<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
________________________
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
________________________
IMPAC MORTGAGE HOLDINGS, INC.
(Name of Issuer)
IMPAC MORTGAGE HOLDINGS, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, $0.01 PAR VALUE PER SHARE
(Title of Class of Securities)
452922 10 7
(Cusip Number of Class of Securities)
________________________
JOSEPH R. TOMKINSON
Chief Executive Officer
Impac Mortgage Holdings, Inc.
20371 Irvine Avenue
Santa Ana Heights, California 92707
(949) 556-0122
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf
of the Person(s) Filing this Statement)
________________________
COPY TO:
Thomas J. Poletti, Esq.
Susan B. Kalman, Esq.
David M. Tamman, Esq.
Freshman, Marantz, Orlanski, Cooper & Klein
9100 Wilshire Boulevard, Suite 8-E
Beverly Hills, California 90212
Telephone: (310) 273-1870
Facsimile: (310) 274-8357
February 24, 1999
(Date Tender Offer First Published, Sent or Given to Security Holders)
Calculation of Filing Fee
<TABLE>
<CAPTION>
AMOUNT OF
TRANSACTION VALUATION* FILING FEE**
------------
<S> <C>
$35,000,000 $7,000
</TABLE>
* Assumes purchase of 5,000,000 Shares of Common Stock at $7.00 per share.
** Calculated based on the transaction valuation multiplied by one-fiftieth of
one percent.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: N/A Filing Party: N/A
Form or Registration No.: N/A Date Filed: N/A
<PAGE>
This Issuer Tender Offer Statement on Schedule 13E-4 relates to an offer by
Impac Mortgage Holdings, Inc. (the "Company") to exchange up to $35,000,000,
aggregate principal amount of its 11% Senior Subordinated Debentures due
February 15, 2004 for up to 5,000,000 Shares of its Common Stock, par value $.01
per share (the "Common Stock," including the associated Preferred Stock Purchase
Rights (the "Rights," and together with the Common Stock, the "Shares")). Upon
the terms and subject to the conditions set forth in the Company's Offering
Circular dated February 24, 1999 relating to the Exchange Offer (the "Offering
Circular") and the related Letter of Transmittal (which are herein collectively
referred to as the "Exchange Offer"), copies of such documents are filed as
Exhibit 99.(a)(1) and Exhibit 99.(a)(2), respectively, to this Statement.
Item 1. Security and Issuer.
(a) The name of the issuer is Impac Mortgage Holdings, Inc., a Maryland
corporation, which has its principal executive offices at 20371
Irvine Avenue, Santa Ana Heights, California 92707 (telephone
number (714) 556-0122).
(b) The information set forth in the sections entitled "Summary," "The
Exchange Offer" and "Description of the Debentures" of the Offering
Circular are incorporated herein by reference.
Shares held by officers, directors and affiliates at the time of
the Exchange Offer are eligible for exchange if properly tendered
pursuant to the Exchange Offer on the same basis as all other
Shares.
(c) The Common Stock is listed on the American Stock Exchange. The
information set forth in the section of the Offering Circular
entitled "Distribution Policy and Price Range of Common Stock" is
incorporated herein by reference.
(d) This statement is being filed by the issuer.
Item 2. Source and Amount of Funds or Other Consideration.
(a) The consideration offered by the Company in exchange for the Shares
is the Company's 11% Senior Subordinated Debentures. If 5,000,000
Shares are tendered and accepted in exchange, up to $35,000,000
aggregate principal amount of Debentures will be issued pursuant to
the Exchange Offer.
(b) Not applicable.
Item 3. Purpose of the Tender Offer and Plans or Proposals of the Issuer or
Affiliate.
(a)-(j) With respect to the primary purpose of the Exchange Offer, the
information set forth in the section of the Offering Circular
entitled "Summary--Purpose and Effect of the Exchange Offer" is
incorporated herein by reference. With respect to the disposition
of the repurchased securities, the information set forth in the
section of the Offering
2
<PAGE>
Circular entitled "The Exchange Offer --General" is incorporated
herein by reference. With respect to changes in the capitalization
of the Company, the information set forth in the section of the
Offering Circular entitled "Capitalization" is incorporated herein
by reference.
Item 4. Interest in Securities of the Issuer.
With respect to any transactions in the Shares effected during the last 40
business days by the issuer, any associate, subsidiary, executive officer or
director, the information set forth in the Section of the Offering Circular
entitled "Interests of Directors, Executive Officers and Controlling
Stockholders; Transactions and Arrangements Concerning the Shares" is
incorporated by reference.
Item 5. Contracts, Arrangements, Understandings or Relationships with Respect
to the Issuer's Securities.
Neither the Company nor, to the best of the Company's knowledge, any of its
directors or executive officers, any person controlling the Company, or any of
the executive officers or directors of any of its subsidiaries, is party to any
contract, arrangement or understanding nor is there any relationship relating to
the Exchange Offer between any of such executive officers, directors and
controlling persons and any other person with respect to any securities of the
Company. The Company's executive officers and directors, however, have advised
the Company that they do not intend to participate in the Exchange Offer.
Item 6. Persons Retained, Employed or to Be Compensated.
The information set forth in the sections of the Offering Circular entitled
"The Exchange Offer--Financial Advisor" and "--Payment of Expenses" is
incorporated herein by reference.
Item 7. Financial Information.
(a) The Consolidated Financial Statements included in the Company's
1997 Annual Report on Form 10-K and Item 1 of the Company's
Quarterly Reports on Form 10-Q for the quarters ended March 31,
June 30, and September 30, 1998, entitled "Financial Statements"
are incorporated herein by reference. With respect to the ratio of
earnings to fixed charges and book value per share information, the
information set forth in the sections of the Offering Circular
entitled "Summary Selected Consolidated Financial Data" and
"Certain Pro Forma Financial Information" is incorporated herein by
reference.
(b) The information set forth in the section of the Offering Circular
entitled "Certain Pro Forma Financial Information" is incorporated
herein by reference.
3
<PAGE>
Item 8. Additional Information.
(a) Not applicable.
(b) The Debentures issued upon exchange of the Shares will be issued by
the Company in reliance on the exemption from the registration
requirements of the Securities Act of 1933, as amended (the
"Securities Act"), provided in Section 3(a)(9) thereof.
In connection with the proposed issuance of 11% Senior Subordinated
Debentures due February 15, 2004 upon consummation of the Exchange
Offer, an application has been filed with the Securities and
Exchange Commission on Form T-3 for qualification of the Indenture
under which the Debentures will be issued.
(c) Not applicable.
(d) None.
(e) Additional information with respect to the Exchange Offer and
related matters is included in the information set forth in the
Offering Circular and the Letter of Transmittal, which are filed as
Exhibit 99.(a)(1) and Exhibit 99.(a)(2) to this Statement and are
incorporated herein by reference in their entirety.
Item 9. Material to Be Filed as Exhibits.
(a) (1) Offering Circular, dated February 24, 1999.
(2) Form of Letter of Transmittal.
(3) Form of Notice of Guaranteed Delivery.
(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and other Nominees dated February 24, 1999.
(5) Form of Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and other Nominees dated February 24, 1999.
(6) Form of Letter to Stockholders dated February 24, 1999 from the
Company.
(7) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(8) Highlights of the Offering
(b) Not applicable.
(c) Not applicable.
4
<PAGE>
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
5
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
IMPAC MORTGAGE HOLDINGS, INC.,
Dated: February 24, 1999 By: /s/ RICHARD J. JOHNSON
-------------------------------------
Richard J. Johnson
Executive Vice President Finance
Chief Financial Officer and Treasurer
6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
99.(a) (1) Offering Circular dated February 24, 1999
99.(a) (2) Form of Letter of Transmittal
99.(a) (3) Form of Notice of Guaranteed Delivery
99.(a) (4) Form of Letter to Brokers, Dealers,
Commercial Banks, Trust Companies and
other Nominees dated February 24, 1999
99.(a) (5) Form of Letter to Clients for use by
Brokers, Dealers, Commercial Banks, Trust
Companies and other Nominees dated
February 24, 1999
99.(a) (6) Form of Letter to Stockholders dated
February 24, 1999 from the Company
99.(a) (7) Guidelines for Certification of Taxpayer
Identification Number on Substitute Form
W-9
99.(a) (8) Highlights of the Offering
</TABLE>
7
<PAGE>
EXHIBIT 99.(a)(2)
IMPAC MORTGAGE HOLDINGS, INC.
OFFER TO EXCHANGE
11% SENIOR SUBORDINATED DEBENTURES DUE FEBRUARY 15, 2004
FOR
UP TO 5,000,000 SHARES OF ITS COMMON STOCK
---------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME,
ON MARCH 26, 1999, UNLESS EXTENDED ("EXPIRATION DATE").
---------------
Impac Mortgage Holdings, Inc., a Maryland corporation (the "Company"),
hereby offers to exchange, upon the terms and subject to the conditions set
forth herein and in the accompanying Letter of Transmittal (which together
constitute the "Exchange Offer"), up to $35,000,000 aggregate principal amount
of its 11% Senior Subordinated Debentures due February 15, 2004 (the
"Debentures"), for up to 5,000,000 shares of its Common Stock, $.01 par value
per share ("Common Stock") (including the associated Preferred Share Purchase
Rights (the "Rights" and together with the Common Stock, the "Shares")).
Unless the Rights become exercisable or separately tradeable prior to the
Expiration Date, a tender of Shares will also constitute a tender of the
associated Rights.
The Company will determine an exchange price (the "Exchange Price") of no
greater than 120% nor less than 105% of the average closing sales price of the
Shares as reported by the American Stock Exchange ("AMEX") for the two trading
day period ending two trading days prior to the Expiration Date (the "Average
Price"), provided that the Exchange Price shall not exceed $7.00 per share. By
way of example, if the Expiration Date is not extended, the two trading days
that will be used to determine the Average Price will be Monday, March 22,
1999 and Tuesday, March 23, 1999. The exact maximum principal amount of
Debentures to be exchanged will be a function of the Average Price. The
Company will exchange validly tendered Shares for a principal amount of
Debentures equal to the number of Shares tendered at or below the Exchange
Price multiplied by the Exchange Price. The Company will select as the final
Exchange Price the lowest Exchange Price which would permit the maximum number
of Shares to be exchanged in the Exchange Offer.
The Exchange Offer will be conducted such that each stockholder will be
able to specify the Exchange Price (in increments of 1%) that such stockholder
is willing to accept in exchange for his or her Shares. Whether and to what
extent a tendering stockholder will have his or her tendered Shares accepted
for exchange in the Exchange Offer will depend on how the Exchange Price
specified by such stockholder compares to Exchange Prices specified by other
tendering stockholders. The Exchange Price specified by each tendering
stockholder must be no greater than 120% nor less than 105% of the Average
Price. The Company will, upon the terms and subject to the conditions of the
Exchange Offer, determine the final Exchange Price, taking into account the
number of Shares tendered and the Exchange Prices specified by tendering
stockholders. The final Exchange Price will be announced by press release by
the Company promptly after the Expiration Date. All Shares validly tendered at
prices at or below the Exchange Price will be exchanged at the Exchange Price,
subject to proration if the Exchange Offer is oversubscribed. Shares tendered
at prices above the Exchange Price will be excluded from the Exchange Offer.
Therefore, to maximize the possibility that Shares will be exchanged at the
Exchange Price stockholders should check the box in the Letter of Transmittal
marked "Shares Tendered at Exchange Price Determined by Dutch Auction" or
indicate their minimum Exchange Price is 105%. The minimum number of Shares
that may be exchanged is 100 Shares.
The Exchange Offer is contingent upon the tender of at least 1,000,000
Shares at or below the Exchange Price. If more than 5,000,000 Shares are
tendered at or below the Exchange Price, the Company will accept no more than
5,000,000 of the tendered Shares, to be allocated among tendering stockholders
on a pro rata basis. The Company reserves the right, in its sole discretion,
to accept a greater or lesser number of Shares pursuant to the Exchange Offer.
Shares validly tendered at or below the Exchange Price will be accepted on or
promptly after the Expiration Date. The Exchange Offer is subject to a number
of additional conditions and may be amended or withdrawn in certain
circumstances. See "The Exchange Offer--Conditions to and Amendment of the
Exchange Offer."
The Debentures will be unsecured obligations of the Company subordinated
and subject in right of payment to all existing and future Senior Indebtedness
(as defined herein) of the Company and effectively subordinated to all
Indebtedness (as defined herein) of the Company's subsidiaries. The Debentures
will bear interest at 11% per annum from their date of issuance, payable
quarterly, commencing May 15, 1999, until the Debentures are paid in full. The
Debentures mature on February 15, 2004, which date may be extended once by the
Company to a date not later than May 15, 2004, provided that the Company
satisfies certain conditions. Commencing on February 15, 2001, the Debentures
will be redeemable, at the Company's option, in whole at any time or in part
from time to time, at the principal amount to be redeemed plus accrued and
unpaid interest thereon to the redemption date. See "Description of the
Debentures--Redemption."
The Common Stock is listed on the AMEX under the symbol "IMH." On
February 23, 1999, the last full trading day prior to the announcement of the
Exchange Offer, the closing sales price of the Common Stock as reported on the
AMEX was $5.75. The Company intends to use its best efforts to list the
Debentures for trading on the AMEX. See"Risk Factors--Risks Relating to
Debentures--Uncertainty as to Fair Market Value of Debentures; No Assurance of
Public Market" and "The Exchange Offer--Listing and Trading of Securities."
---------------
The date of this Offering Circular is February 24, 1999
<PAGE>
IMPORTANT
Stockholders desiring to tender Shares should either (1) complete and sign
the Letter of Transmittal or a facsimile thereof in accordance with the
instructions in the Letter of Transmittal and mail or deliver it together with
the stock certificate(s) and any other required documents to the Exchange
Agent (as defined herein) or tender such Shares pursuant to the procedure for
book-entry transfer set forth in this Offering Circular under "The Exchange
Offer--How to Tender" or (2) request a broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for them. A stockholder
whose Shares are registered in the name of a broker, dealer, commercial bank,
trust company or other nominee must contact such broker, dealer, commercial
bank, trust company or other nominee to tender such Shares. A stockholder who
desires to tender Shares and whose certificates for such Shares are not
immediately available, or who cannot comply with the procedure for book-entry
transfer on a timely basis, may tender Shares by following the procedure for
guaranteed delivery set forth in this Offering Circular under "The Exchange
Offer--How to Tender."
Questions and requests for assistance may be directed to the Information
Agent (as defined herein) at D.F. King & Co., Inc., 77 Water Street, New York,
NY 10005. Banks and brokers can call collect (212) 269-5550; all others can
call toll free (800) 848-2998. Requests for additional copies of this Offering
Circular and the Letter of Transmittal may be directed to the Information
Agent, or to brokers, dealers, commercial banks or trust companies.
The Exchange Offer is being made by the Company in reliance on the
exemption from the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), afforded by Section 3(a)(9) thereof. The Company will not
pay any commission or other remuneration to any broker, dealer, salesman or
other person for soliciting tenders of the Shares. The Information Agent will
assist stockholders in obtaining copies of the materials relating to the
Exchange Offer. Regular employees of the Company may solicit tenders from
stockholders, but they will not receive additional compensation therefor.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THOSE
CONTAINED IN THIS OFFERING CIRCULAR. IF GIVEN OR MADE, THE INFORMATION OR
REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THE DELIVERY OF THIS OFFERING CIRCULAR SHALL NOT, UNDER ANY
CIRCUMSTANCES, IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
NEITHER THIS TRANSACTION NOR THE SECURITIES OFFERED HEREBY HAVE BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE
COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF THIS TRANSACTION OR UPON THE
ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THIS OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER TO ANY PERSON IN ANY
JURISDICTION IN WHICH THAT OFFER WOULD BE UNLAWFUL, AND THE COMPANY WILL NOT
ACCEPT TENDERS FROM STOCKHOLDERS IN ANY JURISDICTION IN WHICH SUCH ACCEPTANCE
WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH
JURISDICTION.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
AVAILABLE INFORMATION..................................................... 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 5
SUMMARY................................................................... 6
The Company............................................................. 6
Purpose and Effect of the Exchange Offer................................ 7
The Exchange Offer...................................................... 9
RISK FACTORS.............................................................. 12
Risks Relating to Retaining Shares...................................... 12
Risks Relating to Debentures............................................ 13
Certain United States Federal Income Tax Risks.......................... 15
SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA.............................. 17
CERTAIN PRO FORMA FINANCIAL INFORMATION................................... 20
CAPITALIZATION............................................................ 22
DISTRIBUTION POLICY AND PRICE RANGE OF COMMON STOCK....................... 23
THE COMPANY............................................................... 25
Description of Operations............................................... 25
Recent Developments..................................................... 26
BACKGROUND, PURPOSE AND EFFECT OF THE EXCHANGE OFFER...................... 28
THE EXCHANGE OFFER........................................................ 30
General................................................................. 30
Expiration Date, Extensions, Termination and Amendments................. 31
How to Tender........................................................... 31
Withdrawal Rights....................................................... 34
Acceptance of Shares for Exchange; Delivery of Debentures to Be
Exchanged.............................................................. 34
Denominations; Fractional Interests..................................... 35
Proration if Shares Tendered Exceed Maximum............................. 35
Preferred Share Purchase Rights Not Triggered........................... 35
Exchange Offer Subject to Minimum Number of Shares Tendered............. 36
Listing and Trading of Securities....................................... 36
Conditions to and Amendment of the Exchange Offer....................... 36
Exchange Agent.......................................................... 37
Information Agent....................................................... 38
Financial Advisor....................................................... 38
Payment of Expenses..................................................... 38
INTEREST OF DIRECTORS, EXECUTIVE OFFICERS AND CONTROLLING STOCKHOLDERS;
TRANSACTIONS AND ARRANGEMENTS CONCERNING THE SHARES...................... 39
DESCRIPTION OF THE DEBENTURES............................................. 40
The Debentures.......................................................... 40
Principal, Maturity and Interest........................................ 40
Payment................................................................. 40
Option to Extend Maturity Date.......................................... 40
Redemption.............................................................. 41
Selection and Notice of Redemption...................................... 41
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Subordination............................................................ 41
Financial Covenants...................................................... 43
Events of Default........................................................ 43
Modification and Waiver.................................................. 44
Defeasance and Covenant Defeasance....................................... 45
Satisfaction and Discharge............................................... 46
Notices.................................................................. 46
Title.................................................................... 46
Governing Law............................................................ 46
Regarding the Trustee.................................................... 46
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES...................... 47
Taxation of the Exchange Offer........................................... 47
Taxation of the Debentures............................................... 49
</TABLE>
4
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the periodic reporting and other informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information may be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following regional offices of the Commission: Seven World Trade Center, Suite
1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials can be
obtained by mail from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, the Commission maintains a site on the World Wide Web that
contains reports, proxy and information statements and other information filed
electronically by the Company with the Commission which can be accessed over
the Internet at http://www.sec.gov.
The Company has filed with the Commission an Issuer Tender Offer Statement
on Schedule 13E-4 under the Exchange Act furnishing certain additional
information with respect to the Exchange Offer. Such Schedule 13E-4 and any
amendments thereto, including exhibits, may be accessed over the Internet at
http://www.sec.gov or inspected without charge at the offices of the
Commission, the addresses of which are set forth above, and copies may be
obtained therefrom at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated by
reference into this Offering Circular:
(i) the Company's Annual Report on Form 10-K for the year ended December
31, 1997, as amended;
(ii) the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30, and September 30, 1998;
(iii) the Company's Reports on Form 8-K filed with the Commission on
February 11, June 3, June 4, October 14, December 8 and December 23,
1998, and January 26 and February 19, 1999;
(iv) the description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A dated October 23, 1995;
(v) the description of the Company's Series A Junior Participating
Preferred Stock contained in the Company's Registration Statement on
Form 8-A dated October 14, 1998; and
(vi) the description of the Company's Series B 10.5% Cumulative Convertible
Preferred Stock contained in the Company's Report on Form 8-K filed
with the Commission on December 23, 1998.
If any statement contained in any of the foregoing documents incorporated
by reference herein is modified or superseded by a statement in this Offering
Circular, the statement in any such foregoing document will be deemed for the
purposes of this Offering Circular to have been modified or superseded by such
statement in this Offering Circular, and the statement in any such foregoing
document is incorporated by reference herein only as modified or to the extent
it is not superseded. All documents subsequently filed by the Company during
the period of the Exchange Offer pursuant to Sections 13, 14 or 15(d) of the
Exchange Act shall be deemed to be incorporated by reference in this Offering
Circular and to be a part hereof from the date of filing such documents.
Any person receiving a copy of this Offering Circular may obtain without
charge, upon written or oral request, a copy of any of the documents
incorporated by reference herein, except for the exhibits to such documents
(unless such exhibits are specifically incorporated by reference into such
documents). Requests should be addressed to Impac Mortgage Holdings, Inc.,
20371 Irvine Avenue, Santa Ana Heights, California 92707, Attention: Investor
Relations, telephone: (714) 438-2100.
5
<PAGE>
SUMMARY
The following is a summary of certain features of the Exchange Offer and
other matters, and all statements contained herein are qualified in their
entirety by reference to the more detailed information and financial data
hereinafter set forth.
Unless the context otherwise requires, references herein to the "Company"
refer to Impac Mortgage Holdings, Inc. ("IMH"), Impac Funding Corporation
(together with its wholly owned special purpose "bankruptcy remote" entity,
Impac Secured Assets Corp., ("IFC")), IMH Assets Corp. ("IMH Assets"), and
Imperial Warehouse Lending Group, Inc. ("IWLG"), collectively. Neither IFC nor
Impac Secured Assets Corp. is considered a subsidiary of IMH; IMH holds all of
the preferred stock of IFC and therefore owns a 99% economic interest in IFC.
All of IFC's common stock is owned by officers of IMH. Except as otherwise
specified, all information in this Offering Circular gives effect to a 3-for-2
Common Stock split effective November 24, 1997.
The Company
The Company is a mortgage loan investment company that originates,
purchases, sells, securitizes and invests in residential mortgage loans. To
date, the Company has purchased and invested primarily in non-conforming
residential mortgages. Non-conforming residential mortgage loans are
residential mortgages that do not qualify for purchase by government sponsored
agencies such as the Federal National Mortgage Association and the Federal Home
Loan Mortgage Corporation. The Company conducts its business through three
operations:
. its conduit operations purchases, sells and securitizes residential
mortgages;
. its long-term investment operations invests in mortgages and securities
backed by mortgages; and
. its warehouse lending operations provides warehouse and repurchase
financing facilities to originators of mortgage loans.
The Company chooses to be taxed at the corporate level as a real estate
investment trust, or a "REIT," for federal income tax purposes. This generally
allows the Company to pass through its income to stockholders without payment
of federal income tax at the corporate level.
Several events have significantly affected the Company since late 1998. They
consist of the following:
. During the third quarter of 1998, the Company experienced a significant
decrease in its liquidity because of the deterioration of the mortgage-
backed securities market and margin calls its lenders made on the
Company's financing and warehouse facilities. The Company delayed the
payment of its third quarter dividend and sold mortgage loans and
mortgage-backed securities as a result of these margin calls. The
delayed dividend was paid on January 6, 1999. In the fourth quarter of
1998, the Company sold $250.4 million of mortgage loans and $8.9 million
of mortgage-backed securities, which increased its liquidity by $13.6
million, after it paid down borrowings related to those assets. The
Company took a $41.7 million non-cash charge in the third quarter of
1998 for certain write-downs of its mortgage loans, equity investments
and investment securities available-for-sale portfolios. Largely as a
result of these charges, the Company incurred a net loss of $20.6
million for the quarter ended September 30, 1998 and a net loss of
approximately $8.1 million for the quarter ended December 31, 1998. The
Company did not declare a dividend for the quarter ended December 31,
1998 and does not expect to declare any material dividend for the first
quarter of 1999.
. In December 1998 the Company signed a letter of intent to acquire a
California chartered, federally insured, thrift and loan. The
acquisition is contingent upon the execution of a definitive agreement
and
6
<PAGE>
obtaining satisfactory regulatory approvals. Upon the consummation of
the transaction, the Company intends to merge its conduit operations
into the thrift and loan charter and operate its mortgage banking and
selected investment activities from the merged company. The Company
intends to initially capitalize the thrift with an estimated $25.0
million. The acquisition of the thrift is expected to reduce the
Company's reliance on warehouse lines of credit and reverse repurchase
agreements and is expected to give the merged company access to low cost
funds.
. In December 1998, the Company completed the sale of 1,200,000 shares of
Series B 10.5% Cumulative Convertible Preferred Stock (the "Series B
Preferred Stock") at $25.00 per share. The proceeds from the sale of the
Series B Preferred Stock were used to reduce outstanding indebtedness
under the Company's financing facilities and for general corporate
purposes, including the payment of the Company's $12.0 million dividend
declared in September 1998 and paid on January 6, 1999.
. In February 1999, the Company executed a final Master Agreement to sell
up to $1.0 billion of its future mortgage loan production to a major
institutional investor over the next year. The Company's first delivery
of mortgage loans under the new agreement will begin in February 1999,
with the first settlement expected to take place no later than March
1999. The transaction is a servicing retained agreement, which gives the
Company a guaranteed pricing spread and cash gains plus the value of the
servicing rights created.
