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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only (as
Permitted by Rule 14a-
6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
HOMECAPITAL INVESTMENT CORPORATION
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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PRELIMINARY COPIES
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[HOMECAPITAL INVESTMENT CORPORATION LETTERHEAD]
__________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 25, 1997
To the Stockholders of
HOMECAPITAL INVESTMENT CORPORATION:
Notice is hereby given that the annual meeting of stockholders ("Annual
Meeting") of HomeCapital Investment Corporation, a Nevada corporation
("Company"), will be held on September 25, 1997, at 10:00 a.m., Central Daylight
Time, at the Company's corporate headquarters, 6836 Austin Center Boulevard,
Suite 280, Austin, Texas 78731, for the following purposes:
1. To elect seven (7) directors to serve on the Company's Board of
Directors.
2. To consider and approve an amendment to the HomeCapital Investment
Corporation 1996 Stock Option Plan.
3. To consider and approve the HomeCapital Investment Corporation Non-
Employee Director Compensation Plan.
4. To consider and approve an amendment to the Articles of Incorporation
of the Company to provide for certain limitations on liabilities of directors
and officers of the Company.
5. To consider and approve an amendment to the Bylaws of the Company to
provide for indemnification of directors, officers, and agents of the Company
under certain circumstances.
6. To ratify the appointment of Coopers & Lybrand L.L.P. as the
independent accountants of the Company.
7. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Stockholders of record at the close of business in August 1, 1997, will be
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
Stockholders are cordially invited to attend the Annual Meeting in person.
Whether or not you plan to attend the Annual Meeting, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING RETURN
ENVELOPE. If you attend the Annual Meeting, you can vote either in person or by
your proxy.
By Order of the Board of Directors
E. Jeff Bomer
Secretary
Austin, Texas
September 1, 1997
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PRELIMINARY COPIES
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HOMECAPITAL INVESTMENT CORPORATION
6836 AUSTIN CENTER BOULEVARD
SUITE 280
AUSTIN, TEXAS 87831
___________________
PROXY STATEMENT
___________________
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of HomeCapital Investment Corporation, a
Nevada corporation (the "Company"), for use at the Annual Meeting of
Stockholders to be held on Thursday, September 25, 1997, at 10:00 a.m., Central
Daylight Time, at the Company's corporate headquarters, 6836 Austin Center
Blvd., Suite 280, Austin, Texas 78731, and any adjournment thereof (such meeting
or any adjournment thereof collectively referred to as the "Annual Meeting").
This Proxy Statement and the accompanying notice and form of proxy are being
mailed to stockholders on or about September 1, 1997. In addition to
solicitation by mail, proxies may be solicited personally or by courier service,
telephone, telegraph or telefax by officers, directors, employees of the
Company, who will receive no additional compensation for solicitation
activities. Arrangements will also be made with brokerage houses and other
custodians, nominees and fiduciaries to forward solicitation materials to the
beneficial owners of shares held of record by such persons, who will be
reimbursed for their reasonable expenses incurred in such connection. The
entire cost of solicitation of proxies will be paid by the Company.
REVOCABILITY OF PROXIES
Stockholders are urged to sign, date and promptly return the enclosed form
of proxy in the envelope provided. A stockholder may revoke a proxy at any time
before it is exercised. However, mere attendance at the Annual Meeting will not
of itself have the effect of revoking a proxy. A stockholder may revoke a proxy
by notification in writing addressed to the Company's corporate offices at 6836
Austin Center Blvd., Suite 280, Austin, Texas 78731, Attention: E. Jeff Bomer,
Secretary. The proxy may also be revoked by proper execution of a proxy bearing
a later date or by attendance at the Annual Meeting and voting in person.
VOTING OF PROXIES
The persons named on the enclosed proxy form will vote the shares for which
they are appointed in accordance with the directions of the stockholders
granting the proxy. In the absence of such directions, such shares will be
voted in favor of the nominees to the Board of Directors of the Company named
herein and for the proposals described herein and, in the best judgment of those
so appointed will be voted on any other matters as may become before the
meeting.
VOTING SECURITIES
Stockholders of record at the close of business on August 1, 1997, are
entitled to Notice of and to vote at the Annual Meeting and any adjournment
thereof. On August 1, 1997, there were outstanding 1,500,000 shares of
Preferred Stock, Series A, $.01 par value per share, of the Company ("Preferred
Stock"), and 8,226,883 shares of Common Stock, $.01 par value per share, of the
Company ("Common Stock"). Subject to special voting rights granted to holders
of the Preferred Stock, holders of Common Stock and Preferred Stock are entitled
to one (1) vote per share voting as a single class on all matters that may
properly come before the Annual Meeting.
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QUORUM AND VOTING
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of Common Stock and Preferred Stock in
the aggregate as a single class is necessary to constitute a quorum. Shares of
Common Stock or Preferred Stock represented by a properly signed and returned
proxy will be counted as present at the Annual Meeting for purposes of
determining a quorum, without regard to whether the proxy is marked as casting a
vote or abstaining. Shares of Common Stock or Preferred Stock held by nominees
that are voted on at least one (1) matter coming before the Annual Meeting will
also be counted as present for purposes of determining a quorum, even if the
beneficial owner's discretion has been withheld (a "broker non-vote") for voting
on some or all other matters.
The election of directors and all of the other proposals to be presented at
the Annual Meeting, except for the approval of the amendment to the Articles of
Incorporation of the Company, will be determined by a majority of the shares of
Common Stock and Preferred Stock, voting as a single class, present, in person
or by proxy, and voted at the Annual Meeting. Accordingly, any abstentions or
broker non-votes will not affect the election of the candidates receiving a
majority of the votes cast. However, the proposal to come before the Annual
Meeting to amend the Articles of Incorporation of the Company requires the
approval of a majority of shares of Common Stock and Preferred Stock entitled to
vote at the meeting. Therefore, abstentions and broker non-votes, as well as
the failure of stockholders to otherwise participate in person or by proxy, at
the Annual Meeting will have the same effect as votes against the proposal to
amend the Articles of Incorporation of the Company.
Votes at the Annual Meeting will be tabulated by inspectors of election
appointed by the Company.
ELECTION OF DIRECTORS
The Board of Directors of the Company have determined that the Board of
Directors shall consist of seven (7) members by resolution in accordance with
the Bylaws of the Company. Accordingly, at the Annual Meeting seven (7)
directors are to be elected constituting the entire Board of Directors to hold
office until the next Annual Meeting of stockholders and until a successor is
elected and qualified. Directors are elected by a majority of the votes cast by
the shares entitled to vote at a meeting at which a quorum is present. The
Articles of Incorporation of the Company do not permit stockholders to cumulate
their votes in the election of directors. As a result, each stockholder may
cast one (1) vote per share with respect to the proposed election of each of the
seven (7) nominees.
Directors will be elected by the favorable vote of a majority of the votes
cast by the holders(s) of the shares of Common Stock and Preferred Stock, voting
as a single class, present, in person or by proxy, at the Annual Meeting and
entitled to vote. The Board of Directors recommends a vote FOR each of the
nominees listed and, unless authority to vote in the election of directors is
withheld as to any or all nominees, all shares represented by proxies will be
voted FOR the election of the nominees listed. If authority to vote in the
election of directors is withheld as to any but not all of the nominees listed,
all shares represented by any such proxy will be voted for the election of the
nominees as to whom authority is not withheld. If a nominee becomes unavailable
for any reason before the election, the shares represented by the proxies will
be voted for such person, if any, as may be designated by the Board of Directors
as a substitute nominee. However, the Board of Directors has no reason to
believe that any nominee will be unavailable. Any vacancy occurring following
the election of directors may be filled by the Board of Directors.
Pursuant to a 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 Preferred Stock and became entitled to nominate two (2)
members of the Company's Board of Directors. Mr. Robert R. Neyland identified
below has been nominated by HCI for election to the Company's Board of
Directors. In lieu of nomination and election of a second director to the Board
of Directors of the Company, HCI has nominated
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a director who has been elected to the Board of Directors of the Company's
wholly-owned subsidiary, HomeOwners Mortgage & Equity, Inc.
NOMINEES FOR DIRECTOR
The following table sets forth the name and age of each nominee listed in
the enclosed form of proxy for director, his principal occupation, the year he
first became a director of the Company, directorships in other public companies
and business affiliations during the preceding five (5) years. For information
with respect to ownership of shares of Common Stock and Preferred Stock by
nominees, see the table in the section entitled "Securities Ownership by
Management and Certain Beneficial Owners," including the footnotes thereto. The
information in the following table has been furnished by each nominee as of the
date hereof.
With the exception of Mr. Meyers, each of the nominees is currently a
member of the Board of Directors. All nominees have consented to serve if
elected.
DIRECTOR NOMINEES
Name Age Since
---- --- -------
JOHN W. BALLARD.............................................. 59 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 HOME 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................................................ 61 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.
J. ROLFE JOHNSON............................................. 58 1996
General Counsel of the Company since November, 1996.
Mr. Johnson is an attorney and has been engaged in
full-time private practice as a corporate and securities
attorney through his own firm, J. Rolfe Johnson, P.C. since
October, 1990; he was a shareholder in the law firm of
Jenkins & Gilchrist, P.C., in Houston, Texas, from
September, 1988 through October, 1990, prior to which he
was a partner of the law firm of Mayor Day & Caldwell (now
Mayor Day Caldwell & Keaton) from February, 1982.
LARRY D. MEYERS.............................................. 48 1997
Owner and President of Meyers & Associates, a legislative
consulting firm, since December, 1984.
ROBERT R. NEYLAND............................................ 44 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
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1990 to June 1996. Mr. Neyland is also a Director of
Capital Communities Corporation.
PETER A. PYHRR............................................... 55 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.
WALTER W. STOEPPELWERTH...................................... 63 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.
During the fiscal year ended September 30, 1996, the Board of Directors of
the Company held ten (10) meetings at which each of the directors was present in
person or by telephone. On six (6) other occasions, the Board took action by
unanimous written consent, and on numerous occasions the Board had informal
discussions among all members regarding Company affairs. The Board intends to
have regular meetings at least monthly. The Company currently has an audit
committee, but did not have an audit committee during the fiscal year ended
September 30, 1996. The audit committee is authorized to review, with the
Company's independent accountants, the annual financial statements of the
Company prior to publication; to review the work of, and approve non-audit
services performed by the independent accountants; and to review and report to
the Board of Directors upon the effectiveness of accounting and reporting
functions, organization, operations and management of the Company. The audit
committee consists of Messrs. Johnson and Neyland. The Board of Directors also
has a compensation committee which did not have any meetings during the fiscal
year ended September 30, 1996. The compensation committee is responsible for
the administration of, and grant of awards under the HomeCapital Investment
Corporation 1996 Stock Option Plan; to interview and recommend employment of
executive officers to the Board of Directors and to review and recommend
compensation for executive officers of the Company. The compensation committee
consists of Messrs. Ballard, Bomer and Pyhrr. The Board of Directors does not
maintain a standing nominating committee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF
THE NOMINEES ABOVE. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE.
COMPENSATION TO DIRECTORS
During the fiscal year ended September 30, 1996, members of the Board of
Directors of the Company did not receive any compensation for serving as
directors. Directors are reimbursed for travel expenses incurred in attending
meetings. In the event that the proposed HomeCapital Investment Corporation
Non-Employee Director Compensation Plan ("Director Plan") is approved and
ratified at the Annual Meeting, then each member of the Board of Directors who
is not a full-time employee of the Company will be paid an annual fee of $10,000
and a fee of $1,000 for each meeting attended and will be reimbursed for all
ordinary and necessary expenses incurred in attending any meeting of the Board
or any committee thereof. In addition, each director will receive a one-time
grant of options to purchase 15,000 shares of Common Stock and an annual grant
thereafter of options to purchase 3,000 shares of Common Stock, vesting over
five (5) years and exercisable in each case at the market price of the Common
Stock in effect on the date of grant. See "Approval of Non-Employee Director
Compensation Plan."
Messrs. Charles R. Leone, III, a former director, and Robert R. Neyland, a
director of the Company, were engaged as financial and business development
consultants to the Company for a one-year period for
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annual fees of $20,000 each pursuant to an agreement effective April 12, 1996,
and served as the designated 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 until April, 1997, at which time Mr. Leone
resigned as a director of the Company and was elected to the Board of Directors
of HOME. Mr. Neyland continues to serve as an HCI designated director of the
Company. During fiscal 1996 each of Messrs. Leone and Neyland received the
$20,000 fee due from the Company under the terms of their consulting agreements.
The Board of Directors of the Company has approved a three (3)-year
incentive plan to encourage and compensate directors who are not full-time
employees 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
("Directors Incentive Plan"). 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 yard and home
improvement product chain stores, a director must have participated with HOME in
producing training seminars and workshops for employees of the customer.
Prior to electing Walter W. Stoeppelwerth to the Board of Directors, the
Company had agreed to compensate Mr. Stoeppelwerth 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.
Stoeppelwerth receives a per diem fee of $2,000 plus expenses for each event.
Total payments to Mr. Stoeppelwerth under this arrangement in fiscal 1996 were
$20,725. Under terms of an agreement with Gary J. Davis, a former director of
the Company, Mr. Stoeppelwerth has agreed to allocate one-half or $1,000 out of
his $2,000 daily event fee to Mr. Davis as compensation for those events in
which Mr. Davis participates. Under terms of the Directors Incentive Plan, Mr.
