SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )1)
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][x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c)Rule 14a-11(c) or Sec. 240.14a-12
Homeplex Mortgage Investments CorporationRule 14a-12
MONTEREY HOMES CORPORATION
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(Name of Registrant as Specified inIn Its Charter)
Jay Hoffman
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-1l(c)(1)(ii), 14a-6(i)(1), 14a-6(j)(2) or Item
22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set(set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Formform or Scheduleschedule and the date of its filing.
1) Amount Previously Paid:previously paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:party:
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4) Date Filed:
HOMEPLEX MORTGAGE
INVESTMENTSfiled:
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MONTEREY HOMES CORPORATION
- --------------------------------------------------------------------------------6613 NORTH SCOTTSDALE ROAD
SUITE 200
SCOTTSDALE, ARIZONA 85250
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NOTICE OFAND PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
June 13, 1995
- --------------------------------------------------------------------------------TO BE HELD ON SEPTEMBER 25, 1997
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To Our Stockholders:
The 1997 Annual Meeting of Stockholders (the "Annual Meeting") of
Homeplex Mortgage InvestmentsMonterey Homes Corporation a Maryland corporation (the "Company"), will be held at 8:9:00 a.m., Arizona
Time, on Tuesday, June 13, 1995,September 25, 1997, at The Wigwamthe Doubletree La Posada Resort, Hotel, Litchfield Park,4949 East
Lincoln Drive, Scottsdale, Arizona 85253, for the following purposes:
1. To elect two Class II directors to serve until the next annual meeting of
stockholders and until their successors are elected and qualified.for two-year terms;
2. To ratifyelect one additional Class II director subject to approval
of the appointmentamendment to the Company's Bylaws described in Proposal
No. 4;
3. To approve the adoption of Kenneth Leventhal & Company as the independent auditorsMonterey Homes Corporation
Stock Option Plan;
4. To approve an amendment to the Company's Bylaws to increase
the number of authorized directors of the Company for the fiscal year ending
December 31, 1995.
3.from five to
up to nine; and
5. To transact such other business as may properly come before
the meetingAnnual Meeting. Management is presently aware of no other
business to come before the meeting.
Each outstanding share of the Company's Common Stock entitles the
holder of record at the close of business on August 8, 1997 (the "Record Date"),
to receive notice of and to vote at the Annual Meeting or any adjournment
thereof. The foregoing itemsShares of business are more fully describedCommon Stock can be voted at the Annual Meeting only if the
holder is present at the meeting in person or by valid proxy. A copy of the
Company's 1996 Annual Report to Stockholders, which includes audited financial
statements, is enclosed. Management cordially invites you to attend the Annual
Meeting.
By Order of the Board of Directors
Scottsdale, Arizona Larry W. Seay
August 11, 1997 Vice President Finance, Chief Financial Officer,
Secretary and Treasurer
IMPORTANT
STOCKHOLDERS ARE REQUESTED TO SIGN, DATE AND MAIL THE ENCLOSED PROXY. A
POSTAGE-PAID ENVELOPE IS PROVIDED FOR MAILING IN THE UNITED STATES.
MONTEREY HOMES CORPORATION
6613 NORTH SCOTTSDALE ROAD
SUITE 200
SCOTTSDALE, ARIZONA 85250
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PROXY STATEMENT
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This Proxy Statement accompanying this Notice.
Onlyis furnished to the stockholders of Monterey Homes
Corporation (the "Company") in connection with the solicitation of proxies to be
used in voting at the Annual Meeting of Stockholders to be held on September 25,
1997. The enclosed proxy is solicited by the Board of Directors of the Company.
The proxy materials relating to the Annual Meeting were mailed on or about
August 18, 1997, to stockholders of record at the close of business on May 5, 1995August 8,
1997 (the "Record Date"). A person giving the enclosed proxy has the power to
revoke it at any time before it is exercised by: (i) attending the Annual
Meeting and voting in person; (ii) duly executing and delivering a proxy bearing
a later date; or (iii) sending written notice of revocation to the Secretary of
the Company at 6613 North Scottsdale Road, Suite 200, Scottsdale, Arizona 85250.
The Company will bear the cost of solicitation of proxies, including
the charges and expenses of brokerage firms and others for forwarding
solicitation material to beneficial owners of the outstanding Common Stock of
the Company. In addition to the use of the mails, proxies may be solicited by
personal interview, telephone or telegraph.
VOTING SECURITIES OUTSTANDING
As of the Record Date, there were 5,247,278 shares of the Company's
Common Stock outstanding. Stockholders are entitled to noticeone vote for each share
held of andrecord on each matter of business to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
To assure your representation at the meeting, however, you are urged to mark,
sign, date and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she previously has returned a
proxy.
Sincerely,
Jay R. Hoffman
Secretary
Phoenix, Arizona
May 12, 1995
HOMEPLEX MORTGAGE
INVESTMENTS CORPORATION
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PROXY STATEMENT
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General
The enclosed proxy is solicited on behalf of Homeplex Mortgage
Investments Corporation, a Maryland corporation (the "Company"), by the
Company's board of directors (the "Board of Directors") for usebe considered at the Annual
MeetingMeeting. Only holders of Stockholders to be held at 8:00 a.m. on Tuesday, June 13, 1995 (the
"Meeting"), or at any adjournment thereof, for the purposes set forth in this
proxy statement and in the accompanying Noticerecord of Annual Meeting of
Stockholders. The Meeting will be held at The Wigwam Resort Hotel, Litchfield
Park, Arizona.
These proxy solicitation materials were mailed on or about May 12,
1995, to all stockholders entitled to vote at the Meeting.
The Company's principal executive office is located at 5333 North
Seventh Street, Suite 219, Phoenix, Arizona 85014.
The information contained in the "Compensation Committee Report on
Executive Compensation" below and "Performance of the Common Stock" below shall
not be deemed "filed" with the Securities and Exchange Commission or subject to
Regulations 14A or 14C or to the liabilities of Section 18 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
Voting Securities and Voting Rights
Stockholders of recordStock at the close of business on May 5, 1995 (the
"Record Date") arethe
Record Date will be entitled to notice of and to vote at the Meeting. On the
Record Date, there were issued and outstanding 9,716,517 shares of the Company's
Common Stock, $.01 par value (the "Common Stock").
The presence, in person or by proxy, of the holders of a majority of
the total number of shares of Common Stock outstanding constitutes a quorum for
the transaction of business at the Meeting. Each stockholder voting at theAnnual Meeting, either in person or
by proxy, mayvalid proxy. Ballots cast one vote per share of Common
Stock held on all matters to be voted on at the Meeting.
The affirmative vote of a majority of the outstanding shares of Common
Stock of the Company present in person or represented by proxy at the Meeting
and entitled to vote on the election of directors is required for the election
of directors. Votes cast by proxy or in person at theAnnual Meeting will be tabulatedcounted by the
election inspectors appointed for the MeetingInspector of Elections and will determinedetermination of whether a quorum is present.exists and whether
the proposals are approved will be announced at the Annual Meeting. The
election inspectorsInspector of Elections will treat abstentions and broker non-votes received as
shares that are present and entitled to vote for purposes of determining the presence
of a
quorum, but as unvoted for purposes of determining the approval of any matter submittedmatter.
The information included herein should be reviewed in conjunction with
the audited financial statements, notes to consolidated financial statements,
independent auditors' reports and other information included in the Company's
1996 Annual Report to Stockholders that was mailed with this Proxy Statement to
all stockholders of record as of the Record Date.
HOMEPLEX MERGER
On December 23, 1996, the stockholders of the Company (formerly
Homeplex Mortgage Investments Corporation), approved the merger (the "Merger")
of Monterey Homes Construction II, Inc., an Arizona corporation ("MHC II"), and
Monterey Homes Arizona II, Inc., an Arizona corporation ("MHA II"), with and
into the Company. MHC II and MHA II were privately owned homebuilders with
operations in Phoenix, Scottsdale and Tucson, Arizona. MHC II and MHA II and
their respective predecessors in interest are referred to herein collectively as
the "Monterey Entities." The Merger was effective on December 31, 1996, and was
completed pursuant to the terms of an Agreement and Plan of Reorganization,
dated September 13, 1996, by and among the Company, MHC II, MHA II and William
W. Cleverly and Steven J. Hilton, the stockholders of MHC II and MHA II (the
"Merger Agreement").
Concurrently with the Merger, William W. Cleverly was elected to serve
as Chairman of the Board of Directors and Co-Chief Executive Officer of the
Company and Steven J. Hilton was elected to serve as a Director, President and
Co-Chief Executive Officer of the Company. In addition, all of the Company's
directors, except Alan D. Hamberlin, and executive officers resigned their
positions with the Company. The Company's Board of Directors now consists of
William W. Cleverly, Steven J. Hilton, Alan D. Hamberlin, the former Chairman of
the Board of Directors of the Company, and two new outside directors, Robert G.
Sarver and C. Timothy White.
Upon consummation of the Merger, the Company's name was changed to
Monterey Homes Corporation and the Company's New York Stock Exchange ticker
symbol was changed to "MTH." In addition, a one-for-three reverse stock split of
the Company's issued and outstanding Common Stock, $.01 par value per share, was
effected. Except as otherwise indicated, the share information contained herein
reflects the one-for-three reverse stock split.
ACQUISITION OF LEGACY HOMES
On May 29, 1997, the Company signed a definitive agreement with Legacy
Homes, Ltd., Legacy Enterprises, Inc., and John Landon and Eleanor Landon
(together, the "Legacy Entities"), to acquire substantially all of the assets of
Legacy Homes, Ltd. and Legacy Enterprises, Inc., a privately-owned builder of
entry-level and move-up homes based in the Dallas/Fort Worth, Texas metropolitan
area, and a related mortgage banking business (the "Legacy Agreement"). The
transactions were effective as of July 1, 1997.
The consideration for the assets and stock acquired consisted of
$1,581,685 in cash (paid out of working capital and subject to final accounting
adjustments), 666,667 shares of the Company's Common Stock and deferred
contingent payments for the four years following the close of the transactions
(the "Deferred Contingent Payments") . The Deferred Contingent Payments will be
equal to 12% of the pre-tax income of the Company and 20% of the pre-tax income
of the Texas division of the Company. In no event will the total of the Deferred
Contingent Payments exceed $15 million. In addition, the Company assumed
substantially all the
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liabilities of the Legacy Entities, including indebtedness that was incurred
prior to the closing of the transactions to fund distributions to the
shareholders of Legacy Homes that reduced its book value to less than $200,000.
The assets purchased from the Legacy Entities principally consist of
real property and other residential home building assets located in the
Dallas/Ft. Worth, Houston and Austin, Texas metropolitan areas. Monterey will
continue the operations of the Legacy Entities.
In connection with the transactions, John Landon has entered into a
vote.four-year employment agreement with the Company (the "Landon Employment
Agreement") pursuant to which he has been appointed Chief Operating Officer and
Co-Chief Executive Officer of Monterey and President and Chief Executive Officer
of Monterey's newly acquired Texas operations. Mr. Landon has also been granted
an option to purchase 166,667 shares of the Company's Common Stock, exercisable
in equal annual increments over three years, commencing July 1, 1998. In
addition, the Company has agreed to use reasonable best efforts to cause Mr.
Landon to be elected to the Company's Board of Directors. The election of Mr.
Landon to the Board is subject to approval by the Company's stockholders of the
amendment to the Company's Bylaws as described in Proposal No. 4.
ELECTION OF DIRECTORS
(Proposal No. 1)
The Articles of Incorporation of the Company divide the Board of
Directors into two classes serving staggered two-year terms. Class I consists of
three directors whose terms expire at the 1998 Annual Meeting of Stockholders.
Class II consists of two directors whose terms expire at the 1997 Annual Meeting
of Stockholders. The Board of Directors has nominated Robert G. Sarver and C.
Timothy White, the incumbent Class II Directors, for re-election. Unless
otherwise noted thereon, the shares represented by the enclosed proxy will be
voted for the election of Messrs. Sarver and White. If either of them become
unavailable for any reason or if a broker indicates onvacancy should occur before election (which
events are not anticipated), the shares represented by the enclosed proxy that it does not have discretionary authoritymay be
voted for such other person or persons as to certainmay be determined by the holders of
such proxy. Each director elected will serve for two years and until his
successor is duly elected and qualified. The affirmative vote of a majority of
the shares to vote
on a particular matter, those shares will not be considered asof Common Stock present at the Annual Meeting in person or by proxy
and entitled to vote with respectis required to that matter.
Revocabilityelect directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION
OF MESSRS. SARVER AND WHITE AS CLASS II DIRECTORS OF THE COMPANY.
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CONDITIONAL ELECTION OF JOHN LANDON AS CLASS II DIRECTOR
(Proposal No. 2)
As explained above, the Landon Employment Agreement requires the
Company to use its reasonable best efforts to elect Mr. Landon as a director of
Proxies
Any person givingthe Company. Accordingly, the Board of Directors has nominated John Landon as a
proxy may revokeClass II director subject to approval by the proxy at any time before its
use by deliveringCompany's stockholders of the
amendment to the Bylaws described in Proposal No. 4.
John R. Landon founded Legacy Homes in December 1987 and has served as
its President since its foundation. From 1983 to 1987 Mr. Landon was employed by
Nash Phillips/Copus Homebuilders ("NPC"), a residential homebuilder. While with
NPC, Mr. Landon formed a land acquisition and development operation for the
Dallas/Fort Worth division. From 1981 to 1983, Mr. Landon held positions in both
sales and land development for the Trammel Crow Residential Group. Mr. Landon
began his career as a public accountant with Ernst & Whinney. Mr. Landon
received his undergraduate degree in Accounting from Louisiana State University
and is a member of the National Homebuilders Association and the Dallas Home and
Apartment Builders Association.