Purpose and Effect of the Exchange Offer
The principal purposes of the Exchange Offer are to provide existing
stockholders the opportunity to obtain an alternative return on their
investment in the Company and to allow the Company to reduce the number of
Shares outstanding, thereby increasing the Company's overall book value per
share and creating the potential for increased earnings per share in the
future. The Company believes these developments could have a positive
influence on the price of its Common Stock. The increased indebtedness
resulting from the Exchange Offer, however, will increase the Company's debt
service requirements and could negatively affect earnings per share. See "Risk
Factors--Risks Relating to Retaining Shares--No Assurance of Increased
Earnings per Share," "Risks Relating to Debentures--Increased Leverage and
Debt Service Obligations," and "Certain Pro Forma Financial Information."
Stockholders electing to participate in the Exchange Offer will realize the
following benefits:
. The Debentures will bear interest at 11% per annum, payable quarterly on
February 15, May 15, August 15 and November 15, or, in the event such
15th day is not a business day, then on the business day immediately
following such 15th day, commencing May 15, 1999, until the Debentures
are paid in full.
. The Debentures, although subordinated in right of payment to all other
existing and future Senior Indebtedness (as defined herein) of the
Company and effectively subordinated to all Indebtedness of the
Company's subsidiaries, represent a claim on the Company's assets senior
to any claim of the holders of the Company's Common Stock.
. The Debentures are expected to provide holders a more consistent and
dependable source of cash flow than the Shares because of the
uncertainty as to the amount of future dividends which may be paid by
the Company. To maintain its qualification as a REIT, the Company must
make annual distributions to stockholders of at least 95% of its taxable
income. While the Company has historically declared quarterly dividends
(with the exception that no dividend was declared for the quarter ended
December 31, 1998), a substantial portion of the Company's earnings, as
calculated according to generally accepted accounting principles
("GAAP"), were derived from the Company's taxable
7
<PAGE>
subsidiary, IFC. However, the Company is not required to distribute
IFC's earnings unless IFC distributes such income as dividends to the
Company. IFC intends to retain its future earnings to rebuild its
capitalization that deteriorated as a result of 1998 third and fourth
quarter losses. This decision effectively reduces the amount of taxable
income the Company will be required to distribute and therefore reduces
the amount of dividends that will be paid to its stockholders.
. In addition, in December 1997, the Company terminated the management
agreement with its manager, Imperial Credit Advisors, Inc. ("ICAI"), and
paid ICAI consideration with a value of approximately $44.4 million as a
termination fee. For each of the years 1999, 2000 and 2001, the Company
intends to reduce its taxable income by offsetting approximately $11.0
million of such termination fee against its taxable income, which should
reduce the amount of dividends required to be paid to the Company's
stockholders and should allow the Company to retain earnings for the
first $11.0 million earned by the Company over each of the next three
years, or $0.35 per share, based upon 31,389,571 Shares outstanding as
of February 3, 1999, on a fully diluted basis giving effect to the full
conversion of Series B Preferred Stock and assuming the full exercise of
all vested options outstanding on that date.
Notwithstanding the benefits to tendering stockholders summarized above,
stockholders contemplating the Exchange Offer should take into account the
considerations further described in "Risk Factors" and "Background, Purpose
and Effect of the Exchange Offer."
8
<PAGE>
The Exchange Offer
Expiration Date....... 5:00 p.m., New York City time, on March 26, 1999,
unless extended.
Exchange Price........ The Company will determine a final Exchange Price that
will allow it to exchange up to 5,000,000 Shares (or
such lesser number of Shares as are validly tendered)
for Debentures. All Shares acquired in the Exchange
Offer will be acquired at the Exchange Price even if
tendered below the Exchange Price. Each stockholder
desiring to tender Shares must specify in the Letter of
Transmittal the minimum Exchange Price (not greater
than 120% nor less than 105% of the Average Price) at
which such stockholder is willing to have Shares
exchanged by the Company. The minimum Exchange Price
will be 5% over the Average Price. The maximum Exchange
Price will be $7.00 per Share. Stockholders wishing to
maximize the possibility that their Shares will be
exchanged at the Exchange Price may indicate that their
minimum Exchange Price is 105% or check the box in the
Letter of Transmittal marked "Shares Tendered at
Exchange Price Determined by Dutch Auction." Checking
this box may result in an Exchange Price of the Shares
so tendered at the minimum Exchange Price of 105%.
Public Announcement... The Company will issue a press release publicly
announcing the Average Price at least 24 hours prior to
the Expiration Date. Such information can also be
obtained from D.F. King & Co., Inc., the Information
Agent, by calling (800) 848-2998.
Acceptance of
Shares................ The Company may accept up to 5,000,000 Shares in the
Exchange Offer. This represents approximately 16% of
the outstanding Shares as of February 3, 1999, on a
fully diluted basis giving effect to the full
conversion of Series B Preferred Stock and assuming the
full exercise of all vested options outstanding on that
date. The Exchange Offer is contingent on the tender of
at least 1,000,000 Shares at or below the Exchange
Price. If, at the Expiration Date, more than 5,000,000
Shares (or such greater number of Shares as the Company
may elect to purchase) are validly tendered at or below
the Exchange Price and not withdrawn, the Company may,
upon the terms and subject to the conditions of the
Exchange Offer, exchange Shares on a pro rata basis
from all stockholders who validly tender Shares at or
below the Exchange Price. The Company reserves the
right, in its sole discretion, to accept a greater or
lesser number of Shares pursuant to the Exchange Offer.
Subject to the terms and conditions of the Exchange
Offer, including the reservation of certain rights by
the Company, Shares validly tendered at or below the
Exchange Price will be accepted on or promptly after
the Expiration Date. Although the Company does not
presently intend to do so, if it modifies the terms of
the Exchange Offer, such modified terms will be
available to all stockholders whether or not their
Shares have been tendered prior to such modification.
Any material modification will be disclosed in
accordance with the applicable rules of the Commission
and, if required, the Exchange Offer will be extended
to permit stockholders adequate time to consider such
modification. See "The Exchange Offer--Acceptance of
Shares for Exchange; Delivery of Debentures to be
Exchanged."
9
<PAGE>
Description of
Debentures............ The Debentures will be unsecured obligations of the
Company subordinated and subject in right of payment to
all existing and future Senior Indebtedness (as defined
herein) of the Company and effectively subordinated to
all Indebtedness (as defined herein) of the Company's
subsidiaries. As of December 31, 1998, the Company and
its subsidiaries' outstanding Indebtedness aggregated
approximately $1.4 billion, all of which would be
Senior Indebtedness. The Debentures will bear interest
at 11% per annum from their date of issuance, payable
quarterly on February 15, May 15, August 15 and
November 15, or, in the event such 15th day is not a
business day, then on the business day immediately
following such 15th day, commencing May 15, 1999, to
holders of record on the last day of the month
preceding the relevant interest payment date until the
Debentures are paid in full. The Company will be
required to repay the principal amount of the
Debentures on February 15, 2004, which maturity may be
extended once by the Company to a date not later than
May 15, 2004, provided that the Company satisfies
certain conditions. In the event the Company elects to
extend the maturity date, interest will accrue from and
after February 15, 2004 to the extended maturity date
at the same rate plus 25 basis points. Commencing on
February 15, 2001, the Debentures will be redeemable,
at the Company's option, in whole at any time or in
part from time to time, at the principal amount to be
redeemed plus accrued and unpaid interest thereon to
the redemption date. See "Description of the
Debentures--Redemption."
Delivery of
Securities............ The Company will deliver Debentures in exchange for
Shares pursuant to the Exchange Offer as soon as
practicable after the Expiration Date. See "The
Exchange Offer--Acceptance of Shares for Exchange;
Delivery of Debentures to be Exchanged."
Certain United States
Federal Income Tax
Consequences.......... For a discussion of certain Federal income tax
consequences associated with the Exchange Offer and the
ownership of the Debentures, see "Risk Factors--Certain
United States Federal Income Tax Risks" and "Certain
United States Federal Income Tax Consequences."
Conditions of the
Offer................. The Company's obligation to consummate the Exchange
Offer is subject to certain conditions. See "The
Exchange Offer--Conditions to and Amendment of the
Exchange Offer."
Withdrawal Rights..... Tenders of Shares pursuant to the Exchange Offer may be
withdrawn prior to the Expiration Date, and, if the
Company has not previously accepted such Shares for
exchange, after the expiration of 40 business days from
the date of this Offering Circular. See "The Exchange
Offer--Withdrawal Rights."
How to Tender......... Stockholders wishing to accept the Exchange Offer must
either (a) complete the accompanying Letter of
Transmittal and forward it with the certificates
representing the Shares to be tendered and any other
required documents to the Exchange Agent or (b) request
a broker, dealer, commercial bank, trust company or
other nominee to effect the transaction for them.
Holders of Shares registered in the name of a broker,
dealer, commercial bank, trust company, or other
nominee must contact such institution to tender their
Shares. Certificates representing the Shares may be
physically delivered after
10
<PAGE>
effecting a valid tender pursuant to certain guaranteed
delivery procedures. Physical delivery is not required
if confirmation of book-entry transfers of such Shares
to the Exchange Agent's account at The Depository Trust
Company ("DTC") is delivered in a timely fashion. See
"The Exchange Offer--How to Tender."
Listing and Trading
of Securities......... On February 23, 1999, the last full trading day before
the announcement of the Exchange Offer, the closing per
share price for the Shares as reported by the AMEX was
$5.75. Although the Company intends to use its best
efforts to list the Debentures on the AMEX (or, in the
event the Company is unable to list the Debentures on
the AMEX, on another exchange of the Company's
choosing), no assurance can be given that the Company
will be able to list the Debentures on any exchange or,
whether or not the Debentures are listed, that an
active trading market will develop. See "Risk Factors--
Risks Relating to Debentures--Uncertainty as to Fair
Market Value of Debentures; No Assurance of Public
Market" and "The Exchange Offer--Listing and Trading of
Securities."
Shares Outstanding.... 24,766,465 Shares were outstanding as of February 3,
1999. In addition, as of that date, 6,060,606 Shares
were issuable upon conversion of the Company's Series B
Preferred Stock, and 562,500 Shares were issuable upon
exercise of outstanding vested stock options.
Exchange Agent and
Trustee............... IBJ Whitehall Bank & Trust Company will serve as the
Exchange Agent (the "Exchange Agent") in connection
with the Exchange Offer and as Trustee (the "Trustee")
under the Indenture (as defined herein). See "The
Exchange Offer--Exchange Agent" and "Description of the
Debentures--Regarding the Trustee."
Information Agent..... D.F. King & Co., Inc. will serve as the Information
Agent (the "Information Agent") in connection with the
Exchange Offer. Bankers and brokers can call the
Information Agent collect at (212) 269-5550, all others
can call the Information Agent toll free at (800) 848-
2998. See "The Exchange Offer--Information Agent."
11
<PAGE>
RISK FACTORS
An investment in the Company's securities involves a high degree of risk.
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing the Company's business. Please refer to the Company's Current
Reports on Form 8-K, filed with the Commission on December 18, 1998, and
January 26, 1999, for risk factors which relate to the Company's business
operations. Additional risks and uncertainties of which the Company is not
presently aware or that the Company currently deems immaterial may also impair
its business operations. If any of these risks actually occur, the Company's
business, financial condition and results of operations could be materially
adversely affected. In such case, you may lose all or part of your investment.
Certain of these risk factors are dependent on each other and so you should
read this Risk Factors section, and those Risk Factors included in the Form 8-
Ks referenced above, as a whole.
This Offering Circular also contains forward-looking statements that
involve risks and uncertainties. These forward-looking statements can be
identified by the use of words such as: "believes," "anticipates," "plans,"
"expects," "may," "will," "intends," "estimates" and their derivatives,
opposites and similar expressions. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including the risks described below and those
included in the Form 8-Ks referenced above.
Risks Relating to Retaining Shares
Increased Leverage and Debt Service Obligations
Following the Exchange Offer, the Company will be more leveraged and will
have incurred additional debt service. At December 31, 1998, as adjusted to
give effect to the issuance of the maximum $35,000,000 principal amount of the
Debentures pursuant to the Exchange Offer, the total indebtedness of the
Company and its subsidiaries would have been approximately $1.4 billion. In
addition, assuming the issuance of the maximum $35,000,000 principal amount of
Debentures pursuant to the Exchange Offer, the Company would incur debt
service on the Debentures of approximately $3.85 million annually.
The Company's increased level of indebtedness and the covenants contained
in the Indenture may have several important effects on its future operations,
including, without limitation:
(i) a portion of the Company's cash flow from operations must be
dedicated to the payment of interest and principal on its indebtedness,
reducing the funds available for operations and for capital expenditures,
including acquisitions;
(ii) limitations on the Company's ability to borrow additional funds for
working capital, capital expenditures, acquisitions and other purposes, or
to dispose of assets, and upon its flexibility in planning for, and
reacting to, changes in its business, including possible acquisition
activities;
(iii) the Company's increased leverage will result in greater
vulnerability to adverse changes in general economic, industry and
competitive conditions; and
(iv) the Company may be placed at a relative competitive disadvantage as
compared to certain of its competitors.
The Company's ability to meet its debt service obligations and to reduce
its total indebtedness will be dependent upon the Company's future
performance, which will be subject to general economic, industry and
competitive conditions and to financial, business and other factors affecting
the operations of the Company, many of which are beyond its control. There can
be no assurance that the Company's business will continue to generate cash
flow at or above current levels. If the Company is unable to generate
sufficient cash flow from operations in the future, it may be required, among
other things, to seek additional financing in the debt or equity markets, to
refinance or restructure all or a portion of its indebtedness, including the
Debentures, to sell selected assets, or to
12
<PAGE>
reduce or delay planned capital expenditures and growth or business
strategies. There can be no assurance that any such measures would be
sufficient, or that any of these measures could be effected on satisfactory
terms, if at all.
If the Company fails to make any required payment of interest or principal
with respect to the Debentures on a timely basis, such failure would
constitute an Event of Default under the terms of the Indenture. An Event of
Default under the Indenture could also trigger an event of default under
certain other existing obligations of the Company, including its warehouse
line and reverse repurchase agreements. As a result, the incurrence of
additional debt resulting from the Exchange Offer will increase the risk of
possible default by the Company with respect to its current and future
obligations.
No Assurance of Increased Earnings per Share
Although one of the primary purposes of the Exchange Offer is to reduce the
number of the Company's outstanding Shares, thereby offering the potential for
increased earnings per share in the future, the reduction in equity and
corresponding increase in indebtedness could have a negative effect on
earnings per share. In this regard, the table set forth in the section
entitled "Certain Pro Forma Financial Information" shows the pro forma effects
of the Exchange Offer on the Company's financial results assuming the maximum
and minimum number of Shares tendered.
Market Issues
The Exchange Offer will reduce the Company's stockholders' equity and
increase its indebtedness, thereby increasing the Company's debt-to-equity
ratio and its debt service obligations. There can be no assurance that the
market will not regard these results unfavorably and that the price of the
Shares will not be adversely affected. To the extent the stockholders exchange
their Shares for Debentures, the number of Shares issued and outstanding will
be reduced, thereby likely reducing the liquidity of an investment in the
Shares.
Possible Limitations on Common Stock Dividends
To maintain its qualification as a REIT, the Company must make annual
distributions to stockholders of at least 95% of its taxable income. While the
Company has historically declared quarterly dividends (with the exception that
no dividend was declared for the quarter ended December 31, 1998), a
substantial portion of the Company's earnings, as calculated according to
GAAP, were derived from the Company's taxable subsidiary, IFC. However, the
Company is not required to distribute IFC's earnings unless IFC distributes
such income as dividends to the Company. IFC intends to retain its future
earnings to rebuild its capitalization that deteriorated as a result of 1998
third and fourth quarter losses. This decision effectively reduces the amount
of taxable income the Company will be required to distribute and therefore
reduces the amount of dividends that will be paid to its stockholders.
In addition, in December 1997, the Company terminated the management
agreement with its manager, ICAI, and paid ICAI consideration with a value of
approximately $44.4 million as a termination fee. For each of the years 1999,
2000 and 2001, the Company intends to reduce its taxable income by offsetting
approximately $11.0 million of such termination fee against its taxable
income, which should reduce the amount of dividends required to be paid to the
Company's stockholders and should allow the Company to retain earnings for the
first $11.0 million earned by the Company over each of the next three years,
or $0.35 per share, based upon 31,389,571 Shares outstanding as of February 3,
1999, on a fully diluted basis giving effect to the full conversion of Series
B Preferred Stock and assuming the full exercise of all vested options
outstanding on that date.
Risks Relating to Debentures
Increased Leverage and Debt Service Obligations
See "--Risks Relating to Retaining Shares--Increased Leverage and Debt
Service Obligations."
13
<PAGE>
Loss of Rights Associated with Common Stock
To the extent stockholders exchange their Shares for Debentures, they will
be relinquishing certain rights available to holders of Shares in exchange for
acquiring rights as holders of debt. Stockholders whose Shares are validly
tendered and accepted for exchange will lose the right to share in any capital
appreciation of the Shares, will not be entitled to vote upon any matters
submitted to the Company's stockholders, and will no longer be entitled to
dividends paid, if any, on the Shares. In addition, the liquidity of a
tendering stockholder's investment in the Company will likely be reduced. See
"--Uncertainty as to Fair Market Value of Debentures; No Assurance of Public
Market."
Subordination
The Debentures will be unsecured obligations of the Company and will be
subordinated in right of payment to all existing and future Senior
Indebtedness and effectively subordinated to all Indebtedness of the Company's
subsidiaries, which includes borrowings under the Company's collateralized
mortgage obligations, warehouse line and reverse repurchase agreements. The
Debentures will rank senior only to other indebtedness of the Company that
expressly provides that it is subordinated in right of payment to the
Debentures, if any. In the event of bankruptcy, liquidation, insolvency,
reorganization or similar proceeding relating to the Company, the assets of
the Company will be available to pay obligations on the Debentures only after
all Senior Indebtedness has been paid in full, and there may not be sufficient
assets remaining to pay amounts due on any or all of the Debentures
outstanding. The Company may not pay principal of or interest on the
Debentures, make any deposit pursuant to defeasance provisions or repurchase
or redeem or otherwise retire any Debentures if:
(i) any payment obligation on Senior Indebtedness is not paid when due
or
(ii) any other event of default on Senior Indebtedness occurs that
permits the holders of such Senior Indebtedness to accelerate the maturity
of such Senior Indebtedness, in accordance with its terms, and the Trustee
for the Debentures receives a notice of such default unless, in either
case, the default has been cured or waived, any such acceleration has been
rescinded or such Senior Indebtedness has been paid in full or, in the case
of any default other than a payment default, 179 days have passed since the
default notice is given.
In addition, if there exists an event of default, as such term is defined
in any instrument creating or evidencing any Designated Senior Indebtedness
(described below), on any Designated Senior Indebtedness or if an executive
officer of the Company has actual knowledge of a default on any Designated
Senior Indebtedness, which with notice or lapse of time or both would become
an event of default, then no payment can be made on the Debentures for a
period of 179 days from the date of such event of default or the date that an
executive officer of the Company obtains actual knowledge that there is such a
default unless such default is cured or waived or a representative of such
Designated Senior Indebtedness terminates the payment blockage period.
Moreover, even if there is an Event of Default with respect to the Debentures
and the Debentures are declared due and payable as a result thereof, no
payment can be made on the Debentures while any Designated Senior Indebtedness
is outstanding without the consent of the Designated Senior Indebtedness. In
the event that there is an event of default under the Designated Senior
Indebtedness or an executive officer of the Company has actual knowledge of a
default under Designated Senior Indebtedness, which with notice or a lapse of
time or both would become an event of default under the Designated Senior
Indebtedness, and a payment is made on the Debentures in violation of the
above provisions, holders of Debentures receiving such payment may be required
to return the monies paid for the benefit of the Senior Indebtedness. In
addition, in an insolvency, bankruptcy or liquidation scenario, there is
always the risk that senior creditors would seek to recover any monies paid on
the Debentures. Designated Senior Indebtedness includes the Company's
collateralized mortgage obligations, reverse repurchase agreements and
warehouse line agreements and any refundings or replacements thereof, as well
as any other Senior Indebtedness designated by the Company from time to time
as Designated Senior Indebtedness.
There are no restrictions in the Indenture on the ability of the Company to
designate Senior Indebtedness as Designated Senior Indebtedness. As of
December 31, 1998, the Company and its subsidiaries had approximately
14
<PAGE>
$1.4 billion of Indebtedness outstanding, all of which would be Senior
Indebtedness. Additional Senior Indebtedness may be incurred by the Company
and its subsidiaries from time to time. See "Description of the Debentures--
Subordination" and "--Financial Covenants."
Risk of Prepayment
Commencing February 15, 2001, the Debentures are subject to redemption at
the option of the Company in whole or in part from time to time without
penalty or premium upon notice to the holders of the Debentures.
See "Description of the Debentures--Redemption." As a result, the Debentures
may be prepaid at a time when interest rates may be generally declining, and
the holders of the Debentures at that time may be forced to reinvest the
redemption proceeds in securities with a lower rate of interest.
Uncertainty as to Fair Market Value of Debentures; No Assurance of Public
Market
The fair market value of the Debentures will be a function of a variety of
factors, including the existence or nonexistence of an active trading market
for the Debentures, the financial condition and prospects of the Company, the
level of interest rates and general economic conditions. No assurance can be
given that the fair market value of the Debentures will equal the face amount
thereof. Although the Company intends to use its best efforts to list the
Debentures on the AMEX (or, in the event the Company is unable to list the
Debentures on the AMEX, on another exchange of the Company's choosing), no
assurance can be given that the Company will be able to list the Debentures.
Even if the Debentures are listed there can be no assurance that an active
trading market for the Debentures will develop or that, if developed, it will
be sustained. Based on the foregoing factors, no assurance can be given that
holders of the Debentures will be able to sell the Debentures at a price equal
to the face amount thereof.
Status of Subsidiaries and IFC; Effects of Asset Encumbrances
The Debentures will be unsecured obligations of the Company and will be
subordinated in right of payment to all existing and future Senior
Indebtedness of the Company. The Debentures will also be effectively
subordinated to all Indebtedness of the Company's subsidiaries. The Debentures
are not guaranteed by any of the subsidiaries of the Company or IFC and,
therefore, should the Company fail to satisfy any payment obligation under the
Debentures, the holders would not have a direct claim therefor against the
subsidiaries or IFC. Any indebtedness incurred directly by the subsidiaries of
the Company or IFC, including guarantees, will be senior in right of payment
to the common stock of such entities. This means that in the event of any
liquidation or bankruptcy of a subsidiary or IFC, all debt of such entity,
whether secured or unsecured, would be entitled to be paid before any amounts
would be available to the Company by virtue of ownership of the capital stock.
The Indenture will not limit the ability of the Company and its subsidiaries
to incur additional indebtedness, including Senior Indebtedness. Moreover,
certain Senior Indebtedness of the Company is now and may in the future be
guaranteed by, and secured by the assets of, the Company's subsidiaries or
IFC. In the event of a default under any such Senior Indebtedness, the lenders
thereunder would be entitled to a claim on the assets securing such
indebtedness. Accordingly, because of any or all of the above, the Company may
not have sufficient monies available from its subsidiaries or from other
means, or assets remaining after payment of prior claims from time to time, to
pay amounts due on the Debentures. In addition, IMH Assets Corp. is the
Company's wholly-owned special purpose "bankruptcy remote" entity. Its assets
are comprised of CMO collateral, in the amount of approximately $1.2 billion
at December 31, 1998, which amount would not be available to satisfy claims of
creditors of the Company on a consolidated basis.
Certain United States Federal Income Tax Risks
For Federal income tax purposes, the Company's delivery of Debentures in
exchange for Shares will be treated as a redemption of the Shares. Generally,
such a redemption will be treated as a sale of Shares to the Company for an
amount equal to the issue price of the Debentures (which should equal the fair
market value of
15
<PAGE>
the Debentures on the issue date or the fair market value of the Shares
tendered, depending upon whether the Debentures are publicly traded, plus any
amount of cash paid by the Company in lieu of fractional interests in the
Debentures). If the redemption is treated as a sale, then a stockholder would
recognize a capital loss on the redemption to the extent the stockholder's
basis in the Shares exchanged exceeded the issue price of the Debentures. A
stockholder would recognize a capital gain to the extent the issue price of
the Debentures exceeded the stockholder's basis in the Shares exchanged.
If, however, certain tests are not satisfied, then the redemption will not
be treated as a payment by the Company in exchange for Shares, but will be
treated instead as a distribution by the Company with respect to the Shares.
The determination of whether the tests for sale treatment are satisfied is
done on a stockholder by stockholder basis so that the redemption could
qualify as a sale for one stockholder and yet be treated as a distribution to
another stockholder. Generally, the redemption should qualify for sale
treatment for those stockholders who have a minimal interest in the Company,
who exercise no control over the Company's affairs, and whose proportionate
interest in the Company is reduced as a result of the redemption.