Stoeppelwerth qualified for incentive compensation related to the addition of
one national home improvement services franchisor as a potential loan source and
the execution of a loan marketing agreement with Builders Square effective
November 27, 1996. Accordingly, Mr. Stoeppelwerth will be entitled in the
subsequent three years to compensation under the Directors Incentive Plan to the
following fees for all loans originated by HOME: (i) by or through the home
improvement franchisor, one-half of one percent in years one and two and one-
quarter of one percent in year three of all loans funded; and (ii) through
Builders Square, one percent in years one and two and one-half percent in year
three of all loans funded. Mr. Stoepplewerth has agreed to allocate to Mr.
Davis, for his efforts in obtaining and maintaining the relationship, fifty
percent (50%) of all fees payable under the Directors Incentive Plan from HOME
by virtue of the Builders Square relationship.
Mr. Gary J. Davis, a former 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 $42,125
was received during the 1996 fiscal year. While serving as consultant, Mr.
Davis was provided health insurance and reimbursement of business-related
expenses. Under the Directors Incentive Plan Mr. Davis qualified for
compensation related to HOME's addition of the national home improvement
franchisor earlier noted. Accordingly, in addition to the $1,000 per day for
participation in each training event, Mr. Davis will be entitled in the
subsequent three years for all loans originated by HOME by or through the
national home improvement franchisor to one-half percent (1/2%) in years one and
two and one-quarter percent (1/4%) in year three of the principal amount of all
loans funded.
EXECUTIVE OFFICERS
Set forth below is the age, positions held with the Company and its
subsidiary and business experience for at least the last five (5) years for each
of the Company's executive officers who are not nominees for election to the
Board of Directors.
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MICHAEL B. THIMMIG, 38, an Executive Vice President and Treasurer of the
Company (Chief Financial Officer) and an Executive Vice President of HOME since
April, 1997. Mr. Thimmig was a member of the law firm of Andrews & Kurth L.L.P.
from February, 1994, to April, 1997, prior to which he was an attorney with the
law firm of Winstead Sechrest & Minick P.C.
THOMAS L. PERRITTE, 50, an Executive Vice President of HOME (Chief
Operating Officer) since July, 1997. Mr. Perritte was a Senior Vice President
of The Money Store (a specialized consumer mortgage lending company) from July,
1994, through June, 1997, prior to which he was an Executive Vice President
(Chief Operating Officer) of Statewide Capital, Inc. (a specialized consumer
mortgage lending company) from August, 1989.
TOMMY M. PARKER, 48, an Executive Vice President of HOME 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.
GENE V. MORRISON, 43, an Executive Vice President of HOME since June, 1997,
and a Senior Vice President of HOME from 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.
EXECUTIVE COMPENSATION
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. For a description of options to purchase securities of the Company
granted as compensation for services, and outstanding options exercised, during
the fiscal year ended September 30, 1996, see "1996 Stock Option Plan" below.
The following table summarizes compensation paid (or earned by the named
individuals) by the Company or HOME to the Company's chief executive officer for
the fiscal years ended September 30, 1996, 1995 and 1994. No other executive
officers received compensation in excess of $100,000 during any of the periods
covered.
SUMMARY COMPENSATION TABLE
Stock
Name and Options
Principal Fiscal (Common Other
Position Year Salary Shares) Compensation(3)
- -------- ---- ------ ------- ------------
JOHN W. BALLARD(1) 1996 $150,000 $12,028
Chairman of the 1995 150,000 - 14,384
Board, President 1994 150,000 409,668(2) 18,655
and Chief Executive
Officer
- ----------------
(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
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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 has not exercised any options during the 1996 fiscal
year, and at September 30, 1996, the unexercised options held by Mr.
Ballard had a determined value of approximately $2,084,145 based upon the
closing bid price of $5.25 per share of Common Stock on the OTC Bulletin
Board of the National Association of Securities Dealers, Inc. at such date.
(3) Includes $3,213, $4,984, and $6,700 for fiscal years 1996, 1995 and 1994,
respectively, representing the value of insurance premiums paid by HOME for
Mr. Ballard; $7,942, $8,789, and $11,845 for fiscal years 1996, 1995 and
1994, respectively, representing the cost to HOME of providing and
maintaining an automobile and mobile phone for Mr. Ballard; and $873, $611
and $110 for fiscal years 1996, 1995 and 1994, respectively, for country
club membership fees paid by HOME for Mr. Ballard.
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 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
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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.
HOME has entered into an employment agreement with Michael B. Thimmig, an
Executive Vice President of HOME, for a term of one (1) year commencing April 8,
1997, that is automatically renewable for six (6)-month terms unless terminated
on 30-days notice. Mr. Thimmig is entitled to (i) a base salary of $150,000 for
the first year and thereafter during any renewal term at the discretion of the
Compensation Committee of the Board of Directors, but not less than the initial
base salary in the absence of cause; (ii) an incentive bonus equal to $25,000 at
the end of the first year and the right to participate in an incentive bonus
plan to be established by the Board of Directors of HOME; and (iii) a one-time
grant of options to purchase 150,000 shares of Common Stock under the Company's
1996 Stock Option Plan. Mr. Thimmig 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 dues and expenses of maintaining his
membership in the State of Texas and American Bar Associations, and a signing or
relocation bonus of $60,000 plus moving expenses (and an amount equal to federal
income taxes payable on such payments) and an amount up to $36,000 to cover any
deficiency on the expected net proceeds from sale of his Dallas, Texas
residence. HOME has also loaned Mr. Thimmig $25,000 for one (1) year bearing
interest at its commercial borrowing rate.
HOME has entered into an employment agreement with Thomas L. Perritte, an
Executive Vice President of HOME, for a term of one (1) year commencing July 1,
1997, that is automatically renewable for six (6)-month terms unless terminated
on 30-days notice. Mr. Perritte is entitled to (i) a base salary of $200,000
for the first year and thereafter during any renewal term at the discretion of
the Compensation Committee of the Board of Directors, but not less than the
initial base salary in the absence of cause; (ii) an incentive bonus equal to
$50,000 at the end of the first year and the right to participate in an
incentive bonus plan to be established by the Board of Directors of HOME; and
(iii) a one-time grant of options to purchase 150,000 shares of Common Stock
under the Company's 1996 Stock Option Plan. Mr. Perritte 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 moving expenses (and an amount equal to federal income taxes
payable on such payments) and the sum of $68,000 upon closing of the purchase of
a residence in the Austin, Texas area.
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 18%) 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
8
<PAGE>
was inaugurated January 1, 1995, and HOME has not authorized or made any
contributions to the plan through December 31, 1996.
1996 STOCK OPTION PLAN
The HomeCapital Investment Corporation 1996 Stock Option Plan ("Stock
Option Plan") was approved by stockholder of the Company in August, 1996, 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. During fiscal 1996 options to purchase an aggregate of
200,000 shares of Common Stock were granted pursuant to the Stock Option Plan,
none of which had been exercised at September 30, 1996. The Board of Directors
of the Company has approved an amendment to the Stock Option Plan to increase
the aggregate shares covered by the plan to 1,000,000. Reference is made to
"Approval of Amendment to HomeCapital Investment Corporation 1996 Stock Option
Plan" for a description of the amendment to the Stock Option Plan and options
granted thereunder.
MANAGEMENT RELATIONSHIPS AND TRANSACTIONS
In addition to transactions described elsewhere in this Proxy 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. References to the "HOME Transaction" mean
the reverse acquisition 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.
Affiliate Relationships. The table below indicates the relationship of certain
affiliates of certain directors and officers of the Company and HOME referred to
in the transactions discussed in this section.
AFFILIATED RELATIONSHIPS OF CERTAIN DIRECTORS, OFFICERS & AFFILIATES OF THE
---------------------------------------------------------------------------
COMPANY
-------
<TABLE>
<CAPTION>
E. Jeff Charles R. Robert R. Peter A. Stephen A. Charles R.
Affiliated Entities Bomer Leone, III Neyland Pyhrr Pyhrr Sutherland
- ----------------------------- ------- ------------- ------------ -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Eaglewood Properties I, Ltd Officer &
("Eaglewood") Director of
General
Partner
HCI Equity Partners L.P. Officer & Sole Manager
("HCI") Director of a of a
General General
Partner Partner
HCIE, L.L.C. ("HCIE")(1) Sole Manager
JDB Investments, Ltd. General &
("JDB") Limited
Partner
PAP Investment, Ltd. General &
("PAP") Limited
Partner
</TABLE>
9
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Penntex Services, Inc.(1) Director &
("Penntex") Officer
Plaza Realty One Limited Officer &
Partnership ("PRO") Director of
General
Partner
SDP Investments, Ltd. General &
("SDP") Limited
Partner
</TABLE>
- ---------------
(1) A general partner of HCI Equity Partners L.P.
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 an affiliate of Peter A. Pyhrr. The loan is jointly
and severally guaranteed by E. Jeff Bomer, Gary J. Davis, Stephen A. Pyhrr,
Peter A. Pyhrr, and John W. Ballard. In addition, Messrs. Bomer, Davis, Peter
A. Pyhrr and Stephen A. Pyhrr and their affiliates have pledged personal assets
to Horizon Bank to secure the Horizon Bank loan to the Company. None of the
guarantors will receive any compensation from the Company for their pledge of
assets or guarantees.
Conversion of Stockholder Loans into Common Stock of the Company. Effective
September 28, 1995, the Company issued 55,239 shares of the Common Stock to each
of John W. Ballard, JDB, PAP and SDP and 110,478 shares of Common Stock to
Eaglewood in conversion, discharge and payment of an aggregate principal balance
of $188,891 and accrued and unpaid interest of approximately $18,250 on six (6)
stockholder loan notes held by such stockholders. The conversion 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.
$125,000 Director Loan Converted to Series A Preferred Stock. On January 27,
1995, Peter A. Pyhrr loaned $125,000 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 and payable upon demand without security. 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 to Company Common 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 dividends into
shares of Company Common Stock in accordance with the terms of the 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 PRO was issued 307,796
shares. The balance of the Company Common Stock issued in the transaction was
issued to non-affiliates of the Company.
10
<PAGE>
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 JDB, PAP, SDP 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 for 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 JDB, PAP, SDP 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, $25,000 each from E. Jeff Bomer and SDP
and $50,000 from Eaglewood. 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 aggregate $75,000 principal amount of the advances by
Mr. Bomer and by Eaglewood were repaid out of the proceeds from sale of shares
of Preferred Stock in connection with the Series A Preferred Stock Placement.
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
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 were 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 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
Preferred Stock purchased by HCI remain outstanding. In addition, the HCI
Agreement imposes 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 Preferred
Stock purchased by HCI, among other things. A total of 150,000 shares of the
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 Preferred Stock were purchased by or for the
benefit of members of Mr. Pyhrr's family. An aggregate of 16,667 shares of
Preferred Stock were issued to SDP 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
Preferred Stock were purchased by members of Mr. Stephen Pyhrr's family. An
aggregate of 90,333 shares of the Preferred Stock were purchased by or in behalf
of officers and employees of the Company and HOME and members of their families.
11
<PAGE>
The 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 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 Preferred Stock. The Preferred Stock is redeemable at
par plus accrued, unpaid dividends, at the option of the Company, at any time
after two (2) years from the date of issuance. Each share of 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 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 Preferred Stock. Shares of 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 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 Preferred Stock is
convertible after nine (9) months from the date of issuance of the Preferred
Stock which rights terminate after three (3) years from the date of issuance of
the 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 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 Mr. Neyland, a Director of the Company, and Mr.
Leone, a director of HOME and former director 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, 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 HUD regulations to have a physical inspection of the
improvements financed, and HOME currently collects the $75 inspection fee
prescribed by HUD 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, 1996 and 1995, HOME paid HomeSpec an
aggregate of $69,715 and $55,675, 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.
SECURITIES OWNERSHIP BY MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
On August 15, 1997, the Company had 8,226,883 shares of Common Stock and
1,500,000 shares of Preferred Stock outstanding. The following table sets forth
certain information as of August 15, 1997, with respect to the shares of the
Company's capital stock beneficially owned by (i) each person who, as of August
15, 1997, was known by the Company to own beneficially more than five percent
(5%) of any class of its capital stock, (ii) each individual directors, director
nominees and certain named executive officers of the Company, and (iii) all
directors and executive officers of the Company as a group.
12
<PAGE>
NAME AND ADDRESS CLASS NUMBER PERCENT(1)
- ---------------- ----- ------ -------
DIRECTORS AND CERTAIN EXECUTIVE OFFICERS:
John W. Ballard Common 909,368(2) 11.05%
6836 Austin Center Blvd.
Suite 280
Austin, Texas 78731
E. Jeff Bomer Common 1,074,039(3) 13.06%
5929 Balcones Drive
Austin, Texas 78731
Charles R. Leone, III Common 1,000,000(4) 10.84%
3330 Oakwell Court Preferred 1,000,000(5) 66.67%
Suite 100
San Antonio, Texas 78218
Larry D. Meyers Common 3,333(6) *
504 Cathedral Drive Preferred 3,333 *
Alexandria, Virginia 22314
Robert R. Neyland Common 1,000,000(4) 10.84%
3330 Oakwell Court Preferred 1,000,000(5) 66.67%
Suite 100
San Antonio, Texas 78218
Peter A. Pyhrr Common 1,593,220(7) 19.37%
8719 Diplomacy Row
Dallas, Texas 75247
Stephen A. Pyhrr Common 1,214,172(8) 14.68%
Preferred 43,335(9) 2.89%
5926 Balcones Drive
Austin, Texas 78731
Directors and Executive
Officers as a Group
(13 persons) Common 5,877,465(10) 60.28%
Preferred 1,063,334(11) 70.89%
13
<PAGE>
NAME AND ADDRESS CLASS NUMBER PERCENT(1)
- ---------------- ----- ------ -------
CERTAIN OTHER BENEFICIAL OWNERS:
Gary J. Davis Common 672,101 8.17%
713 Main
Gatesville, Texas 76528
HCI Equity Partners, L.P. Common 1,000,000(4) 10.84%
3330 Oakwell Court Preferred 1,000,000(11) 66.67%
Suite 100
San Antonio, Texas 78218
Charles R. Sutherland Common 660,967(12) 8.03%
3650 Habersham Road #102
Atlanta, Georgia 30805
EWMW Limited Partnership Common 489,300 5.95%
2414 Jarratt Avenue
Austin, Texas 78703
- -----------------
* Less than 1%.