Pursuant to the terms of the Landon Employment Agreement, failure of
the Company's stockholders to elect John Landon as a director of the Company written noticeon
or before June 30, 1998, will give John Landon "Good Reason" to resign from the
Company. If Mr. Landon resigns for "Good Reason," the Company will remain
obligated to pay Mr. Landon his then current base salary through the term of revocationthe
Landon Employment Agreement and his pro rated incentive compensation through the
date of his resignation. In addition, Mr. Landon will have the option to receive
the Deferred Contingent Payments as scheduled or to take the remainder of the
Deferred Contingent Payments in one lump sum, based upon the pre-tax income of
the Company and the pre-tax income of the Company's Texas division for the
twelve month period ending with the fiscal quarter immediately preceding his
resignation. Any requirement to pay Mr. Landon the Deferred Contingent Payments
in a duly executedlump sum arising out of his failure to be timely elected to the Board of
Directors could have a material adverse affect on the Company. The loss of Mr.
Landon's services upon a resignation for "Good Reason" stemming from his failure
to be elected to the Board of Directors could also adversely affect the Company.
Unless otherwise noted thereon, the shares represented by the enclosed
proxy bearingwill be voted for the election of Mr. Landon. The affirmative vote of a
later datemajority of shares of Common Stock present at the Annual Meeting in person or by
attendingproxy is required to elect Mr. Landon as a Class II director. Mr. Landon's
election will be effective only if the Meeting and votingCompany's stockholders approve the
amendment to the Company's Bylaws described in person.
Voting Solicitation
The costProposal No. 4 of this solicitationProxy
Statement. If elected and if Proposal No. 4 is adopted, Mr. Landon will serve
for two years and until his successor is duly elected and qualified.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION
OF MR. LANDON AS A CLASS II DIRECTOR OF THE COMPANY.
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INFORMATION CONCERNING DIRECTORS AND OFFICERS
Information concerning the Company's current directors and executive
officers is set forth below.
Name Age Position with the Company
- ---- --- -------------------------
William W. Cleverly 41 Chairman of the Board, Class I Director and
Co-Chief Executive Officer
Steven J. Hilton 35 President, Class I Director and Co-Chief
Executive Officer
John R. Landon 39 Chief Operating Officer and
Co-Chief Executive Officer
Larry W. Seay 41 Vice President-Finance, Chief Financial
Officer, Secretary and Treasurer
Anthony C. Dinnell 45 Vice President-Marketing and Sales
Irene Carroll 41 Vice President-Land Acquisition and
Development
Christopher T. Graham 33 Vice President-Construction Operations
Jeffrey R. Grobstein 37 Vice President-Tucson Division
Alan D. Hamberlin(1) 48 Class I Director
Robert G. Sarver(2) 35 Class II Director
C. Timothy White(1)(2) 36 Class II Director
- ------------------------
(1)Member of the Compensation Committee.
(2)Member of the Audit Committee.
William W. Cleverly has served as Chairman of the Board and Co-Chief
Executive Officer of the Company since the Merger on December 31, 1996. Mr.
Cleverly co-founded the Monterey Entities in 1986 and served as President and
director of the Monterey Entities until the Merger on December 31, 1996. From
1983 to 1986, Mr. Cleverly was the President of a real estate development
company which he founded that developed and marketed multi-family projects. Mr.
Cleverly received his undergraduate degree from the University of Arizona, and
is a member of the Central Arizona Homebuilders' Association and the National
Homebuilders' Association.
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Steven J. Hilton has served as President, Co-Chief Executive Officer
and Director of the Company since the Merger on December 31, 1996. Mr. Hilton
co-founded the Monterey Entities in 1986 and served as Treasurer, Secretary and
director of the Monterey Entities until the Merger on December 31, 1996. From
1985 to 1986, Mr. Hilton served as a project manager for Premier Community
Homes, a residential homebuilder. From 1984 to 1985, Mr. Hilton served as a
project manager for Mr. Cleverly's real estate development company. Mr. Hilton
received his undergraduate degree from the University of Arizona, and is a
member of the Central Arizona Homebuilders' Association, the National
Homebuilders' Association, the National Board of Realtors and the Scottsdale
Board of Realtors.
Larry W. Seay has served as the Vice President-Finance and Chief
Financial Officer of the Company since the Merger on December 31, 1996 and as
Secretary and Treasurer of the Company since January 1997. Mr. Seay was
appointed Vice President-Finance and Chief Financial Officer of the Monterey
Entities in April 1996 and served in that capacity until the Merger on December
31, 1996. From 1990 to 1996, Mr. Seay served as Vice President/Treasurer of UDC
Homes, Inc., a homebuilding company based in Phoenix, Arizona. In May 1995,
while Mr. Seay served as Vice President/Treasurer, UDC Homes, Inc. filed for
bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. UDC Homes,
Inc. emerged from reorganization proceedings in November 1995. From 1986 to
1990, Mr. Seay served as Treasurer and Chief Financial Officer of Emerald Homes,
Inc., also a Phoenix, Arizona-based homebuilding company. Prior to 1986, Mr.
Seay worked as a staff accountant and audit manager at Deloitte & Touche LLP.
Mr. Seay graduated with undergraduate degrees in finance and accounting and with
a Masters in Business Administration from Arizona State University. Mr. Seay is
a certified public accountant and a member of the American Institute of
Certified Public Accountants.
Anthony C. Dinnell has served as the Vice President-Marketing and Sales
of the Company since the Merger on December 31, 1996. Mr. Dinnell served as Vice
President-Marketing and Sales of the Monterey Entities from 1992 until the
Merger. From 1991 to 1992, Mr. Dinnell was Regional Sales Manager for M/I
Schottenstein Homes and from 1988 to 1991 he was Division Manager for NV Homes,
both of which are Maryland-based, national homebuilding companies. Prior to
1988, Mr. Dinnell served as Vice President of Sales and Marketing with Coscan
Homes, a residential homebuilder in Phoenix, Arizona, and as Director of
Marketing for Dell Trailor Homes, also a residential homebuilder in Phoenix,
Arizona. He is on the Sales and Marketing Council for the Central Arizona
Homebuilders' Association and a member of the National Homebuilders'
Association.
Irene Carroll has served as the Vice President-Land Acquisition and
Development of the Company since the Merger on December 31, 1996. Ms. Carroll
served as Vice President-Land Acquisition and Development of the Monterey
Entities from 1994 until the Merger on December 31, 1996. From 1992 to 1994, Ms.
Carroll served as a Division Manager for Richmond American Homes, a residential
homebuilder in Phoenix, Arizona. From 1983 to 1992, Ms. Carroll held a number of
other positions with Richmond American Homes and its predecessor, Wood Brothers
Homes, including Vice President of Operations (1992-1994), Vice President of
Finance (1987-1992),
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Division Controller (1984-1987), and Corporate Cash Manager (1983-1984). Ms.
Carroll graduated from the University of Texas, is a certified public
accountant, and is a member of the Central Arizona Homebuilders' Association and
the National Homebuilders' Association.
Christopher T. Graham has served as the Vice President-Construction
Operations of the Company since the Merger on December 31, 1996. Mr. Graham was
appointed Vice President-Construction Operations of the Monterey Entities in
1996 and served in that capacity until the Merger on December 31, 1996. From
1993 to 1996, Mr. Graham served as a Project Manager in Phoenix, Arizona, and as
Director of Construction in Salt Lake City, Utah, for Pulte Home Corporation, a
residential homebuilder. Prior to 1993, Mr. Graham worked in various positions
of increasing responsibility with Continental Homes, a residential homebuilder,
most recently as Purchasing Manager. Mr. Graham represents the Company on the
Central Arizona Homebuilders' Association.
Jeffrey R. Grobstein has served as the Vice President-Tucson Division
of the Company since the Merger on December 31, 1996. Mr. Grobstein joined the
Monterey Entities in 1988 as Community Manager in Monterey's Sales and Marketing
Department. From 1995 to 1996, Mr. Grobstein served as Vice President-Marketing
and Sales for Monterey's Tucson Division, and in 1996 was promoted to Vice
President-Tucson Division and served in that capacity until the Merger on
December 31, 1996. From 1984 to 1988, Mr. Grobstein was employed in the sales
and marketing department of the Dix Corporation, a residential homebuilder. Mr.
Grobstein is a member of the Southern Arizona Homebuilders' Association, the
Tucson Association of Realtors and the National Homebuilders' Association.
Alan D. Hamberlin has served as a director of the Company since the
Company's organization in July 1988. Mr. Hamberlin served as Chief Executive
Officer of the Company from July 1988 until the Merger on December 31, 1996, and
as Chairman of the Board of Directors from January 1990 until the Merger. He
also served as the President of the Company from its organization until
September 1995. Mr. Hamberlin served as the President and Chief Executive
Officer of the managing general partner of the Company's former Manager and has
been President of Courtland Homes, Inc., a Phoenix, Arizona single-family
residential homebuilder, since July 1983. Mr. Hamberlin has served as a director
of American Southwest Financial Corporation and American Southwest Finance Co.,
Inc. since their organization in September 1982, as a director of American
Southwest Affiliated Companies since its organization in March 1985 and as a
director of American Southwest Holdings, Inc. since August 1994.
Robert G. Sarver has served as a director of the Company since the
Merger on December 31, 1996. Mr. Sarver has served as the Chairman and Chief
Executive Officer of GB Bancorporation, a bank holding company for Grossmont
Bank, San Diego's largest community bank, since 1995. Mr. Sarver currently
serves as a director of Zion's Bancorporation, a publicly held bank holding
company. In 1990, Mr. Sarver was a co-founder and currently serves as the
Executive Director of Southwest Value Partners and Affiliates, a real estate
investment company. In 1984, Mr. Sarver founded National Bank of Arizona, Inc.
and served as President until it was acquired by
7
Zion's Bancorporation in 1993. Mr. Sarver received his undergraduate degree from
the University of Arizona and is a certified public accountant.
C. Timothy White has served as a director of the Company since the
Merger on December 31, 1996. Mr. White served as a director of the Monterey
Entities from February 1995 until the Merger on December 31, 1996. Since 1989,
Mr. White has been an attorney with the law firm of Tiffany & Bosco, P.A. in
Phoenix, Arizona. During 1996 and 1995, the Monterey Entities paid Tiffany &
Bosco, P.A. approximately $100,000 and $206,000, respectively, for legal
services rendered. Mr. White received his undergraduate degree from the
University of Arizona and his law degree from Arizona State University.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
Board of Directors. During the year ended December 31, 1996, the
Company's Board of Directors met on five occasions. Each of the directors
attended all of the meetings of the Board of Directors and of the committees of
the Board on which he served.
Compensation Committee. In 1996, the Compensation Committee of the
Board of Directors consisted of the entire Board of Directors. Since the Merger
on December 31, 1996, the Compensation Committee has consisted of Messrs.
Hamberlin and White. The Compensation Committee reviews all aspects of
compensation of executive officers of the Company and makes recommendations on
such matters to the full Board of Directors. The Report of the Compensation
Committee for 1996 is set forth below.
Audit Committee. The Audit Committee, which met once during 1996, makes
recommendations to the Board concerning the selection of outside auditors,
reviews the financial statements of the Company and considers such other matters
in relation to the external audit of the financial affairs of the Company as may
be necessary or appropriate in order to facilitate accurate and timely financial
reporting.
Other Committees. The Company does not maintain a standing nominating
committee or other committee performing similar functions.
Compensation Committee Interlocks and Insider Participation. Prior to
the Merger, the Compensation Committee of the Board of Directors consisted of
the entire Board of Directors. After the Merger, Mr. Hamberlin and Mr. White,
neither of whom are employees of the Company, were appointed to the Compensation
Committee.
8
DIRECTOR COMPENSATION
Prior to the Merger, directors who were not employees of the Company
received an annual retainer of $20,000, plus $1,000 per meeting of the Board of
Directors attended by the director. Currently, non-employee directors of the
Company receive an annual retainer of $10,000 and are not additionally
compensated for attendance at Board or Committee meetings. Subject to the
approval of the Monterey Homes Corporation Stock Option Plan (Proposal No. 3),
it is currently anticipated that each of the non-employee directors also will be
borne bygranted an option to purchase 5,000 shares of the Company.Company's Common Stock as
additional consideration for their service as directors. These options shall
vest in equal 2,500 share increments on each of the first two anniversary dates
of the date of grant and shall have an exercise price equal to the closing price
of the Company's Common Stock on the date of grant.
In addition,connection with the Company may reimburse brokerage firms and other persons
representing beneficial ownersMerger, the Company's stockholders approved an
extension of shares for expenses incurred in forwarding
solicitation materials to such beneficial owners. Proxies also may be solicited
by certain of the Company's stock options. The Company's former
directors and officers, personally or by telephone
or telegram, without additional compensation.
Annual Report
The 1994 Annual Reportare parties to Stockholders,stock option agreements (collectively, the "Existing
Stock Option Agreements") pursuant to which was mailedsuch former directors were issued
stock options to stockholders with or preceding this Proxy Statement, contains financial and
other information about the activitiespurchase shares of the Company but is not incorporated
into this Proxy StatementCommon Stock under the stock
plan of the Company existing prior to the Merger (the "Existing Stock Option
Plan"). The Existing Stock Option Plan and is notExisting Stock Option Agreements
provide for an exercise period after an optionee ceases to be considered a part of these proxy
soliciting materials.
Security Ownership of Principal Stockholders and Management
Asan employee or
director of the Record Date, there were outstanding 9,716,517 sharesCompany of Common Stockthree months after cessation of employment or service
as a director. To facilitate the Merger, and in consideration thereof and in
light of their past service to the Company, the stockholders approved an
extension of the Company.post-termination exercise period from three months to two
years.