If the redemption is treated as a distribution, then the stockholder would
recognize ordinary dividend income as a result of the redemption equal to the
sum of the cash received plus the fair market value of the Debentures received
to the extent the Company has sufficient earnings and profits for the year to
support such dividend treatment. In addition, while the marginal tax rates for
dividends and capital gains remain the same for corporate stockholders, the
top income tax rate on ordinary income of individuals (39.6%) will exceed the
maximum tax rates on long-term capital gains (20%). See "Certain United States
Federal Income Tax Consequences--Taxation of the Exchange Offer."
The Debentures may be issued with significant original issue discount
("OID"). Consequently, holders of the Debentures may be required to recognize
significant amounts of income in advance of receipt of the cash payments to
which the income is attributable regardless of the holders' methods of
accounting. See "Certain United States Federal Income Tax Consequences--
Taxation of the Debentures."
16
<PAGE>
SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated statement of operations data for the
Company and for IFC for each of the years in the three-year period ended
December 31, 1997, and the consolidated balance sheet data as of December 31,
1997 and 1996, were derived from the Company's and IFC's financial statements
audited by KPMG LLP ("KPMG"), independent auditors, whose reports are
incorporated by reference herein. The selected consolidated statements of
operations data for each of the years in the two-year period ended December
31, 1994, and the consolidated balance sheet data as of December 31, 1995,
1994 and 1993, were derived from the combined financial statements of the
Company and IFC, audited by KPMG. Such selected financial data should be read
in conjunction with those financial statements and the notes thereto and with
Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations," included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1997, incorporated by reference herein.
The selected data for the Company and for IFC presented for the nine month
periods ended September 30, 1998 and 1997, and as of September 30, 1998 and
1997, are derived from the unaudited consolidated financial statements of the
Company and IFC. In the opinion of management, such unaudited data reflect all
adjustments, consisting only of normally recurring adjustments, necessary to
fairly present the Company's and IFC's financial position and results of
operations for the periods presented. The results of operations of any interim
period are not necessarily indicative of results to be expected for a full
fiscal year.
17
<PAGE>
IMPAC MORTGAGE HOLDINGS, INC.
(in thousands, except per share and ratio data)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
---------------------- ------------------------------------------------
1998 1997 1997 1996 1995(1) 1994(1) 1993(1)
---------- ---------- ---------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues:
Interest income......... $ 127,591 $ 76,709 $ 109,533 $ 63,673 $ 2,851 $ 292 $ 767
Equity in net earnings
(loss) of Impac Funding
Corporation............ (3,912) 6,132 8,316 903 1,489 532 4,192
Equity in net loss of
Impac Commercial
Holdings, Inc.......... (998) (778) (239) -- -- -- --
Other income............ 2,025 1,436 2,249 593 244 83 320
---------- ---------- ---------- -------- -------- ------ -------
124,706 83,499 119,859 65,169 4,584 907 5,279
---------- ---------- ---------- -------- -------- ------ -------
Expenses:
Interest on CMO
borrowings and reverse
repurchase agreements.. 94,632 54,816 76,577 44,144 1,116 -- --
Interest on borrowings
from Southern Pacific
Bank................... -- -- -- -- 599 127 334
Write down on investment
securities available-
for-sale............... 12,825 -- -- -- -- -- --
Loss on equity
investment............. 9,076 -- -- -- -- -- --
General and
administrative and
other expense.......... 3,908 1,394 1,851 1,449 209 225 --
Provision for loan
losses................. 2,099 4,243 6,843 4,350 488 95 --
Advisory fees........... -- 4,313 6,242 3,347 38 -- --
Termination agreement
expense................ -- -- 44,375 -- -- -- --
---------- ---------- ---------- -------- -------- ------ -------
122,540 64,766 135,888 53,290 2,450 447 531
---------- ---------- ---------- -------- -------- ------ -------
Earnings (loss) before
income taxes........... 2,166 18,733 (16,029) 11,879 2,134 460 4,748
Income taxes (benefit).. -- -- -- -- 76 (30) 234
---------- ---------- ---------- -------- -------- ------ -------
Net earnings (loss)..... $ 2,166 $ 18,733 $ (16,029) $ 11,879 $ 2,058 $ 490 $ 4,514
========== ========== ========== ======== ======== ====== =======
Basic net earnings
(loss) per share....... $ 0.09 $ 1.27 $ (0.99) $ 1.34 $ 0.05 $ -- $ --
========== ========== ========== ======== ======== ====== =======
Diluted net earnings
(loss) per share....... $ 0.09 $ 1.25 $ (0.99) $ 1.32 $ 0.05 $ -- $ --
========== ========== ========== ======== ======== ====== =======
Dividends declared per
share.................. $ 0.97 $ 1.22 $ 1.68 $ 1.61 $ -- $ -- $ --
========== ========== ========== ======== ======== ====== =======
Net earnings per share
before termination
agreement expense...... $ 0.09 $ 1.25 $ 1.72 $ 1.32 $ 0.05 $ -- $ --
========== ========== ========== ======== ======== ====== =======
Ratio of earnings to
fixed charges and
preference
dividends(2)........... 1.0x 1.2x -- (3) 1.2x 1.6x 1.6x 9.9x
========== ========== ========== ======== ======== ====== =======
<CAPTION>
At September 30, At December 31,
---------------------- ------------------------------------------------
1998 1997 1997 1996 1995(1) 1994(1) 1993(1)
---------- ---------- ---------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $ 2,204 $ 35,907 $ 16,214 $ 22,610 $ 2,824 $ -- $ --
CMO collateral.......... 1,291,722 694,387 794,893 501,744 -- -- --
Mortgage loans held-for-
investment............. 24,907 106,158 257,717 914 -- -- --
Finance receivables..... 562,429 301,370 533,101 362,312 583,021 3,120 8,135
Investment in Impac
Funding Corporation.... 23,210 24,938 27,122 9,896 866 6,335 5,446
Total assets........... 2,115,748 1,296,147 1,752,812 972,355 613,688 9,365 13,591
CMO borrowings.......... 1,198,074 645,145 741,907 474,513 -- -- --
Reverse repurchase
agreements............. 619,238 399,292 755,559 357,716 567,727 -- --
Other borrowings........ 16,580 -- -- -- -- -- --
Total debt............. 1,833,892 1,044,437 1,497,466 832,229 567,727 -- --
Common stock............ 314,471 244,192 283,012 135,521 42,500 -- --
Total stockholders'
equity................ $ 231,415 $ 238,673 $ 229,030 $129,190 $ 45,236 $6,853 $ 6,006
Book value per common
share.................. $ 9.43 $ 11.76 $ 10.16 $ 9.16 $ 7.10 $ -- $ --
</TABLE>
- --------
(1) Data prior to the Company's IPO is based upon the historical operations of
IWLG as a division of Southern Pacific Bank, and includes the Company's
equity interest in IFC as a division of Imperial Credit Industries, Inc.
(2) Earnings used in computing the ratio of earnings to fixed charges and
preference dividends consist of earnings before income taxes plus fixed
charges. Fixed charges and preference dividends consist of interest
expense, rental expense deemed to represent the interest factor and
preferred stock dividend requirements.
(3) Earnings were insufficient to cover fixed charges. The amount of the
coverage deficiency for the year ended December 31, 1997 was $16.0
million.
18
<PAGE>
IMPAC FUNDING CORPORATION
(in thousands, except Operating Data)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------ ------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues:
Interest income......... $ 40,330 $ 32,004 $ 48,020 $ 32,799 $ 1,249 $ -- $ --
Mark-to-market loss on
mortgage loans......... (21,041) -- -- -- -- -- --
Gain on sale of loans... 18,932 14,378 19,414 7,747 4,135 2,291 5,859
Loan servicing income... 4,521 3,018 4,109 1,250 5,159 4,043 1,377
Gain on sale of
servicing rights....... -- -- -- -- 370 4,188 5,332
Other income............ 374 505 643 -- -- -- --
-------- -------- -------- -------- -------- ------- -------
43,116 49,905 72,186 41,796 10,913 10,522 12,568
-------- -------- -------- -------- -------- ------- -------
Expenses:
Interest expense on
borrowings............. 33,594 28,536 41,628 31,751 1,786 538 127
General and
administrative and
other expense.......... 11,306 7,207 10,047 7,154 3,662 6,333 4,507
Amortization of mortgage
servicing rights....... 4,683 1,896 2,827 613 2,892 2,070 459
Provision for
repurchases............ 366 1,548 3,148 687 -- 655 175
-------- -------- -------- -------- -------- ------- -------
49,949 39,187 57,650 40,205 8,340 9,596 5,268
-------- -------- -------- -------- -------- ------- -------
Earnings (loss) before
income taxes........... (6,833) 10,718 14,536 1,591 2,573 926 7,300
Income taxes (benefit).. (2,885) 4,525 6,136 679 1,069 389 3,066
-------- -------- -------- -------- -------- ------- -------
Net earnings (loss)..... $ (3,948) $ 6,193 $ 8,400 $ 912 $ 1,504 $ 537 $ 4,234
======== ======== ======== ======== ======== ======= =======
Operating Data (in
millions):
Mortgage loan
acquisitions (volume).. $ 1,878 $ 1,850 $ 2,571 $ 1,542 $ 1,133 $ 1,726 $ 2,149
Servicing portfolio at
period-end............. $ 3,366 $ 2,416 $ 3,029 $ 1,550 $ 512 $ 1,868 $ 950
<CAPTION>
At September 30 At December 31,
------------------ ------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Residual interests in
securitizations........ $ -- $ -- $ -- $ 46,949 $ -- $ -- $ --
Mortgage loans held-for-
sale................... 464,921 588,834 620,549 334,104 544,275 -- --
Mortgage servicing
rights................. 19,461 15,615 15,568 8,785 -- 11,453 9,551
Total assets.......... 544,873 677,700 656,944 399,171 552,631 12,097 10,158
Borrowings from IWLG.... 432,659 236,544 454,840 327,422 550,291 -- --
Other borrowings........ 45,864 339,713 148,307 -- -- -- --
Borrowings from
affiliates............. 27,419 55,972 6,198 54,803 -- 5,698 4,657
Total stockholders'
equity............... $ 23,448 $ 25,190 $ 27,396 $ 9,996 $ 875 $ 6,399 $ 5,501
</TABLE>
19
<PAGE>
CERTAIN PRO FORMA FINANCIAL INFORMATION
(in thousands, except per share and ratio data)
The following table shows the pro forma effects the Exchange Offer would
have had on the adjusted financial condition and results of operations of the
Company for the year ended December 31, 1997 and for the nine months ended
September 30, 1998, assuming (i) the issuance of 1,200,000 shares of Series B
Preferred Stock on December 22, 1998 had occurred on the first day of each
such period and (ii) the minimum and maximum number of shares were tendered,
respectively, and were valued at the maximum Exchange Price of $7.00 per
Share.
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998 Year Ended December 31, 1997
------------------------------------------- -----------------------------------------------
Pro Forma Pro Forma
--------------------------------- -----------------------------------
Exchange and Series Exchange and Series
B Preferred B Preferred
Offerings Offerings
---------------------- ----------------------
Minimum Maximum Minimum Maximum
Series B Number of Number of Series B Number of Number of
Preferred Shares Shares Preferred Shares Shares
Actual Offering Exchanged Exchanged Actual Offering Exchanged Exchanged
-------- --------- --------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues:
Interest income.......... $127,591 $127,591 $127,591 $127,591 $109,533 $109,533 $109,533 $109,533
Equity in net earnings
(loss) of Impac Funding
Corporation............. (3,912) (3,912) (3,912) (3,912) 8,316 8,316 8,316 8,316
Equity in net loss of
Impac Commercial
Holdings, Inc........... (998) (998) (998) (998) (239) (239) (239) (239)
Other income............. 2,025 2,025 2,025 2,025 2,249 2,249 2,249 2,249
-------- -------- -------- -------- -------- -------- -------- --------
124,706 124,706 124,706 124,706 119,859 119,859 119,859 119,859
-------- -------- -------- -------- -------- -------- -------- --------
Expenses:
Interest on CMO
borrowings and reverse
repurchase agreements... 94,632 93,902 93,902 93,902 76,577 75,402 75,402 75,402
Interest expense on
debentures payable...... -- -- 737 3,685 -- -- 983 4,913
Writedown on investment
securities available-
for-sale................ 12,825 12,825 12,825 12,825 -- -- -- --
Loss on equity
investment.............. 9,076 9,076 9,076 9,076 -- -- -- --
General and
administrative and other
expense................. 3,908 3,908 3,908 3,908 1,851 1,851 1,851 1,851
Provision for loan
losses.................. 2,099 2,099 2,099 2,099 6,843 6,843 6,843 6,843
Advisory fees............ -- -- -- -- 6,242 6,242 6,242 6,242
Termination agreement
expense................. -- -- -- -- 44,375 44,375 44,375 44,375
-------- -------- -------- -------- -------- -------- -------- --------
122,540 121,810 122,547 125,495 135,888 134,713 135,696 139,626
-------- -------- -------- -------- -------- -------- -------- --------
Net earnings (loss)...... $ 2,166 $ 2,896 $ 2,159 $ (789) $(16,029) $(14,854) $(15,837) $(19,767)
======== ======== ======== ======== ======== ======== ======== ========
Net earnings (loss)...... $ 2,166 $ 2,896 $ 2,159 $ (789) $(16,029) $(14,854) $(15,837) $(19,767)
Less cash dividends on
cumulative convertible
preferred stock......... -- (2,363) (2,363) (2,363) -- (3,150) (3,150) (3,150)
Net earnings (loss)
available to common
stockholders............ $ 2,166 $ 533 $ (204) $ (3,152) $(16,029) $(18,004) $(18,987) $(22,917)
======== ======== ======== ======== ======== ======== ======== ========
Basic and diluted net
earnings (loss) per
common share............ $ 0.09 $ 0.02 $ (0.01) $ (0.17) $ (0.99) $ (1.11) $ (1.24) $ (2.03)
======== ======== ======== ======== ======== ======== ======== ========
Shares used in
computation:
Basic................... 23,669 23,669 22,699 18,669 16,267 16,267 15,267 11,267
======== ======== ======== ======== ======== ======== ======== ========
Diluted................. 23,871 23,871 22,699 18,669 16,267 16,267 15,267 11,267
======== ======== ======== ======== ======== ======== ======== ========
Ratio of earnings to
fixed charges and
preference
dividends(1)............ 1.0x 1.0x -- (2) -- (2) -- (2) -- (2) -- (2) -- (2)
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998 Year Ended December 31, 1997
------------------------------------------- -------------------------------------------
Pro Forma Pro Forma
-------------------------------- --------------------------------
Exchange and Series B Exchange and Series B
Preferred Offerings Preferred Offerings
--------------------- ---------------------
Minimum Maximum Minimum Maximum
Series B Number of Number of Series B Number of Number of
Preferred Shares Shares Preferred Shares Shares
Actual Offering Exchanged Exchanged Actual Offering Exchanged Exchanged
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $ 2,204 $ 14,237 $ 14,237 $ 14,237 $ 16,214 $ 28,247 $ 28,247 $ 28,247
CMO collateral.......... 1,291,722 1,291,722 1,291,722 1,291,722 794,893 794,893 794,893 794,893
Mortgage loans
held-for-investment.... 24,907 24,907 24,907 24,907 257,717 257,717 257,717 257,717
Finance receivables..... 562,429 562,429 562,429 562,429 533,101 533,101 533,101 533,101
Investment in Impac
Funding Corporation.... 23,210 23,210 23,210 23,210 27,122 27,122 27,122 27,122
Total assets........... 2,115,748 2,127,781 2,127,781 2,127,781 1,752,812 1,764,845 1,764,845 1,764,845
CMO borrowings.......... 1,198,074 1,198,074 1,198,074 1,198,074 741,907 741,907 741,907 741,907
Reverse repurchase
agreements............. 619,238 619,351 619,351 619,351 755,559 739,092 739,092 739,092
Other borrowings........ 16,580 -- -- -- -- -- -- --
Debentures payable...... -- -- 5,937 29,687 -- -- 5,937 29,687
Total debt............. 1,833,892 1,817,425 1,823,362 1,847,112 1,497,466 1,480,999 1,486,936 1,510,686
Cumulative convertible
preferred stock........ -- 28,500 28,500 28,500 -- 28,500 28,500 28,500
Common stock............ 314,471 314,471 308,334 284,584 283,012 283,012 276,875 253,125
Total stockholders'
equity................ $ 231,415 $ 259,915 $ 253,778 $ 230,028 $ 229,030 $ 257,530 $ 251,393 $ 227,643
Common shares
outstanding............ 24,550 24,550 23,550 19,550 22,546 22,546 21,546 17,546
Book value per common
share.................. $ 9.43 $ 9.37 $ 9.50 $ 10.23 $ 10.16 $ 10.09 $ 10.28 $ 11.26
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, 1998 December 31, 1997
------------------- -------------------
Minimum Maximum Minimum Maximum
Number of Number of Number of Number of
Shares Shares Shares Shares
Exchanged Exchanged Exchanged Exchanged
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Par value of Debentures issued......... $ 7,000 $35,000 $ 7,000 $35,000
======= ======= ======= =======
Interest expense incurred during period
at 11%................................ $ 578 $ 2,888 $ 770 $ 3,850
Amortization of the discount of
$1,063,000 and $5,313,000 for the
minimum and maximum Shares exchanged,
respectively.......................... 159 797 213 1,063
------- ------- ------- -------
Interest expense adjustment............ $ 737 $ 3,685 $ 983 $ 4,913
======= ======= ======= =======
Par value of Debentures................ $ 7,000 $35,000 $ 7,000 $35,000
Less: Discount 15.2%(3)................ (1,063) (5,313) (1,063) (5,313)
------- ------- ------- -------
Carrying value of Debentures issued.... 5,937 29,687 5,937 29,687
Estimated stock acquisition costs...... 200 200 200 200
------- ------- ------- -------
Common stock acquired.................. $ 6,137 $29,887 $ 6,137 $29,887
======= ======= ======= =======
</TABLE>
- -------
(1) Earnings used in computing the ratio of earnings to fixed charges and
preference dividends consist of earnings before income taxes plus fixed
charges. Fixed charges and preference dividends consist of interest
expense, rental expense deemed to represent the interest factor and
preferred stock dividend requirements.
(2) Earnings were insufficient to cover fixed charges. The amount of the
coverage deficiency for the nine months ended September 30, 1998, (i)
adjusted to give effect to the issuance of 1,200,000 shares of Series B
Preferred Stock and (ii) as further adjusted to give effect to the
exchange of Debentures assuming the minimum and maximum number of Shares,
respectively were tendered at December 31, 1997 was $240,000 and $3.2
million. The coverage deficiency for the year ended December 31, 1997 on
an actual basis and on a pro forma basis was $16.0 million, $18.0 million,
$19.0 million and $22.9 million, respectively.
(3) The discount is equal to the difference between an assumed Average Price
of $5.9375 per share (based upon the closing sales price of the Company's
Common Stock for the two day period ended February 10, 1999) and the
Maximum Exchange Price of $7.00 per Share of the Debentures to be issued
in exchange for the Shares.
21
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) actual
at September 30, 1998, (ii) as adjusted to give effect to the issuance of
1,200,000 shares of the Series B Preferred Stock on December 22, 1998 and
(iii) as further adjusted to give effect to the exchange of Debentures
assuming the minimum and maximum number of Shares were tendered, respectively,
and were valued at the maximum Exchange Price of $7.00 per Share.
<TABLE>
<CAPTION>
At September 30, 1998
----------------------------------------
As Further Adjusted
--------------------
Minimum Maximum
Number of Number of
As Shares Shares
Actual Adjusted Exchanged Exchanged
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Debt:
Reverse repurchase agreements........ $619,238 $619,351 $619,351 $619,351
Other borrowings..................... 16,580 -- -- --
11% Senior Subordinated Debentures
due February 15, 2004............... -- -- 5,937 29,687
-------- -------- -------- --------
Total debt......................... 635,818 619,351 625,288 649,038
-------- -------- -------- --------
Stockholders' Equity:
Preferred Stock; $0.01 par value;
10,000,000 shares authorized; none
issued and outstanding (actual);
1,200,000 shares Series B Preferred
Stock issued and outstanding (as
adjusted and as further adjusted)... -- 28,500 28,500 28,500
Common Stock; $0.01 par value;
50,000,000 shares authorized;
24,549,840 shares issued and
outstanding (actual and as
adjusted); 23,549,840 and 19,549,840
issued and outstanding (as further
adjusted, minimum and maximum
respectively)....................... 314,471 314,471 308,334 284,584
Retained earnings.................... (1,668) (1,668) (1,668) (1,668)
Cumulative dividends declared........ (79,080) (79,080) (79,080) (79,080)
Other stockholders' equity........... (2,308) (2,308) (2,308) (2,308)
-------- -------- -------- --------
Total stockholders' equity......... 231,415 259,915 253,778 230,028
-------- -------- -------- --------
Total capitalization............... $867,233 $879,266 $879,066 $879,066
======== ======== ======== ========
</TABLE>
22
<PAGE>
DISTRIBUTION POLICY AND PRICE RANGE OF COMMON STOCK
The Company's Common Stock is listed on the AMEX under the symbol IMH. The
following table sets forth for the high and low closing sales prices for the
Company's Common Stock as reported by the AMEX for the periods indicated:
<TABLE>
<CAPTION>
Price Range
-------------
High Low
------ ------
<S> <C> <C>
1997(1)
First Quarter................................................. $17.67 $14.58
Second Quarter................................................ 18.67 13.25
Third Quarter................................................. 19.17 16.25
Fourth Quarter................................................ 18.58 14.69
1998
First Quarter................................................. $18.25 $15.88
Second Quarter................................................ 17.75 14.00
Third Quarter................................................. 16.88 10.00
Fourth Quarter................................................ 11.75 3.38
1999
First Quarter (through February 23)........................... $ 6.00 $ 4.50
</TABLE>
- --------
(1) Adjusted to reflect a 3-for-2 common stock split effective November 24 ,
1997.
On February 23, 1999, the last reported sale price of the Common Stock on
the AMEX was $5.75 per share. As of February 18, 1999, there were
approximately 875 holders of record (including holders who are nominees for an
undetermined number of beneficial owners) of the Company's Common Stock.
In October 1998, the Board of Directors authorized the purchase from time
to time of up to $5.0 million of Shares at management's discretion in open
market purchases. Through February 10, 1999, the Company had purchased
approximately 184,100 Shares for $998,700 pursuant to this authorization. No
such Shares will be purchased by the Company during the pendency of the
Exchange Offer or until ten business days following the expiration or
termination of the Exchange Offer.
Pursuant to the Company's Dividend Reinvestment and Stock Purchase Plan
(the "DRI Plan"), stockholders can acquire additional Shares by reinvesting
their cash dividends at 97% (subject to change by the Company) of the average
high and low market prices as reported on the AMEX on the Investment Date (as
described in the DRI Plan) to the extent Shares acquired pursuant to the DRI
Plan are issued by the Company, rather than being acquired on the open market.
Stockholders may also purchase additional Shares through the cash investment
option to purchase Shares at 97% (subject to change by the Company) of the
average high and low market prices as reported on the AMEX during the three
trading days preceding the Investment Date (as described in the DRI Plan).
To maintain its qualification as a REIT, the Company must make annual
distributions to stockholders of at least 95% of its taxable income. While the
Company has historically declared quarterly dividends (with the exception that
no dividend was declared for the quarter ended December 31, 1998), a
substantial portion of the Company's earnings, as calculated according to
GAAP, were derived from the Company's taxable subsidiary, IFC. However, the
Company is not required to distribute IFC's earnings unless IFC distributes
such income as dividends to the Company. IFC intends to retain its future
earnings to rebuild its capitalization that deteriorated as a result of 1998
third and fourth quarter losses. This decision effectively reduces the amount
of taxable income the Company will be required to distribute and therefore
reduces the amount of dividends that will be paid to its stockholders.
In addition, in December 1997, the Company terminated the management
agreement with its manager, ICAI, and paid ICAI consideration with a value of
approximately $44.4 million as a termination fee. For each of
23
<PAGE>
the years 1999, 2000 and 2001, the Company intends to reduce its taxable
income by offsetting approximately $11.0 million of such termination fee
against its taxable income, which should reduce the amount of dividends
required to be paid to the Company's stockholders and should allow the Company
to retain earnings for the first $11.0 million earned by the Company over each
of the next three years, or $0.35 per share based upon 31,389,571 Shares
outstanding as of February 3, 1999, on a fully diluted basis giving effect to
the full conversion of Series B Preferred Stock and assuming the full exercise
of all vested options outstanding on that date.