(1) Based upon 8,226,883 shares of Common Stock and 1,500,000 shares of
Preferred Stock outstanding on August 15, 1997, 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
conversion of Preferred Stock. No shares were held, beneficially or of
record, by Messrs. J. Rolfe Johnson and Walter W. Stoepplewerth.
(2) Includes 498,700 shares held by the John W. and Jeannie G. Ballard Family
Partnership of which John W. Ballard is general partner; and 409,668 shares
issuable upon exercise of options.
(3) Includes 924,757 shares held by JDB and 149,282 shares held as community
property by E. Jeff Bomer and wife, Donna Bomer.
(4) Includes 1,000,000 indirect shares of Common Stock issuable upon
conversion of 1,000,000 shares of Preferred Stock held by HCI.
(5) Includes 1,000,000 indirect shares of Preferred Stock held by HCI, of
which Messrs. Leone and Neyland disclaim beneficial interest.
(6) Includes 3,333 shares of Common Stock issuable upon conversion of 3,333
shares of Preferred Stock.
(7) Includes 1,593,220 shares held by PAP.
(8) Includes 1,187,504 shares held of record or beneficially by SDP, of which
16,667 shares are issuable upon conversion of Preferred Stock held by SDP;
and 26,668 indirect shares issuable upon conversion of 13,334 shares of
Preferred Stock held by each of The Heather D. La Rue Irrevocable Trust and
The
14
<PAGE>
Steven D. La Rue Irrevocable, Trust (collectively, the "La Rue Trusts"), of
which Stephen Pyhrr is trustee and disclaims beneficial interest.
(9) Includes 16,667 shares of Preferred Stock held by SDP and an aggregate of
26,668 indirect shares of Preferred Stock held by the La Rue Trusts.
(10) Includes 459,668 shares issuable upon conversion of options and 1,063,334
shares issuable upon conversion of Preferred Stock, of which beneficial
interest as to 1,026,668 indirect shares is disclaimed. Shares
beneficially owned by two (2) or more persons have been attributed to only
one (1) of such persons.
(11) Shares held by HCI may be deemed to be held by its general and limited
partners as a group.
(12) Includes 362,171 indirect shares held by Eaglewood and 298,796 shares
indirectly held by PRO, with respect to all of which Mr. Sutherland
disclaims beneficial interest.
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 within 60 days,
including any right to acquire such power through the exercise of any option,
warrant or rights under convertible shares. 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. Shares indicated as
beneficially owned by individuals include those owned by their immediate
families or held by them or their families in family trusts or partnerships.
Shares indicated as indirectly owned include shares owned by corporations,
partnerships or other entities in which the named individuals are officers,
directors, managers or general partners, even though such person may not hold a
financial interest in the shares indicated, and which interest may be
disclaimed.
Mr. Johnson is the designated proxy covering an aggregate of 392,443 shares
of Common Stock under an irrevocable voting agreement. However, the shares
subject to the voting agreement must be voted in the manner and proportion as
shares held by stockholders who are neither officers, directors nor affiliates
of the Company are voted in each matter submitted to a vote of stockholder, and
Mr. Johnson is not permitted to exercise discretion in voting such shares.
Accordingly, such shares are not deemed beneficially owned by Mr. Johnson, and
Mr. Johnson disclaims any beneficial interest therein.
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 requires the Company's
directors and executive officers, and persons who own beneficially ten percent
(10%) or more of a registered class of the Company's voting stock to file
reports of ownership and changes in ownership of such securities with the
Securities and Exchange Commission ("SEC") and the National Association of
Securities Dealers, Inc., and to furnish copies of all such Section 16(a)
reports to the Company. Based solely on a review of copies of such forms
furnished to the Company, or written representations that no forms were
required, the Company believes that all persons known to the Company to be
subject to the reporting requirements have timely filed the required reports
pursuant to Section 16(a) with the Sec, except as follows:
15
<PAGE>
Each of John W. Ballard, JDB, SDP and PAP filed a report in October 1995
(for the month of September 1995) reporting the purchase of 48,241 shares of
Common Stock of the Company; whereas, in fact, each should have reported only
the right to acquire such shares. Pursuant to such rights, each such person
acquired an aggregate of only 15,091 shares over the next three months, and the
rights to acquire the remaining shares were terminated without being exercised.
As a result, each of such persons failed to file three monthly reports to
reflect the purchase transactions.
CERTAIN LEGAL PROCEEDINGS
Tommy M. Parker, an Executive Vice President of HOME, was an officer,
director and shareholder of Mississippi Savings Bank of Batesville, Mississippi,
at the time that it failed and was placed in receivership by the Resolution
Trust Corporation ("RTC") in 1990. The RTC and the Office of Thrift Supervision
("OTS") alleged that Mr. Parker and other principals of the bank received
excessive compensation, improper shareholder distributions and engaged in
imprudent lending and management practices in light of the financial condition
of the bank. Subsequent administrative and judicial proceedings, to the extent
that they involved Mr. Parker, were resolved in October 1992 pursuant to a
Compromise Settlement Agreement and Release with the RTC and a Stipulation and
Consent with the OTS. Mr. Parker entered into the settlement and consent to
avoid the time and expense of enforcement proceedings and litigation and neither
admitted nor denied the allegations of the RTC and the OTS. Among other things,
the joint settlement provided that, in consideration of discharge of certain
obligations of Mr. Parker to the bank, Mr. Parker was required to make a
monetary payment to the RTC and convey to the RTC or its nominees an undivided
interest in certain non-cash or "in-kind" dividends received by Mr. Parker as a
shareholder of the bank. In addition, Mr. Parker agreed that he would not,
without regulatory consent, participate in the conduct of the affairs or
distribution of securities of a federally insured depository institution.
APPROVAL OF AMENDMENT TO HOMECAPITAL INVESTMENT CORPORATION
1996 STOCK OPTION PLAN
THE STOCK OPTION PLAN
The Board of Directors of the Company strongly believes that the growth of
the Company depends upon the efforts of its officers and key employees and that
officers and key employees are best motivated if they own an equity interest in
the Company. In accordance with this philosophy, the HomeCapital Investment
Corporation 1996 Stock Option Plan ("Stock Option Plan") was adopted by the
Board of Directors and approved by stockholders of the Company in 1996.
Directors, officers and key employees of the Company or HOME who have or are
expected to have a significant and lasting impact on the long-term strategy and
success of the Company are eligible to receive incentive stock options and non-
qualified stock options under the Stock Option Plan when granted by the stock
option committee. To date, incentive stock options covering an aggregate of
480,000 shares have been granted and are outstanding to eleven (11) officers and
key employees of the Company.
THE PROPOSED AMENDMENT
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. As a result of options granted to officers and key
employees of the Company and there remain only 20,000 shares of Common Stock the
subject to the grant of further options under the Stock Option Plan.
Accordingly, the Board of Directors of the Company has adopted, subject to
approval of the stockholders of the Company, an amendment to the Stock Option
Plan to increase from 500,000 to 1,000,000 the number of shares of Common Stock
that may be issued upon exercise of options granted under the Stock Option Plan
(the "Plan Amendment").
16
<PAGE>
The Company believes that the growth and loan production, revenues and
earnings that it has experienced over the last fiscal year is attributed, in
part, to the ownership or prospect of ownership of equity in the Company by key
personnel. Moreover, the industry in which the Company operates is highly
competitive and the demand for extraordinary effort and loyalty by employees is
great. The Board of Directors considers that making additional shares available
under the Stock Option Plan will provide continued incentives for motivation of
employees to exceptional performance. Therefore, the Board of Directors urges
stockholders to approve the Plan Amendment at the Annual Meeting.
TERMS OF THE STOCK OPTION PLAN
Administration. The Stock Option Plan is administered by a committee of non-
employee directors of the Company appointed by the Company's Board (the "Stock
Option Committee"). The constituency of the Stock Option Committee and the grant
of options are intended to qualify under Rule 16b-3 if 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 advisable for the administration of the Stock
Option Plan. Options may be granted under the Stock Option Plan until March 21,
2006.
Options. 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 Internal Revenue 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 Stock Option Committee at a price per
share not less than the fair market value of Common Stock on the date of grant.
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. Options granted under the Stock Option Plan are generally
not transferable during the life of the optionee.
Vesting and Exercise. 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 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.
Effect of Reorganization or Changes in Control of the Company. 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.
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<PAGE>
Restrictions on Transfer of Option Shares. 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.
Amendments. The Board of Directors of the Company may further 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 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.
Federal Income Tax Consequences
Under existing federal income tax provisions, a participant who receives
Options under the Stock Option Plan that are subject to restrictions that create
a "substantial risk of forfeiture" (within the meaning of Section 83 of the
Internal Revenue Code of 1986, as amended (the "Code")) will not normally
realize any income, nor will the Company normally receive any deduction for
federal income tax purposes, in the year such Option is granted.
An employee generally will not recognize any income upon the exercise of an
Incentive Option, but the excess of the fair market value of the shares at the
time of exercise over the exercise price will be an item of tax preference,
which may, depending on particular factors relating to the employee, subject the
employee to the alternative minimum tax imposed by Section 55 of the Code. An
employee will recognize capital gain or loss on the sale or exchange of Common
Stock acquired pursuant to the exercise of an Incentive Option provided the
employee does not dispose of such shares within two (2) years from the date of
grant and one (1) year from the date of exercise of the Incentive Option ("the
required holding periods"). An employee disposing of such shares before the
expiration of the required holding periods will recognize ordinary income
generally equal to the difference between the exercise price and the fair market
value of the Common Stock on the date of exercise. The remaining gain, if any,
will be capital gain. The Company will not be entitled to a federal income tax
deduction in connection with the exercise of an Incentive Option, except where
the employee disposes of Common Stock before the expiration of the required
holding period.
When a Non-Qualified Option is exercised, the participant will realize
ordinary income measured by the difference between the aggregate exercise price
of the Option and the aggregate fair market value of the shares of Common Stock
on the exercise date and, subject to Section 162(m) of the Code, the Company
will be entitled to a deduction in the year the Option is exercised equal to the
amount the participant is required to treat as ordinary income.
If, upon a change in control of the Company, any Options that are not yet
exercisable become exercisable ("Accelerated Options"), any excess of the fair
market value on the date of the change in control of the shares issuable upon
exercise of the Accelerated Options on such date over and above the purchase
price of such shares, may be characterized as Parachute Payments (within the
meaning of Section 280G of the Code), if the sum of such amounts and any other
such contingent payments received by the employee exceeds an amount equal to
three (3) times the "Base Amount" for such employee. The Base Amount generally
is the average of the annual compensation of such employee for the five (5)
years preceding such change in
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<PAGE>
ownership or control. An Excess Parachute Payment, with respect to any
employee, is the excess of the Parachute Payments to such person, in the
aggregate, over and above such person's Base Amount. If the amounts received by
an employee upon a change in control are characterized as Parachute Payments,
such employee will be subject to a 20% excise tax on the Excess Parachute
Payment, and the Company will be denied any deduction with respect to such
Excess Parachute Payment.
This summary of federal income tax consequences of the Options that may be
awarded through the Stock Option Plan does not purport to be complete. In
addition to federal tax consequences, there may be state and local income tax
consequences applicable to Options acquired through the Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PLAN
AMENDMENT OF THE STOCK OPTION PLAN.
OPTION GRANT TABLE
The following table provides information about Options granted pursuant to
the Stock Option Plan since inception to certain executive officers and
employees of the Company.
<TABLE>
<CAPTION>
Shares of
Common
Stock
Underlying
Options Exercise Expiration
Name Position Granted(1) Price Date
- ---- -------- ---------- -------- ----------
<S> <C> <C> <C> <C>
John W. Ballard President 167,500 $ 5.625 10/1/06
27,500 $11.000 3/31/07
All Executive Officers as a Group (3 persons) 395,000 $ 5.521(2) (3)
Other Employees as a Group (7 persons) 85,000 $ 4.772(2) (3)
</TABLE>
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 has not yet been determined.
- -----------------
(1) Options become exercisable in five equal annual installments beginning on
the first anniversary of the date of grant, except that options to purchase
150,000 shares of Common Stock granted to an executive officer become
exercisable in three (3) equal installments beginning on the first
anniversary of the date of grant.
(2) Reflects the weighted exercise price ranging from $3.50 to $11.00 per
share.
(3) Expiring variously from June 1, 2006 through June 1, 2007.
VOTE REQUIRED
The affirmative vote of a majority of the votes cast, in person or by
proxy, at the Annual Meeting is required for approval of the Plan Amendment to
the Stock Option Plan.
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Stockholders receiving this Proxy Statement may obtain a copy of the Stock
Option Plan, as amended, 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.
APPROVAL OF NON-EMPLOYEE DIRECTOR COMPENSATION PLAN
The Board of Directors of the Company has adopted, subject to approval of
the stockholders of the Company, a non-employee director compensation plan (the
"Director Plan"). If approved by stockholders, the Director Plan will become
effective immediately following the Annual Meeting. A copy of the Director Plan
is attached as Exhibit A hereto.