9
EXECUTIVE COMPENSATION
The table below sets forth information concerning the beneficialannual and
long-term compensation for services in all capacities to the Company for the
fiscal years ended December 31, 1996, 1995 and 1994, of those persons who were,
at December 31, 1996 (i) the Chief Executive Officers of the Company and (ii)
the other most highly compensated executive officer of the Company
(collectively, the "Named Officers"). Information with respect to the Company's
current Co-Chief Executive Officers and other executive officers is not provided
as such persons did not receive compensation from the Company during 1996 for
their services.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
------------
Annual Compensation Awards
----------------------- ------------
All Other
Name and Principal Position Year Salary Bonus Options(#) Compensation
--------------------------- ---- ---------- --------- ------------ ---------------
Alan D. Hamberlin(1) Chairman of 1996 $1 --- 861 ---
the Board and Chief Executive 1995 $240,000 --- 273,338 ---
Officer 1994 $250,000 $2,100 1,547 ---
Jay R. Hoffman(2) 1996 $200,016 $100,000 178 $200,000(3)
President, Secretary, Treasurer 1995 $183,000 $25,000 413 ---
and Chief Financial Officer 1994 $175,000 $15,000 405 ---
================================ ==== ========== ========= ============ ==============
- ------------------------
(1) Mr. Hamberlin resigned all positions with the Company, other than director,
in conjunction with the Merger on December 31, 1996.
(2) Mr. Hoffman resigned his positions with the Company in conjunction with the
Merger on December 31, 1996.
(3) Represents change of control payment made to Mr. Hoffman upon consummation
of the Merger.
10
OPTION GRANTS IN LAST FISCAL YEAR
The table below sets forth information with respect to the granting of
stock options during the fiscal year ended December 31, 1996, to the Named
Officers and to Messrs. Cleverly and Hilton, who became the Company's Co-Chief
Executive Officers at the close of business on December 31, 1996.
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Individual Grants Term(1)
---------------------------------------------------------- -----------------------------------
Percentage of
Total Options Exercise
Granted to or Base
Options Employees In Price Expiration
Name Granted # Last Fiscal Year ($/Share) Date 0% 5% 10%
---- ----------- ------------------ -------------- ---------- --- --- ---
Alan D. Hamberlin 861(2) * --- 12/31/98 $3,900 $4,300 $4,700
Jay R. Hoffman 178(2) * --- 12/31/98 $800 $900 $1,000
William W. Cleverly 166,667(3) 49.8% $5.25 12/31/02 $297,600 $675,100
Steven J. Hilton 166,667(3) 49.8% $5.25 12/31/02 $297,600 $675,100
==================== ============ ================== ============= ============= ======== =========== ============
- -----------------
* Represents less than 1% of total options granted to employees in 1996.
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option terms. The
potential realizable value is calculated by assuming that the market
price of the underlying security appreciates in value from the date of
grant to the end of the option term at certain specified rates, and
that the option is exercised at the exercise price and sold on the last
day of its term at the appreciated price. These gains are based on
assumed rates of stock appreciation of 0%, 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date, and are not presented to forecast future appreciation,
if any, in the price of the Common Stock.
(2) Represents dividend equivalent rights earned in 1996, all of which are
currently exercisable.
(3) Represents options granted in connection with the Merger. These options
vest in equal one-third increments on December 31, 1997, 1998 and 1999.
Excludes 266,667 shares of contingent stock in which Messrs. Cleverly
and Hilton each have a one-half interest and which will be issued only
if certain stock price goals are achieved.
11
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
OPTION VALUE AS OF DECEMBER 31, 1996
The table below sets forth information with respect to the exercise of
stock options during the fiscal year ended December 31, 1996 to the Named
Officers and to Messrs. Cleverly and Hilton, who became the Company's Co-Chief
Executive Officers at the close of business on December 31, 1996. The Company
does not have a long-term incentive plan or a defined benefit or actuarial plan
and has never issued any stock appreciation rights.
Number of Unexercised Value of Unexercised In-the-
Options at Fiscal Money Options at Fiscal Year
Year End (#) End ($)(1)
----------------------------- ---------------------------------
Shares
Acquired
on
Exercise Value
Name (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- -------------- --------------- -------------- ---------------- -------------- ------------------
Alan D. Hamberlin --- --- 261,435 91,667 $724,600 $275,000
Jay R. Hoffman --- --- 21,268 --- $25,700 ---
William W. Cleverly --- --- --- 166,667 --- $375,000
Steven J. Hilton --- --- --- 166,667 --- $375,000
======================= ============== =============== ============== ================ ============== ==================
- ------------------------
(1) Calculated based on the closing price of the Company's Common Stock on
December 31, 1996 of $7.50 per share less the exercise price per share,
multiplied by the number of applicable shares in the money (including
dividend equivalent rights).
EMPLOYMENT AGREEMENTS
In connection with the Merger, the Company and each of William W.
Cleverly and Steven J. Hilton executed employment agreements (the "Employment
Agreements"). The Employment Agreements each have a term ending on December 31,
2001, and provide for an initial base salary of $200,000 per year (increasing by
5% of the prior year's base salary per year) and an annual bonus for 1997 and
1998 of the lesser of 4% of the pre-tax consolidated net income of the Company
or $200,000. The Landon Employment Agreement, which was entered into in
connection with the Legacy Homes acquisition, has a term ending June 30, 2001,
and provides for an initial base salary of $200,000 per year (increasing by 5%
of the prior year's base salary per year) and an annual bonus for 1997 and 1998
equal to the lesser of 4% of the consolidated pre-tax net income or $200,000.
Thereafter, under both the Employment Agreements and the Landon Employment
Agreement, the bonus percentage payout of consolidated net income will be
determined by the Compensation Committee of the Board of Directors, provided
that in no event will the bonus payable in any year exceed $200,000 per
employee. Mr. Cleverly serves as the Company's Co-Chief Executive Officer and
Chairman of the Board of Directors, and Mr. Hilton serves as the Company's
Co-Chief Executive Officer, Director and President. Mr. Landon serves as the
Company's Co-Chief Executive
12
Officer and Chief Operating Officer and as the President and Chief Executive
Officer of the Company's Texas operation.
If Mr. Cleverly or Mr. Hilton voluntarily terminates his employment or
is discharged for "Cause," the Company will have no obligation to pay him his
current annual salary or bonus. If either Mr. Cleverly or Mr. Hilton is
terminated during the term of the Employment Agreement without "Cause" or as a
result of his death or permanent disability, the Company will be obligated to
pay him (i) his current annual salary through the term of the Employment
Agreement if terminated without "Cause," or for six months after termination in
the event of death or disability, plus (ii) a pro rated bonus.
If Mr. Landon voluntarily terminates his employment without "Good
Reason" or is discharged for "Cause," the Company will have no obligation to pay
him his current annual salary or bonus. The Company will be obligated to pay Mr.
Landon the Deferred Contingent Payments, but will have the option to make the
payments as scheduled or in one lump sum, based on the pre-tax income of the
Company and the pre-tax income of the Company's Texas division for the twelve
month period ending with the fiscal quarter immediately preceding his
termination, less a 25% reduction. If Mr. Landon is terminated without "Cause"
or as a result of death or disability or if he resigns for "Good Reason", the
Company will be obligated to pay Mr. Landon (i) his then current base salary
through the end of the stated term of employment in the event of termination by
the Company without "Cause" or for "Good Reason," or for six months after
termination in the event of death or disability and (ii) a pro rated bonus. If
Mr. Landon is terminated without "Cause" or resigns for "Good Reason," Mr.
Landon will have the option to receive the Deferred Contingent Payments as
scheduled or in one lump sum based on the pre-tax income of the Company and the
Company's Texas division for the twelve month period ending with the fiscal
quarter immediately preceding his termination. If Mr. Landon's employment is
terminated due to death or disability, Mr. Landon or his estate may elect to
have the Deferred Contingent Payments continue as scheduled or have the
remainder paid out in one lump sum, based upon the pre-tax income of the Company
and of the Company's Texas division for the twelve month period ending with the
fiscal quarter immediately preceding termination, less a 25% reduction.
"Cause" under the Employment Agreements and the Landon Employment
Agreement is defined to mean only an act or acts of dishonesty constituting a
felony and resulting or intended to result directly or indirectly in substantial
personal gain or enrichment at the expense of the Company. "Cause" under the
Landon Employment Agreement also includes willful disregard of the employee's
primary duties to the Company. "Good Reason" under the Landon Employment
Agreement is defined to include (i) assignment of duties inconsistent with the
scope of the duties associated with Mr. Landon's titles or positions or which
would require Mr. Landon to relocate his principal residence outside the
Dallas-Fort Worth, Texas metropolitan area; (ii) failure by the Company to elect
Mr. Landon as a director of the Company on or before June 30, 1998; (iii)
failure by the Company to pay any part of the Deferred Contingent Payments under
the Legacy Agreement; (iv) termination of Mr. Landon for Cause and it is
determined that Cause did not exist; or (v) failure of the Company to permit the
Texas operation to utilize its equity to obtain financing or to provide access
to the Texas division of its Intercompany Receivable (as defined in the Legacy
Agreement).
13
The Employment Agreements with Messrs. Cleverly and Hilton and the
Landon Employment Agreement contain non-compete provisions that until December
31, 2001 and June 30, 2001, respectively, restrict the employees from, except in
connection with their performance of their duties under the Employment
Agreements and the Landon Employment Agreement (i) engaging in the homebuilding
business and, with respect to Mr. Landon only, the mortgage brokerage or banking
business, (ii) recruiting, hiring or discussing employment with any person who
is, or within the past six months was, an employee of the Company, (iii)
soliciting any customer or supplier of the Company for a competing business or
otherwise attempting to induce any customer or supplier to discontinue its
relationship with the Company, or (iv) except solely as a limited partner with
no management or operating responsibilities, engaging in the land banking or lot
development business; provided, however, the foregoing provisions shall not
restrict (A) the ownership of less than 5% of a publicly-traded company, or (B)
in the event the employment of either Mr. Cleverly, Mr. Hilton or Mr. Landon is
terminated under his respective employment agreement, engaging in the custom
homebuilding business, engaging in the production homebuilding business outside
a 100 mile radius of any project of the Company or outside Northern California
or engaging in the land banking or lot development business. The non-compete
provisions will survive the termination of the Employment Agreements unless
either Mr. Cleverly or Mr. Hilton is terminated by the Company without Cause.
The non-compete provisions under the Landon Employment Agreement will survive
termination of the Landon Employment Agreement unless Mr. Landon is terminated
without Cause or resigns for Good Reason.
CHANGE OF CONTROL ARRANGEMENTS
In the event there is a change of control of the Company that is not
unanimously approved by the Company's Board of Directors, all unvested options
granted to Alan D. Hamberlin will vest in full and be immediately exercisable by
Mr. Hamberlin.
If prior to the third anniversary of the effective date of the stock
option agreements of Messrs. Cleverly, Hilton and Landon, there is a change of
control of the Company that is required to be reported in a Form 8-K under the
Securities Exchange Act of 1934, as amended, the options granted to Messrs.
Cleverly, Hilton and Landon pursuant to their stock option agreements shall vest
in full and be immediately exercisable.
14
BOARD OF DIRECTORS' REPORT ON EXECUTIVE COMPENSATION
Prior to the Merger, the Board of Directors was responsible for
reviewing and determining the Company's compensation policies and the
compensation paid to executive officers. There was no compensation committee
that reviewed and made recommendations to the Board of Directors on cash
compensation, stock option awards and other compensation for the Company's
executive officers.
Since the Merger, the Company has created a Compensation Committee
which consists of Messrs. Hamberlin and White, both of whom are independent
directors. The Compensation Committee reviews all aspects of compensation of
executive officers of the Company and makes recommendations on such matters to
the full Board of Directors. In addition, the Company has hired a compensation
consultant to advise the Compensation Committee on matters of executive
compensation.
Overview and Philosophy. The Company's compensation program for
executive officers is primarily comprised of base salary, annual bonus and,
subject to stockholder approval of Proposal No. 3 regarding adoption of the
Monterey Homes Corporation Stock Option Plan, long-term incentives in the form
of stock option grants. Executives also participate in various other benefit
plans, including a medical and a 401K plan, generally available to all employees
of the Company.
The Company's philosophy is to pay base salaries to executives that
enable the Company to attract, motivate and retain highly qualified executives.
The annual bonus program is designed to reward performance based on financial
results. Stock option grants are intended to result in no reward if the stock
price does not appreciate, but may provide substantial rewards to executives as
stockholders benefit from stock price appreciation.
Contractual Compensation Arrangements. The Company has entered into
employment agreements with Messrs. Cleverly, Hilton and Landon, which set forth
their respective base salaries and bonus programs. The compensation packages of
Messrs. Cleverly, Hilton and Landon are more fully described above under
Employment Agreements.
Stock Option Plan. The Board of Directors has approved the adoption of
the Monterey Homes Corporation Stock Option Plan (the "Plan") for executives,
directors and consultants of the Company. The Plan authorizes grants of
incentive stock options and non-qualified stock options to individuals and
entities as directed by the Compensation Committee. The total number of shares
of Common Stock available for awards under the Plan is 225,000. The maximum
number of shares of Common Stock that can be issued to any one person under the
Plan is 50,000 shares. The Plan is more fully described below in Proposal No. 3.
The adoption of the Plan is subject to approval of the stockholders of the
Company by affirmative vote of a majority of the shares of Common Stock present
at the Annual Meeting in person or by proxy and entitled to vote.
1996 Compensation. During 1996, the Company's executive officers, Alan
D. Hamberlin and Jay R. Hoffman, were compensated pursuant to the terms of their
employment agreements with the Company. The Board paid a bonus to Mr. Hoffman in
light of his significant contributions to the Company during 1996, especially
his efforts in connection with the Merger. Mr. Hoffman also
15
received a $200,000 change of control payment upon consummation of the Merger
pursuant to the terms of his employment agreement. The Board did not award a
bonus to Mr. Hamberlin and Mr. Hamberlin agreed to waive his $500,000 change of
control payment that may have been triggered by the Merger. No stock options
were granted to Messrs. Hamberlin and Hoffman during 1996 except for those
granted in connection with their dividend equivalent rights.