Any taxable income remaining after the distribution of the regular
quarterly or other dividends will be distributed annually on or prior to the
date of the first regular quarterly dividend payment date of the following
taxable year, at the discretion of the Board of Directors. All distributions
in excess of those required for the Company to maintain REIT status will be
made by the Company at the discretion of the Board of Directors and will
depend on the taxable earnings of the Company, the financial condition of the
Company, and such other factors as the Board of Directors deems relevant. The
Board of Directors has not established a minimum distribution level. The
following table sets forth the dividends paid or declared by the Company:
<TABLE>
<CAPTION>
Period Covered Stockholder Record Date Per Share Dividend Amount(1)
-------------- ----------------------- ----------------------------
<S> <C> <C>
Quarter ended March 31, 1996........... April 24, 1996 $0.26
Quarter ended June 30, 1996............ June 13, 1996 0.30
Quarter ended September 30, 1996....... September 30, 1996 0.35
Special Dividend....................... November 15, 1996 0.28
Quarter ended December 31, 1996........ December 31, 1996 0.37
Quarter ended March 31, 1997........... April 1, 1997 0.39
Quarter ended June 30, 1997............ September 15, 1997 0.40
Quarter ended September 30, 1997....... September 15, 1997 0.43
Quarter ended December 31, 1997........ December 31, 1997 0.46
Quarter ended March 31, 1998........... April 9, 1998 0.48
Quarter ended June 30, 1998............ July 1, 1998 0.49
Quarter ended September 30, 1998(2).... October 9, 1998 0.49
</TABLE>
- --------
(1) Adjusted to reflect 3-for-2 common stock split effective November 24,
1997.
(2) The date of payment of the dividend was delayed until January 6, 1999 and
the Company paid an additional cash dividend of $0.0039 per share in
interest to stockholders of record on October 9, 1998. The Company did not
declare a dividend for the fourth quarter of 1998 and does not expect to
declare a material dividend for the first quarter of 1999.
Distributions to stockholders will generally be taxable as ordinary income,
although a portion of such distributions may be designated by the Company as
capital gain or may constitute a tax-free return of capital. Of the total
dividends paid during 1998 and 1997, approximately $8.9 million and $5.5
million, respectively, represented a tax-free return of capital. The Company
annually furnishes to its stockholders a statement setting forth distributions
paid during the preceding year and their characterization as ordinary income,
capital gains or return of capital.
24
<PAGE>
THE COMPANY
Description of Operations
The Company is a mortgage loan investment company that originates,
purchases, sells, securitizes and invests in residential mortgage loans. To
date, the Company has purchased and invested primarily in non-conforming
residential mortgages. Non-conforming residential mortgage loans are
residential mortgages that do not qualify for purchase by government sponsored
agencies such as the Federal National Mortgage Association and the Federal
Home Loan Mortgage Corporation. The Company conducts its business through
three operations:
. its conduit operations purchases, sells and securitizes residential
mortgages;
. its long-term investment operations invests in mortgages and securities
backed by mortgages; and
. its warehouse lending operations provides warehouse and repurchase
financing facilities to originators of mortgage loans.
The Company chooses to be taxed at the corporate level as a real estate
investment trust, or a "REIT," for federal income tax purposes. This generally
allows the Company to pass through its income to stockholders without payment
of federal income tax.
Conduit Operations
The Company's conduit operations primarily purchases non-conforming
mortgage loans from its network of third party correspondents. The Company
subsequently securitizes or sells these loans to permanent investors,
including its long-term investment operations. The Company competes
effectively with other non-conforming mortgage loan conduits by designing non-
conforming mortgage loans which suit the needs of its correspondent loan
originators and their borrowers. The Company provides an efficient loan
purchasing process, flexible purchase commitment options and competitive
pricing. The Company's conduit operations:
. generates revenues from securitizations and loan sales to third party
investors; and
. supplies its long-term investment operations with non-conforming
mortgage assets.
Long-Term Investment Operations
The Company's long-term investment operations invests in mortgage loans and
securities backed by mortgages. To date, the Company's long-term investment
operations has invested primarily in non-conforming residential mortgage
assets and, to a lesser extent, in second mortgage loans. The Company earns
income from the net interest income that it receives on its mortgage assets.
The Company finances the purchase of its mortgage assets with:
. borrowings under mortgage financing facilities;
. proceeds from the sale of its loans on a whole loan basis or through
securitization; and
. its own capital.
The Company's conduit operations helps its investment objectives by selling to
the Company's long-term investment operations non-conforming residential
mortgage assets at similar prices paid by institutional investors and other
third parties.
Warehouse Lending Operations
The Company's warehouse lending operations provides warehouse and
repurchase financing facilities to the Company's conduit operations and other
third party mortgage banks. Third party mortgage banks use these financing
facilities to finance their purchase of mortgage loans until they are able to
sell the loans. The Company earns income from interest paid to it by these
third party entities under these financing facilities.
25
<PAGE>
Recent Developments
Market Turmoil in late 1998
During the third quarter of 1998, the Company experienced a significant
decrease in its liquidity because of the deterioration of the mortgage-backed
securities market and margin calls its lenders made on the Company's
financings and warehouse facilities. Margin calls result when lenders deem the
market value of the collateral securing financings to be below the amount of
borrowings and require the borrower either to reduce the amount of borrowings
under the financing facilities or to provide them with additional equity or
collateral to secure the borrowings. The Company delayed the payment of its
third quarter dividend and sold mortgage loans and mortgage-backed securities
as a result of these margin calls. The delayed dividend was paid on January 6,
1999. Future margin calls may adversely affect the Company's ability to pay
dividends in future periods. Depending upon the state of the mortgage
industry, any future margin calls and the terms of any sale of mortgage
assets, the Company may incur future losses.
The Company reduced its exposure to margin calls on its existing borrowings
under its current warehouse lines and repurchase facilities by selling
mortgage loans and paying down outstanding borrowings on these facilities with
the proceeds. In the fourth quarter of 1998, the Company made changes in its
business strategy to compete more effectively in the new market environment
and increase its liquidity by:
. raising interest rates on its loan programs;
. decreasing and capping the amount of premiums paid on its loan
acquisitions; and
. reducing its staffing levels by approximately 25%.
In the fourth quarter of 1998, the Company sold $250.4 million of mortgage
loans and $8.9 million of mortgage-backed securities, which increased its
liquidity by $13.6 million, after it paid down borrowings related to those
assets. However, the Company took a $41.7 million non-cash charge in the third
quarter of 1998 for certain write downs of its mortgage loans, equity
investments and investment securities available-for-sale portfolios. Largely
as a result of these charges, the Company incurred a net loss of $20.6 million
for the quarter ended September 30, 1998 and a net loss of approximately $8.1
million for the quarter ended December 31, 1998, primarily the result of
losses on the sale of whole loans which the Company had accumulated for
securitization and an impairment charge to the Company's mortgage loan
servicing portfolio. The Company chose to sell out of its mortgage loan
positions and protect stockholder value rather than continue to expose the
Company to further market risk while accumulating these loans for
securitization. The Company did not declare a dividend for the quarter ended
December 31, 1998 and does not expect to declare any material dividend for the
first quarter of 1999.
The Company's loan originations decreased in the fourth quarter of 1998 and
the Company expects that loan originations may further decrease in the first
quarter of 1999. The Company has reduced its staff by approximately 25% in
response to these lowered expectations. Even with the Company's sale of
mortgage loans and mortgage-backed securities and the recent staffing
reductions, management does not believe that the Company's current operating
cash flows are sufficient both to fund growth of the Company's operations at
historical levels and to pay cash dividends, if any, at historical levels.
Letter of Intent to Acquire Thrift and Loan Charter
Due to the turmoil in the mortgage industry, the Company felt it was
prudent to take steps to alleviate potential future liquidity risks. As a
result, in December 1998 the Company signed a letter of intent to acquire a
California chartered, federally insured, thrift and loan. The acquisition is
contingent upon the execution of a definitive agreement and obtaining
satisfactory regulatory approvals. It is expected that the acquisition and
regulatory approval process will take between three to six months. Upon the
consummation of the transaction, the Company intends to merge its conduit
operations into the thrift and loan charter and operate its mortgage banking
and selected investment activities from the merged company. The Company
intends to initially capitalize
26
<PAGE>
the thrift with an estimated $25.0 million. The acquisition of the thrift is
expected to reduce the Company's reliance on warehouse lines of credit and
reverse repurchase agreements through other commercial banks and investment
banks. In addition, it will give the merged company access to low cost funds
and make available borrowings from the Federal Home Loan Bank.
Sale of Preferred Stock
In a further effort to increase liquidity, in December 1998 the Company
completed the sale of 1,200,000 shares of Series B Preferred Stock at $25.00
per share. Each share of Series B Preferred Stock is initially convertible
into 5.050505 Shares. Dividends on the Series B Preferred Stock accumulate
from the date of issuance and are payable quarterly, in cash or Common Stock,
starting April 27, 1999. The dividend rate per share will be the greater of
$0.656250 or the quarterly cash dividend declared on the number of shares of
Common Stock into which a share of Series B Preferred Stock is convertible.
The Series B Preferred Stock is redeemable, under certain circumstances, at a
price of $25.00 per share, plus accumulated and unpaid dividends, beginning
December 2000.
The proceeds from the sale of the Series B Preferred Stock were used to
reduce outstanding indebtedness under the Company's financing facilities and
for general corporate purposes, including the payment of the Company's $12.0
million dividend declared in September 1998 and paid in January 1999.
Agreement to Sell Future Mortgage Loan Production
In February 1999, the Company executed a final Master Agreement to sell up
to $1.0 billion of its future mortgage loan production to a major
institutional investor over the next year. The Company's first delivery of
mortgage loans under the new agreement will begin in February 1999, with the
first settlement expected to take place no later than March 1999. The
transaction is a servicing retained agreement, which gives the Company a
guaranteed pricing spread and cash gains plus the value of the servicing
rights created.
----------------
The Company is located at 20371 Irvine Avenue, Santa Ana Heights,
California 92707, telephone number (714) 556-0122.
27
<PAGE>
BACKGROUND, PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Company completed its initial public offering in November 1995 with the
sale of 3,750,000 shares of its Common Stock at a price of $8.67 per share.
Following the initial public offering, the price of the Company's Common Stock
increased significantly, to a high of $19.17 per share in the fourth quarter
of 1997, reflecting a stock market with generally increasing stock prices, a
healthy mortgage lending and finance industry, and growth in the Company's
revenues and earnings. In recent periods, however, the mortgage lending and
finance industry has encountered difficulties, with several mortgage lending
companies announcing downward adjustments to their financial statements or
projected operating results, violations of loan covenants, related litigation,
and other events. In addition, certain of these companies have filed for
bankruptcy protection. These difficulties have corresponded with a general
decline in the stock prices of companies involved in this industry. Consistent
with this market decline, the price of the Company's Common Stock has
decreased to $5.75 as of February 23, 1999, a price that is toward the low end
of its 52-week trading range.
The Company does not believe that recent prices reflect the underlying
value of its Common Stock. In this regard, in establishing an Exchange Price
that may be significantly higher than the market price of the Shares, the
Company considered the following factors, among others:
. the closing sales price of $5.75 per share as of February 23, 1999, the
last full trading day prior to the announcement of the Exchange Offer,
represents a 70% decline from its all-time high of $19.17 in the fourth
quarter of 1997 and a 69% decline from its high of $18.25 in 1998. See
"Distribution Policy and Price Range of Common Stock";
. the recent share price reflects a discount of approximately 39% to the
Company's book value per share as of September 30, 1998. See "Summary
Selected Consolidated Financial Data"; and
. the Company's potential for earnings in the future.
The principal purposes of the Exchange Offer are to provide existing
stockholders the opportunity to obtain an alternative return on their
investment in the Company and to allow the Company to reduce the number of
Shares outstanding, thereby increasing the Company's overall book value per
share and creating the potential for increased earnings per share in the
future. The Company believes these developments could have a positive
influence on the price of the Shares. The increased indebtedness resulting
from the Exchange Offer, however, will increase the Company's debt service
requirements and could negatively affect earnings per share. See "Risk
Factors--Risks Relating to Retaining Shares--No Assurance of Increased
Earnings per Share," "--Risks Relating to Debentures--Increased Leverage and
Debt Service Obligations" and "Certain Pro Forma Financial Information."
Holders of Shares electing to participate in the Exchange Offer will
realize the following benefits:
. the Debentures will bear interest at 11% per annum, payable quarterly on
February 15, May 15, August 15 and November 15, or in the event such
15th day is not a business day, then on the business day immediately
following such 15th day, commencing May 15, 1999, until the Debentures
are paid in full; and
. the Debentures, although subordinated in right of payment to all other
existing and future Senior Indebtedness of the Company and effectively
subordinated to all Indebtedness of the Company's subsidiaries,
represent a claim on the Company's assets senior to any claim of the
holders of the Company's Common Stock.
Notwithstanding the benefits to tendering stockholders summarized above,
holders of Shares contemplating the Exchange Offer should take into account
the following considerations:
. although the Company intends to use its best efforts to list the
Debentures on the AMEX (or, in the event the Company is unable to list
the Debentures on the AMEX, on another exchange of the Company's
choosing), no assurance can be given that the Company will be able to
list the Debentures
28
<PAGE>
on any exchange or, whether or not the Debentures are listed, that an
active trading market will develop;
. commencing on February 15, 2001, the Company has the right to redeem the
Debentures at any time without penalty or premium by paying the unpaid
principal amount and accrued interest on the Debentures;
. tendering stockholders will be subject to certain tax consequences;
. the Debentures will be unsecured obligations of the Company and will be
subordinated in right of payment to all existing and future Senior
Indebtedness which will include borrowings under the Company's
collateralized mortgage obligations, warehouse line and reverse
repurchase agreements and effectively subordinated to all Indebtedness
of the Company's subsidiaries;
. tendering stockholders receiving Debentures will relinquish the right to
share in any capital appreciation of the Shares tendered; and
. unlike holders of Common Stock, holders of the Debentures will have no
rights to vote on matters submitted to the Company's stockholders.
For a discussion of certain risk factors which should be taken into account
in considering the Exchange Offer, see "Risk Factors."
29
<PAGE>
THE EXCHANGE OFFER
General
The Company hereby offers to exchange, upon the terms and subject to the
conditions set forth herein and in the accompanying Letter of Transmittal, up
to $35,000,000 aggregate principal amount of its Debentures for up to
5,000,000 Shares. The Company will determine the Exchange Price of no greater
than 120% nor less than 105% of the average closing sales price of the Shares
for the two trading day period ending two trading days prior to the Expiration
Date. The maximum Exchange Price will be $7.00 per share. The Company will
exchange Shares validly tendered at or below the Exchange Price for a
principal amount of Debentures equal to the number of Shares tendered
multiplied by the Exchange Price.
The Exchange Offer is contingent on the tender of at least 1,000,000 Shares
at or below the Exchange Price. If more than 5,000,000 Shares are tendered at
or below the Exchange Price, the Company will accept no more than 5,000,000
Shares, to be allocated among the tendering stockholders on a pro rata basis.
The Company reserves the right, in its sole discretion, to accept a greater or
lesser number of Shares pursuant to the Exchange Offer. The Exchange Offer is
subject to a number of additional conditions. See "--Conditions to and
Amendment of the Exchange Offer" below. As of February 3, 1999, there were
24,766,465 Shares outstanding. In addition, as of February 3, 1999, 6,060,606
Shares were issuable upon conversion of the Series B Preferred Stock, and
562,500 Shares were issuable upon exercise of outstanding vested stock
options. The Company will retire any Shares it receives pursuant to the
Exchange Offer.
Stockholders who do not tender will retain their Shares and stockholders
whose validly tendered Shares are accepted for exchange will receive
Debentures with the following rights compared to those associated with the
ownership of Common Stock.
<TABLE>
<CAPTION>
Common Stock Debentures
------------ ----------
<S> <C>
Equity; pro rata claim to assets of the Debt; right to receive specified principal
Company after payment of all debt amount with senior claim to assets of the
obligations, plus right to share in capital Company compared to holders of equity, but
appreciation. subordinated to all other senior debt
obligations of the Company (including its
subsidiaries), plus the right to receive
interest, but no right to capital
appreciation.
No interest payable on Common Stock, Interest at 11% per annum, payable
although dividends are possible. quarterly in cash on February 15, May 15,
August 15 and November 15, or, in the event
such 15th day is not a business day, then
on the business day immediately following
such 15th day, commencing May 15, 1999.
Voting rights on all matters submitted to No voting rights on matters submitted to
stockholders. stockholders.
Shares are listed on AMEX and are subject Although the Company intends to use its
to established trading market. best efforts to list the Debentures on the
AMEX (or, in the event the Company is
unable to list the Debentures on the AMEX,
on another exchange of the Company's
choosing), no assurance can be given that
the Company will be able to list the
Debentures on any exchange or, whether or
not the Debentures are listed, that an
active trading market will develop.
</TABLE>
The foregoing table is set forth for comparative purposes only and does not
take into account all factors relating to a comparison of the Shares to the
Debentures, nor does it take into account any factors relating to the
30
<PAGE>
tax consequences of accepting the Exchange Offer. For a more complete
description of the Debentures and the Common Stock, see "Description of the
Debentures" herein and "Description of Capital Stock" incorporated by
reference from the Company's Registration Statement on Form 8-A, filed October
23, 1995 and October 14, 1998, as amended. See also "Certain United States
Federal Income Tax Consequences" herein.
Tendering stockholders will not be obligated to pay brokerage commissions
or fees or, subject to Instruction 7 of the Letter of Transmittal, transfer
taxes with respect to the exchange of Shares for Debentures pursuant to the
Exchange Offer. The Company will pay all charges and expenses of the Exchange
Agent, the Information Agent, and the Trustee in connection with the Exchange
Offer. See "--Payment of Expenses."
Expiration Date, Extensions, Termination and Amendments
The Exchange Offer will terminate at 5:00 p.m., New York City time, on
March 26, 1999, unless extended by the Company in its sole discretion. During
any extension of the Exchange Offer, all Shares previously tendered and not
yet exchanged will remain subject to the Exchange Offer (subject to withdrawal
rights specified herein) and may be accepted for exchange by the Company. The
later of 5:00 p.m., New York City time, on March 26, 1999, or the latest time
and date to which the Exchange Offer may be extended, is referred to herein as
the "Expiration Date."
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time for which the Exchange Offer is to remain open by
giving oral or written notice to the Exchange Agent of such extension prior to
9:00 a.m., New York City time, on the business day after the previously
scheduled Expiration Date.
The Company also expressly reserves the right to terminate the Exchange
Offer and not accept for exchange any Shares not theretofore accepted for
exchange upon the occurrence of any of the events set forth herein under "--
Conditions to and Amendment of the Exchange Offer" by giving oral or written
notice of such termination to the Exchange Agent. Upon termination of or
withdrawal of the Exchange Offer, the Company will promptly return the Shares
deposited by or on behalf of holders thereof. In addition, the Company
expressly reserves the right to amend the Exchange Offer by giving oral or
written notice of such amendment to the Exchange Agent.
Any such extension, termination or amendment will be followed as promptly
as practicable by public announcement thereof, such announcement in the case
of an extension to be issued no later than 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date. Without
limiting the manner in which the Company may choose to make such public
announcement, the Company shall not, unless otherwise required by law, have an
obligation to publish, advertise or otherwise communicate any such public
announcement other than by making a release to the Dow Jones News Service.
How to Tender
The Exchange Offer will be conducted such that each stockholder will be
able to specify the Exchange Price (in increments of 1%) that such stockholder
is willing to accept in exchange for his or her Shares. Whether and to what
extent a tendering stockholder will have his or her tendered Shares accepted
for exchange in the Exchange Offer will depend on how the Exchange Price
specified by such stockholder compares to Exchange Prices specified by other
tendering stockholders. The Exchange Price specified by each tendering
stockholder must be no greater than 120% nor less than 105% of the Average
Price. The Company will, upon the terms and subject to the conditions of the
Exchange Offer, determine the final Exchange Price, taking into account the
number of Shares tendered and the Exchange Prices specified by tendering
stockholders. The Company will select as the final Exchange Price the lowest
Exchange Price no greater than 120% nor less than 105% of the Average Price
which would permit the maximum number of Shares to be exchanged in the
Exchange Offer, provided that the Exchange Price shall not exceed $7.00 per
share. The final Exchange Price will be announced by press release by the
Company promptly after the Expiration Date.
31
<PAGE>
Except as set forth below, for a stockholder to validly tender Shares
pursuant to the Exchange Offer, certificates representing the Shares (or a
confirmation of a book-entry transfer of the Shares into the Exchange Agent's
account at DTC as described below), together with a properly completed and
duly executed Letter of Transmittal or manually signed facsimile thereof, with
any required signature guarantees and any other required documents, must be
transmitted to and received by the Exchange Agent on or prior to the
Expiration Date at one of the addresses specified below under "--Exchange
Agent," or the guaranteed delivery procedure described below must be complied
with. LETTERS OF TRANSMITTAL AND CERTIFICATES REPRESENTING THE SHARES SHOULD
NOT BE SENT TO THE COMPANY OR TO THE INFORMATION AGENT. As specified in the
Letter of Transmittal, each stockholder desiring to tender Shares pursuant to
the Exchange Offer must properly indicate in the section captioned "Tender
Price" in the Letter of Transmittal the Exchange Price at which such
stockholder's Shares are being tendered. Stockholders desiring to tender
Shares at more than one Exchange Price must complete separate Letters of
Transmittal for each Exchange Price at which Shares are being tendered, except
that the same Shares cannot be tendered (unless properly withdrawn previously
in accordance with the terms of the Exchange Offer) at more than one Exchange
Price. IN ORDER TO VALIDLY TENDER SHARES, ONE AND ONLY ONE EXCHANGE PRICE BOX
MUST BE CHECKED IN THE APPROPRIATE SECTION ON EACH LETTER OF TRANSMITTAL.
STOCKHOLDERS WISHING TO MAXIMIZE THE POSSIBILITY THAT THEIR SHARES WILL BE
EXCHANGED AT THE EXCHANGE PRICE SHOULD INDICATE THAT THEIR MINIMUM EXCHANGE
PRICE IS 105% OR CHECK THE BOX ON THE LETTER OF TRANSMITTAL MARKED "SHARES
TENDERED AT EXCHANGE PRICE DETERMINED BY DUTCH AUCTION." Checking this box may
result in an exchange of the Shares so tendered at the minimum Exchange Price
of 105%.
It is a violation of Rule 14e-4 promulgated under the Exchange Act for a
person to tender Shares for such person's own account unless the person so
tendering (i) owns such Shares or (ii) owns other securities convertible into
or exchangeable for such Shares or owns an option, warrant or right to
purchase such Shares and intends to acquire Shares for tender by conversion or
exchange of such securities or by exercise of such option, warrant or right.
Rule 14e-4 provides a similar restriction applicable to the tender or
guarantee of a tender on behalf of another person.
A tender of Shares made pursuant to any method of delivery set forth herein
and the acceptance by the Company for exchange of such Shares pursuant to the
procedures described herein and in the Letter of Transmittal will constitute a
binding agreement between the tendering stockholder and the Company upon the
terms and subject to the conditions of the Exchange Offer, including the
tendering stockholder's representation that (i) such stockholder owns the
Shares being tendered within the meaning of Rule 14e-4 promulgated under the
Exchange Act and (ii) the tender of such Shares complies with Rule 14e-4.
Signatures on a Letter of Transmittal must be guaranteed by an Eligible
Institution unless the Shares tendered pursuant to the Letter of Transmittal
are tendered (i) by the registered holder of the Shares tendered therewith and
such holder has not completed the box entitled "Special Issuance Instructions"
or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for
the account of an Eligible Institution. An "Eligible Institution" means a
participant in the Security Transfer Agents Medallion Program or the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program. A verification by a notary public alone is not acceptable.
If Shares are registered in the name of a person other than the signer of the
Letter of Transmittal, the certificates representing the Shares must be
endorsed by, or be accompanied by, a written instrument or instruments of
transfer or exchange in form satisfactory to the Company, duly executed by the
registered holder, with the signature thereon guaranteed as aforesaid.
If the Letter of Transmittal or Notice of Guaranteed Delivery or any
certificates or stock powers are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such persons should
so indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
The Exchange Agent will establish an account with respect to the Shares at
DTC within two business days of the date of this Offering Circular and any
financial institution which is a participant in the DTC system may
32
<PAGE>
make book-entry delivery of the Shares by causing DTC to transfer such Shares
into the Exchange Agent's account in accordance with DTC's procedure for such
transfer. However, although delivery of Shares may be effected through book-
entry transfer into the Exchange Agent's account at DTC, the Letter of
Transmittal (or manually signed facsimile thereof), with any required
signature guarantees and any other required documents, must in any case be
transmitted to and received or confirmed by the Exchange Agent prior to the
Expiration Date at one of the addresses specified below under "--Exchange
Agent", or the guaranteed delivery procedure described below must be complied
with. Delivery of documents to DTC in accordance with DTC's procedures does
not constitute delivery to the Exchange Agent.
Tendering stockholders are required under federal income tax law to provide
a correct Taxpayer Identification Number on a Substitute Form W-9 which is
included, together with guidelines relating to the form, with the Letter of
Transmittal. Failure to complete and return this Substitute Form W-9 to the
Exchange Agent may subject a stockholder to a $50 penalty imposed by the
Internal Revenue Service (the "Service") and will result in backup withholding
of 31% on interest and other payments with respect to the Debentures and cash
in lieu of fractional interests in the Debentures.
