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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:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only (as Permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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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[HomeCapital Investment Corporation Letterhead Appears Here]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 26, 1998
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 February 26, 1998, at 10:00 a.m., Central
Standard Time, at the Hyatt Regency Austin on Town Lake, 208 Barton Springs
Road, Austin, Texas 78704, for the following purposes:
1. To elect seven (7) directors to serve on the Company's Board of
Directors.
2. To ratify the appointment of Coopers & Lybrand L.L.P. as the
independent accountants of the Company.
3. 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 on January 26, 1998, 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
/s/ E. Jeff Bomer
--------------------------------
E. Jeff Bomer
Secretary
Austin, Texas
January 28, 1998
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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, February 26, 1998, at 10:00 a.m., Central
Standard Time, at the Hyatt Regency Austin on Town Lake, 208 Barton Springs
Road, Austin, Texas 78704, 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 January 28, 1998. 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 January 26, 1998, are
entitled to Notice of and to vote at the Annual Meeting and any adjournment
thereof. On January 26, 1998, there were outstanding 1,455,000 shares of
Preferred Stock, Series A, $.01 par value per share, of the Company
("Preferred Stock"), and 8,271,860 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 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.
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. Charles R.
Leone, III, identified below has been nominated by HCI for election to the
Company's Board of Directors. Without waiving its right to do so, HCI has not
nominated a second director for election to the Board of Directors of the
Company.
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
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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.
Each of the nominees is currently a member of the Board of Directors.
All nominees have consented to serve if elected. References to "HOME" are to
the Company's wholly-owned subsidiary, HomeOwners Mortgage & Equity, Inc.
DIRECTOR NOMINEES
Director
Name Age Since
- ---- --- ------
JOHN W. BALLARD*.................................................... 60 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 January, 1991;
he was a shareholder in the law firm of Jenkins & Gilchrist,
P.C., in Houston, Texas, from May, 1989 through
December, 1990, prior to which he was a partner of the law
firm of Mayor Day & Caldwell (now Mayor Day Caldwell &
Keaton) from February, 1982.
CHARLES R. LEONE, III............................................... 38 1998
President of Penntex Investments, Inc., a general partner of HCI,
since January 1992 and since October 1990 has been President
of Federal Services Corporation (a loan servicing and venture
capital firm).
LARRY D. MEYERS..................................................... 49 1997
Owner and President of Meyers & Associates, a legislative consulting
firm based in Washington D. C., since December, 1981. Mr
Meyers also holds a Presidential appointment as a member of
the White House International Trade Advisory Committee.
PETER A. PYHRR*..................................................... 56 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.
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WALTER W. STOEPPELWERTH............................................. 64 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. Mr. Stoeppelwerth has also been a Director
of HOME since July, 1996.
* Executive committee member.
During the fiscal year ended September 30, 1997, the Board of
Directors of the Company held twelve (12) meetings and on eight (8) other
occasions the Board took action by unanimous written consent. The Board
intends to have regular meetings at least quarterly and has established an
executive committee consisting of the Company's executive officers and two
non-management directors that meets at least monthly. The Company has an
audit committee that 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 Leone. The Board of Directors also has a
compensation committee that is responsible for the administration of, and
grant of awards under the homecapital investment corporation 1996 Stock Option
Plan and the HomeCapital Investment Corporation Non-Employee Director
Compensation Plan, interviews and recommends employment of executive officers
to the Board of Directors and reviews and recommends compensation for
executive officers of the Company. The compensation committee consists of
Messrs. Ballard, Bomer and Pyhrr. The audit committee and compensation
committee held no formal meetings during the fiscal year ended September 30,
1997, but acted informally in conducting their respective responsibilities.
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
Director Compensation Plan. Effective September 25, 1997, the
HomeCapital Investment Corporation Non-Employee Director Compensation Plan
("Director Plan") was approved and ratified by stockholders of the Company.
Pursuant to the Director Plan, each member of the board of directors of the
Company or HOME who is not a full-time employee of the Company or HOME is 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 of directors or any committee thereof. In
addition, each director receives 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. During the fiscal year ended September 30, 1997, six (6)
members of the Board of Directors of the Company and two (2) members of the
board of directors of HOME each received a total of $11,000 and are entitled
to options to purchase 15,000 shares of Common Stock at an exercise price of
$8.375 per share under the Director Plan. Directors were also reimbursed for
travel expenses incurred in attending meetings.