THE DIRECTOR PLAN
The Director Plan provides cash compensation and options to purchase Common
Stock of the Company for persons who serve as members of the Board of Directors
of either or both of the Company and HOME ("Directors") and who are not
otherwise employed by the Company or HOME ("Participants"). The Director Plan
provides for an annual retainer of $10,000 payable each year immediately
following the annual election of a Participant as a Director, or upon the
initial election of the Participant as a Director, if not at an annual meeting
of stockholders. Participants will also receive a fee of $1,000 and
reimbursement for accountable expenses in connection with each meeting of the
board of directors attended.
The Director Plan also provides for the granting of non-qualified stock
options to each Participant. The Director Plan authorizes the issuance of
options to purchase 15,000 shares of Common Stock of the Company to each
Participant as of the date of election to the Board of Directors and an annual
award of options to purchase 3,000 shares of Common Stock immediately following
the election of each Participant as a Director on the date of the annual meeting
of stockholders.
Options granted under the Director Plan have an exercise price equal to the
fair market value of the Common Stock on the date that the options are granted.
The Director Plan contains provisions for adjustment of the number of shares
available for options and subject to unexercised options under the Director Plan
in the event of stock splits, dividends payable in Common Stock, business
combinations or certain other events. The Board of Directors has initially
reserved up to 250,000 shares of Common Stock for issuance under the Director
Plan.
Each option granted under the Director Plan is exercisable as to 20% of the
shares subject to the option each year for five (5) consecutive years following
the date of grant. Unexercised options shall expire ten (10) years after the
date of grant, and within 180 days after termination of service as a Director,
disability or death of the Participant.
REASON AND EFFECT OF THE DIRECTOR PLAN
The Board of Directors unanimously determined that the establishment of a
non-employee director compensation plan is essential to the ability of the
Company to secure and maintain non-employee directors and to encourage non-
employee directors to devote the essential time and dedication, and assume the
responsibilities, of Directors of the Company and its operating subsidiary. The
Board of Directors believes that the Director Plan is suitable to the size and
resources of the Company in comparison to other public companies.
In consideration of the compensation to Participants pursuant to the
Director Plan, the Company receives the benefit of the services provided by each
Participant to the Company. As of the date hereof, there
20
<PAGE>
are five (5) eligible Participants, each of whom voted in favor of the Director
Plan and would directly benefit from the Director Plan.
TAX EFFECT
Cash compensation under the Director Plan to Participants will constitute
ordinary income to the Participant when paid and, subject to Section 162 of the
Code, the Company will be entitled to a corresponding deduction for
compensation.
A Participant will not recognize any income and the Company will not be
entitled to a deduction upon the grant of options under the Director Plan. Upon
the exercise of an option, the Participant will recognize ordinary income in an
amount equal to the excess, if any, of the fair market value, on the date of
exercise, of the Common Stock acquired over the exercise price of the option.
The Company will be entitled to a tax deduction in an amount equal to the
ordinary income recognized by the Participant. Any additional gain or loss
realized by the Participant on disposition of the shares of Common Stock will
generally be a capital gain or loss to the Participant and will not result in an
additional tax deduction to the Company.
VOTE REQUIRED
The affirmative vote of a majority of the votes cast, in person or by
proxy, at the Annual Meeting is required for approval of the Director Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS APPROVE AND VOTE FOR
THE NON-EMPLOYEE DIRECTOR COMPENSATION PLAN.
APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION
AMENDMENTS TO NEVADA LAW
Subsequent to the formation of the Company, amendments to the Nevada
Revised Statutes (the "Act") in 1987, 1991 and 1993 permit a Nevada corporation
to include in its articles of incorporation a provision eliminating the personal
liability of directors and officers to the corporation and its stockholders for
monetary damages for violations of fiduciary duty under certain circumstances.
The Act does not affect the liability of directors and officers for (i) acts or
omissions which involve intentional misconduct, fraud or knowing violations of
law, or (ii) paying illegal dividends. The Act affects only the potential
liability of directors for monetary damages, and does not permit the elimination
or limitation of the availability of equitable remedies, such as an injunction
or rescission, for violations of fiduciary duty. See "Description and Effect of
Articles Amendment." The Act represents a legislative response to changes in
the market for directors and officers liability insurance, including sharp
increases in premiums and in some cases the unavailability of traditional
coverage. The availability of liability insurance is a relatively standard
condition of employment of officers and the appointment of directors
unaffiliated with the management of corporations, and in some cases directors of
certain corporations have resigned when such coverage became unavailable. In
other cases, the absence of available insurance may deter directors from making
entrepreneurial decisions. This situation was perceived as a threat to the
quality and stability of the governance of Nevada corporations. The revisions
to the Act were intended to allow Nevada corporations to provide substitute
protection for directors and to limit personal liability under certain
circumstances.
THE ARTICLES AMENDMENT TO THE ARTICLES OF INCORPORATION
The Board of Directors of the Company has unanimously approved an amendment
to the Articles of Incorporation of the Company (the "Articles Amendment")
eliminating the personal monetary liability of
21
<PAGE>
directors as permitted by the Act and has recommended to the stockholders
approval of the Articles Amendment. The proposed Articles Amendment, which
would add a new Article Thirteenth to the Articles of Incorporation of the
Company, is set forth in full as Exhibit B to this Proxy Statement. Approval of
the Articles Amendment by stockholders requires the affirmative vote of the
holders of a majority of the outstanding shares entitled to vote at the Annual
Meeting.
DESCRIPTION AND EFFECT OF ARTICLES AMENDMENT
The proposed Articles Amendment is intended to eliminate or limit the
personal liability of directors and officers to the full extent currently or
hereafter permitted by Nevada law. The Act authorizes a charter provision which
would relieve directors and officers of personal liability, but is not effective
unless such a provision is adopted by stockholders or included in the articles
of incorporation of a newly organized Nevada corporation.
If the Articles Amendment is adopted, the Company or a stockholder will not
be able to prosecute an action for monetary damages against a director or
officer for negligence or gross negligence in satisfying his fiduciary duty.
Actions for monetary damages may be brought if there can be shown that the
director or officer engaged in intentional misconduct, fraud or a knowing
violation of law, or approved or participated in an illegal dividend. The
Articles Amendment will not preclude the Company or a stockholder from seeking
an injunction, rescission or other non-monetary relief in the event of a breach
of fiduciary duty by a director or officer. In addition, the Articles Amendment
applies only to claims against a director or officer in his or her capacity as
such, and not to any claims arising out of his or her role in any other
capacity. Further, the Articles Amendment will not apply to acts or omissions
of directors or officers occurring prior to the time of adoption. The proposed
Articles Amendment does not have any affect on the remedies of stockholders
under federal securities laws. No suits are currently pending, or to the
knowledge of the Company, threatened against its directors or officers alleging
a violation of their fiduciary duty to the Company or its stockholders.
The Articles Amendment has not been proposed as an anti-takeover provision
and the Company is not aware of any attempt by a third party to acquire control
of the Company. However, it could have an indirect affect on such an attempt to
acquire control through a tender offer or merger by theoretically increasing the
flexibility of the Board of Directors and officers to respond to such an
attempt. The Company believes any such impact of the Articles Amendment would
be slight, since the Articles Amendment does not limit the availability of
equitable remedies, such as an injunction, or damages for intentional misconduct
by a director or officer.
Although members of the Board of Directors have a personal interest in
approval of the Articles Amendment, the Board of Directors strongly believes the
Articles Amendment to be in the best interests of the Company and its
stockholders. The Company is currently seeking directors and officers liability
insurance and anticipates that the availability of such insurance at affordable
rates will be dependent, in part, on adoption of the Articles Amendment. While
the existing members of the Board of Directors and officers have not indicated
an intention to resign if the Articles Amendment is not approved, the Company
believes the approval of the Articles Amendment is important to its ability to
recruit and retain competent directors and officers. In addition, the Company
believes effective functioning of the Board of Directors and officers is
impaired if directors and officers are not assured of the traditional protection
against lawsuits that challenge the prudence of good faith business judgments.
VOTE REQUIRED
The affirmative vote of a majority of voting shares entitled to vote at the
Annual Meeting is required for approval of the Articles Amendment to the
Articles of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL
OF THE ARTICLES AMENDMENT TO THE ARTICLES OF INCORPORATION.
22
<PAGE>
APPROVAL OF AMENDMENT TO BY-LAWS
The proposed amendment to the By-laws of the Company provides a new Section
2 to ARTICLE XII of the By-laws relating to the indemnification of directors,
officers and other agents of the Company and its subsidiaries against costs and
expenses of litigation in which they may become involved by reason of their
association with the Company or its subsidiaries ("By-law Amendment"). The text
of the By-law Amendment is set forth as Exhibit C hereto. The By-law Amendment,
with brief explanations, is summarized below:
INDEMNIFICATION
The extent of liabilities that may, in some circumstances, be incurred by
directors and officers of the Company can be of a magnitude to discourage
careful and prudent persons from serving in such capacities. This is of
particular moment in the case of growing companies undertaking diversified
operations and is magnified by increasing complexity of laws and regulations
applicable to business. The amount of such liabilities, or counsel fees and
other expenses of defending against liabilities, may well be out of proportion
to the remuneration received by directors and officers, despite the fact that
they may have acted in good faith and in what they reasonably believed to be the
Company's best interests.
Many of the same considerations that recommend the Articles Amendment also
apply to the By-law Amendment. See "Approval of Amendment to Articles of
Incorporation" above.
The Company has heretofore provided no indemnification for its directors
and officers. In 1987 Nevada Law was amended to provide, among other things,
that such persons may be afforded indemnification by an appropriate Bylaw
provision approved by the stockholders.
The proposed By-law Amendment emanates from such change in Nevada Law and
follows the general pattern of indemnification adopted in recent years by
numerous other corporations. It prescribes as the standard of conduct which
entitles a director or officer to indemnification that such person, in respect
of the matter in issue, shall have acted in good faith and in the manner he
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, acted without
reasonable cause to believe his conduct was unlawful. No indemnification can be
provided under the By-law Amendment to any person in any action or suite by or
on behalf of the Company who has been held liable for gross negligence or
willful misconduct in the performance of his duty to the Company. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that such person did not meet the applicable
standard of conduct.
The By-law Amendment applies to actions, suits or proceedings, including
civil, criminal, administrative or investigative. Subject to the required
standard of conduct, the By-law Amendment covers all expenses incurred,
including attorneys' fees, as well as judgments, fines and amounts paid in
settlement, except that amounts paid for judgments or fines in suits by or in
behalf of the Company may not be indemnified. The coverage extends to all
actions, suits or proceedings threatened, pending or contemplated in which any
person may become involved by reason of being or having been a director or
officer of the Company, or by reason of serving at the request of the Company as
a director or officer of another corporation, partnership, joint venture or
other enterprise. If wholly successful on the merits or otherwise, such person
is entitled to indemnification as of right. Any indemnification, unless ordered
by a court, shall be made only upon a determination that such person has met the
applicable standard of conduct entitling him to indemnification. Such
determination is to be made by a majority vote of a quorum of the Board of
Directors consisting of directors who are not parties to the action, suit or
proceedings, or by written opinion of independent legal counsel or by the
stockholders.
23
<PAGE>
Under the By-law Amendment, expenses incurred with respect to an action,
suit or proceeding may be advanced by the Company prior to final disposition of
the matter upon an undertaking of the director or officer to repay such amount
if it is ultimately determined that he is not entitled to indemnification.
The By-law Amendment applies to actions, suits and proceedings commenced
prior to or after its adoption. There is not now pending any known action,
suit, or proceeding involving any of the Company's directors or officers to
which the By-law Amendment would be applicable, and the Company has not been
notified of any such action, suit or proceeding intended to be brought.
The By-law Amendment further provides that its provisions are not exclusive
of further rights to which a director or officer may be entitled under any
bylaw, agreement or vote of stockholders or disinterested directors or
otherwise, and shall continue as to a person who has ceased to be a director or
officer of the Company.
The By-law Amendment further provides that the Board of Directors may
purchase and maintain insurance on behalf of any person who is or was a director
or officer of the Company or who is or was serving at the request of the Company
as a director or officer of another corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against him and
incurred by him while so serving, whether or not the Company would have the
power to indemnify him against such liability under the other provisions of the
By-law Amendment. The Company is seeking but presently has no such insurance in
force.
The management of the Company has recommended the proposed By-law Amendment
as being in the best interests of the Company and its stockholders, in that it
will provide a modern indemnification plan designed to afford, within proper
limits, appropriate motivation to able executive personnel to remain and in the
future to become associated with the Company.
VOTE REQUIRED
The affirmative vote of a majority of the votes cast at the Annual Meeting,
in person or by proxy, will be required for approval of the By-law Amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS APPROVE AND VOTE FOR
THE BY-LAW AMENDMENT. In the opinion of management, the approval of the By-law
Amendment is in the best interests of the Company and its stockholders. It is
intended that the shares represented by properly executed proxies will be voted,
in the absence of contrary indication, in favor of the proposed By-law
Amendment.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has appointed Coopers & Lybrand
L.L.P. as the Company's independent accountants for the current fiscal year,
subject to ratification by stockholders of the Company at the Annual Meeting.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at the
Annual Meeting, will be given an opportunity to make a statement, if they desire
to do so, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS RATIFICATION OF COOPERS &
LYBRAND L.L.P. AS INDEPENDENT ACCOUNTANTS OF THE COMPANY.
OTHER MATTERS
The Company does not know of any matters to be presented at the Annual
Meeting other than those described herein. However, if any other matters
properly come before the Annual Meeting or any
24
<PAGE>
adjournment thereof, the persons named in the enclosed proxy will have
discretionary authority to vote all proxies in accordance with their best
judgment.
STOCKHOLDER PROPOSALS
Eligible stockholders who desire to present a proposal qualified for
inclusion in the proxy materials relating to the 1998 Annual Meeting of the
Company must forward the proposal in writing to the Secretary of the Company at
the principal office of the Company not later than May 28, 1998.