The method of delivery of certificates representing the Shares and all
other required documents is at the election and risk of the tendering
stockholder but delivery by registered mail with return receipt requested,
properly insured, is recommended.
Guaranteed Delivery. If a stockholder desires to tender Shares and
certificates representing the Shares are not immediately available or time
will not permit such holder's Letter of Transmittal, certificates representing
the Shares or other required documents to reach the Exchange Agent before the
Expiration Date, such holder's tender may be effected if:
(a) such tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent has received a
telegram, facsimile transmission or letter from such Eligible
Institution setting forth the name and address of the holder of such
Shares and the number of the Shares tendered and stating that the
tender is being made thereby and guaranteeing that, within three AMEX
trading days after the date of such telegram, facsimile transmission or
letter, the Letter of Transmittal, together with certificates
representing the Shares (or confirmation of book-entry transfer of such
Shares into the Exchange Agent's account with DTC as described above)
and any other documents required by the Letter of Transmittal, will be
deposited by such Eligible Institution with the Exchange Agent; and
(c) such Letter of Transmittal and certificates representing the Shares, in
proper form for transfer (or confirmation of book-entry transfer of
such Shares into the Exchange Agent's account at DTC as described
above), and other required documents are received by the Exchange Agent
within three AMEX trading days after the date of such telegram,
facsimile transmission or letter.
Dividend Reinvestment and Stock Purchase Plan. As of February 3, 1999, the
DRI Plan owned 1,758,493 Shares. Participants in the DRI Plan will tender
their Shares by completing the Letter of Transmittal and forwarding it to the
Exchange Agent. The Information Agent will make available to the participants
whose accounts are credited with Shares under the DRI Plan all documents
furnished to stockholders generally in connection with the Exchange Offer.
Each participant may direct that all, some or none of the Shares credited to
the participant's account under the DRI Plan and the Exchange Price at which
such participant's Shares are to be tendered. Participants in the DRI Plan are
urged to read the Letter of Transmittal and related materials carefully.
The acceptance by a stockholder of the Exchange Offer pursuant to one of
the procedures set forth above will constitute an agreement between the
stockholder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the accompanying Letter of Transmittal. The
Company will accept Shares by giving notice thereof to the Exchange Agent.
33
<PAGE>
All questions as to the form of all documents and the validity (including
time of receipt) and acceptance of all tenders will be determined by the
Company, in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
not in proper form or the acceptance of which would, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the absolute right
to waive any of the conditions of the Exchange Offer or any defect or
irregularity in the tender of any of the Shares. The Company's interpretation
of the terms and conditions of the Exchange Offer (including the Letter of
Transmittal and the instructions thereto) will be final. No tender of Shares
will be deemed to have been properly made until all defects and irregularities
have been cured or waived. Neither the Company, the Information Agent, the
Exchange Agent nor any other person shall be under any duty to give
notification of any defects or irregularities in tenders, nor shall any of
them incur any liability for failure to give such notification.
Withdrawal Rights
All tenders duly and validly made are irrevocable, except that Shares
tendered pursuant to the Exchange Offer may be withdrawn prior to the
Expiration Date, and, unless theretofore accepted for exchange as provided in
the Exchange Offer, may also be withdrawn after 5:00 p.m., New York City time,
on April 21, 1999.
To be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be received by the Exchange Agent on a timely basis at one of
the addresses specified under "--Exchange Agent." Any notice of withdrawal
must specify the name of the person having tendered the Shares to be
withdrawn, the names in which the Shares are registered if different from that
of the tendering stockholder and the number of Shares to be withdrawn. If
certificates representing the Shares have been physically delivered to the
Exchange Agent, then prior to the release of such certificates, the tendering
stockholder must also submit the certificate number of the certificates
representing the Shares to be withdrawn and the signature on such holder's
notice of withdrawal must be guaranteed by an Eligible Institution. If
certificates representing the Shares have been delivered pursuant to the book-
entry procedures set forth above under "--How to Tender," any notice of
withdrawal must specify the name and number of the participant's account at
DTC to be credited with the withdrawn Shares. All questions as to validity,
form and eligibility (including time of receipt) of notices of withdrawal will
be determined by the Company, in its sole discretion, which determination
shall be final and binding. Any Shares effectively withdrawn will be deemed
not to have been duly tendered for purposes of the Exchange Offer.
Participants in the DRI Plan should notify the Exchange Agent in the event
that they wish to deliver a notice of withdrawal, and should specify in such
notice of withdrawal that the Shares to be withdrawn pursuant thereto are
credited to such participant's account in the DRI Plan.
None of the Company, the Information Agent or any other person will be
under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give such
notification. However, the Exchange Agent will attempt to correct any
defective tenders by contacting the tendering stockholder. Withdrawals of
tenders of Shares may not be rescinded, and any Shares properly withdrawn will
thereafter be deemed not validly tendered for purposes of the Exchange Offer.
However, withdrawn Shares may be returned by following one of the procedures
described under "--How to Tender" at any time prior to the Expiration Date.
Acceptance of Shares for Exchange; Delivery of Debentures to Be Exchanged
As soon as practicable after the Expiration Date, the Company will, upon
the terms and subject to the conditions of the Exchange Offer, determine the
lowest Exchange Price not greater than 120% nor less than 105% of the Average
Price that will allow it to exchange 5,000,000 Shares validly tendered at or
below the Exchange Price and not withdrawn (or such lesser number of Shares as
are validly tendered) for Debentures. For purposes of the Exchange Offer, the
Company will be deemed to have accepted for exchange, subject to proration,
Shares that are validly tendered at or below the Exchange Price and not
withdrawn when, as and if it gives oral or written notice to the Exchange
Agent of its acceptance of such Shares for exchange pursuant to the Exchange
Offer.
34
<PAGE>
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Shares validly tendered and not withdrawn will be
made promptly after the Expiration Date. For purposes of the Exchange Offer,
the Company will be deemed to have accepted for exchange validly tendered
Shares at or below the Exchange Price when, as and if the Company has given
oral or written notice thereof to the Exchange Agent. The Exchange Agent will
act as agent for the tendering stockholders for the purposes of receiving
Debentures from the Company and delivering such securities to such
stockholders. If the Company should extend the Exchange Offer or be delayed in
consummation of the Exchange Offer for any reason, then, without prejudice to
the Company's rights under the Exchange Offer, the Exchange Agent acting on
behalf of the Company may retain tendered Shares, and such Shares may not be
withdrawn, subject to the withdrawal rights of tendering stockholders set
forth above under "--Withdrawal Rights." Tendered Shares not accepted for
exchange by the Company because of an invalid tender, the termination of the
Exchange Offer as a result of the existence of a condition set forth below
under "--Conditions to and Amendment of the Exchange Offer," or for any other
reason, will be returned without expense to the tendering stockholders (or, in
the case of Shares delivered by book-entry transfer within DTC, will be
credited to the account maintained within DTC by the participant in the DTC
system who delivered such Shares) as promptly as practicable following the
expiration or termination of the Exchange Offer.
Delivery of Debentures in exchange for Shares tendered pursuant to the
Exchange Offer will be made by the Company to the Exchange Agent, as agent for
the tendering stockholders, only after receipt by the Exchange Agent of
certificates representing the tendered Shares (or confirmation of the book-
entry transfer of such Shares into the Exchange Agent's account at DTC), a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), and any other required documents. Stockholders who are entitled to
receive Debentures will receive Debentures through book-entry transfer by
crediting the stockholder's DTC account, unless stockholders choose to receive
Debentures in registered form in accordance with the instructions in the
Letter of Transmittal. Stockholders who receive Debentures through book-entry
transfer will not be the registered holders of the Debentures. Debentures
received in this manner will be registered in the name of Cede & Co., the
nominee of DTC, but will be beneficially owned by the stockholder entitled to
such Debentures.
Denominations; Fractional Interests
The Debentures will be issued only in denominations of $25.00 and integral
multiples thereof. Fractional interests with respect to the Debentures will
not be distributed to tendering stockholders. Instead, the Company will pay
cash in lieu of such interests. Any such cash payment will be made through the
Exchange Agent.
Proration if Shares Tendered Exceed Maximum
Upon the terms and subject to the conditions of the Exchange Offer, in the
event that prior to the Expiration Date more than 5,000,000 Shares (or such
greater number of Shares as the Company may elect to exchange pursuant to the
Exchange Offer) are validly tendered at or below the Exchange Price and not
withdrawn, Shares will be accepted on a pro rata basis based on the number of
Shares tendered at or below the Exchange Price. The Company will accept from
each such tendering stockholder that number of Shares equal to 5,000,000
multiplied by a fraction, the numerator of which is the total number of Shares
validly tendered at or below the Exchange Price by such tendering stockholder
and the denominator of which is the total number of Shares validly tendered at
or below the Exchange Price by all tendering stockholders. The number of
Shares will be rounded up or down as nearly as practicable to result in the
tender of whole Shares rather than fractional Shares. Any Shares not accepted
by the Company as a result of the allocation described above will be returned
promptly to the tendering stockholder. Although the Company does not expect to
be able to announce the final results of such proration until approximately
seven business days after the Expiration Date, it will announce preliminary
results of proration by press release as promptly as practicable after the
Expiration Date.
Preferred Share Purchase Rights Not Triggered
On October 7, 1998, the Company's Board of Directors declared a dividend
distribution of one Right for each Share outstanding on October 19, 1998 (the
"Record Date"). Each Share issued subsequent to the Record
35
<PAGE>
Date had a Right attached to it. The Rights expire on October 19, 2008 unless
earlier redeemed by the Company. Each Right entitles the registered holder to
purchase from the Company one one-hundredth of a share of Series A Junior
Participating Preferred Stock of the Company at an exercise price of $100,
subject to adjustment. The Rights generally become exercisable upon the
acquisition by a person of 10% or more of the Company's Common Stock. The
Rights are not currently exercisable and trade together with the Shares
associated therewith. The Rights will not become exercisable or separately
tradeable as a result of the Exchange Offer. Absent circumstances causing the
Rights to become exercisable or separately tradeable prior to the Expiration
Date, the tender of any Shares pursuant to the Exchange Offer will also
constitute a tender of the associated Rights. No separate consideration will
be paid for such Rights. Upon the exchange of Shares by the Company pursuant
to the Exchange Offer, the sellers of the Shares so exchanged will no longer
have an interest in the Rights associated with such Shares. The Company does
not expect that any current stockholder will trigger exercisability of the
Rights upon completion of the Exchange Offer.
Exchange Offer Subject to Minimum Number of Shares Tendered
The Exchange Offer is subject to the condition that holders of at least
1,000,000 Shares validly tender Shares at or below the Exchange Price.
However, if less than 1,000,000 Shares are validly tendered at or below the
Exchange Price by the Expiration Date, the Company reserves the right, in its
sole discretion, to accept a lesser number of Shares pursuant to the Exchange
Offer.
Listing and Trading of Securities
Although the Company intends to use its best efforts to list the Debentures
on the AMEX (or, in the event the Company is unable to list the Debentures on
the AMEX, on another exchange of the Company's choosing), no assurance can be
given that the Company will be able to list the Debentures on any exchange.
Even if the Debentures are listed, there can be no assurance that an active
market for the Debentures will develop or that, if developed, it will be
sustained.
Conditions to and Amendment of the Exchange Offer
The Company may accept up to 5,000,000 Shares validly tendered. This
represents approximately 16% of the outstanding Shares as of February 3, 1999,
on a fully diluted basis giving effect to the full conversion of Series B
Preferred Stock and the full exercise of all vested options outstanding on
that date. If more than 5,000,000 Shares are tendered at or below the Exchange
Price, the Company will follow the procedures described under "--Proration if
Shares Tendered Exceed Maximum." If less than 1,000,000 Shares are validly
tendered at or below the Exchange Price by the Expiration Date, the Company
reserves the right, in its sole discretion, to terminate the Exchange Offer.
See "--Exchange Offer Subject to Minimum Number of Shares Tendered." The
Exchange Offer is subject to other conditions described below.
An application will be filed with the Commission for qualification of the
Indenture under which the Debentures will be issued under the Trust Indenture
Act of 1939 (the "Trust Indenture Act"). The Exchange Offer is conditioned
upon the Indenture being qualified under the Trust Indenture Act. In addition
to the foregoing conditions, the Company may decline to accept any Shares in
exchange for Debentures and may withdraw the Exchange Offer as to Shares not
then accepted if, before the time of acceptance, there shall have occurred any
of the following events which, in the Company's sole judgment, makes it
inadvisable to proceed with such acceptance:
(a) any government agency or other person shall have instituted or
threatened any action or proceeding before any court or administrative
agency (i) challenging the acquisition of Shares pursuant to the
Exchange Offer or otherwise in any manner relating to the Exchange
Offer or (ii) otherwise materially adversely affecting the Company; or
(b) any statute, rule or regulation shall have been proposed or enacted, or
any action shall have been taken by any governmental authority, which
would or might prohibit, restrict or delay consummation of the
36
<PAGE>
Exchange Offer or materially impair the contemplated benefits of the
Exchange Offer to the Company; or
(c) any state of war, national emergency, banking moratorium or suspension
of payments by banks in the State of New York shall have occurred, or
any currency or exchange control laws or regulations or general
suspension of trading or limitation on prices on AMEX shall have been
imposed or there shall have occurred a material adverse change in the
securities markets generally; or
(d) any required consents or approvals from third parties or government
regulatory agencies shall not have been obtained; or
(e) the Exchange Offer would result in the Shares being delisted from the
AMEX; or
(f) a tender or exchange offer with respect to some or all of the Shares
(other than the Exchange Offer), or a merger or acquisition proposal
for the Company, shall have been proposed, announced or made by another
person or shall have been publicly disclosed, or the Company shall have
learned that any person or "group" (within the meaning of Section
13(d)(3) of the Exchange Act) shall have acquired or proposed to
acquire beneficial ownership of more than 5% of the outstanding Shares,
or any new group shall have been formed that beneficially owns more
than 5% of the outstanding Shares; or
(g) any person or group shall have filed a Notification and Report Form
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
reflecting an intent to acquire the Company or any of its Shares; or
(h) there shall have occurred, or be likely to occur, any event affecting
the business or financial affairs of the Company, or which, in the sole
judgment of the Company, would or might prohibit, prevent, restrict or
delay consummation of the Exchange Offer, or that will, or is
reasonably likely to, materially impair the contemplated benefits to
the Company of the Exchange Offer.
The Company reserves the right to waive any of the foregoing conditions.
The Company also reserves the right to amend the Exchange Offer by public
announcement of any amendment. See "--Expiration Date, Extensions, Termination
and Amendments."
Exchange Agent
IBJ Whitehall Bank & Trust Company has been appointed as Exchange Agent for
the Exchange Offer. All correspondence in connection with the Exchange Offer
and the Letter of Transmittal should be addressed to the Exchange Agent, as
follows:
<TABLE>
<S> <C> <C>
Mailing Address: Facsimile Copy Number (For Hand/Overnight Delivery:
IBJ Whitehall Bank & Trust Company Eligible Institutions Only): IBJ Whitehall Bank & Trust Company
P.O. Box 84 (212) 858-2611 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Confirm Receipt of Facsimile by Attn: Securities Processing Window,
Attn: Reorganization Operations Department Telephone: Subcellar One, (SC-1)
(212) 858-2103
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A
FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID
DELIVERY.
37
<PAGE>
Information Agent
D.F. King & Co., Inc. will act as Information Agent in connection with the
Exchange Offer. For further assistance or additional copies of documents call
the Information Agent. Banks and brokers can call collect (212) 269-5550, all
others call toll-free at (800) 848-2998 or write to the Information Agent at:
Mailing Address:
D.F. King & Co., Inc.
77 Water Street
20th Floor
New York, New York 10005
LETTERS OF TRANSMITTAL AND CERTIFICATES REPRESENTING THE SHARES SHOULD NOT
BE SENT TO THE INFORMATION AGENT. See "--How to Tender."
Financial Advisor
The Company has retained PaineWebber Incorporated ("PaineWebber"), an
investment banking firm, as its financial advisor in connection with the
Exchange Offer. PaineWebber has rendered advice to the Company in connection
with the Exchange Offer. PaineWebber has not been retained to solicit any
tenders pursuant to the Exchange Offer or to render any opinion as to the
fairness of the Exchange Offer to the Company or to the holders of the Shares
or Debentures. For its services as financial advisor, PaineWebber is entitled
to receive a fixed fee of $250,000 in cash, regardless of whether or not the
Exchange Offer is consummated. In addition, PaineWebber is entitled to be
reimbursed for certain out-of-pocket expenses. The Company has agreed to
indemnify PaineWebber against certain losses, claims, damages and liabilities,
including liabilities under federal securities laws, to which PaineWebber may
become subject in connection with its services to the Company as financial
advisor. PaineWebber has provided investment banking services to the Company
from time to time.
Payment of Expenses
The Exchange Offer is being made by the Company in reliance on the
exemption from the registration requirements of the Securities Act afforded by
Section 3(a)(9) thereof. Therefore, the Company will not pay any commission or
other remuneration to any broker, dealer, salesman or other person for
soliciting tenders of the Shares. However, regular employees of the Company
(who will not be additionally compensated therefor) may solicit tenders and
will answer inquiries concerning the Exchange Offer.
The Company will pay the Exchange Agent and the Information Agent
reasonable and customary fees for their services and will reimburse such
parties for their reasonable out-of-pocket expenses in connection therewith.
The Company will also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of this Offering Circular and related documents to the
beneficial owners of the Shares held of record by such persons and in handling
or forwarding tenders and consents for their customers.
38
<PAGE>
INTEREST OF DIRECTORS, EXECUTIVE OFFICERS AND CONTROLLING STOCKHOLDERS;
TRANSACTIONS AND ARRANGEMENTS CONCERNING THE SHARES
In October 1998, the Board of Directors authorized the purchase from time
to time of up to $5.0 million of Shares at management's discretion in open
market purchases. Through February 10, 1999, the Company had purchased
approximately 184,100 Shares for $998,700 pursuant to this authorization. No
such Shares will be purchased by the Company during the pendency of the
Exchange Offer or until ten business days following the expiration or
termination of the Exchange Offer.
In December 1998, the Company completed the sale of 1,200,000 shares of
Series B Preferred Stock at $25.00 per share, through a directed public
offering registered under the Securities Act. As of the date of this Offering
Circular, each share of the Series B Preferred Stock was convertible into
5.050505 Shares.
As of February 3, 1999, there were 24,766,465 Shares outstanding. In
addition, at that date there were 6,060,606 Shares issuable upon conversion of
the Series B Preferred Stock, and 562,500 Shares issuable upon exercise of all
outstanding vested stock options. As of February 3, 1999, the Company's
directors and executive officers as a group (seven persons) beneficially owned
199,989 Shares (including Shares issuable to such persons upon exercise of
options exercisable within 60 days of such date) which constituted less than
1% of the outstanding Shares (including Shares issuable if options held by the
Company's directors and executive officers exercisable within 60 days of such
date were exercised) at such time. If the Company exchanges the maximum number
of Shares in the Exchange Offer and none of the directors or executive
officers participate in the Exchange Offer, then the Company's directors and
executive officers as a group would still beneficially own less than 1% of the
outstanding Shares (including shares issuable if options held by the Company's
directors and executive officers exercisable within 60 days of such date were
exercised). In addition to the foregoing, 610,000 Shares are issuable to the
Company's directors and officers as a group upon exercise of outstanding
unvested options under the Company's stock option plans or agreements relating
thereto, which options are eligible for vesting at various times through
January 2007.
As of February 3, 1999, Prime Acquisition Corp. ("PAC") beneficially owned
800,000 shares of the Company's Series B Preferred Stock, which shares are
convertible into 4,040,404 Shares at PAC's option. If the Company purchases
the maximum number of Shares pursuant to the Exchange Offer, and if PAC does
not tender any Shares pursuant to the Exchange Offer, PAC would beneficially
own approximately 17% of the outstanding shares immediately after the Exchange
Offer, assuming the conversion of all of PAC's 800,000 shares of Series B
Preferred Stock, and further assuming that no other Series B Preferred
Stockholder chose to convert.
As of February 2, 1999, Imperial Credit Industries, Inc. ("ICII")
beneficially owned 1,692,810 Shares, representing approximately 7% of the
Shares outstanding on February 3, 1999. If the Company purchases the maximum
number of Shares pursuant to the Exchange Offer, and if ICII does not tender
any Shares pursuant to the Exchange Offer, ICII would beneficially own
approximately 9% of the outstanding Shares immediately after the Exchange
Offer.
Based upon the Company's records and upon information provided to the
Company by its directors, executive officers, associates and subsidiaries,
neither the Company nor any of its associates or subsidiaries or persons
controlling the Company nor, to the best of the Company's knowledge, any of
the directors or executive officers of the Company or any of its subsidiaries,
nor any associates or subsidiaries of any of the foregoing, has effected any
transactions in the Shares during the 40 business days prior to the date
hereof other than: H. Wayne Snavely, who sold 18,600 Shares at a price of
$4.31 per Share and 11,400 Shares at a price of $4.25 per Share; Joseph R.
Tomkinson, who purchased 2,000 Shares at a price of $4.50 per Share and 2,000
Shares at a price of $4.38 per Share; William Ashmore, who purchased 3,000
Shares at a price of $4.83 per Share; Richard J. Johnson, who purchased 2,130
Shares at a price of $4.38 per Share; and Mary C. Glass-Schannault, who
purchased 845 Shares at a price of $4.31 per Share.
Except as set forth in this Offering Circular, neither the Company or any
person controlling the Company nor, to the Company's knowledge, any of its
directors or executive officers, is a party to any contract,
39
<PAGE>
arrangement, understanding or relationship with any other person relating,
directly or indirectly, to the Exchange Offer with respect to any securities
of the Company (including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any
such securities, joint ventures, loan or option arrangements, puts or calls,
guarantees of loans, guarantees against loss or the giving or withholding of
proxies, consents or authorizations).
DESCRIPTION OF THE DEBENTURES
The Debentures
The Debentures will be issued under an Indenture, as supplemented and
amended by the First Supplemental Indenture thereto (collectively, the
"Indenture"), by and between the Company and IBJ Whitehall Bank & Trust
Company, as Trustee (the "Trustee"). The following summary of certain
provisions of the Indenture does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the Trust Indenture Act, and
to all of the provisions of the Indenture, including the definitions of
certain terms therein and those terms made a part of the Indenture by
reference to the Trust Indenture Act as in effect on the date of the
Indenture. A copy of the Indenture substantially in the form in which it is to
be executed will be filed with the Commission as an exhibit to the Form T-3
filed in connection with the qualification of the Indenture under the Trust
Indenture Act. For purposes of this "Description of the Debentures,"
references to the "Company" mean only Impac Mortgage Holdings, Inc. and not
its subsidiaries.
The Indenture allows the issuance of debt securities which may be issued in
an aggregate principal amount determined from time to time by the Board of
Directors. The First Supplemental Indenture establishes the Debentures as a
series of debt securities under the Indenture.
Principal, Maturity and Interest
The Debentures are limited in aggregate principal amount to $35,000,000 or
such lesser amount as may be issued pursuant to the Exchange Offer and will
mature on February 15, 2004. Interest on the Debentures will accrue from the
date of original issuance at the rate of 11% per annum and will be payable
quarterly in cash on February 15, May 15, August 15 and November 15, or, in
the event such 15th day is not a business day, then on the business day
immediately following such 15th day, (each, an "Interest Payment Date"),
commencing on May 15, 1999, to the registered holders of the Debentures
("Holders") at the close of business on the last day of each quarter
immediately preceding the applicable Interest Payment Date (the "Regular
Record Date"). Interest is payable on the Debentures from the most recent date
to which interest has been paid or, if no interest has been paid, from and
including the date of issuance.
The Debentures will be unsecured obligations of the Company and will not be
entitled to the benefit of any mandatory sinking fund.
Payment
Payment of interest on a Debenture on any Interest Payment Date will be
made to the Person in whose name such Debenture (or one or more Predecessor
Debentures) is registered at the close of business on the Regular Record Date
for such interest payment.
Option to Extend Maturity Date
The maturity date of the Debentures is February 15, 2004, which date may be
extended once to a date not later than May 15, 2004 by the Company upon not
less than 15 days' notice prior to February 15, 2004 if an Event of Default
does not exist at the date of notice of the extension. In the event the
Company elects to extend the maturity date, interest will accrue at the same
rate plus 25 basis points and will be payable through the maturity date, as
extended. Pursuant to the Indenture, the Company is required to give notice of
the Company's election to extend the maturity date to the holders of the
Debentures.
40
<PAGE>
Redemption
Commencing on February 15, 2001, the Debentures will be redeemable, at the
Company's option, in whole at any time or in part from time to time, upon not
less than 30 nor more than 60 days' notice, at the principal amount to be
redeemed, plus, in each case, accrued and unpaid interest thereon, if any, to
the date of redemption.
