W. Ballard Common 908,368/(2)/ 11.90%
6836 Austin Center Blvd.
Suite 280
Austin, Texas 78731
E. Jeff Bomer Common 1,174,039/(3)/ 14.86%
Donna Bomer Common 1,174,039/(3)/ 14.86%
JDB Investments, Ltd. Common 924,757/(4)/ 12.80%
("JDB")
5929 Balcones Drive
Austin, Texas 78731
Gary J. Davis Common 766,984 10.61%
713 Main
P.O. Box 738
Gatesville, Texas 76528
Charles R. Leone, III Common 1,000,000/(5)/ 12.16%
Preferred 1,000,000/(6)/ 66.67%
Penntex Services, Inc. Common 1,000,000/(5)/ 12.16%
("Penntex") Preferred 1,000,000/(6)/ 66.67%
HCI Equity Partners, L.P. Common 1,000,000/(5)/ 12.16%
("HCI") Preferred 1,000,000/(7)/ 66.67%
3330 Oakwell Court
Suite 100
San Antonio, Texas 78218
Robert R. Neyland Common 1,000,000/(5)/ 12.16%
Preferred 1,000,000/(8)/ 66.67%
HCIE, L.L.C. ("HCIE") Common 1,000,000/(5)/ 12.16%
Preferred 1,000,000/(8)/ 66.67%
8214 Westchester, Suite 907
Dallas, Texas 75225
Stephen A. Pyhrr Common 1,261,672/(9)/ 17.36%
Preferred 43,335/(10)/ 2.89%
Daphne Phyrr Common 1,259,837/(11)/ 17.34%
Preferred 41,500/(12)/ 2.77%
</TABLE>
14
<PAGE>
<TABLE>
<S> <C> <C> <C>
SDP Investments, Ltd. Common 1,235,004/(13)/ 17.05%
("SDP") Preferred 16,667 1.11%
6850 Austin Center Blvd.
Suite 220
Austin, Texas 78731
Peter A. Pyhrr Common 1,743,220/(14)/ 22.75%
Preferred 150,000 10.00%
PAP Investments, Ltd. Common 1,593,220/(15)/ 21.37%
("PAP")
8719 Diplomacy Row
Dallas, Texas 75247
Richard F. Watkins Common 1,420,965/(16)/ 19.06%
Helen T. Watkins Common - -
EWMW Ltd. Partnership Common 603,141 8.35%
("EWMW")
2414 Jarratt Avenue
Austin, Texas 78703
Jimmy E. Nix Common 1,604,042/(17)/ 20.20%
KJE I, Ltd. ("KJE") Common 770,677/(18)/ 9.99%
Commerce Professional
Group, Inc. ("CPG") Common 608,740/(19)/ 8.17%
Plaza Realty One
Limited Partnership
("PRO") Common 608,740/(20)/ 8.17%
12222 Merit Drive
Suite 1750
Dallas, Texas 75251
Walter W. Steopplewerth Common - -
5151 River Road
Bethesda, Maryland 30816
Directors and Executive
Officers as a Group
(14 persons) Common 6,826,949/(21)/ 78.58%
Preferred 1,234,000 75.28%
</TABLE>
- - -------------
/(1)/ Based upon 7,225,617 shares of Common Stock outstanding on July 1, 1996,
adjusted to include the number of authorized but unissued shares that
each beneficial holder has the right to acquire within 60 days pursuant
to the exercise of options or warrants or conversion of Preferred Stock.
Unless expressly stated, no shares of Preferred Stock are held of record
or beneficially by the persons named.
/(2)/ Includes 409,668 shares issuable upon exercise of fully-vested Company
options granted upon cancellation of the Ballard HOME option granted
pursuant to the Ballard Employment Agreement and 15,091 outstanding
shares that may be purchased upon exercise of an option from KJE I, Ltd.
/(3)/ Includes 924,757 shares beneficially owned by JDB and 148,298 shares
held as community property by E. Jeff Bomer and Donna Bomer, husband and
wife, who are the sole general partners of JDB.