BY ORDER OF THE BOARD OF DIRECTORS
E. JEFF BOMER
SECRETARY
AUSTIN, TEXAS
SEPTEMBER 1, 1997
25
<PAGE>
EXHIBIT A
HOMECAPITAL INVESTMENT CORPORATION
NON-EMPLOYEE DIRECTOR COMPENSATION PLAN
1. PURPOSE. This compensation plan to be known as the HomeCapital
Investment Corporation Non-Employee Director Compensation Plan (hereinafter,
this "Plan") is intended to promote the interests of HomeCapital Investment
Corporation (hereinafter, the "Company") and its wholly-owned subsidiary,
HomeOwners Mortgage & Equity, Inc. ("Home"), by providing a cash inducement to
obtain and retain the services of qualified persons who are neither employees
nor officers to serve as members of the Board of Directors of either or both of
the Company and Home. The Plan also contains provisions for the granting of
options to the non-employee directors. The options granted pursuant hereto are
intended by the Company and the optionees to be nonstatutory stock options and
will not qualify for any special tax benefits to the optionees. The Plan is
intended to qualify under Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") in order to be exempt from the
requirements of Section 16(b) of the Exchange Act.
2. DEFINITIONS. For purposes of the Plan, the following terms shall have
the meanings set forth below:
"Annual Retainer" means the annual dollar amount, designated from time to
time by the Board, payable monthly in arrears to each Participant for services
as a Director. The initial Annual Retainer is $10,000.
"Board" means the Board of Directors of the Company, as constituted from
time to time.
"Code" means the Internal Revenue Code of 1986, as in effect and as amended
from time to time, or any successor statute thereto, together with any rules,
regulations and interpretations promulgated thereunder or with respect thereto.
"Committee" means the Board or a committee appointed by the Board from time
to time to exercise the power set forth in Sections 5.1 and 5.2 herein.
"Common Stock" means the Common Stock, par value $.01 per share, of the
Company or any security of the Company issued by the Company in substitution or
exchange therefor.
"Company" means HomeCapital Investment Corporation, a Nevada corporation,
or any successor company.
"Director" means a member of the Board of Directors of either or both of
the Company and Home.
<PAGE>
"Director Fee" means the sum of the Annual Retainer and the Meeting Fees.
"Effective Date" means the date on which this Plan is approved by the
stockholders of the Company.
"Exchange Act" means the Securities Exchange of 1934, as in effect and as
amended from time to time, or any successor statute thereto, together with any
rules, regulations and interpretations promulgated thereunder or with respect
thereto.
"Fair Market Value" means on, or with respect to, any given date, the
closing price of the Common Stock on such date (or, if the Common Stock was not
traded on such date, then the next preceding day on which the Common Stock was
traded) as reported on the NASDAQ composite tape or, if the Common Stock is not
traded on such exchange, as reported on any other national securities exchange
on which the Common Stock may be traded.
"Home" means HomeOwners Mortgage & Equity, Inc., a Delaware corporation.
"Meeting Fee" means the fee payable to each Participant for attending each
meeting of the Board of Directors of either or both of the Company and Home, or
committee thereof on which the Participant then serves, designated from time to
time by the Board. The initial Meeting Fee is $1,000 and may be changed by
resolution of the Board from time to time in its discretion.
"Participant" means a Director who is neither an officer or employee of the
Company or any subsidiary of the Company.
"Plan" means this HomeCapital Investment Corporation Non-Employee Director
Compensation Plan, as set forth herein and as in effect and as amended from time
to time (together with any rules and regulations promulgated by the Committee
with respect thereto).
"Stock Option" means an option granted under Section 6 of the Plan.
"Stock Option Agreement" means an agreement executed by a Participant
pursuant to Section 11 of the Plan in connection with the granting of a Stock
Option pursuant to Section 6 of the Plan.
3. TERM OF PLAN. This Plan shall become effective as of the Effective
Date and shall continue in effect through December 31, 2007 unless earlier
terminated.
4. AVAILABLE SHARES. The total number of shares of Common Stock for which
Stock Options may be granted under this Plan shall not exceed 250,000 shares,
subject to adjustment in accordance with Section 10 of the Plan. Shares subject
to the Plan may be either authorized but unissued shares or shares that were
once issued and subsequently reacquired by the Company. If any options granted
under this Plan are surrendered before exercise or lapse without exercise, in
whole
-2-
<PAGE>
or in part, the shares reserved therefor shall continue to be available under
this Plan. No fractional shares of Common Stock shall be issued under the Plan,
unless the Committee determines otherwise. For the purpose of computing the
maximum number of shares of Common Stock available for Stock Options under the
Plan, there shall be counted against the limitations set forth above the maximum
number of shares of Common Stock potentially subject to issuance upon exercise
of Stock Options granted under the Plan determined as of the date on which such
Stock Options are granted. If any Stock Options expire unexercised or are
otherwise forfeited, surrendered, canceled, or terminated, the shares of common
Stock which were theretofore subject (or potentially subject) to such Stock
Options shall again be available under the Plan to the extent of such
expiration, forfeiture, surrender, cancellation or termination.
5. ADMINISTRATION.
5.1 The Committee. The Plan shall be administered by the Committee.
The Committee shall be appointed from time to time by the Board and shall be
comprised of not less than two of the then members of the Board who qualify to
administer the Plan in a manner so that Stock Options granted under the Plan
will qualify under Rule 16b-3 of the Exchange Act. Consistent with the Bylaws of
the Company, members of the Committee shall serve at the pleasure of the Board
and the Board, subject to the immediately preceding sentence, may at any time
and from time to time remove members from, or add members to, the Committee.
5.2 Plan Administration and Plan Rules. The Committee is authorized to
construe and interpret the Plan and to promulgate, amend and rescind rules and
regulations relating to the implementation, administration and maintenance of
the Plan. Subject to the terms and conditions of the Plan, the Committee shall
make all determinations necessary or advisable for the implementation,
administration and maintenance of the Plan, in each case consistent with the
terms of the Plan, including, without limitation, (i) granting Stock Options
pursuant to the terms of the Plan in such consistent form as the Committee shall
determine, (ii) imposing such restrictions, terms and conditions upon such Stock
Options as the Committee shall deem appropriate, and (iii) correcting any
technical defect or technical omission or reconciling any technical
inconsistency between the Plan and/or any Stock Option Agreement. The Committee
may designate persons other than members of the Committee to carry out the day-
to-day administration of the Plan under such conditions and limitations as it
may prescribe, except that the Committee shall not delegate its authority with
regard to selection for participation in the Plan and/or the granting of any
Stock Options to Participants. Any determination, decision or action of the
Committee in connection with the construction, interpretation, administration,
implementation or maintenance of the Plan shall be final, conclusive and binding
upon all Participants and any person(s) claiming under or through any
Participants.
5.3 Liability Limitation. Neither the Board nor the Committee, nor any
member of either, shall be liable for any act, omission, interpretation,
construction or determination made in good faith in connection with the Plan (or
any Stock Option Agreement), and the members of the Board and the Committee
shall be entitled to indemnification and reimbursement by the Company in respect
of any claim, loss, damage or expense (including, without limitation, attorneys'
fees) arising
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or resulting therefrom to the fullest extent permitted by law and/or under any
directors and officers liability insurance coverage which may be in effect from
time to time.
6. AUTOMATIC STOCK OPTION GRANT.
6.1 Stock Option Grant.
(a) Initial Stock Options. Upon the Effective Date of the Plan,
Stock Options to purchase 15,000 shares of the Common Stock of the Company shall
automatically be granted to each Participant who has not already otherwise
received Stock Options to purchase 15,000 shares of Common Stock of the Company
in connection with such Participant's agreement to serve as a Director of the
Company ("Initial Stock Options"). Initial Stock Options shall also
automatically be granted to each individual who becomes a Participant after the
Effective Date of the Plan upon the election of such individual as Director of
the Company.
(b) Annual Stock Options. An annual award of Stock Options to
purchase 3,000 shares of Common Stock shall be automatically granted to each
Participant who is reelected to serve as a Director immediately following the
election of such Participant at the annual meeting of stockholders of the
Company and Home, respectively ("Annual Stock Options").
(c) Allocation of Remaining Shares. In the event that there are
not sufficient shares available under the Plan to allow for the grant to a
Participant of a Stock Option provided for above, such Participant shall be
granted a Stock Option to purchase the remaining shares that are reserved under
the Plan. If two or more Participants are entitled to grants of Stock Options
hereunder under such circumstances, then such Participants shall receive grants
of Stock Options to purchase shares of Common Stock equal to their pro rata
share of the total number of shares of Common Stock remaining and available
under the Plan. The Stock Options may be granted under the Plan in such form as
the Committee may from time to time approve with such terms and conditions, not
inconsistent with the express terms and provisions of the Plan, as the Committee
shall set forth in the relevant Stock Option Agreement.
6.2 Exercise Price. The exercise price per share of Common Stock
subject to an Initial Stock Option granted pursuant to this Section 6 of this
Plan shall be 100% of the Fair Market Value of such shares upon the later to
occur of (i) the Effective Date, and (ii) the date of initial election of the
Participant as a Director. The exercise price per share of Common Stock subject
to Annual Stock Options granted pursuant to this Section 6 shall be 100% of the
Fair Market Value of such shares upon the date of reelection of the Participant
as a Director. The exercise price will be subject to adjustment in accordance
with the provisions of Section 10 of this Plan.
6.3 Term. Unless soon terminated in accordance with the provisions of
this Plan or pursuant to the terms of the Stock Option Agreement, a Stock Option
granted hereunder shall expire on a date which is ten (10) years after the date
of grant of the Stock Option.
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6.4 Exercise. Subject to the terms and conditions of this Plan and the
Stock Option Agreement, a Stock Option granted hereunder shall, to the extent
then exercisable, be exercisable in whole or in part by giving written notice to
the Company by mail or in person addressed to the Secretary of the Company, at
its principal executive offices, stating the number of shares with respect to
which the option is being exercised. Such notice shall be accompanied by payment
in full of the exercise price by any method that is approved by the Committee
and that will cause the shares to be issued to be fully paid and non-assessable,
including without limitation payment in cash, by certified check, bank draft or
money order payable to the order of the Company or, if permitted by the terms of
the relevant Stock Option Agreement and applicable law, by delivery of, alone or
in connection with a partial cash or instrument payment, shares of Common Stock
already owned by the Participant for at least six months. The Committee may, in
the relevant Stock Option Agreement, also permit Participants (either on a
selective or group basis) to simultaneously exercise Stock Options and sell the
shares of Common Stock thereby acquired, pursuant to a brokerage "cashless
exercise" arrangement, selected by and approved of in all respects in advance by
the Committee, and use the proceeds from such sale as payment of the exercise
price of such Stock Options. Payment instruments shall be reviewed by the
Company subject to collection. The proceeds received by the Company upon
exercise of any Stock Option may be used by the Company for general corporate
purposes.
7. DIRECTOR FEES.
7.1 Annual Retainer Fee. Each Participant shall be paid the Annual
Retainer on the date of election or reelection of the Participant as a Director.
7.2 Meeting Fee. Each Participant shall also be paid the Meeting Fee
for each meeting of the Board of Directors of either or both of the Company and
Home attended by such Participant in person or by conference telephone, payable
upon adjournment of the meeting. Participants shall not be entitled to a Meeting
Fee with respect to proceedings of Directors by written consent.
8. VESTING AND NON-TRANSFERABILITY OF STOCK OPTIONS.
8.1 Vesting. Stock Options granted pursuant to the Plan shall vest
during the service of a Participant as a Director with respect to twenty percent
(20%) of the shares subject to any Stock Option each year on the anniversary of
the date of grant of each Stock Option and shall become fully vested on the
fifth anniversary of the date of grant of the Stock Option.
8.2 Legend on Certificates. Stock certificates issued pursuant to the
exercise of Stock Options may bear a legend, among other required legends, as
determined by the Committee substantially as follows:
"The shares represented by this certificate have been taken without a view
to the distribution thereof within the meaning of the Securities Act of
1933, as amended, and may not be sold,
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pledged, transferred or otherwise disposed of except in accordance with
such act and the rules and regulations thereunder and in accordance with
applicable state securities laws. The Company will not transfer such shares
except upon receipt of evidence satisfactory to the Company that the
registration provisions of such act have been complied with or that such
registration is not required and that such transfer will not violate any
applicable state securities laws.
The transferability of this certificate and the shares of stock represented
hereby are subject to the terms and conditions (including, without
limitation, forfeiture events) contained in the HomeCapital Investment
Corporation Non-Employee Director Compensation Plan (the "Plan") and a
Stock Option Agreement entered into between the registered owner hereof and
the Company. Copies of the Plan and Stock Option Agreement are on file in
the office of the Secretary of the Company. The Company will furnish to
the record holder of this certificate, without charge, upon written request
at its principal place of business a copy of such Plan and Stock Option
Agreement."
8.3 Non-transferability of Stock Options. No Stock Option under the
Plan or any Stock Option Agreement, and no rights or interests herein or
therein, shall or may be assigned, transferred, sold, exchanged, pledged,
disposed of or otherwise hypothecated or encumbered by a Participant or any
beneficiary hereof or thereof, except by testamentary disposition or the laws of
descent and distribution. No such interest shall be subject to seizure for the
payment of the Participant's (or any beneficiary's debts, judgments, alimony, or
separate maintenance or be transferable by operation of law in the event of the
Participant's (or any beneficiary's) bankruptcy or insolvency. During the
lifetime of a Participant, Stock Options are exercisable only by the
Participant.