Selection and Notice of Redemption
In the event that less than all of the Debentures are to be redeemed at any
time, selection of such Debentures for redemption will be made by the Trustee
(i) on a pro rata basis, (ii) by lot or (iii) by such other method as the
Trustee shall deem fair and appropriate. Notice of redemption shall be mailed
by first-class mail at least 30 but not more than 60 days before the
redemption date to each Holder of Debentures to be redeemed at its registered
address. If any Debenture is to be redeemed in part only, the notice of
redemption that relates to such Debenture shall state the portion of the
principal amount thereof to be redeemed. A new Debenture in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Debenture. On and after the
redemption date, interest will cease to accrue on Debentures or portions
thereof called for redemption as long as the Company has deposited with the
Paying Agent (as defined in the Indenture) funds in satisfaction of the
applicable redemption price pursuant to the Indenture. Each notice of
redemption may include a statement that such redemption shall be conditional
upon the receipt by the Trustee on or prior to the Redemption Date of amounts
sufficient to pay principal of, and interest on, the Debentures to be
redeemed, and that if such amounts shall not have been so received, said
notice shall be of no force and effect, the Debentures to be redeemed will not
become due and payable on the Redemption Date, and the Company shall not be
required to redeem such Debentures on such date. If such a Conditional Notice
is given, failure by the Company to deposit money necessary to effect the
redemption on or prior to the Redemption Date will not result in a default
under the Indenture.
Subordination
The payment of all obligations on the Debentures is subordinated in right
of payment to the prior payment in full of all obligations on Senior
Indebtedness. Upon any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
any liquidation, dissolution, winding up, assignment for the benefit of
creditors or marshaling of assets of the Company or in a bankruptcy,
reorganization, insolvency, receivership or other similar proceeding relating
to the Company or its property, whether voluntary or involuntary, all
Obligations (as hereafter defined) due or to become due upon all Senior
Indebtedness shall first be paid in full, or such payment duly provided for to
the satisfaction of the holders of Senior Indebtedness, before any payment or
distribution of any kind or character is made on account of any Obligations on
the Debentures, or for the acquisition of any of the Debentures for cash or
property or otherwise. If any default occurs and is continuing in the payment
when due, whether at maturity, upon any redemption, by acceleration or
otherwise, of any principal of, premium or interest on any Senior
Indebtedness, no payment of any kind or character shall be made by or on
behalf of the Company or any other Person on its behalf with respect to any
Obligations on the Debentures or to acquire any of the Debentures for cash or
property or otherwise.
In addition, if any other event of default occurs and is continuing with
respect to any Senior Indebtedness, other than the Designated Senior
Indebtedness (as hereafter defined), as such event of default is defined in
the instrument creating or evidencing such Senior Indebtedness, permitting the
holders of such Senior Indebtedness then outstanding to immediately accelerate
the maturity thereof and if a representative for such issue of Senior
Indebtedness gives written notice of the event of default to the Trustee (a
"Default Notice"), then, unless and until all events of default with respect
to such Senior Indebtedness have been cured or waived in writing or have
ceased to exist or the Trustee receives notice from such representative for
the respective issue of Senior Indebtedness terminating the Blockage Period
(as defined below), during the 179 days after the delivery of such Default
Notice (the "Blockage Period"), neither the Company nor any other Person on
its behalf shall (x) make any payment of any kind or character with respect to
any Obligations on the Debentures or (y) acquire any of
41
<PAGE>
the Debentures for cash or property or otherwise. Notwithstanding the above,
in no event will a Blockage Period extend beyond 179 days from the date the
payment on the Debentures was due and only one such Blockage Period may be
commenced within any 365 consecutive days irrespective of the number of
defaults with respect to Senior Indebtedness during such period. In no event
may the total number of days during which any Blockage Period is or Blockage
Periods are in effect exceed 179 days in the aggregate during any consecutive
365-day period. No event of default which existed or was continuing on the
date of the commencement of any Blockage Period with respect to the Senior
Indebtedness shall be, or be made, the basis for commencement of a second
Blockage Period by a representative of such Senior Indebtedness unless such
event of default shall have been cured or waived for a period of not less than
90 consecutive days. However, any subsequent action, or any breach of any
financial covenants for a period commencing after the date of commencement of
such Blockage Period that, in either case, would give rise to an event of
default pursuant to any provisions under which an event of default previously
existed or was continuing shall constitute a new event of default for this
purpose.
In addition, if any event of default (as defined in the instrument creating
or evidencing any Designated Senior Indebtedness) occurs and is continuing
with respect to any Designated Senior Indebtedness or an executive officer of
the Company has actual knowledge of a default under any Designated Senior
Indebtedness, which with notice or lapse of time or both would result in an
event of default under such Designated Senior Indebtedness, then the Company
shall give notice thereof to the Trustee and, regardless of the giving of such
notice, no payment of any kind or character shall be made by or on behalf of
the Company or any other Person on its behalf with respect to any Obligations
on the Debentures or to acquire any of the Debentures for cash or property or
otherwise for a period of 179 days from the date of each such event of default
or the date that an executive officer obtains actual knowledge that there is
such a default (a "Designated Senior Indebtedness Blockage Period"), unless
and until all such events of defaults or defaults with respect to such
Designated Senior Indebtedness have been cured or waived in writing pursuant
to the Designated Senior Indebtedness or have ceased to exist or the Trustee
receives notice from a representative for the applicable issue of Designated
Senior Indebtedness terminating the Designated Senior Indebtedness Blockage
Period. In the event any Debenture is declared due and payable before its
expressed maturity under Section 502 of the Indenture, (i) the Company will
give prompt notice in writing of such happening to the holders of Designated
Senior Indebtedness and (ii) no payment of any kind or character shall be made
by or on behalf of the Company or any other Person on its behalf with respect
to any obligations on the Debentures or to assume any of the Debentures for
cash or property or otherwise without the consent of the Designated Senior
Indebtedness.
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Indebtedness,
including the Holders of the Debentures, may recover less, ratably, than
holders of Senior Indebtedness. See also "Risk Factors--Risks Relating to
Debentures--Subordination."
For purposes of the subordination provisions of the Debentures, the
following definitions apply:
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Designated Senior Indebtedness" means Collateralized Mortgage Obligations,
Warehouse Facilities, Warehouse Indebtedness, Purchase Facilities and any
other similar facility or any other Senior Indebtedness designated by the
Company as "Designated Senior Indebtedness" from time to time.
"Indebtedness" means with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all Capitalized Lease Obligations of such Person, (iv) all
obligations of such Person issued or assumed as the deferred purchase price of
property, all conditional sale obligations and all Obligations under any title
retention agreement (but excluding trade accounts payable and other similar
accrued liabilities arising in the ordinary course of business and payable in
accordance with customary terms), (v) all obligations for the
42
<PAGE>
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction, (vi) guarantees and other contingent obligations
in respect of Indebtedness referred to in clauses (i) through (v) above and
clause (viii) below, (vii) all obligations of any other Person of the type
referred to in clauses (i) through (vi) which are secured by any lien on any
property or asset of such Person, the amount of such obligation being deemed
to be the lesser of the fair market value of such property or asset or the
amount of the obligation so secured, and (viii) all obligations under currency
agreements and interest swap agreements of such Person.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Senior Indebtedness" means all Obligations on any Indebtedness of the
Company and any Subsidiary, whether outstanding on the date of original
issuance of the Debentures or thereafter created, incurred or assumed, unless,
in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
Debentures. Notwithstanding the foregoing, "Senior Indebtedness" shall not
include (i) any Indebtedness of the Company to a Subsidiary of the Company,
(ii) Indebtedness to, or guaranteed on behalf of, any stockholder, director,
officer or employee of the Company (including, without limitation, amounts
owed for compensation), (iii) any liability for federal, state, local or other
taxes owed or owing by the Company, and (iv) Indebtedness which, when incurred
and without respect to any election under Section 1111(b) of Title 11, United
States Code, is without recourse to the Company.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that the Company or its subsidiaries may issue. As of September 30, 1998,
outstanding Senior Indebtedness of the Company and its subsidiaries aggregated
approximately $1.4 billion.
The subordination provisions apply only to Debentures that are Outstanding.
Debentures will not be deemed to be Outstanding if, among other circumstances,
money in the necessary amount has been deposited with the Trustee or any
Paying Agent (other than the Company) in trust, or set aside and segregated in
trust by the Company (if it acts as its own Paying Agent) for the redemption
of such Debentures and notice of redemption has been given as required in the
Indenture or provision therefor satisfactory to the Trustee has been made. In
addition, upon the effectiveness of any Defeasance or Covenant Defeasance as
described below under the heading "Defeasance and Covenant Defeasance," the
Debentures then Outstanding shall cease to be subordinated under the
Indenture.
Financial Covenants
For purposes of the financial covenant, the following definitions apply.
"Consolidated Net Worth" as of any date of determination means the
consolidated net worth of the Company and its consolidated Subsidiaries, as
determined in accordance with GAAP.
The Indenture will contain the following covenant provided for the
Debentures:
Minimum Equity. The Company will at all times maintain Consolidated Net
Worth (defined above) of the lesser of $70.0 million or two times the
aggregate principal amount of Debentures issued pursuant to the Exchange
Offer.
Events of Default
Each of the following will constitute an Event of Default under the
Indenture with respect to the Debentures: (i) failure to pay any interest on
the Debentures when due, continued for 30 days; (ii) failure to pay principal
of or any premium on the Debentures when due; (iii) failure to perform any
other covenant of the Company in the Indenture (other than a covenant included
in the Indenture solely for the benefit of a series other than the
Debentures), that continues for 90 days after written notice has been given by
the Trustee or to the Company
43
<PAGE>
and the Trustee by the Holders of at least 25% in principal amount of the
Outstanding Debentures, as provided in the Indenture; and (iv) certain events
in bankruptcy, insolvency, or reorganization.
If an Event of Default (other than an Event of Default described in clause
(iv) above) with respect to the Outstanding Debentures shall occur and be
continuing, either the Trustee or the Holders of at least 25% in aggregate
principal amount of the Outstanding Debentures by notice as provided in the
Indenture, may declare the principal amount of the Debentures to be due and
payable immediately by written notice to the Company (and to the Trustee if
given by the Holders). If an Event of Default described in clause (iv) above
with respect to the Outstanding Debentures shall occur, the principal amount
of all the Debentures will automatically, and without any action by the
Trustee or any Holder, become immediately due and payable. After any such
acceleration, but before a judgment or decree based on acceleration, the
Holders of a majority in aggregate principal amount of the Outstanding
Debentures may rescind and annul such acceleration if all Events of Default,
other than the non-payment of accelerated principal, have been cured or waived
as provided in the Indenture and payment of all overdue interest and certain
other payments are made by the Company. For information as to waiver of
defaults, see "--Modification and Waiver."
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the Holders, unless
such Holders shall have offered to the Trustee reasonable indemnity. Subject
to such provisions for the indemnification of the Trustee and to certain other
conditions, the Holders of a majority in principal amount of the Outstanding
Debentures will have the right to direct the time, method, and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Debentures.
No Holder of Debentures will have any right to institute any proceeding
with respect to the Indenture, or for the appointment of a receiver or a
trustee, or for any other remedy thereunder, unless (i) such Holder has
previously given to the Trustee written notice of a continuing Event of
Default with respect to the Debentures, (ii) the Holders of at least 25% in
aggregate principal amount of the Outstanding Debentures have made written
request, and such Holder or Holders have offered reasonable indemnity, to the
Trustee to institute such proceeding as trustee, and (iii) the Trustee has
failed to institute such proceeding, and has not received from the Holders of
a majority in aggregate principal amount of the Outstanding Debentures a
direction inconsistent with such request, within 60 days after such notice,
request, and offer. However, such limitations do not apply to a suit
instituted by a Holder of Debentures for the enforcement of payment of the
principal of or any premium or interest on the Debentures on or after the
applicable due date specified in the Debentures.
The Company will be required to furnish to the Trustee annually a statement
by certain of its officers as to whether or not the Company, to their
knowledge, is in default in the performance or observance of any of the terms,
provisions, and conditions of the Indenture and, if so, specifying all such
known defaults.
If a default occurs under the Indenture with respect to the Debentures, the
Trustee shall give the Holders of the Debentures notice of such default as
required by the Trust Indenture Act.
Modification and Waiver
Modifications and amendments of the Indenture may be made by the Company
and the Trustee at any time and from time to time without the consent of the
Holders of any of the Debentures in certain limited cases. In addition,
modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of at least a majority in
aggregate principal amount of the Outstanding Debentures affected by such
modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each Outstanding Debenture
affected thereby, (i) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Debenture, (ii) reduce the
principal amount of, or any premium or interest on, any Debenture, (iii)
reduce the amount of principal payable upon acceleration of the Maturity
thereof, (iv) change the place or currency of payment of principal of, or any
premium
44
<PAGE>
or interest on, any Debenture, (v) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debenture, (vi) reduce
the percentage in principal amount of Outstanding Debentures, if the consent
of the Holders is required for modification or amendment of the Indenture, or
for waiver of certain defaults, or modify such provisions with respect to
modification and waiver.
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Debentures may waive compliance by the Company with certain
restrictive provisions of the Indenture.
The Holders of a majority in principal amount of the Outstanding Debentures
may waive any past default under the Indenture with respect to the Debentures,
except a default in the payment of principal, premium, or interest and certain
covenants and provisions of the Indenture which cannot be amended without the
consent of the Holder of each Outstanding Debenture affected.
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Debentures have given or taken
any request, demand, authorization, direction, notice, consent, waiver, or
other action under the Indenture as of any date, the principal amount that
will be deemed to be Outstanding will be the amount of the principal thereof
that would be due and payable as of such date upon acceleration of the
Maturity thereof to such date. Debentures whose payment or redemption money
has been deposited or set aside in trust for the Holders and Debentures that
have been fully defeased pursuant to Section 1302 of the Indenture, will not
be deemed to be Outstanding.
Except in certain limited circumstances, the Company will be entitled to
set any day as a record date for the purpose of determining the Holders of
Outstanding Debentures entitled to give or take any request, demand,
authorization, direction, notice, consent, waiver, or other action under the
Indenture, in the manner and subject to the limitations provided in the
Indenture. In certain limited circumstances, the Trustee will be entitled to
set a record date for action by Holders. If a record date is set for any
action to be taken by Holders of the Debentures, such action may be taken only
by persons who are Holders of Outstanding Debentures on the record date. To be
effective, such action must be taken by Holders of the requisite principal
amount of such Debentures within a specified period following the record date.
For any particular record date, this period will be 180 days or such other
shorter period as may be specified by the Company (or the Trustee, if it sets
the record date), and may be shortened or lengthened (but not beyond 180 days)
from time to time.
Defeasance and Covenant Defeasance
The provisions of Section 1302 and 1303 of the Indenture, relating to
defeasance and discharge of indebtedness, and defeasance of certain
restrictive covenants, will apply to the Debentures.
Defeasance and Discharge. Pursuant to Section 1302 of the Indenture, the
Company will be discharged from all its obligations with respect to the
Debentures (except for certain obligations to exchange or register the
transfer of Debentures, to replace stolen, lost, or mutilated Debentures, to
maintain paying agencies, and to hold moneys for payment in trust) upon
satisfaction of certain conditions, including the deposit in trust for the
benefit of the Holders of Debentures of money or U.S. Government Obligations,
or both, which, through the payment of principal and interest in respect
thereof in accordance with their terms, will provide money in an amount
sufficient to pay the principal of and any premium and interest on the
Debentures on the respective Stated Maturities or on any Redemption Date
established for the Debentures in accordance with the terms of the Indenture
and such Debentures. Such Defeasance or discharge may occur only if, among
other things, the Company has delivered to the Trustee an Opinion of Counsel
to the effect that the Company has received from, or there has been published
by, the Service a ruling, or there has been a change in tax law, in either
case to the effect that Holders of the Debentures will not recognize gain or
loss for Federal income tax purposes as a result of such deposit, Defeasance,
and discharge and will be subject to Federal income tax on the same amount, in
the same manner, and at the same times as would have been the case if such
deposit, Defeasance, and discharge were not to occur.
45
<PAGE>
Defeasance of Certain Covenants. Pursuant to Section 1303 of the Indenture,
if certain conditions are satisfied, the Company may omit to comply with
certain restrictive covenants in the Indenture, and the occurrence of certain
Events of Default, which are described above in clause (iii) (with respect to
such restrictive covenants) under "Events of Default," will be deemed not to
be or result in an Event of Default and the provisions of Article Fourteen of
the Indenture relating to subordination will cease to be effective, in each
case with respect to the Debentures. The Company, in order to exercise such
option, will be required to deposit, in trust for the benefit of the Holders
of the Debentures, money or U.S. Government Obligations, or both, which,
through the payment of principal and interest in respect thereof in accordance
with their terms, will provide money in an amount sufficient to pay the
principal of and any premium and interest on the Debentures on the respective
Stated Maturities or on any Redemption Dates established for the Debentures in
accordance with the terms of the Indenture and the Debentures. The Company
will also be required, among other things, to deliver to the Trustee an
Opinion of Counsel to the effect that Holders of the Debentures will not
recognize gain or loss for Federal income tax purposes as a result of such
deposit and Defeasance of certain obligations and will be subject to Federal
income tax on the same amount, in the same manner, and at the same times as
would have been the case if such deposit and Defeasance were not to occur. In
the event the Company exercised this option with respect to the Debentures and
the Debentures were declared due and payable because of the occurrence of any
Event of Default, the amount of money and U.S. Government Obligations so
deposited in trust would be sufficient to pay amounts due on the Debentures at
the time of their respective Stated Maturities, but may not be sufficient to
pay amounts due on the Debentures upon any acceleration resulting from such
Event of Default. In such case, the Company would remain liable for such
payments.
Satisfaction and Discharge
The Indenture will also be deemed to be satisfied and discharged, except as
to certain limited provisions, as to Debentures that have become due and
payable or will become due and payable at their Stated Maturity within one
year from the date of determination or are to be called for redemption within
one year under arrangements satisfactory to the Trustee, but only if the
Company deposits money in an amount sufficient to pay the entire principal,
premium, and interest to the date of deposit (as to Debentures that have
become due and payable) or to the Stated Maturity or Redemption Date, as the
case may be, and certain other conditions are satisfied. See also "--
Defeasance and Covenant Defeasance."
Notices
Notices to Holders of Debentures will be given by mail to the addresses of
such Holders as they may appear in the Security Register.
Title
The Company, the Trustee, and any agent of the Company or the Trustee may
treat the person in whose name a Debenture is registered as the absolute owner
thereof (whether or not such an Debenture may be overdue) for the purpose of
making payment and for all other purposes.
Governing Law
The Indenture and the Debentures will be governed by, and construed in
accordance with, the law of the State of California.
Regarding the Trustee
The Trustee under the Indenture is IBJ Whitehall Bank & Trust Company.
46
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a general summary of the Federal income tax
consequences of the exchange of Shares pursuant to the Exchange Offer. The
discussion does not address all of the tax consequences that may be relevant
to particular stockholders in light of their personal circumstances, or to
certain types of stockholders (such as certain financial institutions, dealers
in securities or commodities, insurance companies, tax-exempt organizations,
persons who acquired Shares as compensation and persons who hold Shares as a
position in a "straddle" or as part of a "hedging" or "conversion" transaction
for Federal income tax purposes). Moreover, this discussion assumes that all
stockholders hold Shares as capital assets within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended (the "Code"). In the context
of the discussion pertaining to the Debentures, the discussion describes
certain tax consequences applicable only to original holders of the
Debentures. The discussion does not include any description of the tax laws of
any state, local, or non-U.S. government that may be applicable to a
particular stockholder. Stockholders should consult their own tax adviser for
a complete description of the tax consequences to an exchange of Shares
pursuant to the Exchange Offer.
Taxation of the Exchange Offer
For Federal income tax purposes, the Company's delivery of Debentures in
exchange for Shares will be treated as a redemption of the Shares. Generally,
such a redemption will be treated as a sale of Shares to the Company for an
amount equal to the issue price of the Debentures (which should equal the fair
market value of the Debentures on the issue date or the fair market value of
the Shares tendered depending upon whether the Debentures are publicly
traded), plus any amount of cash paid by the Company in lieu of the fractional
interests in the Debentures. If, however, certain tests are not satisfied,
then the redemption will not be treated as a payment by the Company in
exchange for Shares, but will be treated instead as a distribution by the
Company with respect to the Shares. The determination of whether the tests for
sale treatment are satisfied is done on a stockholder by stockholder basis so
that the redemption could qualify as a sale for one stockholder and yet be
treated as a distribution to another stockholder.
The exchange of Shares for Debentures and cash in lieu of the fractional
interests in the Debentures will be treated as a sale if (i) the redemption
results in a complete redemption of the stockholder's interest in the Company,
(ii) the redemption is substantially disproportionate, or (iii) the redemption
is not essentially equivalent to a dividend with respect to the stockholder. A
redemption is a complete redemption of a stockholder's interest only if,
following the redemption, the stockholder does not own, directly or
indirectly, any interest in the Company. A redemption is disproportionate if
the redemption results in a reduction in the stockholder's proportionate
interest in the Company of 20% or more. A redemption is not essentially
equivalent to a dividend if the redemption results in a meaningful reduction
in the stockholder's proportionate interest in the Company. If a stockholder
has a minimal interest in the Company and does not exercise any control over
the affairs of the Company, any reduction in the stockholder's proportionate
interest should be considered meaningful.
In determining whether these tests are satisfied, the attribution rules set
out in Section 318 of the Code apply. Those rules treat a stockholder as
owning Shares owned by persons to whom such stockholder is related or by
entities (such as partnerships, corporations, and trusts) in which the
stockholder has an ownership interest. A stockholder is also treated as owning
Shares that such stockholder could acquire through exercise of an option or
upon conversion of a convertible security. In addition, contemporaneous
acquisitions or dispositions of Shares by a stockholder or related individuals
or entities may be deemed to be part of a single integrated transaction that
will be taken into account in determining whether these tests are satisfied.
If one or more of the above-described tests is satisfied and the redemption
is treated as a sale, then a stockholder would recognize a capital loss on the
redemption to the extent the stockholder's basis in the Shares exchanged
exceeded the issue price of the Debentures plus any cash received in lieu of
the factional interests in the Debentures. A corporate stockholder is allowed
a deduction for capital losses only to the extent of its capital gains for the
year. Generally, a corporate stockholder will be allowed to carry back any
excess three years and
47
<PAGE>
then carry forward any remaining excess five years. A stockholder other than a
corporation will be allowed a deduction for capital losses to the extent of
capital gains for the year plus $3,000. Any excess can be carried forward
indefinitely.
A stockholder would recognize a capital gain to the extent the issue price
of the Debentures and any cash received in lieu of the factional interests in
the Debentures exceeded the stockholder's basis in the Shares exchanged. To
the extent a stockholder who is an individual held the Shares that are
redeemed for at least one year, any gain realized would be subject to a
maximum tax rate of 20%.
If, however, the redemption does not satisfy any one of the tests with
respect to a particular stockholder, then the redemption will be treated as a
distribution. The amount of the distribution will equal the fair market value
of the Debentures and any cash received by the stockholder in lieu of the
factional interests in the Debentures (without reduction for the adjusted tax
basis of the Shares tendered). If the Company's earnings and profits for 1999
exceed the total amount of all distributions made by the Company for the year,
then the entire amount of the distribution would be treated as a dividend. If
the Company's total distributions for 1999 exceed the Company's earnings and
profits for 1999, then only a proportionate part of each such distribution
will be a dividend. The balance of each distribution will first be treated as
a tax-free return of basis, and, to the extent the distribution exceeded a
stockholder's basis in the Shares, as gain from the sale of such Shares. In
addition, if the redemption is treated as a distribution with respect to some
stockholders, then stockholders who do not tender their shares could be viewed
as having received a constructive distribution under Section 305(c) of the
Code to the extent such stockholders experience an increase in their
proportionate interest in the Company.
The gross proceeds payable to a stockholder pursuant to the Exchange Offer
are subject to a 31% withholding tax unless either: (a) the stockholder has
provided the stockholder's taxpayer identification number/social security
number, and certifies under penalties of perjury: (i) that such number is
correct, and (ii) either that (A) the stockholder is exempt from backup
withholding, (B) the stockholder is not otherwise subject to backup
withholding as a result of a failure to report all interest or dividends, or
(C) the Service has notified the stockholder that the stockholder is no longer
subject to backup withholding; or (b) an exception applies under applicable
law and Treasury Regulations.
Stockholders who are not U.S. persons may be required to provide a
completed Form W-8 in order to avoid 31% backup withholding.
Unless a reduced rate of withholding or a withholding exemption is
available under an applicable tax treaty, a stockholder who is not a U.S.
person may be subject to a United States withholding tax on the gross proceeds
received by such stockholder, if the proceeds are treated as a dividend under
the rules described above. Stockholders who are not U.S. persons should
consult their tax advisers regarding application of these withholding rules.
For purposes of this discussion, a "U. S. person" is (i) a citizen or
resident of the United States; (ii) a corporation (or entity treated as a
corporation for tax purposes) created or organized in the United States or
under the laws of the United States or of any state thereof, including, for
this purpose, the District of Columbia; (iii) a partnership (or entity treated
as a partnership for tax purposes) organized in the United States or under the
laws of the United States or of any state thereof, including, for this
purpose, the District of Columbia (unless provided otherwise by future
Treasury regulations); (iv) an estate whose income is includible in gross
income for United States income tax purposes regardless of its source; or (v)
a trust, if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more U.S. persons
have authority to control all substantial decisions of the trust.