/(4)/ Includes 15,091 outstanding shares that may be purchased upon exercise
of an option from KJE I, Ltd.
15
<PAGE>
/(5)/ Includes 1,000,000 shares of Common Stock issuable upon conversion of
1,000,000 shares of Preferred Stock held by HCI.
/(6)/ Includes 1,000,000 shares of Preferred Stock held by HCI, of which
Penntex is a general partner and of which Mr. Leone is a Director and
President.
/(7)/ Shares held by HCI may be deemed to be held by its general and limited
partners as a group.
/(8)/ Includes 1,000,000 shares of Preferred Stock of HCI, of which HCIE is a
general partner and of which Mr. Neyland is a managing member.
/(9)/ Includes 1,235,004 shares held of record or beneficially by SDP, of
which 16,667 shares are issuable upon conversion of Preferred Stock held
by SDP, of which Stephen Pyhrr is a general partner, and 26,668 shares
issuable upon conversion of 13,334 shares of Preferred Stock held by
each of The Heather D. La Rue Irrevocable Trust and The Steven D. La Rue
Irrevocable, Trust (collectively, the "La Rue Trusts"), of which Stephen
Pyhrr is trustee.
/(10)/ Includes 16,667 shares of Preferred Stock held by SDP and an aggregate
of 26,668 shares of Preferred Stock held by the La Rue Trusts.
/(11)/ Includes 24,833 shares issuable upon conversion of Preferred Stock held
as separate property and 1,235,004 shares held of record or beneficially
by SDP, including 16,667 shares issuable upon conversion of shares of
Preferred Stock held by SDP, of which Daphne Pyhrr is a general partner.
/(12)/ Includes 16,667 shares of Preferred Stock held by SDP.
/(13)/ Includes 16,667 shares issuable upon conversion of 16,667 shares of
Preferred Stock held by SDP and 15,091 outstanding shares upon exercise
of an option from KJE I, Ltd.
/(14)/ Includes 150,000 shares issuable upon conversion of 150,000 shares of
Preferred Stock, and 1,593,220 shares beneficially owned by PAP, of
which 228,085 are issuable upon exercise of warrants held by PAP, of
which Peter Pyhrr is the sole general partner.
/(15)/ Includes 228,085 shares issuable upon exercise of warrants, and 15,091
outstanding shares that may be purchased upon exercise of an option from
KJE.
/(16)/ Includes 603,141 shares held of record by EWMW, of which Mr. Watkins is
the sole general partner; 608,740 shares beneficially owned by CPG, of
which Mr. Watkins is a Director and Vice President, including 228,085
shares issuable to PRO upon exercise of warrants; and 209,084 shares
owned beneficially by Eaglewood Properties I, Inc., of which Mr. Watkins
is a Director and Vice President.
/(17)/ Includes 770,677 shares beneficially owned by KJE, of which Mr. Nix is
sole general partner, including 487,040 shares issuable upon the
exercise of Series A Warrants of the Company; 608,740 shares
beneficially owned by CPG, of which Mr. Nix is a Director and President,
including 228,085 shares issuable upon the exercise of warrants; 209,084
shares beneficially owned by Eaglewood Properties I, Inc., of which Mr.
Nix is a Director and Vice President, and 15,541 shares beneficially
owned by United Realty Group, Inc., of which Mr. Nix is Director and
President.
/(18)/ Includes 487,040 shares issuable upon the exercise of Series A Warrants
of the Company.
/(19)/ Includes 380,655 shares held of record by PRO and 228,085 shares
issuable to PRO upon exercise of warrants. CPG is the sole general
partner of PRO.
/(20)/ Includes 228,085 shares issuable upon conversion of warrants.
16
<PAGE>
/(21)/ Includes 1,234,000 shares issuable upon conversion of Preferred Stock
held by such persons, 228,085 shares issuable upon the exercise of
warrants and 30,182 shares issuable upon the exercise of options to
purchase outstanding shares from KJE. Shares beneficially owned by two
(2) or more persons have been attributed to only one (1) of such
persons.