9. TERMINATION OF MEMBERSHIP AS A DIRECTOR. Except as otherwise provided
herein, if a Participant's membership as a Director is terminated for any
reason, such Participant's rights, if any, to exercise any then exercisable
Stock Options shall terminate 180 days after the date of such termination and
thereafter the Participant shall forfeit any rights or interests in or with
respect to any such Stock Options. If any Participant dies while entitled to
exercise a Stock Option, if any, such Participant's estate, designated
beneficiary or other legal representative, as the case may be, shall have the
right, subject to the applicable provisions of the Plan (and any rules or
procedures thereunder), to exercise such then exercisable Stock Options, if any,
at any time within 180 days from the date of such Participant's death.
10. CHANGES IN CAPITALIZATION AND OTHER MATTERS.
10.1 No Corporate Action Restriction. The existence of the Plan,
any Stock Option Agreement and/or the Stock Options granted hereunder shall not
limit, affect or restrict in any way the right or power of the Board or the
stockholders of the Company to make or authorize (i) any adjustment,
recapitalization, reorganization or other change in the Company's or any
affiliate's capital structure or its business, (ii) any merger, consolidation or
change in the ownership of the Company or any affiliate, (iii) any issue of
bonds, debentures, capital, preferred or prior preference stock ahead
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<PAGE>
of or affecting the Company's or any affiliate's capital stock or the rights
thereof, (iv) any dissolution or liquidation of the Company or any affiliate,
(v) any sale or transfer of all or any part of the Company's or any affiliate's
assets or business, or (vi) any other corporate act or proceeding by the Company
or any affiliate. No Participant, beneficiary or any other person shall have any
claim against any member of the Board or the Committee, the Company or any
affiliate as a result of any such action.
10.2 Recapitalization Adjustments. In the event of any change in
capitalization affecting the Common Stock of the Company, including, without
limitation, a stock dividend or other distribution, stock split, reverse stock
split, recapitalization, consolidation, subdivision, split-up, spin-off, split-
off, combination or exchange of shares or other form of reorganization, or any
other change affecting the Common Stock, the Board shall authorize and make such
adjustments, if any, as are appropriate to reflect such change, including,
without limitation, with respect to the aggregate number of shares of the Common
Stock for which Stock Options in respect thereof may be granted under the Plan,
the maximum number of shares of the Common Stock which may be sold to any
Participant, the number of shares of the Common Stock covered by each
outstanding Stock Option, and the exercise price per share of Common Stock in
respect of outstanding Stock Options.
10.3 Reorganizations. The foregoing provisions of Section 10
notwithstanding, the following provisions of Section 10 shall control, where
applicable:
(a) If the Company shall at any time participate in a
reorganization of a type described in Section 424(a) of the Code and in which
(i) the Company is not the surviving entity, or (ii) the Company is the
surviving entity and the stockholders of Common Stock are required to exchange
their shares for property and/or securities, the Company shall give the
Participants written notice of any such proposed reorganization on or before
thirty (30) days before such reorganization, and any outstanding Stock Options
shall be exercisable after receipt of such notice and prior to such
reorganization in full for all of the shares of Common Stock covered by the
Stock Options; provided, however, either the Participant or the Company may make
the exercise of outstanding Stock Options after Participant's receipt of such
notice effective only immediately prior to the consummation of such
reorganization. To the extent not exercised prior to such reorganization, the
Stock Options shall expire on the occurrence of such reorganization. A sale of
all or substantially all the assets of the Company for a consideration (apart
from the assumption of obligations) consisting primarily of securities shall be
deemed a reorganization for the foregoing purposes.
(b) In the event of the proposed dissolution or liquidation of
the Company, the Stock Options granted hereunder shall terminate as of a date to
be fixed by the Board, provided that not less than thirty (30) days' prior
written notice of the date so fixed shall be given to the Participants, and the
Participants shall have the right, during the period of thirty (30) days
preceding such termination, to exercise their Stock Options in full for all of
the shares of Common Stock covered by the Stock Options; provided, however,
either the Participant or the Company may make the exercise of the outstanding
Stock Options after participant's receipt of such notice effective only
immediately prior to the consummation of such dissolution.
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<PAGE>
11. STOCK OPTION AGREEMENTS. Each Participant receiving a "Stock Option"
under Section 6 of the Plan shall enter into a Stock Option Agreement with the
Company in a form to be prescribed by the Committee not inconsistent with the
Plan or any determinations made by the Committee. Each such Participant shall
agree and be bound by the restrictions, terms and conditions of this Plan and
the Stock Option Agreement.
12. MISCELLANEOUS.
12.1 Compensation Limitations. Participants shall not receive more
than one Initial Stock Option, only one Annual Retainer and one Annual Stock
Option during each period between annual meetings of Stockholders of the
Company, and shall only receive Meeting Fees with respect to service as a
Director of the Company, while serving simultaneously as a Director of the
Company and Home.
12.2 Tax withholding. With respect to the exercise of any Stock Option
the Company shall have the right to withhold or cause to be withheld by any
lawful means any federal, state, local or other taxes, assessments or amounts of
any kind which the Committee, in its sole discretion, deems necessary to be
withheld to comply with the Code and/or any other applicable law, rule or
regulation. If the Committee, in its sole discretion, permits shares of Common
Stock to be used to satisfy any such withholding, such Common Stock shall be
valued based on the Fair Market Value of such stock as of the date the
withholding is required to be made, such date to be determined by the Committee.
The Committee may establish rules limiting the use of Common Stock to meet
withholding requirements by Participants who are subject to Section 16 of the
Exchange Act.
12.3 Unfunded Plan. The Plan shall be unfunded and the Company shall
not be required to segregate any assets in connection with any compensation or
Stock Options under the Plan, except that the Company shall reserve all shares
of Common Stock covered by the Plan for issuance pursuant to Stock Options to be
granted pursuant to the Plan. Any liability of the Company to any person with
respect to any Stock Option under the Plan or any Stock Option Agreement shall
be based solely upon the contractual obligations that may be created as a result
of the Plan or any such award or agreement. No such obligation of the Company
shall be deemed to be secured by any pledge of, encumbrance on, or other
interest in, any property or asset of the Company or any affiliate. Nothing
contained in the Plan or any Stock Option Agreement shall be construed as
creating in respect of any Participant (or beneficiary thereof or any other
person) any equity or other interest of any kind in any assets of the Company or
any affiliate or creating a trust of any kind or a fiduciary relationship of any
kind between the Company, any affiliate and/or any such Participant, any
beneficiary thereof or any other person.
12.4 Listing, Registration and Other Legal Compliance. No shares of
the Common Stock shall be issued under the Plan unless legal counsel for the
Company shall be satisfied that such issuance will be in compliance with all
applicable federal and state securities laws and regulations and any other
applicable laws or regulations. The Committee may require, as a condition of any
payment or share issuance, that certain agreements, undertakings,
representations, certificates, and/or
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<PAGE>
information, as the Committee may deem necessary or advisable, be executed or
provided to the Company to assure compliance with all such applicable laws or
regulations. Certificates for shares of the Common Stock delivered under the
Plan may be subject to such stock-transfer orders and such other restrictions as
the Committee may deem advisable under the rules, regulations, or other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Common stock is then listed, and any applicable federal or state
securities law. The Committee may cause a legend or legends to be put on any
such share certificates to make appropriate reference to such restrictions. In
addition, if, at any time specified herein (or in any Stock Option Agreement)
for (i) the making of any determination or (ii) the issuance or other
distribution of Common Stock to or through a Participant with respect to any
Stock Option, any law, rule, regulation or other requirement of any governmental
authority or agency shall require either the Company, any affiliate or any
Participant (or any estate, designated beneficiary or other legal representative
thereof) to take any action in connection with any such determination, any such
shares to be issued or distributed, or the making of any such determination, as
the case may be, shall be deferred until such required action is taken.
12.5 Governing Law. The Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Nevada,
without regard to principles of conflict of laws thereunder. Any titles and
headings herein are for reference purposes only, and shall in no way limit,
define or otherwise affect the meaning, construction or interpretation of any
provisions of the Plan.
12.6 Effective Date. The Plan shall be effective as of the date of
approval of a majority of the Company's outstanding stock entitled to vote on
such matter.
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EXHIBIT B
HOMECAPITAL INVESTMENT CORPORATION
AMENDMENT TO ARTICLES OF INCORPORATION
FOR
LIMITATION OF DIRECTOR AND OFFICER LIABILITY
THIRTEENTH. No director or officer of the Corporation shall be personally
liable to the Corporation or any of its stockholders for monetary damages for
breach of fiduciary duty as a director or officer, except that this Article does
not eliminate or limit the liability of a director or officer for: (i) an act
or omission that involves intentional misconduct, fraud or a knowing violation
of the law; (ii) an act or omission for which the liability of a director or
officer is expressly provided for by an applicable statute, including the
liability for payment of distributions in violation of Section 78.300 of the
Nevada Revised Statutes; or (iii) any other act, omission, transaction or breach
of duty as to which any applicable statute, rule or regulation provides that the
liability of directors or officers may not be eliminated or limited. If the
Nevada Revised Statutes or other applicable laws (collectively, "Laws")
hereafter are amended to authorize the further elimination or limitation of the
liability of directors or officers], then the liability of a director or officer
of the Corporation, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by the amended Laws.
No amendment to or repeal of this Article shall apply to or have any effect on
the liability or alleged liability of any director or officer of the Corporation
for or with respect to any acts or omissions of such director or officer
occurring prior to such amendment or repeal.
<PAGE>
EXHIBIT C
HOMECAPITAL INVESTMENT CORPORATION
AMENDMENT TO BY-LAWS
FOR
INDEMNIFICATION OF DIRECTORS AND OFFICERS
ARTICLE XII - MISCELLANEOUS PROVISIONS
*****
2. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) Indemnification Coverage. To the fullest extent permitted by law, the
Company shall indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, arbitrative or investigative, any
appeal to such an action, suit or proceeding and any inquiry or investigation
that could lead to such an action, suit or proceeding (collectively, such
actions, suits, proceedings, appeals, inquiries and investigations are referred
to collectively as "Proceedings" and individually as "Proceeding"), by reason of
the fact that such person either is or was a director, officer, employee or
agent of the Company, or is or was serving at the request of the Company as a
director, officer, partner, venturer, proprietor, trustee, employee, agent or
similar functionary of another domestic or foreign corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan or other
enterprise, against expenses (including attorney's fees), judgments, penalties
(including excise and similar taxes), fines and amounts paid in settlement
actually and reasonably incurred by the person in connection with such
Proceeding, if it is determined that such person acted in good faith and in a
manner which such person reasonably believed to be in or not opposed to the best
interests of the Company and, with respect to any criminal Proceeding, had no
reasonable cause to believe his conduct was unlawful; provided, however, that
indemnification may not be made for any claim, issue or matter as to which such
a person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the Company or for amounts
paid in settlement to the Company, unless and only to the extent that the court
in which the Proceeding was brought or other court of competent jurisdiction
determines upon application that in view of all the circumstances of the case,
the person is fairly and reasonably entitled to indemnity for such expenses as
the court deems proper. The termination of any Proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
does not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Company and that, with respect to any
criminal Proceeding, such person had reasonable cause to believe that his
conduct was unlawful.
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(b) Eligibility Determination. Any indemnification under subsection (a),
unless ordered by a court or advanced pursuant to subsection (d), must be made
by the Company only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances. The determination must be made: (i) by the stockholders; or (ii)
by the board of directors by a majority vote of a quorum consisting of directors
who at the time of the vote are not named defendants or respondents in the
Proceeding; or (iii) if a majority of such a quorum so orders, by written
opinion of independent legal counsel; or (iv) if such a quorum cannot be
obtained, by written opinion of independent legal counsel.
(c) Mandatory Indemnification. To the extent that a director, officer,
employee or agent of the Company has been successful on the merits or otherwise
in defense of any Proceeding referred to in subsection (a) of this Section, or
in defense of any claim, issue or matter therein, such person shall be
indemnified by the Company against expenses (including court costs and
attorneys' fees) actually and reasonably incurred by him in connection with the
defense of the Proceeding.
(d) Expenses Advance. The reasonable expenses incurred by a director or
officer in defending a Proceeding shall be paid by the Company as they are
incurred in advance of the final disposition of such Proceeding and without any
of the determinations specified in subsection (b) of this Section, upon receipt
by the Company of a written undertaking by or on behalf of the director or
officer to repay such amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the Company
as authorized in this Section. The Company may, to the extent authorized from
time to time by the board of directors, grant rights to the advancement of
expenses to any employee or agent of the Company to the fullest extent of the
provisions of this Section with respect to the advancement of expenses of
directors and officers of the Company.
(e) Non-Exclusive. The right to indemnification conferred in this Section
shall be a contract right. The indemnification provided by this Section shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled under any other law, by-law, agreement, vote of stockholders or
disinterested directors, or otherwise, either as to action in an official
capacity or an action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
(f) Insurance. The Company may purchase and maintain insurance or make
any other financial arrangement on behalf of any person who is or was a
director, officer, employee or agent of the Company, or is or was serving at the
request of the Company as a director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise against any liability asserted against him and
any liability and expenses incurred by him in any such capacity, or arising out
of his status as such, whether or not the Company would have the authority to
indemnify him against such liability and expenses; provided, however, that no
financial arrangement made pursuant to this subsection may provide protection
for a person adjudged by a court of competent jurisdiction, after exhaustion of
all appeals therefrom, to be liable for
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<PAGE>
intentional misconduct, fraud or a knowing violation of law, except with respect
to the advancement of expenses or indemnification ordered by a court. The
insurance or other arrangement may be procured, maintained or established within
the Company or with any insurer or other person deemed appropriate by the board
of directors regardless of whether all or part of the stock or other securities
of the insurer or other person is owned in whole or part by the Company. In
the absence of fraud, the judgment of the board of directors as to the terms and
conditions of the insurance or other arrangement and the identity of the insurer
or other person participating in an arrangement shall be conclusive and the
insurance or arrangement shall not be voidable and shall not subject the
directors approving the insurance or arrangement to liability, on any ground,
regardless of whether directors participating in the approval are beneficiaries
of the insurance or arrangement.