Notwithstanding the last clause of the preceding sentence, to the extent
provided in Treasury Regulations, certain trusts in existence on August 20,
1996, and treated as U.S. persons prior to such date, may elect to continue to
be U.S. persons.
48
<PAGE>
Taxation of the Debentures
Under Treasury Regulations concerning OID, all payments of stated interest
on the Debentures will be qualified stated interest. As a result, each Holder
will be required to include such interest in income in accordance with the
Holder's method of accounting.
The Debentures will be treated as having been issued with OID in an amount
equal to the excess of the stated redemption price at maturity of the
Debentures over the issue price of the Debentures. The stated redemption price
at maturity is the sum of all payments to be made on the Debentures other than
qualified stated interest (i.e., the principal amount of the Debentures). The
issue price of the Debentures will equal the fair market value of the
Debentures on the issue date if the Debentures are publicly traded within 30
days of the issue date. If the Debentures are not so publicly traded, then the
issue price of the Debentures will equal the fair market value of the Shares
tendered in exchange for the Debentures on the issue date. The Company does
not know at this time whether the Debentures will be publicly traded for
purposes of the Treasury Regulations concerning OID.
Each Holder must include in income the daily portions of OID that accrue
with respect to the Debentures for each day during the Holder's taxable year
for which the Holder held the Debentures. The amount of OID that accrues with
respect to the Debentures for any quarterly accrual period will equal the
product of the Debentures' adjusted issue price at the beginning of the
accrual period and the Debentures' yield to maturity. The adjusted issue price
at the beginning of any accrual period is the sum of the issue price and all
OID accrued in prior accrual periods, less any payments made on the Debentures
other than payments of qualified stated interest. The Debentures' yield to
maturity is the discount rate that when applied to the stream of principal and
interest payments to be made on the Debentures produces a present value equal
to the issue price of the Debentures. The OID accrued in any quarterly accrual
period is then allocated ratably among the days in the quarter to determine
the daily accruals of OID.
A Holder must include OID in income as it accrues regardless of the
Holder's regular method of accounting. The cash payment attributable to the
OID accruals may not be received until the Debentures are sold, redeemed, or
retired at maturity. Because the rules governing accrual of OID may require
holders of Debentures to pay Federal income taxes on income in advance of
receipt of the cash attributable to such income, stockholders contemplating an
exchange of Shares for Debentures pursuant to the Exchange Offer are urged to
consult their own tax advisors.
The Company will furnish annually to the Service and to record holders of
the Debentures information relating to the OID accruing during the calendar
year. Such information will be based on the amount of OID that would have
accrued to a Holder who acquired the Debentures in the Exchange Offer.
Disposition of the Debentures
Generally, any disposition of the Debentures by a Holder will result in
taxable gain or loss equal to the difference between the sum of the amount of
cash and the fair market value of the other property received (except to the
extent attributable to accrued but previously untaxed interest, which portion
of the consideration would be taxed as ordinary income) and the Holder's
adjusted basis in the Debentures. The initial tax basis of a Holder's
Debentures will equal the issue price of the Debentures. A Holder's initial
tax basis in the Debentures will be increased by any OID with respect to the
Debenture included in the Holder's income prior to the disposition of the
Debenture and will be reduced by any cash payments other than payments of
qualified stated interest. Such gain or loss will be capital gain or loss if
the Debenture is held as a capital asset by the Holder.
Withholding
Unless interest and OID on a Debenture are considered effectively connected
with the conduct of a trade or business in the United States, such interest
and OID generally will qualify as portfolio interest in the hands of a non-
U.S. person and will be exempt from tax and withholding tax. The Holder
cannot, however, own more than
49
<PAGE>
10% of the voting control of the Company, and cannot be a controlled foreign
corporation to which the Company is related. The Holder must, however, furnish
to the person required to withhold an appropriate statement (on Form W-8 or a
similar form), signed under penalties of perjury certifying that the Holder is
not a U.S. person and providing the Holder's name and address. If the
Debenture is held through a securities clearing organization or certain other
financial institutions, the organization or institution may provide the
relevant signed statement to the withholding agent. In that case, however, the
signed statement must be accompanied by a Form W-8 provided by the non-U.S.
person who owns the Debenture.
Any capital gain realized by a non-U. S. person upon the sale, retirement,
or other disposition of a Debenture will be exempt from United States income
tax and withholding tax provided that (i) such gain is not effectively
connected with the conduct of a trade or business in the United States, and
(ii) in the case of an individual, such individual is present in the United
States for 183 days or more in the taxable year.
Each Holder of a Debenture (other than an exempt Holder, such as a
corporation, tax exempt organization, individual retirement account, or non-U.
S. person who provides a certification of non-U. S. person status) will be
required to provide, under penalties of perjury, a statement containing the
Holder's name, address, correct federal tax identification number, and a
statement that the Holder is not subject to backup withholding. Failure to
comply may result in withholding tax at a rate of 31%. Any amounts so withheld
will be available as a credit against federal income tax liability.
50
<PAGE>
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
IBJ Whitehall Bank & Trust Company
<TABLE>
<S> <C> <C>
Mailing Address: Facsimile Copy Number Hand/Overnight Delivery:
IBJ Whitehall Bank & Trust Company (For Eligible Institutions Only): IBJ Whitehall Bank & Trust Company
P.O. Box 84 (212) 858-2611 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Confirm Receipt of Facsimile by Attn: Securities Processing Window,
Attn: Reorganization Operations Telephone: Subcellar One, (SC-1)
Department (212) 858-2103
</TABLE>
THE INFORMATION AGENT FOR THE EXCHANGE OFFER IS:
D.F. King & Co., Inc.
77 Water Street
20th Floor
New York, New York 10005
Banks and Brokers can Call Collect: (212) 269-5550
All Others Call Toll Free: (800) 848-2998
<PAGE>
EXHIBIT 99.(a)(2)
LETTER OF TRANSMITTAL
To Tender Shares of
Common Stock
(including the associated Preferred Stock Purchase Rights)
OF
IMPAC MORTGAGE HOLDINGS, INC.
PURSUANT TO THE OFFERING CIRCULAR DATED FEBRUARY 24, 1999
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON MARCH 26, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE").
The Exchange Agent for the Exchange Offer is:
IBJ Whitehall Bank & Trust Company
<TABLE>
<S> <C> <C>
Mailing Address: Facsimile Copy Number Hand/Overnight Delivery:
(For Eligible Institutions Only):
IBJ Whitehall Bank & Trust
Company (212) 858-2611 IBJ Whitehall Bank & Trust Company
P.O. Box 84 One State Street
Bowling Green Station Confirm Receipt of Facsimile by New York, New York 10004
New York, New York 10274-0084 Telephone: Attn: Securities Processing Window,
Attn: Reorganization Operations
Department (212) 858-2103 Subcellar One, (SC-1)
</TABLE>
---------------
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A
FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID
DELIVERY.
The Information Agent for the Exchange Offer is:
D.F. King & Co., Inc.
Mailing Address:
D.F. King & Co., Inc.
77 Water Street
20th Floor
New York, New York 10005
LETTERS OF TRANSMITTAL AND CERTIFICATES REPRESENTING THE SHARES SHOULD NOT
BE SENT TO THE INFORMATION AGENT.
The stockholder(s) whose signature(s) appear(s) hereon (the "Stockholder")
hereby tender(s) to Impac Mortgage Holdings, Inc., a Maryland corporation (the
"Company"), Common Stock, $.01 par value per share ("Common Stock") (including
the associated Preferred Share Purchase Rights (the "Rights," and together
with the Common Stock, the "Shares")) pursuant to the Company's offer to
exchange up to $35,000,000 aggregate principal amount of its 11% Senior
Subordinated Debentures due February 15, 2004 (the "Debentures") for up to
5,000,000 Shares as contained in the Offering Circular dated February 24,
1999, and this Letter of Transmittal (which together constitute the "Exchange
Offer"), receipt of which is hereby acknowledged. Unless the Rights become
exercisable or separately tradeable prior to the Expiration Date, a tender of
Shares will also constitute a tender of the associated Rights. The Debentures
will bear interest from the date of original issuance. Capitalized terms not
defined herein have the meanings set forth in the Offering Circular.
<PAGE>
The Company will determine an exchange price (the "Exchange Price") of no
greater than 120% nor less than 105% of the average closing sales price of the
Shares as reported by the American Stock Exchange ("AMEX") for the two trading
day period ending two trading days prior to the Expiration Date (the "Average
Price"), provided that the Exchange Price shall not exceed $7.00 per share. By
way of example, if the Expiration Date is not extended, the two trading days
that will be used to determine the Average Price will be Monday, March 22,
1999 and Tuesday, March 23, 1999. The exact maximum principal amount of
Debentures to be exchanged will be a function of the Average Price. The
Company will exchange validly tendered Shares for a principal amount of
Debentures equal to the number of Shares tendered at or below the Exchange
Price multiplied by the Exchange Price. The Company will select as the final
Exchange Price the lowest Exchange Price which would permit the maximum number
of Shares to be exchanged in the Exchange Offer.
The Exchange Offer will be conducted such that each stockholder will be able
to specify the Exchange Price (in increments of 1%) that such stockholder is
willing to accept in exchange for his or her Shares. Whether and to what
extent a tendering stockholder will have his or her tendered Shares accepted
for exchange in the Exchange Offer will depend on how the Exchange Price
specified by such stockholder compares to Exchange Prices specified by other
tendering stockholders. The Exchange Price specified by each tendering
stockholder must be no greater than 120% nor less than 105% of the Average
Price. The Company will, upon the terms and subject to the conditions of the
Exchange Offer, determine the final Exchange Price, taking into account the
number of Shares tendered and the Exchange Prices specified by tendering
stockholders. The final Exchange Price will be announced by press release by
the Company promptly after the Expiration Date. All Shares validly tendered at
prices at or below the Exchange Price will be exchanged at the Exchange Price,
subject to proration if the Exchange Offer is oversubscribed. Shares tendered
at prices above the Exchange Price will be excluded from the Exchange Offer.
Therefore, to maximize the possibility that Shares will be exchanged at the
Exchange Price stockholders should check the box in the Letter of Transmittal
marked "Shares Tendered at Exchange Price Determined by Dutch Auction" or
indicate their minimum Exchange Price is 105%. The minimum number of Shares
that may be exchanged is 100 Shares.
The Exchange Offer is contingent upon the tender of at least 1,000,000
Shares at or below the Exchange Price. If more than 5,000,000 Shares are
tendered at or below the Exchange Price, the Company will accept no more than
5,000,000 of the tendered Shares, to be allocated among tendering stockholders
on a pro rata basis. The Company reserves the right, in its sole discretion,
to accept a greater or lesser number of Shares pursuant to the Exchange Offer.
Shares validly tendered at or below the Exchange Price will be accepted on or
promptly after the Expiration Date. The Exchange Offer is subject to a number
of additional conditions and may be amended or withdrawn in certain
circumstances. See the section of the Offering Circular entitled "The Exchange
Offer--Conditions to and Amendment of the Exchange Offer."
This Letter of Transmittal is to be completed by the Company's stockholders
either if certificates representing Shares ("Share Certificates") are to be
forwarded herewith or if delivery of Shares is to be made by book-entry
transfer to the account maintained by the Exchange Agent at The Depository
Trust Company ("DTC") pursuant to the procedures set forth in the Offering
Circular under "The Exchange Offer--How to Tender." This Letter of Transmittal
may be used for Shares credited to accounts in the Company's Dividend
Reinvestment and Stock Purchase Plan (See box entitled "Dividend Reinvestment
and Stock Purchase Plan Shares").
Stockholders whose Share Certificates are not immediately available or who
cannot transmit their Share Certificates (or confirm a book-entry transfer of
such Shares into the Exchange Agent's account at DTC) and transmit any other
documents required hereby to the Exchange Agent so that they are received
prior to the Expiration Date must tender their Shares according to the
guaranteed delivery procedures set forth in the Offering Circular under "The
Exchange Offer--How to Tender." See Instruction 1 to this Letter of
Transmittal.
2
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
Stockholder deposits with you the Shares described below. The Stockholder
hereby sells, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to such Shares as are being tendered hereby
(and any and all shares of capital stock or other securities issued or
issuable in respect of such Shares) after the acceptance for exchange of such
Shares. The Stockholder hereby irrevocably constitutes and appoints the
Exchange Agent the true and lawful agent and attorney-in-fact of the
Stockholder (with full knowledge that such Exchange Agent also acts as the
agent of the Company) with respect to such Shares and any such securities with
full power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest) to (a) deliver such Shares or
transfer ownership of such Shares on the account books maintained by DTC,
together, in either case, with all accompanying evidences of transfer and
authenticity, to or upon the order of the Company, upon receipt by the
Exchange Agent, as the Stockholder's agent, of the Debentures, at the Exchange
Price specified below for exchange and (b) receive all benefits (including
without limitation, all interest, shares of capital stock and other securities
resulting from any distribution, combination or exchange involving such
Shares) and otherwise exercise all rights of beneficial ownership of such
Shares and any such securities, all in accordance with the terms of the
Exchange Offer.
The Stockholder hereby represents and warrants that the Stockholder has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and such shares of capital stock or other securities issued in respect
thereof) and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claim when the same are purchased by the
Company. The Stockholder will, upon request, execute and deliver any
additional documents deemed by the Exchange Agent or the Company to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares and any such securities tendered hereby.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the Stockholder and every obligation of the Stockholder
hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the Stockholder. Except as stated in the Offering
Circular, this tender is irrevocable.
The Stockholder understands that acceptance of the Exchange Offer will
constitute an agreement between the Stockholder and the Company upon the terms
and subject to the conditions of the Exchange Offer only when either (a) a
duly executed and properly completed copy of this Letter of Transmittal, or
facsimile thereof, accompanied by Share Certificates (or confirmation of a
book-entry transfer of such Shares into the Exchange Agent's account at DTC)
is received by the Exchange Agent, or (b) (i) such tender is made by or
through an Eligible Institution (as defined in Instruction 1 of this Letter of
Transmittal), (ii) prior to the Expiration Date the Exchange Agent has
received a telegram, facsimile transmission or letter from such Eligible
Institution setting forth the name and address of the holder of such Shares
and the number of Shares tendered and stating that the tender is being made
thereby and that, within three American Stock Exchange ("AMEX") trading days
after the date of such telegram, facsimile transmission or letter, the Letter
of Transmittal, together with the Share Certificates (or confirmation of a
book-entry transfer of such Shares into the Exchange Agent's account at DTC)
and any other documents required by the Letter of Transmittal, will be
deposited by such Eligible Institution with the Exchange Agent, and (iii) such
Letter of Transmittal and Share Certificates, in proper form for transfer (or
confirmation of a book-entry transfer of such Shares into the Exchange Agent's
account at DTC) and other required documents are received by the Exchange
Agent within three AMEX trading days after the date of such telegram,
facsimile transmission or letter, all as provided in the Offering Circular
under "The Exchange Offer--How to Tender."
Unless otherwise indicated in the boxes entitled "Special Issuance
Instructions" and "Special Delivery Instructions," please deliver Debentures
(and, if applicable, Shares not exchanged in an over-subscription) through
book-entry transfer by causing DTC to transfer such Debentures into the DTC
account of the undersigned in accordance with DTC's procedures for such
transfer. If indicated under "Special Issuance Instructions" or "Special
Delivery Instructions" below, please send Debentures in registered form (and,
if applicable, substitute certificates for any Shares not exchanged) to the
undersigned at the address set forth in Special Issuance Instructions and
Special Delivery Instructions. The undersigned understands that
3
<PAGE>
stockholders who tender Shares by book-entry transfer ("Book-Entry
Stockholders") may request that any Shares not exchanged be returned by
crediting such account maintained at the DTC as such Book-Entry Stockholder
may designate by making an appropriate entry under "Special Issuance
Instructions" and "Special Delivery Instructions." The undersigned recognizes
that the Company has no obligation pursuant to the "Special Issuance
Instructions" and "Special Delivery Instructions" to transfer any Shares from
the name of the registered holder thereof if the Company does not accept for
exchange any of the Shares.
List below the Shares to which this Letter of Transmittal relates. If the
space provided below is inadequate, list the number of Shares and certificate
numbers on a separately executed Schedule and affix the Schedule to this
Letter of Transmittal. The minimum number of Shares that may be exchanged is
100 Shares.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- -----------------------------------------------------------------------------------------------
Name(s) and Address(es) of Holder(s) Total Shares
Tendered (Please fill in, if blank) Number of Shares Certificate Represented by
(Attach additional list if necessary) Tendered * Number(s) ** Certificate(s)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Total Number of Shares Tendered
- -----------------------------------------------------------------------------------------------
</TABLE>
* Unless otherwise indicated, the total number of Shares represented by the
Share Certificate(s) will be deemed to have been tendered.
** Need not be completed by Stockholders who deliver Shares by book-entry
transfer.
[_] CHECK HERE IF SHARE CERTIFICATES FOR TENDERED SHARES ARE ENCLOSED HEREWITH.
[_] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE
ACCOUNT MAINTAINED BY THE EXCHANGE AGENT AT DTC AND COMPLETE THE FOLLOWING
(ONLY PARTICIPANTS IN DTC MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution: _____________________________________________
DTC Account Number: ________________________________________________________
Transaction Code Number: ___________________________________________________
[_] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING.
Name of Registered Owner: __________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution which guaranteed delivery: _____________________________
DTC Account Number (if delivered by book-entry transfer): __________________
4
<PAGE>
---------------------------------- ------------------------------------
TENDER PRICE DIVIDEND REINVESTMENT AND
STOCK PURCHASE PLAN SHARES
If Shares are being tendered at (See Instruction 5)
more than one Exchange Price, a
separate Letter of Transmittal This section is to be completed
for each Exchange Price specified ONLY if Shares held in the
must be used. (See Instruction 4) Dividend Reinvestment and Stock
Purchase Plan are to be tendered.
CHECK ONLY ONE BOX. IF MORE THAN
ONE BOX IS CHECKED, OR IF NO BOX [_] By checking this box, the
IS CHECKED, THERE IS NO VALID undersigned represents that
TENDER OF SHARES. the undersigned is a
participant in the Dividend
Shares Tendered at Exchange Price Reinvestment and Stock
Determined by Dutch Auction. Purchase Plan and hereby
instructs the Exchange Agent
[_] The undersigned wants to to tender on behalf of the
maximize the chance of having undersigned the following
the Company purchase all the number of Shares credited to
Shares the undersigned is the Dividend Reinvestment and
tendering (subject to the Stock Purchase Plan account of
possibility of proration). the undersigned at the Tender
Accordingly, by checking this Price indicated in the box
one box INSTEAD OF ONE OF THE entitled "Tender Price" in
PRICE BOXES BELOW, the this Letter of Transmittal:
undersigned hereby tenders
Shares at, and is willing to ______ Shares *
accept, the Exchange Price
resulting from the Dutch Account Number: _______________
Auction tender process. This
action could result in * The undersigned understands
receiving an Exchange Price as and agrees that all Shares
low as 105% or as high as held in the Dividend
120%. Reinvestment and Stock
Purchase Plan account(s) of
***CHECK EITHER THE BOX ABOVE the undersigned will be
OR CHECK ONE BOX BELOW*** tendered if the above box is
checked and the space above is
Shares Tendered at Exchange Price left blank.
Determined by Stockholder
-----------------------------------
[_]105%
[_]106%
[_]107%
[_]108%
[_]109%
[_]110%
[_]111%
[_]112%
[_]113%
[_]114%
[_]115%
[_]116%
[_]117%
[_]118%
[_]119%
[_]120%
- -----------------------------------
5
<PAGE>
- ------------------------------------ ------------------------------------
PLEASE SIGN HERE SPECIAL ISSUANCE INSTRUCTIONS
(To Be Completed By All (See Instructions 2, 6 and 9)
Tendering Stockholders)
(See Instruction 6) To be completed ONLY if Share
Certificates for Shares not
Important: Must be signed by exchanged and/or Debentures are
Stockholder(s) as name(s) to be registered in the name of
appear(s) on Share Certificate(s) and sent to someone other than
or by person(s) authorized to the undersigned; if Shares
become holders by endorsements tendered by book-entry transfer
and other documents transmitted. which are not exchanged are to be
If signature is by trustee, returned by credit to an account
executor, administrator, maintained at DTC or if
guardian, officer or other person Debentures are to be issued in
acting in a fiduciary or registered form instead of
representative capacity, please through book-entry transfer.
set forth full title.
Issue and Mail:
X ________________________________ (check appropriate box(es)):
X ________________________________ [_]Debentures to:
(Signature(s) of Holder(s) or
Authorized Signatory) [_]Shares to:
Date: ____________________________ Name(s) __________________________
(Please Print)
Name(s): _________________________
Address __________________________
__________________________________
(Please Print) __________________________________
(City, State) (Zip Code)
Capacity: ________________________
Credit unexchanged Shares
Address:__________________________ tendered by book-entry transfer
to the DTC account set forth
__________________________________ below.
(Including Zip Code)
__________________________________
Area Code and (DTC Account Number)
Telephone No.: ___________________
__________________________________
PLEASE COMPLETE SUBSTITUTE (Taxpayer Identification
FORM W-9 HEREIN or Social Security Number)
SIGNATURE GUARANTEE SPECIAL DELIVERY INSTRUCTIONS
(See Instruction 6) (See Instructions 2, 6 and 9)
Certain Signatures Must be To be completed ONLY if Share
Guaranteed by an Eligible Certificates for Shares not
Institution exchanged and/or Debentures
registered in the name of the
__________________________________ undersigned are to be sent to
(Name of Eligible Institution someone other than the
Guaranteeing Signatures) undersigned or to the undersigned
at an address other than that
__________________________________ shown in the box entitled
(Address (including Zip Code) "Description of Shares Tendered"
and Telephone Number above.
(including Area Code) of Firm)
Mail or deliver:
__________________________________
(Authorized Signature) Name _____________________________
(Printed Name) (Please Print)
__________________________________ Address __________________________
(Title)
__________________________________
Date: ____________________________ (City, State) (Zip Code)
__________________________________
(Taxpayer Identification
or Social Security Number)
- ------------------------------------ ------------------------------------
6
<PAGE>
IMPORTANT TAX INFORMATION
Under the Federal income tax law, a Stockholder whose tendered Shares are
accepted for exchange is required to provide the Exchange Agent with such
Stockholder's correct Taxpayer Identification Number ("TIN") on Substitute
Form W-9. If such Stockholder is an individual, the TIN is his social security
number. If the Exchange Agent is not provided with the correct TIN, the
Stockholder may be subject to a $50 penalty imposed by Federal law. In
addition, interest payments with respect to the Debentures and any cash paid
in lieu of the issuance of fractional interests in Debentures may be subject
to backup withholding of 31% of any payments made to the Stockholder. Backup
withholding is not an additional tax. Rather, the Federal income tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained.
Certain holders of securities (including, among others, all corporations and
certain foreign individuals) are not subject to backup withholding. In order
for a foreign person to qualify as an exempt recipient, that Stockholder must
attest under penalties of perjury to that person's exempt status. Other exempt
recipients can establish their exemptions from backup withholding in the
manner described in the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
Purpose of Substitute Form W-9
To prevent backup withholding on payments that are made to a Stockholder
with respect to Debentures acquired pursuant to the Exchange Offer, the
Stockholder is required to notify the Exchange Agent of his correct TIN (or
that such Stockholder is awaiting a TIN) by completing and signing the
Substitute Form W-9.
What Number to Give the Exchange Agent
The Stockholder is required to give the Exchange Agent the TIN of the record
owner of the Shares. If the Shares are in more than one name or are not in the
name of the actual owner, consult the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
guidance on which number to report. If "Special Issuance Instructions" above
have been completed, the TINs of the person(s) in whose name the Debentures
are to be registered and the payee of the check for fractional interests, as
specified therein, are required to be given to the Exchange Agent.
7
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(See Instruction 9)
- --------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR ______________________
SUBSTITUTE TIN IN THE BOX AT RIGHT AND Social Security Number
CERTIFY BY SIGNING AND
DATING BELOW.
Form W-9 OR ___________________
Employer Identification
Number
DEPARTMENT OF
THE TREASURY
INTERNAL REVENUE
SERVICE
--------------------------------------------------------
Part 2--Certification--Under Penalties Part 3--
of Perjury, I Certify that:
Payer's Request for
Taxpayer Identification
Number (TIN)
(1) The number shown on this form is my Awaiting
correct Taxpayer Identification TIN [_]
Number (or I am waiting for a number
to be issued to me) and
(2) I am not subject to backup
withholding either because I have
not been notified by the Internal
Revenue Service ("IRS") that I am
subject to backup withholding as a
result of failure to report all
interest or dividends, or the IRS
has notified me that I am no longer
subject to backup withholding.
- --------------------------------------------------------------------------------
Certification Instructions--You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2).