In connection with the Merger, the Company's stockholders approved an
extension of certain of the Company's stock options. The Company's former
executive officers are parties to the Existing Stock Option Agreements pursuant
to which they were issued stock options to purchase shares of the Company Common
Stock under the Existing Stock Option Plan. The Existing Stock Option Plan and
Existing Stock Option Agreements provide for an exercise period after an
optionee ceases to be an employee or director of the Company of three months
after cessation of employment or service as a director. To facilitate the
Merger, and in consideration thereof and in light of their past service to the
Company, the stockholders approved an extension of the post-termination exercise
period from three months to two years.
FORMER BOARD OF DIRECTORS
Alan D. Hamberlin
Jay R. Hoffman
Larry E. Cox
Mark A. McKinley
Gregory K. Norris
COMPENSATION COMMITTEE
Alan D. Hamberlin
C. Timothy White
16
STOCK PRICE PERFORMANCE GRAPH
The following chart compares the cumulative total stockholder return on
the Company Common Stock during the five years ended December 31, 1996, with a
cumulative total return on the Standard & Poor's 500 Stock Index and an industry
index (the "Index") prepared by the National Association of Real Estate
Investment Trusts ("NAREIT"). The Index consists of Mortgage Real Estate
Investment Trusts as compiled by NAREIT. The comparison assumes $100 was
invested on December 31, 1991 in the Company's Common Stock and in each of the
foregoing indices and assumes reinvestment of dividends.
As a result of the Merger and the concurrent termination of the
Company's REIT status, the Company will select new comparisons for the stock
price performance graph in next year's Proxy Statement.
As of December 31,
-------------------------------------------------
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
The Company 100 38 20 16 25 43
NAREIT Index 100 102 117 88 144 218
S & P 500 100 108 118 120 165 203
17
SECURITY OWNERSHIP OF
PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth, as of July 1, 1997, the Record Datenumber and
percentage of outstanding shares of the Company's Common Stock beneficially
owned by each person known by the Company to beneficially own more than 5% of
such stock, by each director and nominee for director, by each executive officer of the Company and by all
directors and executive officers of the Company as a group, and each person known to the
Company to be a beneficial owner of more than five percent of Common Stock which
information as to beneficial ownership is based upon statements furnished to the
Company by such persons.group.
Name and Address Number of Shares Beneficially Percent
of
of Beneficial Owner Beneficially Owned(1) Common Stock(2)Owner(1) Owned(2) Owned(3)
------------------- -------- --------
William W. Cleverly 647,696 12.34%
Steven J. Hilton 644,363 12.27%
John R. Landon 666,667(4) 12.71%
Alan D. Hamberlin* ...................... 274,609(3) 2.71%
JayHamberlin 286,701(5) 5.19%
Robert G. Sarver 113,700 2.17%
C. Timothy White -- --
Larry W. Seay -- --
Anthony C. Dinnell -- --
Irene Carroll 6,666 *
Christopher T. Graham 500 *
Jeffrey R. Hoffman* ......................... 77,029(4) **
Mark A. McKinley* ....................... 46,575(5) **
Mike Marusich* .......................... 34,273(5) **
Gregory K. Norris* ...................... 11,423(5) **Grobstein 1,020 *
All directorsDirectors and executive officersExecutive Officers 2,367,313 45.12%
as a group (five(11 persons)
.............. 443,909(6) 4.31%
5% Stockholders:
Ira Sochet .............................. 513,400 5.28%
5701 Sunset Drive, Suite 315
South Miami, Florida 33143
The InterGroup Corporation .............. 859,000(7) 8.84%
and John V. Winfield- -------------------
* Each director and executive officer of the Company may be reached through
the Company at 5333 North Seventh Street, Suite 219, Phoenix, Arizona
85014.
** LessRepresents less than 1% of the Company's outstanding shares of Common Stock.
(1) The address for each director and officer is c/o Monterey Homes
Corporation, 6613 North Scottsdale Road, Suite 200, Scottsdale, Arizona
85250.
(2) Includes, where applicable, shares of Common Stock owned of record by such
person's minor children and spouse and by other related individuals and
entities over whose shares of Common Stock such person has custody, voting
control or the power of disposition.
(2)(3) The percentages shown include the shares of Common Stock actually owned as
of May 5, 1995July 1, 1997 and the shares of Common Stock which the person or group
had the right to acquire within 60 days of such date. In calculating the
percentage of ownership, all shares of Common Stock which the identified
person or group had the right to acquire within 60 days of May 5, 1995July 1, 1997
upon the exercise of options are deemed to be outstanding for the purpose
of computing the percentage of the shares of Common Stock owned by such
person or group, but are not deemed to be outstanding for the purpose of
computing the percentage of the shares of Common Stock owned by any other
person.
(3)(4) Includes 37,900200,000 shares of Common Stock owned with Eleanor Landon, spouse,
as tenants-in-common and 466,667 shares owned by Legacy Homes, Ltd., a
Texas limited partnership of which Legacy Enterprises, Inc., a Texas
corporation, is the general partner. Mr. Landon serves as a director and
as President and Secretary and Mrs. Landon serves as Vice President and
Treasurer of Legacy Enterprises, Inc. Mrs. Landon is the sole stockholder
of Legacy Enterprises, Inc.
(5) Includes 12,633 shares of Common Stock indirectly beneficially owned by
Mr. Hamberlin through a partnership and 236,709274,068 shares of Common Stock
which Mr. Hamberlin had the right to acquire within 60 days of May 5, 1995
byJuly 1,
1997 upon the exercise of stock options (including dividend equivalent
rights).
(4) Includes 15,000 shares of Common Stock owned by Mr. Hoffman and 62,029
shares of Common Stock which Mr. Hoffman had the right to acquire within
60 days of May 5, 1995 by the exercise of stock options (including
dividend equivalent rights).
(5) All of such shares of Common Stock are shares which Mr. McKinley, Mr.
Marusich and Mr. Norris had the right to acquire within 60 days of May 5,
1995 by the exercise of stock options (including dividend equivalent
rights).
(6) Includes 391,009 shares of Common Stock which such persons had the right
to acquire within 60 days of May 5, 1995 by the exercise of stock options
(including dividend equivalent rights).
(7) The nature of beneficial ownership of the 859,000 shares is 459,000 shares
are owned by the InterGroup Corporation and 400,000 shares are owned by
John V. Winfield. Mr. Winfield is Chairman of the Board and President of
The InterGroup Corporation. As of February 7, 1995, 427,406 shares of
InterGroup common stock, constituting 46% of the outstanding InterGroup
shares, were owned directly or beneficially by Mr. Winfield.
Other than options and dividend equivalent rights granted under the
Company's stock option plan, there are no outstanding warrants, options or
rights to purchase any shares of Common Stock of the Company, and no outstanding
securities convertible into Common Stock of the Company.
Compliance with Section18
SECTION 16(a) of the Securities Exchange Act of 1934BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, and directors and persons who own more than 10% of a registered
class of the Company's equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC") and the New York Stock Exchange..
Officers, directors and greater than 10% stockholders are required by SEC
regulationregulations to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on the Company'supon a review of the copies of such forms received
by it duringfurnished to the
fiscal year ended December 31, 1994, andCompany, or written representations that no other reportsall required forms were required,filed, the
Company believes that each person who, at any time during suchthe Company's preceding fiscal year was a director, officer or
beneficial owner of more than 10% of the Company's Common Stock complied with all Section
16(a) filing requirements during such fiscal year or prior fiscal
years.
ELECTION OF DIRECTORS
Nominees
A board of fourapplicable to its officers, directors is to be elected at the Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
forand greater than
10% beneficial owners were complied with.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
Alan D. Hamberlin, Mike Marusich, Mark A. McKinley and Gregory K. Norris,
all of whom currently are directors of the Company. In the event that any
nominee of the Company is unable or declines to serve as a director at the time
of the Meeting, the proxies will be voted for any nominee designated by the
current Board of Directors to fill the vacancy. It is not expected that any
nominee will be unable or will decline to serve as a director. The term of
office of each person elected as a director will continue until the next annual
meeting of stockholders and until a successor has been elected and qualified.
Biographical information respecting the nominees for directors is set forth
below under the heading "Information Concerning Directors and Executive Officers
of the Company."
The Company's bylaws provide that the Board of Directors shall consist of
not fewer than three nor more than 15 members. The bylaws further provide that,
for so long as the Company maintains its election to be treated as a real estate
investment trust ("REIT"), the majority of the members of the Board of Directors
and of any committee of the Board of Directors will at all times be Unaffiliated
Directors, except in the case of a vacancy. Unaffiliated Directors are directors
who are not themselves, or affiliated with persons, responsible for directing or
performing the day to day business affairs of the Company. As of the date of
this Proxy Statement, the Unaffiliated Directors are Messrs. Marusich, McKinley
and Norris. Vacancies occurring on the Board of Directors among the Unaffiliated
Directors will be filled by nominees selected by the Unaffiliated Directors who
are approved by the vote of a majority of the directors, including a majority of
the Unaffiliated Directors.
All directors are elected at each annual meeting of the Company's
stockholders for a term of one year, and hold office until their successors are
elected and qualified. All officers serve at the discretion of the Board of
Directors.
Information Concerning Directors and Executive Officers of the Company
The directors and executive officers of the Company are as follows:
Name Age Position(s) Held
Alan D. Hamberlin 46former Chairman of the Board of Directors, Director,
President and Chief Executive Officer
Jay R. Hoffman 40 Vice President, Secretary, Treasurer and Chief
Financial and Accounting Officer
Mike Marusich 69 Director
Mark A. McKinley 48 Director
Gregory K. Norris 44 Director
Alan D. Hamberlin has been a Director and the President and
Chief Executive Officer of the Company, since its organization and Chairman of the
Board of Directors of the Company since January 1990. Mr. Hamberlinis also served
as the President and Chief Executive Officer of the managing general partner of
the Company's former Manager. Mr. Hamberlin has been President of Courtland
Homes, Inc. since July 1983. Mr. Hamberlin has served as a Director of American
Southwest Financial Corporation and American Southwest Finance Co., Inc. since
their organization in September 1982. Mr. Hamberlin also has served as a
Director of American Southwest Affiliated Companies and American Southwest
Holdings, Inc. since their respective organizations in March 1985 and August
1994.
Jay R. Hoffman has been a Vice President and the Secretary, Treasurer and
Chief Financial and Accounting Officer of the Company since July 1988. Mr.
Hoffman, a certified public accountant, engaged in the practice of public
accounting with Kenneth Leventhal & Company from March 1987 through June 1988
and with Arthur Andersen & Co. from June 1976 through March 1987.
Mike Marusich has been a Director of the Company since June 1990. Mr.
Marusich has been a business consultant since 1980. Mr. Marusich, a certified
public accountant for 38 years, engaged in the practice of public accounting
with Ernst & Whinney (now Ernst & Young) for 15 years and was a
partner-in-charge of that firm's Phoenix, Arizona office from 1976 until his
retirement in 1980.
Mark A. McKinley has been a Director of the Company since May 1988. Mr.
McKinley is currently Senior Vice President of NationsBanc Mortgage Corporation.
Prior to that, he was the Co-Founder, President and Director of Cypress
Financial Corporation organized in 1983 and Managing Director of Rancho Santa
Margarita Mortgage Corporation, organized in 1990.
Gregory K. Norris has been a Director of the Company since June 1990. Mr.
Norris has been the President of Norris & Benedict Associates P.C., certified
public accountants, or its predecessor firms since November 1979. Mr. Norris
previously was engaged in the practice of public accounting with Bolan, Vassar
and Borrows, certified public accountants, from December 1978 until November
1979 and with Ernst & Whinney (now Ernst & Young) from July 1974 until December
1978.
On November 1, 1992, the Company entered into an employment agreement with
Alan D. Hamberlin which superseded the previous employment agreement that was to
expire on April 30, 1993. The term of the employment agreement is for the period
from November 1, 1992 through April 30, 1996. The employment agreement provides
for the employment of Mr. Hamberlin as the President and Chief Executive Officer
of the Company and for Mr. Hamberlin to perform such duties and services as are
customary for such a position. The employment agreement provides for Mr.
Hamberlin to receive an annual base salary of $250,000 and an annual performance
bonus in an amount equal to $1,500 for each $.01 per share of taxable income
(computed in accordance with the Internal Revenue Code of 1986, as amended (the
"Code")) distributed to the Company's stockholders with respect to each calendar
year beginning with 1992. A corporation owned by Mr. Hamberlin also is entitled
to the payment of $15,000 annually as reimbursement for expenses incurred by
such company in providing support to Mr. Hamberlin in connection with the
performance of his duties.
The employment agreement provides for Mr. Hamberlin to receive his fixed
and bonus compensation to the date of the termination of his employment by
reason of his death, disability or resignation and for Mr. Hamberlin to receive
his fixed compensation to the date of the termination of his employment by
reason of the termination of his employment for cause as defined in the
agreement. The employment agreement also provides for Mr. Hamberlin to receive
his fixed compensation in a lump sum and bonus payments that would have been
payable through the term of the agreement as if his employment had not been
terminated in the event that Mr. Hamberlin or the Company terminates Mr.
Hamberlin's employment following any "change in control" of the Company as
defined in the agreement. Section 280G of the Code may limit the deductibility
of such payments for federal income tax purposes. A change in control would
include a merger or consolidation of the Company, a sale of all or substantially
all of the assets of the Company, changes in the identity of a majority of the
members of the Board of Directors of the Company or acquisitions of more than
9.8% of the Company's Common Stock subject to certain limitations. The
employment agreement also restricts the Company from entering into a separate
management agreement or arrangement without Mr. Hamberlin's consent.