3
<PAGE>
HOMECAPITAL INVESTMENT CORPORATION
1996 STOCK OPTION PLAN
(AS AMENDED)
1. PURPOSE AND EFFECTIVE DATE.
1.1. PURPOSE. The Plan is intended to enable the Company to remain
competitive and innovative in its ability to attract, motivate, reward and
retain a strong management team of superior capability and to encourage the
holding of proprietary interests in the Company to make awards that
recognize the creation of value for the stockholders of the Company and
promote the Company's growth and success. In furtherance of that purpose,
eligible persons may receive Incentive Stock Options or Non-Qualified Stock
Options or a combination of Incentive Stock Options or Non-Qualified Stock
Options.
1.2. EFFECTIVE DATE. The Effective Date of the Plan shall be March
21, 1996. The Plan must be approved by stockholders within twelve months
before or after the date on which the Board of Directors of the Company
adopts the Plan. If the Plan is not approved by the stockholders within the
period of time designated within this Section 1.2, this Plan and all
Options granted hereunder, if any, shall be voided.
2. DEFINITIONS.
2.1. DEFINITIONS. Whenever used herein, the following terms shall
have the respective meanings set forth below:
(a) "Board" means the Board of Directors of HomeCapital
Investment Corporation.
(b) "Change of Control" shall be deemed to have occurred if (i)
a tender offer by any person other than existing stockholders shall be
made and consummated for the ownership of 50% or more of the
outstanding voting securities of the Company, (ii) the Company shall
be merged or consolidated with another corporation and as a result of
such merger or consolidation less than 50% of the outstanding voting
securities of the surviving or resulting corporation shall be owned in
the aggregate by the former stockholders of the Company, (iii) the
Company shall sell at least 75% of its assets by value in a single
transaction or in a series of transactions to another person or
corporation which is not a wholly owned subsidiary of the Company, or
(iv) a person, within the meaning of Section 3(a)(9) or of Section
13(d)(3) (as in effect on the date thereof) of the Exchange Act, shall
acquire 50% or more of the outstanding voting securities of the
Company (whether directly, indirectly, beneficially or of record). For
purposes hereof, ownership of voting securities shall take into
account and shall include ownership as determined by applying the
provisions of Rule 13d-3(d)(1)(i) (as in effect of the date thereof)
pursuant to the Exchange Act.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Board of Directors of HomeCapital
Investment Corporation or a Stock Option Committee appointed from time
to time by the Board of Directors to administer this Plan, however
designated.
(e) "Company" means HomeCapital Investment Corporation, a
Nevada corporation.
(f) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
<PAGE>
(g) "Exercise Price" means:
(1) With respect to an Incentive Stock Option, a value
which is not less than (i) the Fair Market Value, or (ii) in the
case of Incentive Stock Options granted to a Ten Percent
Stockholder, 110 percent of the Fair Market Value of a share of
Stock on the date the Incentive Stock Option is granted, as
determined by the Committee.
(2) With respect to a Non-Qualified Stock Option, a value
which may be more or less than the Fair Market Value on the date
the Non-Qualified Stock Option is granted, as determined by the
Committee.
(h) "Fair Market Value" means for a share of Stock as of any
date,
(1) The closing price, regular way, for the shares on the
New York Stock Exchange on such date (or if such Exchange was
not open for trading on such date, the next preceding date on
which it was open); or
(2) If there is no price as specified in (1), the mean of
the last reported bid-and-asked quotations, regular way, for the
shares on the New York Stock Exchange on such date or next
preceding date as the case may be; or
(3) If there is no price as specified in (2), the closing
sales price, regular way, or in the absence thereof the mean of
the last reported bid-and-asked quotations, for the shares on
any other exchange on which the shares are permitted to trade
having the greatest volume of trading in the shares during the
thirty-day period preceding such date, on such date or next
preceding date as the case may be; or
(4) If there is no price as specified in (3), the final
reported sales price, or, if not so reported, then the highest
bid quotation, in the over-the-counter market for the shares as
reported by the National Association of Securities Dealers
Automated Quotation System, or if not so reported, then as
reported by the National Quotation Bureau Incorporated, or if
such organization is not in existence, by an organization
providing similar services, on such date (or if such date is not
a date for which such system or organization generally provides
reports, then on the next preceding date for which it does so);
or
(5) If there is no price as specified in (4), the price
determined by the Committee by reference to bid-and-asked
quotations for the shares provided by members of an association
of brokers and dealers registered pursuant to subsection 15(b)
of the Exchange Act, which members make a market in the shares,
on such recent dates as the Committee shall determine to be
appropriate for fairly determining current market value; or
(6) If there is no price as specified in (5), the amount
determined in good faith by the Committee based on such relevant
facts, which may include opinions of independent experts, as may
be available to the Committee.
(i) "Home" means HomeOwners Mortgage & Equity, Inc., a Delaware
corporation and wholly-owned subsidiary of the Company.
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(j) "Incentive Stock Option" means an Option granted under the
Plan that complies with the terms and conditions of Section 422 of the
Code and is designated by the Committee as an Incentive Stock Option.
(k) "Non-Qualified Stock Option" means an Option granted under
the Plan other than an Incentive Stock Option.
(l) "Option" means the contractual right granted to a
Participant to purchase a number of shares of Stock under the Plan at
a stated Exercise Price for a specified period of time. An Option may
be either an Incentive Stock Option or a Non-Qualified Stock Option.
(m) "Participant" means any director, executive officer or key
employee designated by the Committee to participate in the Plan
pursuant to Article III.
(n) "Permanent Disability" means the physical or mental
condition of a Participant which renders a Participant incapable of
continuing his customary employment with the Company and Home. A
Participant will be considered disabled for purposes of this Plan if
the Participant qualifies to receive disability payments under the
Social Security Administration's disability program.
(o) "Plan" means the HomeCapital Investment Corporation 1996
Stock Option Plan, as it may be amended from time to time.
(p) "Securities Act" means the Securities Act of 1933, as
amended.
(q) "Stock" means the common stock, par value $.01 per share,
of the Company.
(r) "Ten Percent Stockholder" means an individual who owns
stock possessing more than 10 percent of the total combined voting
power of all classes of capital stock of the Company.
(s) "Termination-for-Cause" means the termination of a
Participant's employment by the Company or Home, by written notice to
the Participant, specifying the event relied upon for such
termination, due to the Participant's conviction of a felony or
perpetration of a common law fraud involving the Company or Home or
any of its affiliates or subsidiaries, or theft, fraud, embezzlement,
dishonesty or other conduct which is or has resulted or is likely to
result in material economic damage to the Company or any of its
affiliates or subsidiaries.
(t) "Vested" means that an Option is nonforfeitable and
exercisable with regard to a designated number of shares of Stock as
specified in Section 7.5, except as provided in Article VIII.
2.2. GENDER AND NUMBER. Except when otherwise indicated by the
context, words in the masculine gender when used in the Plan shall include
the feminine gender, the feminine gender shall include the masculine
gender, the singular shall include the plural, and the plural shall include
the singular.
3. ELIGIBILITY AND PARTICIPATION. Participants in the Plan shall be
recommended by the President of the Company and approved by the Committee from
among directors, executive officers and key employees
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of the Company or Home who have or are expected to have a significant and
lasting impact on long-term Company strategy and on the long-term success of the
Company.
4. ADMINISTRATION. The Board of Directors shall be responsible for the
administration of the Plan. The Board of Directors may appoint a Stock Option
Committee to administer the Plan on behalf of the Board of Directors. The
Committee shall consist of two or more directors, each of whom is a
"disinterested person" within the meaning of Rule 16b-3(c)(2)(i) promulgated
under Section 16 of the Exchange Act. From time to time, the Board of Directors
may increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members to fill any
vacancies. The Board of Directors may also administer the Plan directly, if
each member of the Board is a "disinterested person."
The Committee, subject to the approval of the Board, is authorized to
interpret the Plan and any Options awarded thereunder, to prescribe, amend, and
rescind rules and regulations relating to the Plan, to provide for conditions
and assurances deemed necessary or advisable to protect the interests of the
Company, and to make all other determinations necessary or advisable for the
administration of the Plan. Determinations, interpretations, or other actions
made or taken by the Committee pursuant to the provisions of the Plan shall be
final, binding and conclusive for all purposes and upon all persons.
The Committee may, in its absolute discretion, (i) accelerate the date on
which any Option granted under the Plan becomes exercisable or (ii) extend the
date on which any Option granted under the Plan ceases to be exercisable.
In addition, the Committee may, in its absolute discretion, grant Options
to Participants on the condition that such Participants surrender to the
Committee for cancellation such other Options (including, without limitation,
Options with higher exercise prices) as the Committee specifies. Options
granted on the condition of surrender of outstanding Options shall not count
against the limitation on the Stock subject to the Plan set forth in Article V
until such time as such Options are surrendered.
No member of the Committee shall be liable for any action, omission, or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated from and against any cost or
expense (including reasonable attorneys' fees) or liability (including any sum
paid in settlement of a claim with the approval of the Board or the Committee)
arising out of any action, omission or determination relating to the Plan,
unless, in either case, such action, omission or determination was taken or made
by such member, director or employee in bad faith and without reasonable belief
that it was in the best interests of the Company.
5. STOCK SUBJECT TO PLAN.
5.1. NUMBER. Except as provided in Section 5.2 and subject to
adjustment as provided by Section 5.3, the total number of shares of Stock
reserved for Options and subject to issuance under the Plan may not exceed
1,000,000 shares of Stock. The shares to be delivered under the Plan may
consist, in whole or in part, of authorized but unissued Stock or treasury
Stock, not reserved for any other purpose.
5.2. UNUSED STOCK. In the event any shares of Stock are subject to an
Option which, for any reason, expires or is terminated unexercised as to
such shares, such shares again shall become available for issuance under
the Plan.
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5.3. ADJUSTMENT IN CAPITALIZATION.
(a) Outstanding Options: Increase or Decrease in Issued Shares
Without Consideration. Subject to any required action by the
stockholders of the Company, in the event of any increase or decrease
in the number of issued shares of Stock resulting from a subdivision
or consolidation of shares of Stock or the payment of a stock dividend
(but only on the shares of Stock), or any other increase in the number
of such shares effected without receipt of consideration by the
Company, the Committee shall proportionally adjust the number of
shares and the exercise price per share of Stock subject to each
outstanding Option.
(b) Outstanding Options: Certain Mergers. Subject to any
required action by the stockholders of the Company, if the Company
shall be the surviving corporation in any merger or consolidation
(except a merger or consolidation as a result of which the holders of
shares of Stock receive securities of another corporation), each
Option outstanding on the date of such merger or consolidation shall
entitle the Participant to acquire on exercise the securities that a
holder of the number of shares of Stock subject to such Option would
have received in such merger or consolidation.
(c) Outstanding Options: Certain Other Transactions. In the
event of a dissolution or liquidation of the Company, a sale of all or
substantially all of the Company's assets, a merger or consolidation
involving the Company in which the Company is not the surviving
corporation or a merger or consolidation involving the Company in
which the Company is the surviving corporation but the holders of
shares of Stock receive securities of another corporation and/or other
property, including cash, the Committee shall, in its absolute
discretion, have the power to:
(i) cancel, effective immediately prior to the occurrence
of such event, each Option outstanding immediately prior to such
event (whether or not then exercisable), and, in full
consideration of such cancellation, pay to the Participant to
whom such Option was granted an amount in cash for each share of
Stock subject to such Option equal to the excess of (A) the
value, as determined by the Committee in its absolute
discretion, of the property (including cash) received by the
holder of a share of Stock as a result of such event, over (B)
the exercise price of such Option; or
(ii) provide for the exchange of each Option outstanding
immediately prior to such event (whether or not then
exercisable) for an option on some or all of the property for
which such Option is exchanged and, incident thereto, make an
equitable adjustment as determined by the Committee in its
absolute discretion in the exercise price of the Option, or the
number of shares or amount of property subject to the Option or,
if appropriate, provide for a cash payment to the Participant to
whom such Option was granted in partial consideration for the
exchange of the Option.
(d) Outstanding Options: Other Changes. In the event of any
change in the capitalization of the Company or corporate change other
than those specifically referred to in Sections 5.3(a), (b) or (c)
hereof, the Committee may, in its absolute discretion, make such
adjustments in the number and class of shares subject to Options
outstanding on the date on which such change occurs and in the per
share exercise price of each such Option as the Committee may consider
appropriate to prevent dilution or enlargement of rights.
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(e) No Other Rights. Except as expressly provided in the Plan,
no Participant shall have any rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any
dividend, any increase or decrease in the number of shares of stock of
any class or any dissolution, liquidation, merger or consolidation of
the Company or any other corporation. Except as expressly provided in
the Plan, no issuance by the Company of shares of stock of any class,
or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect
to, the number of shares of Stock subject to, or the Exercise Price
of, any Option granted under the Plan.
6. DURATION OF PLAN. The Plan shall remain in effect, subject to the
Board's right to terminate the Plan pursuant to Article X, until all Stock
subject to the Plan shall have been purchased or acquired pursuant to the
provisions hereof. Notwithstanding the foregoing, no Option may be granted
under the Plan on or after the tenth anniversary of the Effective Date of the
Plan.
7. TERMS OF OPTIONS.
7.1. GRANT OF OPTIONS. Subject to the provisions of Section 5.1 and
Articles III and VI, Options may be granted to Participants at any time
following the Effective Date of the Plan as determined by the Committee.