Under the regulations of the Securities and Exchange Commission, shares
are deemed to be "beneficially owned" by a person if such person, directly or
indirectly, has or shares the power to vote or dispose of the shares, whether or
not such person has any pecuniary interest in such shares, or if such person has
the right to acquire the power to vote or dispose of such shares with 60 days,
including any right to acquire such power through the exercise of any option,
warrant or right. Each of the persons named above disclaims that such person is
the beneficial owner of any shares not held of record by such person or in which
such person has no pecuniary interest and which have been attributed to such
person indirectly or by virtue of any right to acquire such shares or any rights
with respect thereto.
The Company is unaware of any arrangements the operation of which may at
a subsequent date result in a change of control of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), requires the Company's directors and executive officers, and
persons who own ten percent (10%) or more of the Company's voting stock to file
reports of ownership and changes of ownership of the Company's equity securities
with the Securities and Exchange Commission, ("SEC") and the National
Association of Securities Dealers, Inc. Directors, executive officers and ten
percent (10%) or more stockholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on the review of copies of such forms furnished to the
Company, or written representations that no forms were required, the Company
believes that its directors, executive officers and ten percent (10%) or more
stockholders complied with all Section 16(a) filing requirements during the most
recent fiscal year.
APPROVAL OF HOMECAPITAL INVESTMENT CORPORATION
1996 STOCK OPTION PLAN
Pursuant to such corporate action without a meeting by less than
unanimous written consent, the HomeCapital Investment Corporation 1996 Stock
Option Plan ("Stock Option Plan") will be approved, adopted and ratified.
STOCK OPTION PLAN
Effective March 21, 1996, the Board of Directors of the Company adopted
the Stock Option Plan and directed that it be submitted for approval by the
stockholders of the Company in connection with the next proceedings of
stockholders of the Company. The Stock Option Plan provides that up to 500,000
shares of Common Stock may be issued upon exercise of options granted under the
Stock Option Plan, subject to adjustment to reflect stock splits, stock
dividends and similar capital stock transactions.
The Stock Option Plan will be administered by a committee of non-
employee directors of the Company appointed by the Company's Board (the "Stock
Option Committee"), each of whom is required to be "disinterested" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended. The
Stock Option Committee has the authority to interpret the Stock Option Plan; to
determine the terms and conditions of options granted under the Stock Option
Plan ("Options"); to prescribe, amend and rescind the rules and regulations of
the Stock Option Plan; and to make all other determinations necessary or
17
<PAGE>
advisable for the administration of the Stock Option Plan. Options may be
granted under the Stock Option Plan until March 21, 2006.
Options granted under the Stock Option Plan may be incentive stock
options, which are intended to qualify under the provisions of Section 422 of
the Code ("Incentive Options"), or non-qualified stock options, which do not so
qualify ("Non-qualified Options"). The Stock Option Committee selects the
eligible persons to whom Options will be granted and determines the dates,
amounts, exercise prices, vesting periods and other relevant terms of the
Options, provided that the exercise price for each Option that is to be an
Incentive Option is determined by the Committee at a price per share not less
than the fair market value of Common Stock on the date of grant. Options granted
under the Stock Option Plan are generally not transferable during the life of
the optionee.
Options granted under the Stock Option Plan vest and become exercisable
as determined by the Stock Option Committee in its discretion. Options granted
under the Stock Option Plan may be exercised at any time after they vest and
before the expiration date determined by the Stock Option Plan Committee,
provided that no Option may be exercised more than ten (10) years after its
grant (five years after grant in the case of Options granted to persons owning
beneficially ten percent or more of the capital stock of the Company).