Meetings and Committees of the Board of Directors
The Company's bylaws authorize the Board of Directors to appoint among its
members an executive committee, an audit committee and other committees composed
of three or more directors. A majority of the members of any committee so
appointed must be Unaffiliated Directors. Messrs. Marusich, McKinley and Norris
are members of the Company's Audit Committee and the Company's Special
Committee. The Audit Committee reviews the annual financial statements, the
significant accounting issues and the scope of the audit with the Company's
independent auditors and is available to discuss with the auditors any other
audit related matters which may arise during the year. The Special Committee was
formed in May 1994 for the purpose of evaluating and negotiating a proposed
merger transaction between American Southwest Holdings, Inc. and the Company. In
February 1995, the Board of Directors of American Southwest Holdings, Inc.
notified the Company that they were ending negotiations with respect to such
merger transaction.
The Board of Directors of the Company held a total of three meetings
during the fiscal year ended December 31, 1994. One director was absent for one
of the three meetings. The Company's Audit Committee met separately at one
formal meeting during the fiscal year ended December 31, 1994. One director was
absent for such Audit Committee meeting. The Special Committee held a total of
eight meetings during the fiscal year ended December 31, 1994. One director was
absent for one of the eight meetings.
Transactions with Management and Others
The Company is a party to a subcontract agreement (the "Subcontract
Agreement") with American Southwest Financial Services, Inc. ("ASFS"), an
affiliate of American Southwest Financial Corporation and American Southwest
Finance Co., Inc. (together "American Southwest"), pursuant to which ASFS has
agreed to perform certain services for the Company in connection with the
issuance and administration of mortgage securities issued by the Company or by
any affiliate of ASFS with respect to which the Company acquires mortgage
interests. Based on reports received by the Company from ASFS, ASFS received
administration fees and expenses of $165,000 for the year ended December 31,
1994 for services performed by ASFS in connection with mortgage securities with
respect to which the Company owns mortgage interests.
The Company is not affiliated with American Southwest or ASFS, except as
described in the following two paragraphs. Except for the Subcontract Agreement
with ASFS, the Company has no agreements with ASFS or American Southwest.
Alan D. Hamberlin directly or indirectly owns a total of 6.7% of the
voting stock of American Southwest Holdings, Inc. American Southwest Holdings,
Inc. directly or indirectly owns 100% of the voting stock of, among other
entities, ASFS, American Southwest Financial Corporation and Westam Mortgage
Financial Corporation.
Alan D. Hamberlin also is a director of American Southwest
Financial Corporation, American Southwest Finance Co., Inc., American Southwest
Affiliated Companies and American Southwest Holdings, Inc. Executive Compensation
The following table sets forth compensation received by the Company's
Chief Executive Officer and its other executive officer for the Company's last
three fiscal years ending December 31, 1994.
Long-Term
Annual Compensation Compensation
Other
Annual Restricted
Compen- Stock Stock All Other
Name and Principal Position Year Salary Bonus sation Awards Options Compensation
Alan D. Hamberlin 1994 $250,000 $ 2,100 -- -- 4,642 $ --
Chairman, President and 1993 250,000 4,100 -- -- 5,439 --
Chief Executive Officer 1992 250,000 47,500 -- 25,280 243,861(1)
Jay R. Hoffman, Vice 1994 175,000 15,000 -- -- 1,216 --
President, Secretary, 1993 175,000 -- -- -- 1,425 --
Treasurer and Chief 1992 175,000 -- -- 4,091 12,975(1)
Accounting and Financial
- -----------------
(1) During 1992 the Company purchased 64,818 shares of Common Stock from Mr.
Hamberlin and 9,793 shares of Common Stock from Mr. Hoffman pursuant to
the purchase provisions of the Company's stock option plan. The net value
realized (purchase price of stock on date of purchase by Company less fair
market value on such date) equaled $243,861 for Mr. Hamberlin and $12,975
for Mr. Hoffman. Such shares had originally been purchased in 1991 and
1990 by Mr. Hamberlin and in 1991 by Mr. Hoffman through the exercise of
stock options. At the time Mr. Hamberlin exercised his options to acquire
the 64,818 shares of Common Stock, such shares of Common Stock had a fair
market value in excess of the exercise price paid of $291,422. At the time
Mr. Hoffman exercised his options to acquire the 9,793 shares of Common
Stock, such shares of Common Stock had a fair market value in excess of
the exercise price paid of $57,716. Such amounts were previously disclosed
in the Company's Form 10-Ks for the years ended December 31, 1991 and
December 31, 1990, as applicable. A portion of these amounts, for Federal
income tax purposes, were reported as compensation to Mr. Hamberlin and
Mr. Hoffman in the years the stock options were exercised.
Officers and key personnela member of the
Company are eligiblemanagement committee of American Southwest Financial Group, L.L.C. ("ASFG").
Mr. Hamberlin directly and indirectly owns a total of 25% of the voting
stock of American Southwest Holdings, Inc., American Southwest Holdings, Inc.
directly or indirectly owns 100% of the voting stock of, among other entities,
American Southwest Financial Services, Inc. ("ASFS"), American Southwest
Financial Corporation and Westam Mortgage Financial Corporation. Mr. Hamberlin
also directly and indirectly owns up to receive stock
options under25% of the Company's stock option plan. See "Employee Benefit Plans."
Director Compensationcapital interest held by the
common members of ASFG and indirectly owns up to 25% of the capital interest of
the preferred members of ASFG.
The Company paysis a party to a Subcontractor Agreement pursuant to which
ASFG, as assignee of ASFS, performs certain services for the Company in exchange
for administration fees. ASFS received administration fees of approximately
$133,000 during 1996, $144,000 during 1995 and $165,000 during 1994. The
Subcontractor Agreement renews on an annual director's feebasis and the Company has the right
to each Unaffiliated Director
equalterminate the Subcontractor Agreement upon the happening of certain events.
Since September 1994, Monterey has leased approximately 11,000 square
feet of office space in a Scottsdale, Arizona office building from a limited
liability company owned by Messrs. Cleverly and Hilton. The lease has a
five-year term, and Monterey has an option to $20,000, a fee of $1,000 for each regular meeting of the Board of
Directors attended by each Unaffiliated Director and reimbursement of costs and
expenses for attending such meetings. In addition, the Company's directors are
eligible to participateexpand its space in the Company's stock option plan. See "Employee
Benefit Plans."
During 1994,building
and renew the Unaffiliated Directors also accrued dividend equivalent
rights,lease for additional terms at rates that are competitive with
those in the amounts of 913 with respect to Mr. McKinley, 224 with respect to
Mr. Norris, and 672 with respect to Mr. Marusich. The dividend equivalent rights
accrued to Messrs. Hamberlin and Hoffman during 1994 are included in the table
on options grantedmarket at such time. Rents paid to the Company's executive officers below. In addition, the
Company's directors are eligible to participate in the Company's stock option
plan described below.
Employee Benefit Plan
Stock Option Plan
In May 1988, the Company's Board of Directors adopted a stock option plan
(the "Plan") which was amended on July 18, 1990 to limit the redemption price
available to optionholders as described below. Underlimited liability company
totaled $173,160, $164,394 and $53,244 during fiscal years 1996, 1995 and 1994,
respectively. Monterey believes that the terms of the lease are no less
favorable than those which could be obtained in an arm's-length negotiated
transaction.
In connection with the Legacy acquisition, the Company has assumed
Legacy Homes, Ltd.'s lease agreement with Home Financial Services, a Texas
partnership owned by John and Eleanor
19
Landon, for office space in Plano, Texas. The annual rent under the lease is
$163,175. The lease expires May 15, 2002.
During 1996 and 1995, Monterey incurred fees for legal services to
Tiffany & Bosco, P.A. of approximately $100,000 and $206,000, respectively. C.
Timothy White, a director of the Company, is a shareholder of Tiffany & Bosco,
P.A.
ADOPTION OF THE
MONTEREY HOMES CORPORATION STOCK OPTION PLAN
(Proposal No. 3)
General
The Board of Directors of the Company has approved and recommends that
the stockholders approve adoption of the Monterey Homes Corporation Stock Option
Plan both
qualifiedfor executives, directors and consultants of the Company. The Plan
authorizes grants of incentive stock options ("ISOs"), which are intended to meet the
requirements of Section 422A of the Code, and non-qualified stock
options may("NQSOs") to individuals and entities as the Company's Compensation
Committee (the "Committee") in its discretion should be granted. ISOs may be granted toawarded such incentives
in light of the officers and key personnelbest interests of the Company. Non-qualified stock options may be granted to the Company's directors and key
personnel. The purpose of the Plan is to provide a means of performance-based
compensation in order to attract and retain qualified personnel and to provide
an incentive to others whose job performance affects the Company.
Under the Plan, options to purchase shares of the Company's Common Stock
may be granted to the Company's directors, officers and key personnel. The
maximum number of shares of the Company's Common Stock which may be covered by
options granted under the Plan is limited to 5% of the number of shares
outstanding. An option granted under the Plan may be exercised in full or in
part at any time or from time to time during the term of the option, or provide
for its exercise in stated installments at stated times during the term of the
option. The exercise price for any option granted under the Plan may not be less
than 100% of the fair market value of the shares of Common Stock at the time the
option is granted. The optionholder may pay the exercise price in cash, bank
cashier's check, or by delivery of previously acquired shares of Common Stock of
the Company. No option may be granted under the Plan to any person who, assuming
exercise of all options held by such person, would own directly or indirectly
more than 9.8% of the total outstanding shares of Common Stock of the Company.
An optionholder also will receive at no additional cost "dividend
equivalent rights" to the extent that dividends are declared on the outstanding
shares of Common Stock of the Company on the record dates during the period
between the date an option is granted and the date such option is exercised. The
number of dividend equivalent rights which an optionholder receives on any
dividend declaration date is determined by application of a formula whereby the
number of shares subject to the option is multiplied by the dividend per share
and divided by the fair market value per share (as determined in accordance with
the Plan) to arrive at the total number of dividend equivalent rights to which
the optionholder is entitled.
The dividend equivalent rights earned will be distributed to the
optionholder (or his successor in interest) in the form of shares of the
Company's Common Stock when the option is exercised. Dividend equivalent rights
will be computed both with respect to the number of shares under the option and
with respect to the number of dividend equivalent rights previously earned by
the optionholder (or his successor in interest) and not issued during the period
prior to the dividend record date. Shares of the Company's Common Stock issued
pursuant to the exchange of dividend equivalent rights will not qualify for the
favored tax treatment afforded shares issued upon exercise of an ISO,
notwithstanding the character of the underlying option with respect to which the
dividend equivalent rights were earned. The number of shares issuable upon
exchange of dividend equivalent rights is not subject to the limit of the number
of shares which are issuable upon exercise of options granted under the Plan.
Under the Plan, an exercising optionholder has the right to require the
Company to purchase some or all of the optionholder's shares of the Company's
Common Stock. That redemption right is exercisable by the optionholder only with
respect to shares (including the related dividend equivalent rights) that he has
acquired by exercise of an option under the Plan. Furthermore, the optionholder
can only exercise his redemption rights within six months from the last to
expire of (i) the two year period commencing with the grant date of an option,
(ii) the one year period commencing with the exercise date of an option, or
(iii) any restriction period on the optionholder's transfer of the shares of
Common Stock he acquires through exercise of his option. The price for any
shares repurchased as a result of an optionholder's exercise of his redemption
right is the lesser of the book value of those shares at the time of redemption
or the fair market value of the shares on the date the options were exercised.
The Plan is administered by the Board of Directors which will determine
whether such options will be granted, whether such options will be ISOs or
non-qualified stock options, which directors, officers or key personnel will be
granted options, and the number of options to be granted, subject to the
aggregate maximum amount of shares issuable under the Plan set forth above. Each
option granted must terminate no more than 10 years from the date it is granted.
Under current law, ISOs cannot be granted to directors who are not also
employees of the Company, or to directors or employees of entities unrelated to
the Company.
The Board of Directors may amend the Plan at any time, except that
approval by the Company's stockholders is required for any amendment that
increases the aggregate number of shares of
Common Stock that may be issued
pursuant toavailable for awards under the Plan increases theis 225,000. The maximum number
of shares of Common Stock that maycan be issued to any one person changes the class of persons eligible to
receive such options, modifies the period within which the option may be
granted, modifies the period within which the options may be exercised or the
terms upon which options may be exercised, or increases the material benefits
accruing to the participants under the Plan. Unless previously terminated by the
Board of Directors, the Plan will terminate in May 1998.
is
50,000 shares. The following table provides information on options granted to the
Company's executive officers during 1994.
Percentage of
Total Stock
Granted to Exercise Grant Date
Options Employees Price Expiration Market Price
Name Granted(#)(1) in 1994 (per share) Date(3) of Stock Valuation(4)
Alan D. Hamberlin 4,642 59.67% (2) (2) $1.00 $4,642
Jay R. Hoffman 1,216 15.63 (2) (2) 1.00 1,216
(1) All of such options are currently exercisable.
(2) Represent dividend equivalent rights earned in 1994. Such rights expire at
the same time as the options on which they were earned which expire at
various dates between July 26, 1999 and February 6, 2002.
(3) Options are subject to earlier expiration upon an optionee's termination
for cause or three months after any other termination of employment.
(4) This column represents the Black-Scholes option valuation method
calculation of the options' present value. The Black-Scholes computation
is based upon certain assumptions, including hypothetical stock price
volatility and market interest rate calculations. In addition, the
Black-Scholes valuation method does not reflect the effects upon option
valuation of the options' nontransferability and conditional
exercisability.
The following table provides information on options exercised in 1994 by
the Company's executive officers and the value of such officer's unexercised
options at December 31, 1994.
Number of Value of Unexercised
Unexercised Options In-The-Money Options at
At December 31, 1994 December 31, 1994($)(1)
Shares Acquired Value At
Name on Exercise (#) Exercise($) Exercisable Unexercisable Exercisable Unexercisable
Alan D. Hamberlin -- $ -- 236,709 -- $ -- $ --
Jay R. Hoffman -- $ -- 62,029 -- $ -- $ --
(1) Calculated based on the closing price at December 31, 1994 of $1.00
multiplied by the number of applicable shares in the money (including
dividend equivalent rights), less the total exercise price per share.