Directors Incentive Plan. 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
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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 were
$78,127 in the fiscal 1997 and $20,725 in fiscal 1996. 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, resigned as a director of the Company and HOME in
March 1997. However, prior to his resignation Mr. Davis qualified for
compensation under the Directors Incentive Plan related to HOME's addition of
the national home improvement franchisor discussed above. 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.
Mr. Davis also served as a consultant to HOME on marketing and new
business developments for which he received an aggregate of $67,500 in fees
during fiscal 1997 and $42,125 during fiscal 1996.
Mr. Robert R. Neyland resigned as a director of the Company in
January 1998. However, prior to his resignation Mr. Neyland served as a
consultant to the Company regarding capital markets and investor relations for
which he received $40,000 during fiscal 1997.
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.
MICHAEL B. THIMMIG,* 38, an Executive Vice President of the Company
and 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,* 51, an Executive Vice President of the Company
and HOME 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.
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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, 44, 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.
REBECCA F. BLANCHARD, 37, Treasurer of the Company since September
1997, and Treasurer of HOME since September 1996. Ms. Blanchard served as
Controller of HOME from August 1993 to September 1996 and as Controller of
American Savings Mortgage Corporation from April 1998 to August 1993.
* Executive committee member.
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 options
exercised during and held at the end of the fiscal year ended September 30,
1997, see "1996 Stock Option Plan" below.
The following table summarizes compensation paid to the Company's
chief executive officer and three other executive officers of the Company and
HOME for the fiscal years ended September 30, 1997, 1996 and 1995,
respectively. 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
Position Year Salary(1) Bonus Shares)
- --------- ------ --------- ----- ---------
JOHN W. BALLARD 1997 $250,000 - 195,000(2)
President and Chief Executive 1996 150,000 - -
Officer of the Company 1995 150,000 - -
MICHAEL B. THIMMIG 1997 $ 62,500 $ 60,000 -
Executive Vice President
of the Company
TOMMY M. PARKER 1997 $133,333 - -
Executive Vice President 1996 41,667 - 150,000
and Chief Financial Officer
of HOME
GENE V. MORRISON 1997 $100,999 - 50,000
Executive Vice President 1996 70,591 - -
of HOME 1995 14,585 - -
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____________
(1) Additionally, HOME provides and maintains an automobile and mobile
telephone, and provides health and group life insurance and reimbursement
of business-related expenses to the named executives. See "Executive
Contracts" below. The value of perquisites and other compensation received
did not exceed 10% of the reported compensation for any of the executives
in any period. HOME paid $6,712, $3,213, and $4,984, for fiscal years 1997,
1996 and 1995, respectively, for life insurance premiums on behalf of Mr.
Ballard.
(2) Mr. Ballard holds restricted stock options to purchase 409,668 shares of
Company Common Stock at an exercise price of $.1626 per share had a
determined value of approximately $3,364,357 based upon the closing bid
price of $8.375 per share of Common Stock on the SmallCap Market of the
National Association of Securities Dealers, Inc. as of September 30, 1997.
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 canceled and converted into a fully-vested option to
purchase 409,668 shares of Company Common Stock at $.1626 per share on August
26, 1994. 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 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. Effective
October 1, 1996, the annual base salary under the Ballard Employment Agreement
was increased to $250,000 in consideration of waiver of an annual incentive
bonus for prior years. 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 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.
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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
is also obligated to loan 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.
HOME has entered into an employment agreement with Gene V. Morrison,
an Executive Vice President of HOME, for a term of one (1) year commencing
April 1, 1997, that is automatically renewable for six (6)-month terms unless
terminated on 30-days notice. Mr. Morrison is entitled (i) to a base salary
of $125,000 for the first year and thereafter during any renewal term at the
discretion of the Compensation Committee of the Board of Directors; (ii) to
participate in group health, life insurance and other employee benefit plans
and reimbursement of business-related expenses and (iii) to an automobile
allowance of $350.00 per month.
1996 STOCK OPTION PLAN
The HomeCapital Investment Corporation 1996 Stock Option Plan, as
amended ("Stock Option Plan") provides options to purchase up to an aggregate
of 1,000,000 shares of Common Stock as financial incentives to directors,
executive officers and other key employees of the Company and HOME.