Furthermore, in the absence of a specific agreement to the contrary, Options
will generally terminate immediately upon termination of the recipient's
employment with the Company for just cause, or twelve (12) months after death or
permanent disability, or three (3) months after termination of employment for
any other reason. The aggregate fair market value (determined at the time of
grant) of the stock underlying Incentive Options that become exercisable in any
calendar year may not exceed $100,000; Options in excess of this limit are
treated as Non-qualified Options.
If the Company consummates any reorganization or merger or
consolidation, each outstanding Option will, upon exercise, entitle the optionee
to receive the same consideration received by holders of Common Stock in such
reorganization or merger or consolidation, with appropriate exercise price
adjustments. In case of certain changes in control of the Company, any Options
specified at any time by the Stock Option Committee or the Board in its
discretion shall vest and become exercisable. In addition, in case of certain
changes in control involving the liquidation of the Company, the disposition of
substantially all of the Company's assets, or certain reorganizations or mergers
or consolidations of the Company, all outstanding Options will automatically
vest and become exercisable, if and to the extent that such Options are not, in
connection with the change in control, to be cashed-out at full value, continued
by the Company as the surviving corporation, assumed by the successor
corporation or parent thereof, or replaced with comparable options or other
compensation programs. The Board of Directors has not yet selected and
identified a Stock Option Committee. In the meanwhile, options may be granted
under the Stock Option Plan by the Board of Directors, as long as the members of
the Board of Directors are "disinterested."
Shares of Common Stock purchased upon the exercise of Options under the
Stock Option Plan generally may not be sold until a date that is two (2) years
from the date the Option was granted or one (1) year from the date the shares
were purchased, whichever is later. Moreover, the shares of Common Stock
subject to Options under the Stock Option Plan have not been registered under
applicable federal and state securities laws, and the Company is under no
obligation to do so. Accordingly, in the absence of such registration or
qualification, such shares of Common Stock may only be sold or transferred in
accordance with exemptions from registration under applicable securities laws.
Stockholders receiving this Information Statement may obtain a copy of
the Stock Option Plan from the principal office of the Company by directing a
request to: Ms. Anna Walker, Assistant Secretary, HomeCapital Investment
Corporation, 6836 Austin Center Boulevard, Suite 280, Austin, Texas 87831,
Telephone (512) 343-8911, Telefax (512) 795-9815.
The Board of Directors of the Company may amend, modify or terminate the
Stock Option Plan at any time without adversely affecting any Option granted
under the Stock Option Plan and provided that, without the approval of
stockholders of the Company, no action by the Board of Directors shall increase
the total number of shares eligible to be issued under the Stock Option Plan,
change the class of individuals
18
<PAGE>
eligible to receive Options, change the provisions regarding determination of
the exercise price, extend the period during which Options may be granted or the
maximum period after the date of grant of Options during which Options may be
exercised, or otherwise materially increase the cost of the Stock Option Plan or
materially increase the benefits to participants under the Stock Option Plan.
OPTION GRANT TABLE
The following table provides information about Options granted pursuant
to the Stock Option Plan to certain executive officers by the Board of Directors
since the Stock Option Plan was approved by the Board.
<TABLE>
<CAPTION>
Shares of
Common Stock
Underlying
Options Exercise
Name Position Granted Price
- - ----------------------------- ------------------------ ---------- --------
<S> <C> <C> <C>
Tommy M. Parker Executive Vice President 150,000 $3.50
Glenn R. Theriac Senior Vice President 50,000 $3.50
Executive Group (2 persons) 200,000 $3.50
</TABLE>
No other persons have been granted Options under the Stock Option Plan,
and there is no means of determining the persons or class of persons to whom
Options may be granted in the future or the number of shares or the exercise
price thereof under the Stock Option Plan.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Pursuant to such stockholder action without a meeting by less than
unanimous written consent, Coopers & Lybrand L.L.P. is to be appointed as the
independent public accountants of the Company and its subsidiary.
OTHER MATTERS
No business other than that set forth in the accompanying notice of
stockholder action by written consent is expected to be acted upon.
Dated: July 26, 1996
19