SEP-IRA
On June 27, 1991, the Company established a simplified employee
pension-individual retirement account pursuant to Section 408(k) of the Code
(the "SEP-IRA"). Annual contributions may be made by the Company under the
SEP-IRA to employees. Such contributions will be excluded from each employee's
gross income and will not exceed the lesser of 15% of such employee's
compensation or $30,000. The Company did not make any contributions to the
SEP-IRA during 1994.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
The Board of Directors is responsible for reviewing and determining the
Company's compensation policies and the compensation paid to executive officers,
including approving the employment agreement with the Company's President. There
is no compensation committee that reviews and makes recommendations to the Board
of Directors on cash compensation, stock option awards and other compensation for the Company's executive officers.
The principal component of the compensation for the Company's President is
established pursuant to a three-year employment agreement with Mr. Hamberlin.
The term of the employment agreement with respect to Mr. Hamberlin is for the
period from November 1, 1992 through April 30, 1996 and provides for Mr.
Hamberlin to receive an annual base salary of $250,000 and an annual performance
bonus in an amount equal to $1,500 for each $.01 per share of taxable income
(computed in accordance with the Code) distributed to the Company's stockholders
with respect to each calendar year beginning with 1992. With respect to the
calendar year ending December 31, 1994, Mr. Hamberlin received an annual
performance bonus in an amount equal to $2,100 based upon the foregoing
computation. A corporation owned by Mr. Hamberlin also is entitled to the
payment of $15,000 annuallyCommon Stock on August 7, 1997, as
reimbursement for expenses incurred by such
company in providing support to Mr. Hamberlin in connection with the performance
of his duties.
On August 1, 1991, the Company entered into a three-year employment
agreement with Jay R Hoffman, the Vice President, Secretary, Treasurer and Chief
Financial and Accounting Officer of the Company. The employment agreement
provided that Mr. Hoffman receive an annual base salary of $175,000 and, if
determined in the sole discretion of the President of the Company, a bonus. The
employment agreement expired on July 31, 1994 and no new agreement has been
entered into between the Company and Mr. Hoffman. However, the Company has
continued to compensate Mr. Hoffmanreported on the same basis.
In approving the employment agreement for Mr. Hamberlin, the Board of
Directors took into account, among other things, (1) the historical financial
results of the Company, (2) the performance of the Company's CommonNew York Stock (3)
compensation paid to executive officers or to a management company in prior
years, and (4) compensation of executive officers employed by companies in
industries similar to the Company.
The Company also compensates its executive officers through the stock
option plans approved by the stockholders.Exchange, was $12.25 per share.
The Board of Directors believes that stock option grants provide an incentive that aligns the executive officers'Plan will promote the success
and enhance the value of the Company by (i) tying the personal interests withof
participants to those of the Company's stockholders, and (ii) providing
participants with an incentive for outstanding performance. The following
summary of the Plan is qualified in its entirety by giving themreference to the Plan, a
copy of which is attached as Exhibit A.
The Plan will be administered by the Compensation Committee (the
"Committee") of the Board of Directors and will consist entirely of directors
qualifying as non-employee directors. The Committee has the exclusive authority
to administer the Plan, including the power to determine eligibility, the types
of awards to be granted, the timing of awards and the exercise price of awards.
Description of the Available Awards
Incentive Stock Options. An ISO is a stock option that satisfies the
requirements specified in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). Under the Code, ISOs may only be granted to employees. In
order for an equity stakeoption to qualify as an ISO, the price payable to exercise the
option must equal or exceed the fair market value of the stock at the date of
the grant, the option must lapse no later than 10 years from the date of the
grant, and the stock subject to ISOs that are first exercisable by an employee
in any calendar year must not have a value of more than $100,000 as of the date
of grant. Certain other requirements must also be met. The Committee determines
the amount of consideration to be paid to the Company upon exercise of any
options. The form of payment may include cash, Common Stock or other property.
20
An optionee is not treated as receiving taxable income upon either the
grant of an ISO or upon the exercise of an ISO. However, the difference between
the exercise price and the fair market value of the stock at the time of
exercise is an item of tax preference at the time of exercise in determining
liability for the alternative minimum tax, assuming that the Common Stock is
either transferrable or is not subject to a substantial risk of forfeiture under
Section 83 of the Code. If at the time of exercise, the Common Stock is both
nontransferable and is subject to a substantial risk of forfeiture, the
difference between the exercise price and the fair market value of the Common
Stock (determined at the time the Common Stock becomes either transferrable or
not subject to a substantial risk of forfeiture) will be a tax preference item
in the business.year in which the Common Stock becomes either transferrable or not
subject to a substantial risk of forfeiture.
If Common Stock acquired by the exercise of an ISO is not sold or
otherwise disposed of within two years from the date of its grant and is held
for at least one year after the date such Common Stock is transferred to the
optionee upon exercise, any gain or loss resulting from its disposition is
treated as long-term capital gain or loss. If such Common Stock is disposed of
before the expiration of the above-mentioned holding periods, a "disqualifying
disposition" occurs. If a disqualifying disposition occurs, the optionee
realizes ordinary income in the year of the disposition in an amount equal to
the difference between the fair market value of the Common Stock on the date of
exercise and the exercise price, or the selling price of the Common Stock and
the exercise price, whichever is less. The Company'sbalance of the optionee's gain on a
disqualifying disposition, if any, is taxed as capital gain.
The Company is not entitled to any tax deduction as a result of the
grant or exercise of an ISO, or on a later disposition of the Common Stock
received, except is the event of a disqualifying disposition, the Company is
entitled to a deduction equal to the amount of ordinary income realized by the
optionee.
Non-Qualified Stock Options. An NQSO is any stock option other than an
Incentive Stock Option. Such options are referred to as "non-qualified" because
they do not meet the requirements of, significant valueand are not eligible for, the favorable
tax treatment provided by Section 422 of the Code.
No taxable income is realized by an optionee upon the grant of an NQSO,
nor is the Company entitled to a tax deduction by reason of such grant. Upon the
exercise of an NQSO, the optionee realizes ordinary income in an amount equal to
the executive
officer receiving such options onlyexcess of the fair market value of the Common Stock on the date of exercise
over the exercise price and the Company is entitled to a corresponding tax
deduction.
Upon a subsequent sale or other disposition of Common Stock acquired
through exercise of an NQSO, the optionee realizes a short-term or long-term
capital gain or loss to the extent of any intervening appreciation or
depreciation. Such a resale by the optionee has no tax consequences to the
Company.
21
Change of Control
Upon the occurrence of a Corporate Transaction (as defined in the
Plan), if the surviving corporation or the purchaser does not assume the
obligations of the Company under the Plan, all outstanding options shall become
immediately exercisable in full and each option holder shall be afforded the
opportunity to exercise their options prior to the consummation of the Corporate
Transaction so that the option holder can participate in the Corporate
Transaction. The Plan defines a "Corporate Transaction" to include (i) a merger
or consolidation in which the priceCompany is not the surviving entity; (ii) the
sale, transfer or other disposition of all or substantially all of the assets of
the Company in a liquidation or dissolution of the Company; or (iii) any reverse
merger in which the Company is the surviving entity but in which the beneficial
ownership of securities possessing more than 50% of the total combined voting
power of the Company's stock increases aboveoutstanding securities are transferred to holders
different from those who held such securities immediately prior to such merger.
To the extent that the Plan is unaffected and assumed by the successor
corporation or its parent company, a Corporate Transaction will have no effect
on the outstanding options and the options shall continue in effect according to
their terms. Options which continue in effect shall be appropriately adjusted to
account for the number and class of securities which would have been issued to
the option holder in connection with the consummation of the Corporate
Transaction had the option holder exercised the option immediately prior to the
Corporate Transaction. Appropriate adjustments also shall be made to the
exercise price of such options, provided that the aggregate exercise price shall
remain the same.
Plan Benefits
The following table sets forth grants of options that the Company made
on March 13, 1997, subject approval of the Plan by the stockholders, to (i) each
current executive officer of the Company; (ii) all current executive officers as
a group; (iii) all current directors who are not executive officers as a group;
and (iv) all employees, including all current officers who are not executive
officers, as a group. The options granted subject to stockholder approval of the
Plan have a ten year term, vest equally over five years commencing on the first
anniversary of the date of grant and have an exercise price of $5.62 per share.
Grants under the Plan will be made at the discretion of the Committee and,
accordingly, future grants are not yet determinable.
22
PLAN BENEFITS
STOCK OPTION PLAN
Number of Shares
Name and Location To Be Granted Initially
- ----------------- -----------------------
William W. Cleverly ---
Chairman and Co-Chief Executive Officer
Steven J. Hilton ---
President and Co-Chief Executive Officer
John R. Landon
Chief Operating Officer and Co-Chief
Executive Officer ---
Larry W. Seay 10,000
Vice President - Finance, Chief Financial
Officer, Secretary and Treasurer
Anthony C. Dinnell 10,000
Vice President - Marketing and Sales
Jeffrey R. Grobstein 10,000
Vice President - Tucson Division
Irene Carroll 7,500
Vice President - Land Acquisition and
Development
Christopher T. Graham 7,500
Vice President - Construction Operations
Executive Officer Group 45,000
Director Group 15,000
Employee Group 13,500
Required Vote
Approval of the Monterey Homes Corporation Stock Option Plan requires
the affirmative vote of a majority of shares of Common Stock present at the
Annual Meeting in person or by proxy.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE MONTEREY HOMES CORPORATION STOCK OPTION PLAN.
23
AMENDMENT TO THE COMPANY'S BYLAWS
(Proposal No. 4)
General
The Board of Directors has approved, and recommends that the
stockholders approve an amendment (the "Amendment") to Article II, Section 2 of
the Bylaws of the Company that would allow for an increase in the size of the
Board of Directors. Under the Amendment, the number of directors could initially
be increased or decreased from time to time upon a majority vote of the entire
Board of Directors. As presently in effect, the Company's Bylaws specify that
the Company's Board of Directors shall consist of five members and that such
number of directors can not be changed except with the approval of the
stockholders.
The Amendment to allow for expanding the size of the Board of Directors
was unanimously approved on March 13, 1997, by the Company's Board of Directors
which deemed it to be advisable and in the best interest of the Company and all
its stockholders. In the opinion of management, the Amendment will benefit the
stockholders because, if approved, the Company will have the flexibility to
expand its current Board membership as needed and, if desired, retain the
services of additional, well-qualified persons to serve on the Company's Board
of Directors. If the Amendment is approved, Article II, Section 2 of the Bylaws
of the Company shall be deleted in its entirety and replaced with the following:
"The number of directors of the Corporation may be increased or
decreased from time to time by vote of a majority of the entire Board
of Directors to a number not less than five and not greater than nine.
The directors shall be divided into two classes designated Class I and
Class II. Each Class shall consist of one-half of the directors or as
close thereto as possible. Each director whose term shall have expired
at an annual meeting of stockholders shall be elected for a term
running until the second annual meeting of stockholders next succeeding
his or her election and until his or her successors shall have been
duly elected an qualified. A director may be removed from office as
provided in Article I, Section 10 of these Bylaws."
Purpose and Effect
The Board of Directors believes that in order to attract and retain a
sufficient number of qualified directors, the size of the Board must be
increased. Currently, the Board of Directors consists of five members. Of these
five members, Mr. Cleverly and Mr. Hilton are current employees of the Company
and Mr. Hamberlin is the former Chief Executive Officer of the Company.
An increase in the number of board members will allow the Company the
flexibility to recruit additional outside directors who may provide the Company
with business expertise in industries that are similar or complementary to the
Company's homebuilding business. In addition, the Company currently does not
have the ability to provide a seat of the Board of Directors to an officer of
another corporation should the Company decide to undertake a merger or
acquisition, and expanding the Board would allow the Company to provide a
director position to such an officer. In that regard, and
24
as explained above under "Acquisition of Legacy Homes", if the Amendment is
approved by the stockholders, the Company will immediately increase the size of
the Board to six and use its reasonable best efforts to elect John Landon to the
Board of Directors.
If the Amendment is not approved by the majority of the outstanding
shares of Common Stock entitled to vote at the Annual Meeting, John Landon
cannot be elected to the Board of Directors pursuant to Proposal No. 2. Pursuant
to the terms of the Landon Employment Agreement, failure of the Company to elect
John Landon as a director of the Company on or before June 30, 1998, will give
John Landon "Good Reason" to resign from the Company. If Mr. Landon resigns for
"Good Reason," the Company will remain obligated to pay Mr. Landon his then
current base salary through the term of the Landon Employment Agreement and his
pro rated incentive compensation through the date of his resignation. In
addition, Mr. Landon will have the option to receive the Deferred Contingent
Payments as scheduled or to take the remainder of the Deferred Contingent
Payments in one lump sum based on the pre-tax income of the Company and the
Company's Texas division for the twelve month period ending with the fiscal
quarter immediately preceding his resignation. Any requirement to pay Mr. Landon
the Deferred Contingent Payments in a lump sum arising out of his failure to be
timely elected to the Board of Directors could have a material adverse affect on
the Company. The loss of Mr. Landon's services upon a resignation for "Good
Reason" stemming from his failure to be elected to the Board of Directors could
also adversely affect the Company.
Required Vote
The affirmative vote of a majority of the outstanding shares of Common
Stock entitled to vote at the Annual Meeting is required to approve the
Amendment to the Company's Bylaws.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
AMENDMENT TO THE BYLAWS TO INCREASE THE AUTHORIZED NUMBER OF DIRECTORS.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The principal independent public accounting firm utilized by the
Company during the fiscal year ended December 31, 1996 was Ernst and Young LLP,
independent certified public accountants.