With input from the President, the Committee shall have complete discretion
in determining the number of Options granted to each Participant. The
Committee shall also determine whether an Option is to be an Incentive
Stock Option, or a Non-Qualified Stock Option or a combination of both,
which shall be clearly designated by the terms of the Option Agreement. To
the extent, however, that any Option designated as an Incentive Stock
Option fails to qualify as such pursuant to the provisions of Section 422
of the Code, it shall automatically be considered a Non-Qualified Stock
Option. Incentive Stock Options may only be granted to Participants who are
employed by the Company or Home.
The aggregate Fair Market Value (determined at the date of grant) of
Stock with respect to which the Incentive Stock Options are exercisable for
the first time by a Participant in any calendar year under this Plan or any
other plan of the Company meeting the requirements of Section 422 of the
Code, may not exceed $100,000. To the extent that the $100,000 limit is
exceeded, such Options shall not be treated as Incentive Stock Options, and
the determination of which Options are Incentive Stock Options and which
are not Incentive Stock Options will be made on the basis of the order in
which such Options are granted. Nothing in this Article VII of the Plan
shall be deemed to prevent the grant of Non-Qualified Stock Options in
excess of the maximum established by Section 422(d)(1) of the Code.
7.2. OPTION AGREEMENT. Each Option shall be evidenced by an Option
Agreement that shall specify the type of Options granted, the Exercise
Price, the term of the Options, the number of shares of Stock subject to
the Option, the vesting schedule, the events by which the Options become
Vested, a requirement to notify the Committee if Stock acquired pursuant to
the exercise of an Incentive Stock Option is disposed of prior to the
expiration of the holding periods specified in Section 422(a)(1) of the
Code (as described in Section 7.10 hereof), and such other provisions as
the Committee may determine.
7.3. EXERCISE PRICE. Any Option granted pursuant to the Plan shall
have an Exercise Price, defined in Section 2.1(g), that is established by
the Committee.
7.4. TERM OF OPTIONS. Subject to the provisions of Article VIII, each
Option shall expire at such time as the Committee shall determine at the
time it is granted; provided, however, that no Option shall be exercisable
on or after ten (10) years following the date of grant. In the case of a
Ten Percent Stockholder, such period shall not exceed five (5) years from
the date of grant regarding any grant of an Incentive Stock Option.
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7.5. VESTING OF OPTIONS.
(a) The Committee has the discretion to determine the schedule
by which an Option becomes exercisable. This vesting schedule shall be
set forth in the Option Agreement.
(b) Notwithstanding Section 7.5(a), in the event of a Change of
Control, any Option granted under the Plan shall become 100% Vested
and exercisable for a period of one year or until expiration,
whichever is earlier, except to the extent that the exercisability of
any such Option would result in an "excess parachute payment" within
the meaning of Section 280G of the Code, as determined by the Board
based on information available to it at said time.
7.6. NONTRANSFERABILITY OF OPTIONS. No Option granted under the Plan,
may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, otherwise than by will or by the laws of descent and
distribution. During the lifetime of a Participant, Options may be
exercised only by such Participant.
7.7. RESTRICTION ON STOCK TRANSFERABILITY. Shares of Stock purchased
pursuant to an Incentive Stock Option cannot be sold or otherwise
transferred within two (2) years from the date the Option was granted, or
within one (1) year from the date the Option was exercised, whichever is
later.
Shares of Stock purchased upon exercise of an Option may not be sold
or otherwise transferred except pursuant to transactions that are exempt
from registration under applicable securities laws, including sales (after
the applicable holding period) in accordance with the requirements of Rule
144 promulgated under the Securities Act.
The Committee may impose such restrictions on any shares of Stock
acquired pursuant to the exercise of an Option under the Plan as it may
deem advisable, including, without limitation, restrictions under
applicable federal securities laws, under the requirements of any stock
exchange upon which such shares of Stock are then listed, under any blue
sky or state securities laws applicable to such shares and under any
buy/sell agreements entered into by the existing stockholders, and the
Articles of Incorporation of the Company. Certificates evidencing any
shares of Stock acquired upon exercise of an Option shall bear a legend,
describing any applicable transfer restrictions.
7.8. EXERCISE OF OPTIONS. A Participant shall exercise an Option
which has Vested by written notice to the Company, directed to the
attention of the Secretary and delivered not less than five (5) business
days prior to the proposed exercise date, specifying the number of shares
of Stock to be purchased. Options shall be exercisable in whole or in part
with respect to whole shares of Stock. Upon the partial exercise of an
Option, the new Option Agreement shall be returned to the Participant with
a notation thereon of the remaining unexercised shares of Stock subject to
the Option. The Exercise Price of any Vested Option shall be payable to the
Company in full at the time of the exercise of the Option either (i) in
cash or its equivalent, (ii) by tendering shares of previously acquired
Stock having a Fair Market Value on the date of exercise equal to the total
Exercise Price (subject to any applicable federal and state securities
laws), or (iii) by a combination of (i) and (ii). The notice of exercise to
the Company shall be accompanied by the Exercise Price and the Option
Agreement. The proceeds from such a payment shall be added to the general
funds of the Company and shall be used for general corporate purposes.
7.9. PURCHASE FOR INVESTMENT. At the time of any exercise of any
Option, the Committee may, if it shall deem it necessary for any reason
connected with any law or regulation of any governmental authority relating
to the regulation of securities, require as a condition to the issuance
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of Stock that the Participant represent in writing to the Company an
intention to acquire the Stock for the account of the Participant for
investment only and not for resale or distribution. In the event such a
representation is required and made, no Stock shall be issued to the
Participant unless and until the Company is satisfied with respect to the
validity of such representation. Certificates for Stock as to which such
representations are required and made may, in the discretion of the
Committee, be endorsed with a legend noting such representations and any
appropriate restrictions resulting therefrom.
7.10. NOTICE OF CERTAIN DISPOSITIONS . Any Participant who disposes of
any Stock acquired through the exercise of an Incentive Stock Option
granted hereunder either (i) within two years from the date of the grant of
the Option pursuant to which the subject shares were acquired or (ii)
within one year after the transfer of such Stock to the Participant,
whichever is later, shall promptly notify the Company of such disposition
and the amount of consideration realized upon such disposition.
8. TERMINATION OF EMPLOYMENT.
8.1. TERMINATION OF EMPLOYMENT. In the event that an employee
Participant shall cease to be employed by the Company or Home for any
reason other than death, Disability, or Termination-for-Cause, any
outstanding Vested Options may be exercised by the Participant for a period
of three (3) months following termination of employment, or such earlier
date as the Options would have expired according to their terms. All non-
Vested Options shall expire at the close of business on the date of such
termination.
8.2. DEATH. If the Participant shall die while in the employ of the
Company or Home, the Participant's estate or personal representative shall
have the right to exercise any outstanding Vested Options for a period of
one (1) year from said date of death or such earlier date as the Options
would have expired according to their terms. All non-Vested Options shall
expire at the close of business on the date of death of the Participant.
8.3. PERMANENT DISABILITY. In the event the Participant shall cease
to be employed by the Company or Home by reason of Permanent Disability,
any outstanding Vested Options may be exercised by the Participant for a
period of the earlier of one (1) year following termination of employment,
or the expiration date of the Options. All non-Vested Options shall expire
at the close of business on the date of termination of employment.
8.4. TERMINATION-FOR-CAUSE. In the event the Participant shall cease
to be employed by the Company or Home by reason of Termination-for-Cause,
any outstanding Options, whether Vested or not, shall immediately expire at
the close of business on the date of termination of employment and may no
longer be exercised.
9. NO CONTRACT OF EMPLOYMENT. Nothing in the Plan shall interfere with or
limit in any way the right of the Company or Home to terminate any Participant's
employment at any time, nor does participation in the Plan confer upon any
Participant any right to continue in the employ of the Company or Home.
10. AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN. The Board may at
any time terminate, and from time to time may amend or modify the Plan,
provided, however, that no such action of the Board, without the approval by
vote of the holders of a majority of the outstanding shares of Stock may:
(a) Increase the total amount of Stock which may be issued under the
Plan, except as provided in Sections 5.1 and 5.3 of the Plan.
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(b) Change the class of individuals eligible to receive Options.
(c) Change the provisions of the Plan regarding the Exercise Price,
except as permitted by Section 5.3.
(d) Materially increase the cost of the Plan or materially increase
the benefits to Participants.
(e) Extend the period during which Options may be granted under the
Plan.
(f) Extend the maximum period after the date of grant during which
Options may be exercised.
No amendment, modification, or termination of the Plan shall in any
manner adversely affect any Option previously granted under the Plan without the
consent of the affected Participant.
11. WITHHOLDING TAX. Whenever shares of Stock are to be issued under the
Plan, the Company shall have the power to require the recipient of the Stock to
remit to the Company an amount sufficient to satisfy federal, state, and local
tax and payroll withholding requirements deemed by the Company to be applicable
in its sole discretion. The Company may also deduct the necessary amount of
minimum withholding from the Participant's salary or, upon the exercise of an
Option, withhold from delivery to the recipient a number of shares, the Fair
Market Value of which is sufficient to satisfy federal, state, and local minimum
withholding requirements.
12. UNFUNDED PLAN. The Plan shall be unfunded. The Company shall not be
required to segregate any assets that may be represented by Options. The
Company shall not be deemed to be a trustee of any amounts to be paid under any
Option. Any liability of the Company to pay any Participant with respect to an
Option shall be based solely upon any contractual obligations created pursuant
to the provisions of the Plan; no such obligation shall be deemed to be secured
by any pledge or encumbrance on any property of the Company.
13. REQUIREMENT OF LAW.
13.1. REQUIREMENT OF LAW. The granting of Options and the issuance
of shares of Stock shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required. The Company shall be under no
obligation to effect the registration pursuant to the Securities Act of any
shares of Stock to be issued hereunder or to effect similar compliance
under any state laws. Notwithstanding anything herein to the contrary, the
Company shall not be obligated to cause to be issued or delivered any
certificates evidencing shares of Stock pursuant to the Plan, unless and
until the Company is advised by its counsel that the issuance and delivery
of such certificates is in compliance with all applicable laws, regulations
of governmental authority and the requirements of any securities exchange
on which shares of Stock are traded. The Committee may require, as a
condition of the issuance and delivery of certificates evidencing shares of
Stock pursuant to the terms hereof, that the recipient of such shares make
such covenants, agreements and representations, and that such certificates
bear such legends, as the Committee, in its sole discretion, deems
necessary or desirable.
The exercise of any Option granted hereunder shall only be effective
at such time as counsel to the Company shall have determined that the
issuance and delivery of shares of Stock pursuant to such exercise is in
compliance with all applicable laws, regulations of governmental
authorities and the requirements of any securities exchange on which shares
of Stock are traded.
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13.2. GOVERNING LAW. The Plan, and all agreements hereunder, shall
be construed in accordance with and governed by the laws of the State of
Texas and applicable federal law. No person shall have any rights as a
stockholder with respect to any shares of Stock covered by or relating to
any Option granted pursuant to this Plan until the date of the issuance of
a stock certificate with respect to such shares. Except as otherwise
expressly provided in Section 5.3 hereof, no adjustment to any Option shall
be made for dividends or other rights for which the record date occurs
prior to the date such stock certificate is issued.
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HOMECAPITAL INVESTMENT CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John W. Ballard and E. Jeff Bomer, and either of
them, with full power of substitution, as proxy or proxies of the undersigned to
represent the undersigned and to vote all shares of Common or Preferred Stock of
HomeCapital Investment Corporation (the "Company") which the undersigned would
be entitled to vote if personally present at the Annual Meeting of Stockholders
of the Company to be held at the executive offices of the Company, 6836 Austin
Center Blvd., Suite 280, Austin, Texas 78731, at 10:00 a.m., local time, on
September 25, 1997, and at any adjournment(s) thereof:
1. To elect the following seven (7) nominees to the Board of Directors of the
Company for a term of one (1) year.
John W. Ballard J. Rolfe Johnson Peter A. Pyhrr
E. Jeff Bomer Larry D. Meyers Walter W. Stoeppelwerth
Robert R. Neyland
[ ] FOR all nominees above [ ] WITHHOLD AUTHORITY
(except as marked to to vote for ALL
the contrary above) nominees listed above
INSTRUCTION: To withhold authority for any individual nominee, mark the first
box above and line through that nominee's name as it appears above.
2. To approve an amendment to the Company's 1996 Stock Option Plan to increase
the number of shares available for issuance thereunder by 500,000 shares to an
aggregate of 1,000,000 shares.
[ ] FOR the amendment [ ] AGAINST the amendment [ ] ABSTAIN
3. To approve the Company's Non-Employee Director Compensation Plan.
[ ] FOR the Director Plan [ ] AGAINST the Director Plan [ ] ABSTAIN
(continued on reverse side)
4. To approve an amendment to the Company's Article of Incorporation to provide
certain limitations on liabilities of Company directors and officers.
[ ] FOR the amendment [ ] AGAINST the amendment [ ] ABSTAIN
5. To approve an amendment to the Company's Bylaws to provide for
indemnification of Company directors, officers and agents.
[ ] FOR the amendment [ ] AGAINST the amendment [ ] ABSTAIN
6. To ratify the appointment of Coopers & Lybrand, L.L.P., as independent
accountants of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before this meeting.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENVELOPE
PROVIDED
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement relating to the above proposals. This proxy,
when properly executed, will be voted in accordance with the directions given by
the undersigned stockholder. If no direction is made, it will be voted FOR all
director nominees listed above and FOR the approval of the other proposals.
SIGNATURE(S) DATE
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SIGNATURE(S) DATE
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NOTE: Please sign exactly as name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