Option Grant Table. The following table provides information about
options to purchase shares of Common Stock granted pursuant to the Stock
Option Plan during the fiscal year ended September 30, 1997, to named
executive officers.
% of Total
Options Options Exercise Expiration
Name Granted(1) Granted(2) Price Date
- ---- ---------- ------------- -------- ----------
JOHN W. BALLARD 167,500 57.75 $ 5.625 10/01/06
27,500 9.48 11.000 03/31/07
GENE V. MORRISON 10,000 3.44 5.625 10/01/06
40,000 13.79 8.875 06/01/07
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- --------------------
(1) Options become exercisable in four equal annual installments beginning
on the first anniversary of the date of grant.
(2) Based upon 290,000 options granted to all employees of the Company and
HOME during the fiscal year ended September 30, 1997.
Option Ownership Table. The following table provides information
concerning all unexercised options to purchase shares of Common Stock held as
of September 30, 1997, by the named executive officers. No options were
exercised during fiscal year 1997 by the named executive officers. The value
of unexercised options reflects the difference between the market price of
Common stock as of September 30, 1997 ($8.375 per share), and the exercise
price. The value actually realized upon exercise of the options by the named
executive officers will depend on the market price of Common stock at the time
of exercise.
Unexercised Value of
Option Shares Option Shares(1)
---------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
JOHN W. BALLARD 451,543 153,125 $3,479,555 $345,469
GENE V. MORRISON 2,500 47,500 6,875 20,625
TOMMY M. PARKER 50,000 100,000 243,750 487,500
- --------------------
(1) Includes only option shares that have an exercise price lower than the
market price of Common Stock at September 30, 1997.
401(K) PROFIT SHARING PLAN
HOME sponsors a 401(k) plan, a savings and investment plan intended
to be qualified under Section 401(k) 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 was inaugurated January
1, 1995, and HOME has not authorized or made any contributions to the plan
through December 31, 1997.
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 and other principal stockholders with
the Company or HOME.
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
9
<PAGE>
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 Equity Partners, L.P. ("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 Investments,
Ltd. ("SDP"), of which Mr. Stephen A. Pyhrr is sole general and limited partner,
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.
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
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September 30, 1997 and 1996, HOME paid HomeSpec an aggregate of $145,380 and
$69,715, 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 January 26, 1998, the Company had 8,271,860 shares of Common Stock
and 1,455,000 shares of Preferred Stock outstanding. The following table sets
forth certain information as of January 26, 1998, with respect to the shares
of the Company's capital stock beneficially owned by (i) each person who, as
of January 26, 1998, was known by the Company to own beneficially more than
five percent (5%) of any class of its capital stock, (ii) each individual
director, director nominee and certain named executive officers of the Company
and HOME, and (iii) all directors and executive officers of the Company and
HOME as a group.
NAME AND ADDRESS CLASS NUMBER PERCENT(1)
- ---------------- ----- ----- -------
DIRECTORS AND CERTAIN EXECUTIVE OFFICERS:
John W. Ballard Common 950,243(2) 10.89%
6836 Austin Center Blvd.
Suite 280
Austin, Texas 78731
E. Jeff Bomer Common 1,074,039(3) 12.98%
5929 Balcones Drive
Austin, Texas 78731
Charles R. Leone, III Common 1,000,000(4) 10.78%
3330 Oakwell Court Preferred 1,000,000(5) 68.72%
Suite 100
San Antonio, Texas 78218
Larry D. Meyers Common 4,583(6) *
504 Cathedral Drive Preferred 3,333 *
Alexandria, Virginia 22314
Gene V. Morrison Common 2,500(7) *
6836 Austin Center Blvd.
Suite 280
Austin, Texas 78731
Robert R. Neyland Common 1,005,200(4) 10.84%
3330 Oakwell Court Preferred 1,000,000(5) 68.72%
Suite 100
San Antonio, Texas 78218
Tommy M. Parker Common 63,332(8) *
6836 Austin Center Blvd. Preferred 13,332 *
Suite 280
Austin, Texas 78731
Peter A. Pyhrr Common 1,603,720(9) 19.39%
8719 Diplomacy Row
Dallas, Texas 75247
11
<PAGE>
NAME AND ADDRESS CLASS NUMBER PERCENT(1)
- ---------------- ----- ----- -------
DIRECTORS AND CERTAIN EXECUTIVE OFFICERS (CONTINUED):
Stephen A. Pyhrr Common 1,219,472(10) 14.67%
5929 Balcones Drive Preferred 43,335(11) 2.97%
Austin, Texas 78731
Directors and Executive
Officers as a Group
(14 persons) Common 5,930,339(12) 60.29%
Preferred 1,063,334(13) 72.85%
CERTAIN OTHER BENEFICIAL OWNERS:
Gary J. Davis Common 590,101 7.13%
713 Main
Gatesville, Texas 76528
HCI Equity Partners, L.P. Common 1,000,000(4) 10.78%
3330 Oakwell Court Preferred 1,000,000(13) 68.72%
Suite 100
San Antonio, Texas 78218
Charles R. Sutherland Common 645,080(14) 7.80%
3650 Habersham Road #102
Atlanta, Georgia 30805
EWMW Limited Partnership Common 447,300 5.40%
2414 Jarratt Avenue
Austin, Texas 78703
- ---------------
* Less than 1%.
(1) Based upon 8,271,860 shares of Common Stock and 1,455,000 shares of
Preferred Stock outstanding on January 26, 1998, 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 451,543 shares
issuable upon exercise of options.
(3) Includes 924,757 shares held by JDB Investments, Ltd. 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.
12
<PAGE>
(7) Represents shares issuable upon exercise of options.
(8) Includes 50,000 shares issuable upon exercise of options and 13,332 shares
issuable upon conversion of Preferred Stock.
(9) Includes 1,603,720 shares held by PAP Investments, Ltd.
(10) Includes 1,192,804 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 Steven D. La Rue Irrevocable, Trust (collectively, the "La Rue
Trusts"), of which Stephen A. Pyhrr is trustee and disclaims beneficial
interest.
(11) 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.
(12) Includes 505,293 shares issuable upon conversion of options and 1,060,000
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.
(13) Includes 26,668 indirect shares as to which beneficial interest is
disclaimed. Shares held by HCI may be deemed to be held by its general and
limited partners as a group.
(14) Includes 344,284 indirect shares held by Eaglewood Properties I, Ltd. and
298,796 shares indirectly held by Plaza Realty One Limited Partnership,
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 379,703
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.
13
<PAGE>
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.
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 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 1999 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 September 30, 1998.
The Annual Report to Stockholders of the Company for the fiscal year
ended September 30, 1997 is being mailed with this proxy statement to
stockholders entitled to vote at the Annual Meeting. A copy of the Company's
Annual Report, as amended, on Form 10-KSB for its fiscal year ended September
30, 1997, as filed with the Securities and Exchange Commission, is included in
the Annual Report to Stockholders of the Company and will be furnished
without charge to any stockholder upon written request to HomeCapital
Investment Corporation, 6836 Austin Center Blvd., Suite 280, Austin, Texas
78731, Attn: Investor Relations.
By Order of the Board of Directors
/s/ E. Jeff Bomer
------------------------------------
E. Jeff Bomer
Secretary
AUSTIN, TEXAS
JANUARY 28, 1998
14
<PAGE>
P R O X Y 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 proxies of the undersigned
to represent and vote all shares of stock of HomeCapital Investment
Corporation (the "Company") which the undersigned would be entitled to vote at
the Annual Meeting of Stockholders of the Company to be held on February 26,
1998, and at any adjournment(s) thereof, as follows:
1. Election of Directors: John W. Ballard, E. Jeff Bomer, J. Rolfe Johnson,
Charles R. Leone, III, Larry D. Meyers, Peter A. Pyhrr, Walter W.
Stoeppelwerth.
[ ] FOR all nominees (except as marked to the contrary)
[ ] WITHHOLD AUTHORITY to vote for ALL nominees
INSTRUCTION: To withhold authority for any individual nominee, mark the FOR
box above and line through the nominee name.
2. Ratify Appointment of Coopers & Lybrand L.L.P.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(continued on reverse side)
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.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement relating to the above proposals.
______________________DATE______________
______________________DATE______________
Signature(s) of Stockholder(s)
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.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENVELOPE
PROVIDED