On January 14, 1997, the Company's Board of Directors dismissed Ernst &
Young LLP, and to replaced them with KPMG Peat Marwick LLP. KPMG Peat Marwick
LLP served as the independent accountants for the Monterey Entities prior to the
Merger described above. KPMG Peat Marwick LLP performed the audit of the
Company's financial statements for the year ended December 31, 1996. A
representative of KPMG Peat Marwick will attend the Annual Meeting for the
purpose of responding to appropriate questions and will be afforded an
opportunity to make a statement if the representative so desires.
Ernst & Young LLP rendered unqualified reports with respect to the
financial statements of the Company for the two most recent fiscal years. In
addition, during the two most recent fiscal years there were no disagreements
between the Company and Ernst & Young LLP with respect to
25
any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure.
STOCKHOLDER PROPOSALS
The Board of Directors will consider nominations from stockholders to
the class of directors whose terms expire at the 1998 Annual Meeting of
Stockholders that are made in writing to the Secretary of the Company, are
received at least 90 days prior to the 1998 Annual Meeting, and contain
sufficient background information concerning the nominee to enable proper
judgment to be made as to his or her qualifications, as more fully provided in
the Company's Articles of Incorporation and Bylaws. Proposals of stockholders as
to other matters intended to be presented at the 1998 Annual Meeting must be
received by the Company by December 19, 1997 for inclusion in the Company's
proxy materials relating to such Annual Meeting.
OTHER MATTERS
The Board of Directors does not intend to present at the Annual Meeting
any matters other than those described herein and does not presently know of any
matters that will be presented by other parties.
Monterey Homes Corporation
Larry W. Seay
Vice President Finance, Chief Financial Officer,
Secretary and Treasurer
August 11, 1997
26
EXHIBIT A
---------
MONTEREY HOMES CORPORATION
STOCK OPTION PLAN
-----------------
1. ESTABLISHMENT, PURPOSE AND DEFINITIONS.
---------------------------------------
a. The Stock Option Plan (the "Option Plan") of Monterey Homes
(the "Company"), is hereby adopted. The Option Plan shall
provide for the issuance of incentive stock options ("ISOs")
and nonqualified stock options ("NSOs").
b. The purpose of this Option Plan is to promote the long-term
success of the Company by attracting, motivating and retaining
key executives, consultants and directors (the "Participants")
through the use of competitive long-term incentives which are
tied to stockholder interests by providing incentives to the
Participants in the form of stock options which offer rewards
for achieving the long-term strategic and financial objectives
of the Company.
c. The Option Plan is intended to provide a means whereby
Participants may be given an opportunity to purchase shares of
Stock of the Company pursuant to (i) options which may qualify
as ISOs under Section 422 of the Internal Revenue Code of
1986, as amended (the "Internal Revenue Code"), or (ii) NSOs
which may not so qualify.
d. The term "Affiliates" as used in this Option Plan means parent
or subsidiary corporations, as defined in Section 424(e) and
(f) of the Code (but substituting "the Company" for "employer
corporation"), including parents or subsidiaries which become
such after adoption of the Option Plan.
2. ADMINISTRATION OF THE PLAN
--------------------------
a. The Option Plan shall be administered by the Compensation
Committee (the "Committee") appointed by the Board of
Directors of the Company from time to time (the "Board").
b. The Committee shall consist entirely of directors qualifying
as "non-employee directors" as such term is defined in Rule
16b-3 promulgated by the Securities and Exchange Commission
(the "Committee"). Members of the Committee shall serve at the
pleasure of the Board.
c. The Committee may from time to time determine which employees
of the Company or its Affiliates or other individuals or
entities (each an "option holder") shall be granted options
under the Option Plan, the terms thereof (including without
1
limitation determining whether the option is an incentive
stock option and the times at which the options shall become
exercisable), and the number of shares of Stock for which an
option or options may be granted.
d. If rights of the Company to repurchase Stock are imposed, the
Board or the Committee may, in its sole discretion,
accelerate, in whole or in part, the time for lapsing of any
rights of the Company to repurchase shares of such Stock or
forfeiture restrictions.
e. If rights of the Company to repurchase Stock are imposed, the
certificates evidencing such shares of Stock awarded
hereunder, although issued in the name of the option holder
concerned, shall be held by the Company or a third party
designated by the Committee in escrow subject to delivery to
the option holder or to the Company at such times and in such
amounts as shall be directed by the Board under the terms of
this Option Plan. Share certificates representing Stock which
is subject to repurchase rights shall have imprinted or typed
thereon a legend or legends summarizing or referring to the
repurchase rights.
f. The Board or the Committee shall have the sole authority, in
its absolute discretion, to adopt, amend and rescind such
rules and regulations, consistent with the provisions of the
Option Plan, as, in its opinion, may be advisable in the
administration of the Option Plan, to construe and interpret
the Option Plan, the rules and regulations, and the
instruments evidencing options granted under the Option Plan
and to make all other determinations deemed necessary or
advisable for the administration of the Option Plan. All
decisions, determinations and interpretations of the Committee
shall be binding on all option holders under the Option Plan.
3. STOCK SUBJECT TO THE PLAN
-------------------------
a. "Stock" shall mean Common Stock of the Company or such stock
as may be changed as contemplated by Section 3(c) below. Stock
shall include shares drawn from either the Company's
authorized but unissued shares of Common Stock or from
reacquired shares of Common Stock, including without
limitation shares repurchased by the Company in the open
market. The maximum shares of Common Stock that can be issued
under this Option Plan is 225,000 shares, and the maximum
shares of Common Stock that can be issued to any one person
under this Option Plan is 50,000 shares.
b. Options may be granted under the Option Plan from time to time
to eligible persons. Stock options awarded pursuant to the
Option Plan which are forfeited, terminated, surrendered or
canceled for any reason prior to exercise shall again become
available for grants under the Option Plan (including any
option canceled in accordance with the cancellation regrant
provisions of Section 6 (f) herein).
2
c. If there shall be any changes in the Stock subject to the
Option Plan, including Stock subject to any option granted
hereunder, through merger, consolidation, recapitalization,
reorganization, reincorporation, stock split, reverse stock
split, stock dividend, combination or reclassification of the
Company's Stock or other similar events, an appropriate
adjustment shall be made by the Committee in the number of
shares of Stock. Consistent with the foregoing, in the event
that the outstanding Stock is changed into another class or
series of capital stock of the Company, outstanding option to
purchase Stock granted under the Option Plan shall become
options to purchase such other class or series and the
provisions of this Section 3(c) shall apply to such new class
or series.
d. The aggregate number of shares of Stock approved by the Option
Plan may not be exceeded without amending the Option Plan and
obtaining stockholder approval within twelve months of such
amendment.
4. ELIGIBILITY
-----------
Persons who shall be eligible to receive stock options granted under
the Option Plan shall be those individuals and entities as the
Committee in its discretion determines should be awarded such
incentives given the best interests of the Company; provided, however,
that (i) ISOs may only be granted to employees of the Company and its
Affiliates and (ii) any person holding capital stock possessing more
than 10% of the total combined voting power of all classes of Stock of
the Company or any Affiliate shall not be eligible to receive ISOs
unless the exercise price per share of Stock is at least 110% of the
fair market value of the Stock on the date the option is granted.
5. EXERCISE PRICE FOR OPTIONS GRANTED UNDER THE PLAN
-------------------------------------------------
a. All ISOs and the majority of NSOs will have option exercise
prices per option share not less than the fair market value of
a share of the Stock on the date the option is granted, except
that in the case of ISOs granted to any person possessing more
than 10% of the total combined voting power of all classes of
stock of the Company or any Affiliate the price shall be not
less than 110% of such fair market value. The price of ISOs or
NSOs granted under the Option Plan shall be subject to
adjustment to the extent provided in Section 3(c) above.
b. The fair market value on the date of grant shall be determined
based upon the closing price on an exchange on that day or, if
the Stock is not listed on an exchange, on the average of the
closing bid and asked prices in the Over the Counter Market on
that day.
3
6. TERMS AND CONDITIONS OF OPTIONS
-------------------------------
a. Each option granted pursuant to the Option Plan shall be
evidenced by a written stock option agreement (the "Option
Agreement") executed by the Company and the person to whom
such option is granted. The Option Agreement shall designate
whether the option is an ISO or an NSO.
b. The term of each ISO and NSO shall be no more than 10 years,
except that the term of each ISO issued to any person
possessing more than 10% of the voting power of all classes of
stock of the Company or any Affiliate shall be no more than 5
years. Subsequently issued options, if Stock becomes available
because of further allocations or the lapse of previously
outstanding options, will extend for terms determined by the
Board or the Committee but in no event shall an ISO be
exercised after the expiration of 10 years from the date of
its grant.
c. In the case of ISOs, the aggregate fair market value
(determined as of the time such option is granted) of the
Stock to which ISOs are exercisable for the first time by such
individual during any calendar year (under this Option Plan
and any other plans of the Company or its Affiliates if any)
shall not exceed the amount specified in Section 422(d) of the
Internal Revenue Code, or any successor provision in effect at
the time an ISO becomes exercisable.
d. The Option Agreement may contain such other terms, provisions
and conditions regarding vesting, repurchase or other
provisions as may be determined by the Committee. To the
extent such terms, provisions and conditions are inconsistent
with this Option Plan, the specific provisions of the Option
Plan shall prevail. If an option, or any part thereof, is
intended to qualify as an ISO, the Option Agreement shall
contain those terms and conditions which the Committee
determine are necessary to so qualify under Section 422 of the
Internal Revenue Code.
e. The Committee shall have full power and authority to extend
the period of time for which any option granted under the
Option Plan is to remain exercisable following the option
holder's cessation of service as an employee, director or
consultant, including without limitation cessation as a result
of death or disability; provided, however, that in no event
shall such option be exercisable after the specified
expiration date of the option term.
f. As a condition to option grants under the Option Plan, the
option holder agrees to grant and/the Company the repurchase
rights as Company may at its option require and as may be set
forth in a separate repurchase agreement. Any option granted
under the Option Plan may be subject to a vesting schedule as
provided in the Option Agreement and, except as provided in
this Section 6 herein, only the vested portion of such option
may be exercised at any time during the Option Period. All
rights to
4
exercise any option shall lapse and be of no further effect
whatsoever immediately if the option holder's service as an
employee is terminated for "Cause" (as hereinafter defined) or
if the option holder voluntarily terminates the option
holder's service as an employee. The unvested portion of the
option will lapse and be of no further effect immediately upon
any termination of employment of the option holder for any
reason. In the remaining cases where the option holder's
service as an employee is terminated due to death, permanent
disability, or is terminated by the Company (or its
affiliates) without Cause at any time, unless otherwise
provided by the Committee, the vested portion of the option
will extend for a period of three (3) months following the
termination of employment and shall lapse and be of no further
force or effect whatsoever only if it is not exercised before
the end of such three (3) month period. "Cause" shall be
defined in an Employment Agreement between Company and option
holder and if none there shall be "Cause" for termination if
(i) the option holder is convicted of a felony, (ii) the
option holder engages in any fraudulent or other dishonest act
to the detriment of the Company, (iii) the option holder fails
to report for work on a regular basis, except for periods of
authorized absence or bona fide illness, (iv) the option
holder misappropriates trade secrets, customer lists or other
proprietary information belonging to the Company for the
option holder's own benefit or for the benefit of a
competitor, (v) the option holder engages in any willful
misconduct designed to harm the Company or its stockholders,
or (vi) the option holder fails to perform properly assigned
duties.
g. No fractional shares of Stock shall be issued under the Option
Plan, whether by initial grants or any adjustments to the
Option Plan.
7. USE OF PROCEEDS
---------------
Cash proceeds realized from the sale of Stock under the Option Plan
shall constitute general funds of the Company.
8. AMENDMENT, SUSPENSION OR TERMINATION OF PLAN
--------------------------------------------
a. The Board may at any time suspend or terminate the Option
Plan, and may amend it from time to time in such respects as
the Board may deem advisable provided that (i) such amendment,
suspension or termination complies with all applicable state
and federal requirements and requirements of any stock
exchange on which the Stock is then listed, including any
applicable requirement that the Option Plan or an amendment to
the Option Plan be approved by the stockholders, and (ii) the
Board shall not amend the Option Plan to increase the maximum
number of shares of Stock subject to ISOs under the Option
Plan or to change the description or class of persons eligible
to receive ISOs under the Option Plan without the consent of
the stockholders of the Company sufficient to approve the
Option Plan in the first instance. The Option Plan shall
terminate on the earlier of (i) tenth anniversary of
5
the Plan's approval or (ii) dividend distributionsthe date on which no additional shares of
Stock are available for issuance under the Option Plan.
b. No option may be granted during any suspension or after the
termination of the Option Plan, and no amendment, suspension
or termination of the Option Plan shall, without the option
holder's consent, alter or impair any rights or obligation
under any option granted under the Option Plan.
c. The Committee, with the consent of affected option holders,
shall have the authority to cancel any or all outstanding
options under the Option Plan and grant new options having an
exercise price which may be higher or lower than the exercise
price of canceled options.
d. Nothing contained herein shall be construed to permit a
termination, modification or amendment adversely affecting the
rights of any option holder under an existing option
theretofore granted without the consent of the option holder.
9. ASSIGNABILITY OF OPTIONS AND RIGHTS
-----------------------------------
Each ISO and NSO granted pursuant to this Option Plan shall, during the
option holder's lifetime, be exercisable only by the option holder, and
neither the option nor any right to purchase Stock shall be
transferred, assigned or pledged by the option holder, by operation of
law or otherwise, other than upon a beneficiary designation executed by
the option holder and delivered to the Company or the laws of descent
and distribution.
10. PAYMENT UPON EXERCISE
---------------------
Payment of the purchase price upon exercise of any option or right to
purchase Stock granted under this Option Plan shall be made by giving
the Company written notice of such exercise, specifying the number of
such shares of Stock as to which the option is exercised. Such notice
shall be accompanied by payment of an amount equal to the Option Price
of such shares of Stock. Such payment may be (i) cash, (ii) by check
drawn against sufficient funds, (iii) such other consideration as the
Committee, in its sole discretion, determines and is consistent with
the Option Plan's purpose and applicable law, or (iv) any combination
of the foregoing. Any Stock used to exercise options to purchase Stock
(including Stock withheld upon the exercise of an option to pay the
purchase price of the shares of Stock as to which the option is
exercised) shall be valued in accordance with procedures established by
the Committee. If accepted by the Committee in its discretion, such
consideration also may be paid through a broker-dealer sale and
remittance procedure pursuant to which the option holder (i) shall
provide irrevocable written instructions to a designated brokerage firm
to effect the immediate sale of the purchased Stock and remit to the
Company, out of the sale proceeds available on the Company's Commonsettlement date,
sufficient funds to cover the aggregate option price payable for the
purchased Stock results in the accrual of dividend equivalent rights with
respectplus all applicable Federal and State income and
6
employment taxes required to the stock options. Thus, the Board of Directors believes that the
Company's stock option plan motivates its executive officers to managebe withheld by the Company in a manner that willconnection
with such purchase and (ii) shall provide the best overall returnwritten directives to the
Company's
stockholders.
During fiscal year 1994,Company to deliver the compensation earnedcertificates for the purchased Stock directly to
such brokerage firm in order to complete the sale transaction.
11. WITHHOLDING TAXES
-----------------
a. Shares of Stock issued hereunder shall be delivered to an
option holder only upon payment by executive officers
pursuant to their respective employment agreements was related to corporate
performancesuch person to the extentCompany
of cash bonuses which, with respectthe amount of any withholding tax required by applicable
federal, state, local or foreign law. The Company shall not be
required to Mr. Hamberlin,
was directly relatedissue any Stock to an option holder until such
obligations are satisfied.
b. The Committee may, under such terms and conditions as it deems
appropriate, authorize an option holder to satisfy withholding
tax obligations under this Section 11 by surrendering a
portion of any Stock previously issued to the option holder or
by electing to have the Company withhold shares of Stock from
the Stock to be issued to the option holder, in each case
having a fair market value equal to the amount of taxable income distributedthe
withholding tax required to be withheld.
12. RATIFICATION
------------
This Option Plan and all options issued under this Option Plan shall be
void unless this Option Plan is or was approved or ratified by (i) the
Board; and (ii) a majority of the votes cast at a stockholder meeting
at which a quorum representing at least a majority of the outstanding
shares of Stock is (either in person or by proxy) present and voting on
the Option Plan within twelve months of the date this Option Plan is
adopted by the Board. No ISOs shall be exercisable prior to the Company's stockholders. In addition, compensationdate
such stockholder approval is obtained.
13. CORPORATE TRANSACTIONS
----------------------
a. For the purpose of this Section 13, a "Corporate Transaction"
shall include any of the following stockholder-approved
transactions to which the Company is a party: (i)a merger or
consolidation in which the formCompany is not the surviving
entity, except for a transaction the principal purpose of
stock options
held bywhich is to change the Company's executive officers was related to corporate performance
because the value of such stock options depends upon the valueState of the Company's Common Stockincorporation;
(ii) the sale, transfer or other disposition of all or
substantially all of the assetsof the Company in
liquidation or dissolution of the Company; or
(iii) any reverse merger in which the Company is the
surviving entity but in which beneficial ownership of
securities possessing more than fifty percent (50%)
of the total combined voting power of the Company's
outstanding securities are transferred to holders
different from those who held such securities
immediately prior to such merger.
b. Upon the occurrence of a Corporate Transaction, if the
surviving corporation or the purchaser, as the case may be,
does not assume the obligations of the Company under
7
the Option Plan, then irrespective of the vesting provisions
contained in individual option agreements, all outstanding
options shall become immediately exercisable in full and each
option holder will be afforded an opportunity to exercise
their options prior to the consummation of the merger or sale
transaction so that they can participate on a pro rata basis
in the markettransaction based upon the number of shares of Stock
purchased by them on exercise of options if they so desire. To
the extent that the Option Plan is unaffected and assumed by
the successor corporation or its parent company a Corporate
Transaction will have no effect on outstanding options and the
amountoptions shall continue in effect according to their terms.
c. Each outstanding option under this Option Plan which is
assumed in connection with the Corporate Transaction or is
otherwise to continue in effect shall be appropriately
adjusted, immediately after such Corporate Transaction, to
apply and pertain to the number and class of dividend distributions onsecurities which
would have been issued to the Common Stock (which resultsoption holder in connection with
the accrualconsummation of dividend equivalent rightssuch Corporate Transaction had such person
exercised the option immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to the
option price payable per share, provided the aggregate option
price payable for such securities shall remain the same. In
addition, the class and number of securities available for
issuance under this Option Plan following the consummation of
the Corporate Transaction shall be appropriately adjusted.
d. The grant of options under this Option Plan shall in no way
affect the right of the Company to adjust, reclassify,
reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
14. REGULATORY APPROVALS
--------------------
The obligation of the Company with respect to Stock issued under the
Plan shall be subject to all applicable laws, rules and regulations and
such approvals by any governmental agencies or stock options). These two methodsexchanges as may
be required. The Company reserves the right to restrict, in whole or in
part, the delivery of compensation reflectsStock under the directors' belief that a portion of the annual compensation of each executive
officer should correlatePlan until such time as any legal
requirements or regulations have been met relating to the performanceissuance of
Stock, to their registration or qualification under the Company.
Alan D. Hamberlin Mike Marusich Mark A. McKinley Gregory K. Norris
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The entire BoardSecurities
Exchange Act of Directors1934, if applicable, or any applicable state securities
laws, or to their listing on any stock exchange at which time such
listing may be applicable.
15. NO EMPLOYMENT/SERVICE RIGHTS
----------------------------
Neither the action of the Company in establishing this Option Plan, nor
any action taken by the Board or the Committee hereunder, nor any
provision of this Option Plan shall be construed so as to grant any
individual the right to remain in the employ or service of the
8
Company (or any parent, subsidiary or affiliated corporation) for any
period of specific duration, and the Company (or any parent, subsidiary
or affiliated corporation retaining the services of such individual)
may terminate or change the terms of such individual's employment or
service at any time and for any reason, with or without cause.
16. MISCELLANEOUS PROVISIONS
------------------------
a. The provisions of this Option Plan shall be governed by the
laws of the State of Arizona, as such laws are applied to
contracts entered into and performed the function of
determining the Company's compensation policies applicablein such State, without
regard to its executive
officers. Alan D. Hamberlin,rules concerning conflicts of law.
b. The provisions of this Option Plan shall insure to the Chairmanbenefit
of, and be binding upon, the Company and its successors or
assigns, whether by Corporate Transaction or otherwise, and
the option holders, the legal representatives of their
respective estates, their respective heirs or legatees and
their permitted assignees.
c. The option holders shall have no divided rights, voting rights
or any other rights as a stockholder with respect to any
options under the Option Plan prior to the issuance of a stock
certificate for such Stock.
d. If there is a conflict between the terms of any employment
agreement pursuant to which options under this Plan are to be
granted and the provisions of this Plan, the terms of the
employment agreement shall prevail.
9
This Proxy is Solicited on Behalf of the Board of Directors
also was
the President and Chief Executive Officer of the Company during the fiscal year.
Although Mr. Hamberlin served on the Company's Board of Directors, he did not
participate in the Board of Directors' decisions regarding the approval of his
employment agreement or grants of stock options to him.
PERFORMANCE GRAPH
The following chart compares the cumulative total stockholder return on
the Company's Common Stock during the five years ended December 31, 1994, with a
cumulative total return on the Standard & Poor's 500 Stock Index and an industry
index (the "Index") prepared by the National Association of Real Estate
Investment Trusts ("NAREIT"). The Index consists of Mortgage Real Estate
Investment Trusts and includes 29 companies with a total market capitalization
of $2.5 billion as compiled by NAREIT. The comparison assumes $100 was invested
on December 31, 1989 in the Company's Common Stock and in each of the foregoing
indices and assumes reinvestment of dividends.
HOMEPLEX MORTGAGE INVESTMENTSMONTEREY HOMES CORPORATION
1994 PROXY STOCK PERFORMANCE GRAPH
12-31-89 12-31-90 12-31-91 12-31-92 12-31-93 12-31-94
-------- -------- -------- -------- -------- --------
Homeplex
Mortgage
Investments
Corporation 100 160.3 383.5 138.5 72.9 59.5
Mortgage
REIT Index 100 81.6 107.6 109.7 125.6 95.1
S & P 500 100 96.8 126.4 136.1 149.7 151.7
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Kenneth Leventhal & Company,
independent public accountants, to audit the consolidated financial statements
of the Company for the fiscal year ending December 31, 1995 and recommends that
stockholders vote in favor of the ratification of such appointment. In the event
of a negative vote on such ratification, the Board of Directors will reconsider
its selection. The Board of Directors anticipates that representatives of
Kenneth Leventhal & Company will be present at the Meeting, will have the
opportunity to make a statement if they desire, and will be available to respond
to appropriate questions.
DEADLINE FOR RECEIPT OF STOCKHOLDERS PROPOSALS
Stockholder proposals that are intended to be presented by such
stockholders at the annual meeting of the Company for the fiscal year ending
December 31, 1995 must be received by the Company no later than February 1, 1996
in order to be included in the proxy statement and form of proxy relating to
such meeting.
OTHER MATTERS
The Company knows of no other matters to be submitted to the Meeting. If
any other matters properly come before the Meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors may recommend.
Dated: May 12, 1995
HOMEPLEX MORTGAGE INVESTMENTS CORPORATION
19951997 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholderhereby appoints William W. Cleverly and Steven J.
Hilton, or any one of HOMEPLEX MORTGAGE INVESTMENTS
CORPORATION, a Maryland corporation, hereby acknowledges receiptthem acting in the absence of the Noticeother with full powers
of substitution, the true and lawful attorneys and proxies for the undersigned
and to vote, as designated below, all shares of Common Stock of MONTEREY HOMES
CORPORATION (the "Company") that the undersigned is entitled to vote at the
Annual Meeting of Stockholders and Proxy Statement, each dated May 12, 1995,
and hereby appoints Alan D. Hamberlin and Jay R. Hoffman, and each of them,
proxies and attorneys-in-fact, with full power to each of substitution, on
behalf and in the name of the undersigned, to represent the undersigned at the
1995 Annual Meeting of Stockholders of HOMEPLEX MORTGAGE INVESTMENTS
CORPORATION,Shareholders (the "Meeting") to be held on Tuesday, June 13, 1995,Thursday, September
25, 1997, at 8:9:00 a.m., Arizona Time, at The Wigwamthe Doubletree La Posada Resort, Hotel, Litchfield Park,4949
East Lincoln Drive, Scottsdale, Arizona 85253 and at any adjournmentand all adjournments
thereof, and to vote all shares of Common Stock thatwhich the undersigned would be
entitled to vote, if then and there personally present, on the matters set forth
below:
(Continued, and to be marked, dated and signed, on the reverse
side.
This proxy will be voted as directed or, if no contrary direction is
indicated, will be voted FOR the election of Directors; FOR the ratification of
the appointment of Kenneth Leventhal & Company as independent auditors of the
Company; and as the Proxies deem advisable on such other matters as may come
before the meeting.
A majority of such attorneys or substitutes as shall be present and
shall act at said meeting or any adjournment or adjournments thereof (or if only
one shall be present and act, then that one) shall have and may exercise all of
the powers of said attorneys-in-fact hereunder.
This Proxy is solicited on behalf of the Board of Directors.
[x] Please mark your votes as this
----------
COMMON
[ ] I plan to attend meeting
1. ELECTION OF DIRECTORS: WITHHOLD AUTHORITY to vote
FOR all nominees listed below for all nominees listed below
(except as indicated)
[ ] [ ]
(If you wish to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list below):
Alan D. Hamberlin Mike Marusich Mark A. McKinley Gregory K. Norris
2. Proposal to ratify the appointment of Kenneth Leventhal & Company as the
independent auditors of the Company.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
And upon such other matters that may properly come before the meeting or any
adjournment thereof.
-----------------------------
DATE
-----------------------------
SIGNATURE
-----------------------------
SIGNATURE
(This Proxy should be dated, signed by the stockholders(s) exactly as his or her
name appears hereon, and returned promptly in the enclosed envelope. Persons
signing in a fiduciary capacity should so indicate. If shares are held by joint
tenants or as a community property, both stockholders should sign.side)
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
Please mark
your votes as [X]
indicated in
this example
WITHHELD
FOR FOR ALL
1. ELECTION OF TWO DIRECTORS: [ ] [ ] THIS PROXY WILL BE VOTED AS DIRECTED OR, IF
VOTE FOR nominees listed below CONTRARY DIRECTION IS INDICATED, WILL BE VOTED
FOR THE ELECTION OF DIRECTOR NOMINEES, FOR
Robert G. Sarver APPROVAL OF THE COMPANY'S STOCK OPTION PLAN AND
C. Timothy White FOR APPROVAL OF THE AMENDMENT TO THE COMPANY'S
BYLAWS, AND AS SAID PROXIES DEEM ADVISABLE ON
SUCH OTHER MATTERS AS MAY COME BEFORE THE
MEETING.
WITHHELD FOR:(Write that nominee's name in the space povided below.)
________________________________________________________________________________
2. ELECTION OF ADDITIONAL DIRECTOR: FOR WITHHELD Subject to approval of the amendment to the Company's Bylaws
VOTE FOR nominees listed below [ ] [ ] described in Proposal No. 4
John R. Landon
3. APPROVAL OF THE MONTEREY HOMES FOR AGAINST ______
CORPORATION STOCK OPTION PLAN [ ] [ ] |
|
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4. APPROVAL OF AMENDMENT TO THE COMPANY'S BYLAWS FOR AGAINST
TO INCREASE NUMBER OF AUTHORIZED DIRECTORS [ ] [ ]
FROM THE FIVE TO UP TO NINE
Signature ___________________________________________Signature ___________________________________________Date______________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such.
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