Signature: ______________________________ Date: ___________________________
Note: Failure to complete and return this form may result in a $50
penalty imposed by the Internal Revenue Service and in backup
withholding of 31% of any cash payments made to you. Please review the
enclosed Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9 for additional details.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within
sixty days, 31 percent of all reportable payments made to me thereafter will
be withheld until I provide a number.
Signature: ______________________________ Date: ___________________________
8
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. Delivery of Letter of Transmittal and Shares
This Letter of Transmittal is to be used either if Share Certificates are to
be forwarded herewith or if tenders are to be made pursuant to the procedures
for book-entry transfer set forth in the Offering Circular under "The Exchange
Offer." Share Certificates or any book-entry transfer into the Exchange
Agent's account at the DTC of Shares tendered electronically, as well as a
properly completed and duly executed copy of this Letter of Transmittal or a
facsimile thereof and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at its address set forth
below or (in the case of tenders by book-entry transfer) confirmed to the
Exchange Agent on or prior to the Expiration Date. The method of delivery of
this Letter of Transmittal, the Shares and any other required documents is at
the election and risk of the Stockholder, but, except as otherwise provided
below, the delivery will be deemed made only when actually received or
confirmed by the Exchange Agent. If Share Certificates are sent by mail, it is
suggested that the mailing be made with return receipt requested, properly
insured, and sufficiently in advance of the Expiration Date to permit delivery
to the Exchange Agent on or before the Expiration Date. The minimum number of
Shares that may be exchanged is 100 Shares.
Stockholders whose Shares are not immediately available or who cannot
deliver their Shares and all other required documents to the Exchange Agent or
who cannot complete the procedures for book-entry transfer on or prior to the
Expiration Date may tender their Shares pursuant to the guaranteed delivery
procedure set forth in the Offering Circular. Pursuant to such procedure: (i)
such tender must be made by or through a firm that is a member of a registered
national securities exchange or a member of the National Association of
Securities Dealers, Inc. or by a commercial bank or trust company having an
office in the United States (an "Eligible Institution"); (ii) prior to the
Expiration Date the Exchange Agent must have received from such Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by telegram, telex, facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Shares and the number
of Shares tendered, stating that the tender is being made thereby and
guaranteeing that, within three American Stock Exchange ("AMEX") trading days
after the Expiration Date, this Letter of Transmittal together with the Shares
and any other documents required by this Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and (iii) the
Share Certificates for all tendered Shares, or a confirmation of a book-entry
transfer of such Shares into the Exchange Agent's account at DTC as described
above, and this Letter of Transmittal as well as all other documents required
by this Letter of Transmittal, must be received by the Exchange Agent within
three AMEX trading days after the Expiration Date, all as provided in the
Offering Circular under "The Exchange Offer--How to Tender--Guaranteed
Delivery."
See "The Exchange Offer" section of the Offering Circular.
2. Partial Tenders and Withdrawals.
Issuance of Debentures in exchange for Shares will be made only against
deposit of tendered Shares. If less than the entire number of Shares evidenced
by a submitted Share Certificate is tendered, the tendering Stockholder should
fill in the number of Shares tendered in the appropriate boxes above entitled
"Number of Shares Tendered." The Exchange Agent will then issue and send to
the tendering holder (unless otherwise requested by the holder under "Special
Issuance Instructions" and "Special Delivery Instructions" in this Letter of
Transmittal), a newly issued Share Certificate for Shares submitted but not
tendered, together with any tendered Shares that were not accepted for
exchange because of proration or otherwise. The entire number of all Shares
deposited with the Exchange Agent will be deemed to have been tendered unless
otherwise indicated.
Tendered Shares not accepted for exchange by the Company, including as a
result of proration, if any, will be returned without expense to the tendering
holder of such Shares (or, in the case of the Shares tendered by book-entry
transfer into the Exchange Agent's account at DTC, such Shares will be
credited to an account maintained at DTC) as promptly as practicable following
the Expiration Date, subject to delays, if any, resulting from proration.
Any holder of Shares who has tendered such Shares may withdraw the tender by
delivering written notice of withdrawal to the Exchange Agent prior to 5:00
P.M., New York City time, on March 26, 1999, or, unless such tenders have
previously been accepted for exchange, after 5:00 P.M., New York City time, on
April 21, 1999. To be effective, a notice of withdrawal must indicate the
Share Certificate number or numbers to which it relates (or, if the tender was
by book-entry delivery, information sufficient to enable the Exchange Agent to
identify the Shares so tendered) and the number of Shares represented by such
Share
9
<PAGE>
Certificate and (a) be signed by the holder in the same manner as the original
signature in this Letter of Transmittal or (b) be accompanied by evidence
satisfactory to the Company that the holder revoking such tender has succeeded
to beneficial ownership of such Shares. Withdrawals of tenders of Shares may
not be rescinded, and any Shares withdrawn will be deemed not validly tendered
thereafter for purposes of the Exchange Offer. However, properly withdrawn
Shares may be tendered again at any time prior to the Expiration Date by
following the procedures for tendering not previously tendered Shares.
3. Denominations: Fractional Interests.
The Debentures will be issued only in denominations of $25.00 and any
integral multiple thereof. The Company will pay cash in lieu of fractional
interests all as provided in the Offering Circular under "The Exchange Offer--
Denominations; Fractional Interests," and subject to the conditions and
exceptions set forth therein.
4. Indication of Exchange Price at Which Shares Are Being Tendered.
For Shares to be validly tendered, the Stockholder must check the box
indicating the Exchange Price which such Stockholder is tendering Shares under
"Tender Price" in this Letter of Transmittal. ONLY ONE BOX MAY BE CHECKED. IF
MORE THAN ONE BOX IS CHECKED OR IF NO BOX IS CHECKED, THERE IS NO VALID TENDER
OF SHARES. A Stockholder wishing to tender portions of such Stockholder's
Shares at different Exchange Prices must complete a separate Letter of
Transmittal for each Exchange Price at which such Stockholder wishes to tender
each such portion of such Stockholder's Shares. The same Shares cannot be
tendered at more than one Exchange Price. Stockholders wishing to maximize the
possibility that their Shares will be purchased may check the box on the
Letter of Transmittal marked "Shares Tendered at Exchange Price Determined by
Dutch Auction." Checking this box may result in an Exchange Price of the
Shares so tendered at the minimum Exchange Price.
5. Dividend Reinvestment and Stock Purchase Plan.
If a tendering Stockholder desires to have Shares credited to the
Stockholder's account under the Dividend Reinvestment and Stock Purchase Plan
(the "DRI Plan") tendered pursuant to the Exchange Offer, the box captioned
"Dividend Reinvestment and Stock Purchase Plan Shares" should be completed. A
participant in the DRI Plan may complete such box on only one Letter of
Transmittal submitted by such participant. If a participant submits more than
one Letter of Transmittal and completes such box on more than one Letter of
Transmittal, the participant will be deemed to have elected to tender all
Shares credited to the Stockholder's account under the DRI Plan at the lowest
of the prices specified in such Letters of Transmittal.
6. Signatures on Letter of Transmittal, Stock Powers and Endorsements;
Guarantee of Signatures.
If this Letter of Transmittal is signed by the registered holder of the
Shares tendered hereby, the signature must correspond exactly with the name as
written on the face of the Share Certificates without any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several Share
Certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter of Transmittal as there are different
registrations of Share Certificates.
When this Letter of Transmittal is signed by the registered holder or
holders of the Shares listed and tendered hereby, no endorsements of
certificates or separate stock powers are required. If, however, Debentures
are to be issued, or Share Certificates for any untendered Shares are to be
reissued, to a person other than the registered holder, then endorsements of
any Share Certificates transmitted hereby or separated stock powers are
required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of any Share Certificate(s) listed, such Share
Certificate(s) must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered holder or
holders appear on the Share Certificate(s).
Any beneficial owner whose Shares are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender Shares in the Exchange Offer should contact such registered holder to
tender the Shares on such beneficial owner's behalf. If any beneficial owner
wishes to tender Shares himself,
10
<PAGE>
that beneficial owner must, prior to completing and executing the Letter of
Transmittal and where applicable delivering his Shares, either make
appropriate arrangements to register ownership of the Shares in such
beneficial owner's name or follow the procedures described in the immediately
preceding paragraph, the transfer of record ownership may take a considerable
amount of time.
If this Letter of Transmittal or any Share Certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
Endorsements on Shares Certificates or signatures on stock powers required
by this Instruction 6 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Shares are tendered: (i) by a registered
holder of such Shares (which term, for purposes of this letter, shall include
any participant in DTC whose name appears on a security position listing as
the owner of the Shares) who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on this Letter of
Transmittal; or (ii) for the account of an Eligible Institution.
7. Transfer Taxes.
The Company will pay any transfer taxes applicable to the transfer of the
Shares to it or its order pursuant to the Exchange Offer. If, however,
Debentures and/or substitute Share Certificates for Shares not exchanged are
to be delivered to, or are to be registered or issued in the name of any
person other than the registered holder of the Shares tendered hereby, or if
the Shares tendered hereby are registered in the name of any person other than
the person signing this Letter of Transmittal, or if a transfer tax is imposed
for any reason other than the transfer of Shares to the Company or its order
pursuant to the Exchange Offer, the amount of any such transfer taxes (whether
imposed on the registered holder or any other person) will be payable by the
tendering Stockholder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted herewith, the amount of such transfer
taxes due will be billed directly to such tendering Stockholder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Share Certificates listed in this
Letter of Transmittal.
8. Substitute Form W-9.
The tendering Stockholder is required to provide the Exchange Agent with a
correct Taxpayer Identification Number ("TIN") on Substitute Form W-9, unless
an exemption applies. Failure to provide the information on the form may
subject the tendering Stockholder to backup withholding tax of 31% on interest
payments with respect to the Debentures and any cash paid in lieu of the
issuance of fractional interests in the Debentures. If the tendering
Stockholder has not been issued a TIN and has applied for a number (or intends
to apply for a number in the near future), the tendering Stockholder should
write "Applied for" on the face of the Substitute Form W-9. If the Exchange
Agent is not provided with a TIN within 60 days, the Exchange Agent will
withhold 31% of all such payments in respect of interest thereafter until a
TIN is provided to the Exchange Agent. See "Important Tax Information," above
and on the enclosed "Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9" for additional information concerning
Substitute Form W-9 and 31% backup withholding, including information on
exemptions from backup withholding.
9. Special Issuance and Special Delivery Instructions.
Tendering holders should indicate in the applicable box the name and address
to which Debentures and/or substitute Share Certificates for the number of
Shares not exchanged are to be issued or sent, if different from the name and
address of the person signing this Letter of Transmittal. In the case of
issuance in a different name, the TIN or Social Security Number of the person
named must also be indicated. If no such instructions are given, any such
Shares which are not exchanged will be returned by crediting the account at
DTC as designated below the box entitled "Description of Shares Tendered." In
addition, holders who wish to have their Debentures delivered in registered
form, instead of through book-entry transfer, should so indicate in the
appropriate box, entitled "Special Issuance Instructions" or "Special Delivery
Instructions."
11
<PAGE>
10. Waiver of Conditions.
The Company reserves the absolute right to waive satisfaction of any of the
specified conditions in the Exchange Offer in the case of any Shares tendered.
11. No Conditional Offers.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Stockholders, by execution of this Letter of
Transmittal (or a facsimile thereof), shall waive any right to receive notice
of the acceptance of their Shares for exchange.
The Company, Exchange Agent or any other person is not obligated to give
notice of defects or irregularities in any tender, nor shall any of them incur
any liability for failure to give any such notice.
12. Mutilated, Lost, Stolen or Destroyed Share Certificates.
Any stockholder whose Share Certificates have been mutilated, lost, stolen
or destroyed should contact the Exchange Agent at the address indicated herein
for further instructions.
13. Requests for Assistance or Additional Copies.
Requests for assistance or additional copies of the Offering Circular and
the Letter of Transmittal may be directed to the Information Agent at the
address and telephone number set forth on the cover page of this Letter of
Transmittal or to your broker, dealer, commercial bank or trust company.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH
SHARE CERTIFICATES OR CONFIRMATION OF A BOOK-ENTRY TRANSFER OF SUCH
SHARES INTO THE ACCOUNT OF THE EXCHANGE AGENT AT DTC) AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT OR A
NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE
AGENT, PRIOR TO THE EXPIRATION DATE, ALL AS DEFINED IN THE OFFERING
CIRCULAR.
+------------------------------------------+
| |
| |
| |
| |
| |
| |
| |
| |
+------------------------------------------+
12
<PAGE>
EXHIBIT 99.(A)(3)
NOTICE OF GUARANTEED DELIVERY
TO TENDER SHARES
OF
COMMON STOCK
(including the associated Preferred Stock Purchase Rights)
OF
IMPAC MORTGAGE HOLDINGS, INC.
PURSUANT TO THE OFFERING CIRCULAR DATED FEBRUARY 24, 1999
- --------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME,
ON MARCH 26, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE").
- --------------------------------------------------------------------------
As set forth in the Offering Circular dated February 24, 1999, (the
"Offering Circular") under "The Exchange Offer--How to Tender," this form or one
substantially equivalent hereto must be used to accept the Exchange Offer (as
defined below) of IMPAC Mortgage Holdings, Inc., a Maryland corporation (the
"Company"), if certificates representing Shares of Common Stock, $.01 par value
per share ("Common Stock") (including the associated Preferred Stock Purchase
Rights (the "Rights" and together with the Common Stock, the "Shares")) ("Share
Certificates") are not immediately available (or the procedures for book-entry
transfer cannot be completed on a timely basis) or the stockholders cannot
deliver their Share Certificates, Letter of Transmittal and other required
documents to the Exchange Agent (as defined in the Offering Circular) on or
prior to 5:00 p.m., New York City time, on March 26, 1999, unless such period is
extended as described in the Offering Circular. Such form may be delivered by
hand or transmitted by facsimile transmission or mail to the Exchange Agent
prior to the Expiration Date.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
IBJ Whitehall Bank & Trust Company
<TABLE>
<S> <C> <C>
Mailing Address: Facsimile Copy Number Hand/Overnight Delivery:
IBJ Whitehall Bank & Trust Company (For Eligible Institutions Only): IBJ Whitehall Bank & Trust Company
P.O. Box 84 (212) 858-2611 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Confirm Receipt of Facsimile by Attn: Securities Processing Window,
Attn: Reorganization Operations Telephone: Subcellar One, (SC-1)
Department (212) 858-2103
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OR TRANSMISSION OF INSTRUCTION
VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
This form is not to be used to guarantee signatures. The Eligible
Institution (as defined in the Letter of Transmittal) that completes this form
must communicate the guarantee to the Exchange Agent and must deliver the Letter
of Transmittal and Share Certificates to the Exchange Agent within the time
period shown herein. Failure to do so could result in a financial loss to such
Eligible Institution.
The undersigned hereby tenders to the Company, upon the terms andconditions
set forth in the Offering Circular and related Letter of Transmittal (which
together constitute the "Exchange Offer"),receipt of which is hereby
acknowledged, Shares pursuant to theguaranteed delivery procedure
--------
described in the Exchange Offer "The Exchange Offer--How to Tender." Unless the
Rights become exercisable or separately tradeable prior to the Expiration Date,
a tender of Shares will also constitute a tender of the associated Rights. <PAGE>
1
<PAGE>
- ------------------------------------------------------------------------------
TENDER PRICE
If Shares are being tendered at more than oneExchange Price, a separate Letter
of Transmittalfor each Exchange Price specified must be used.
CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED,
THERE IS NO VALID TENDER OF SHARES.
Shares Tendered at Exchange Price Determined by Dutch Auction.
[_] The undersigned wants to maximize the chance of having the Company
purchase allthe Shares the undersigned is tendering (subject to
the possibility of proration). Accordingly, by checking this one
box INSTEAD OF ONE OF THE PRICE BOXES BELOW, the undersigned
hereby tenders Shares at, and is willing to accept, the Exchange
Price resulting from the Dutch Auction tender process. This action
could result in receiving an Exchange Price as low as 105% or as
high as 120%.
***CHECK EITHER THE BOX ABOVE OR CHECK ONE BOX BELOW***
------
Shares Tendered at Exchange Price Determined by Stockholder
[_] 105%
[_] 106%
[_] 107%
[_] 108%
[_] 109%
[_] 110%
[_] 111%
[_] 112%
[_] 113%
[_] 114%
[_] 115%
[_] 116%
[_] 117%
[_] 118%
[_] 119%
[_] 120%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
PLEASE TYPE OR PRINT ALL INFORMATION BELOW
Signature(s):
--------------------------------------------------------
Common Stock Certificate No.(s) (if available):
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Name(s) of Record Holder(s):
-----------------------------------------
Total Number of Shares Represented By
Certificate(s):
------------------------------------------------------
Address(es):
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Name of Tendering Institution:
---------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Zip Code
-------------------------------------------------------------
Area Code and Tel. No.(s):
-------------------------------------------
Account Number:
------------------------------------------------------
Dated:
---------------------------------------------------------------
- --------------------------------------------------------------------------
2
<PAGE>
- -------------------------------------------------------------------------
GUARANTEE
(DO NOT USE FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office
in the United States, hereby guarantees (a) that the above named
person(s) "own(s)" the Shares tendered hereby within the meaning of
Rule 14e-4 under the Securities Exchange Act of 1934, as amended,
and (b) that delivery to the Company of certificates representing the
Shares tendered hereby, together with a properly completed and duly
executed Letter of Transmittal (or manually signed facsimile thereof
properly completed and duly executed and any other required
documents will be received by the Exchange Agent no later than three
(3) AMEX trading days after the date of execution of this Notice of
Guaranteed Delivery.
- --------------------------------------------------------------------------
Name of Firm
- --------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------
City, State Zip Code
- --------------------------------------------------------------------------
Area Code and Telephone No.
- --------------------------------------------------------------------------
Authorized Signature
- --------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------
Title
- --------------------------------------------------------------------------
Date
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS FORM. SHARE
CERTIFICATES MUST BE SENT WITH THE LETTER OF TRANSMITTAL.
- --------------------------------------------------------------------------
3
<PAGE>
EXHIBIT 99.(a)(4)
IMPAC MORTGAGE HOLDINGS, INC.
Offer to Exchange 11% Senior Subordinated Debentures Due February 15, 2004
for up to 5,000,000 Shares of its Common Stock
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MARCH 26,
1999, UNLESS EXTENDED (THE "EXPIRATION DATE").
- --------------------------------------------------------------------------------
February 24, 1999
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
IMPAC Mortgage Holdings, Inc., a Maryland corporation (the "Company"), is
offering, upon the terms and conditions set forth in the enclosed Offering
Circular dated February 24, 1999 (the "Offering Circular") and the enclosed
Letter of Transmittal relating to the offer (the "Exchange Offer"), to exchange
its 11% Senior Subordinated Debentures due February 15, 2004 (the "Debentures")
for up to 5,000,000 shares of its Common Stock, $.01 par value per share
("Common Stock") (including the associated Preferred Share Purchase Rights (the
"Rights," and together with the Common Stock, the "Shares")). Unless the Rights
become exercisable or separately tradeable prior to the Expiration Date, a
tender of Shares will also constitute a tender of the associated Rights.
The Company will determine an exchange price (the "Exchange Price") of no
greater than 120% nor less than 105% of the average closing sales price of the
Shares as reported by the American Stock Exchange ("AMEX") for the two trading
day period ending two trading days prior to the Expiration Date (the "Average
Price"), provided that the Exchange Price shall not exceed $7.00 per share.
By way of example, if the Expiration Date is not extended, the two trading days
that will be used to determine the Average Price will be Monday, March 22, 1999
and Tuesday, March 23, 1999. The exact maximum principal amount of Debentures to
be exchanged will be a function of the Average Price. The Company will exchange
validly tendered Shares for a principal amount of Debentures equal to the number
of Shares tendered at or below the Exchange Price multiplied by the Exchange
Price. The Company will select as the final Exchange Price the lowest Exchange
Price which would permit the maximum number of Shares to be exchanged in the
Exchange Offer.
The Exchange Offer will be conducted such that each stockholder will be
able to specify the Exchange Price (in increments of 1%) that such stockholder
is willing to accept in exchange for his or her Shares. Whether and to what
extent a tendering stockholder will have his or her tendered Shares accepted for
exchange in the Exchange Offer will depend on how the Exchange Price specified
by such stockholder compares to Exchange Prices specified by other tendering
stockholders. The Exchange Price specified by each tendering stockholder must
be no greater than 120% nor less than 105% of the Average Price. The Company
will, upon the terms and subject to the conditions of the Exchange Offer,
determine the final Exchange Price, taking into account the number of Shares
tendered and the Exchange Prices specified by tendering stockholders. The final
Exchange Price will be announced by press release by the Company
<PAGE>
promptly after the Expiration Date. All Shares validly tendered at prices at or
below the Exchange Price will be exchanged at the Exchange Price, subject to
proration if the Exchange Offer is oversubscribed. Shares tendered at prices
above the Exchange Price will be excluded from the Exchange Offer. Therefore, to
maximize the possibility that Shares will be exchanged at the Exchange Price
stockholders should check the box in the Letter of Transmittal marked "Shares
Tendered at Exchange Price Determined by Dutch Auction" or indicate their
minimum Exchange Price is 105%. The minimum number of Shares that may be
exchanged is 100 Shares.
The Exchange Offer is contingent upon the tender of at least 1,000,000
Shares at or below the Exchange Price. If more than 5,000,000 Shares are
tendered at or below the Exchange Price, the Company will accept no more than
5,000,000 of the tendered Shares, to be allocated among tendering stockholders
on a pro rata basis. The Company reserves the right, in its sole discretion, to
accept a greater or lesser number of Shares pursuant to the Exchange Offer.
Shares validly tendered at or below the Exchange Price will be accepted on or
promptly after the Expiration Date. The Exchange Offer is subject to a number
of additional conditions and may be amended or withdrawn in certain
circumstances. See the section of the Offering Circular entitled "The Exchange
Offer--Conditions to and Amendment of the Exchange Offer."
We are asking you to contact your clients for whom you hold Shares
registered in your name or in the name of your nominee.
The Company will not pay any fees or commissions to any broker or dealer or
other person for soliciting tenders of Shares pursuant to the Exchange Offer.
However, you will be reimbursed for customary mailing and handling expenses
incurred by you in forwarding any of the enclosed materials to your clients.
The Company will pay or cause to be paid all transfer taxes, if any,
applicable to the exchange of Shares to it or its order, except as otherwise
provided in Instruction 7 of the Letter of Transmittal.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee or who hold Shares
registered in their own names, we are enclosing the following documents:
1. The Offering Circular;
2. A Letter of Transmittal (to be used to accept the Exchange Offer);
3. A form of letter that may be sent to your clients for whose accounts
you hold Shares registered in your name or in the name of your
nominee, with space provided for obtaining such clients instructions
with regard to the Exchange Offer;
4. A Notice of Guaranteed Delivery;
5. A letter from the Company to the stockholders;
<PAGE>
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. A return envelope addressed to the Exchange Agent.
WE URGE YOU TO FORWARD THIS INFORMATION TO YOUR CLIENTS AS SOON AS
POSSIBLE. The Exchange Offer will expire at 5:00 p.m., New York City time, on
March 26, 1999, unless extended.
A stockholder wishing to tender Shares pursuant to the Exchange Offer
should (i) complete and execute the Letter of Transmittal (or facsimile
thereof), and have the signature thereon guaranteed if required by the
instructions thereof, and deliver such Letter of Transmittal, together with
certificates representing the Shares to be tendered and any other required
documents, to the Exchange Agent at or prior to the Expiration Date, or (ii)
request his broker, dealer, commercial bank, trust company or other nominee to
effect the transaction for him. See the section of the Offering Circular
entitled "The Exchange Offer--How to Tender."
Stockholders who wish to tender their Shares pursuant to the Exchange Offer
and (i) whose Share Certificates are not immediately available, or (ii) who
cannot deliver their Share Certificates and Letter of Transmittal to the
Exchange Agent on or prior to the Expiration Date, must tender their Shares
according to the guaranteed delivery procedures set forth in the Exchange Offer
under "The Exchange Offer--How to Tender."
Any inquiries you may have with respect to the Exchange Offer or requests
for additional copies of the above documents should be addressed to D.F. King &
Co., Inc., call collect at (212) 269-5550.
Very truly yours,
IMPAC MORTGAGE HOLDINGS, INC.
Nothing contained herein or in the enclosed documents shall constitute you or
any person as an agent of the Company or authorize you or any other person to
use any document or make any representation on behalf of any of them with
respect to the Exchange Offer not made in the Offering Circular or the Letter of
Transmittal.
<PAGE>
EXHIBIT 99.(a)(5)
IMPAC MORTGAGE HOLDINGS, INC.
OFFER TO EXCHANGE
11% SENIOR SUBORDINATED DEBENTURES DUE FEBRUARY 15, 2004
FOR
UP TO 5,000,000 SHARES OF ITS COMMON STOCK
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON MARCH 26, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE").
February 24, 1999
To Our Clients:
Enclosed for your consideration are an Offering Circular dated February 24,
1999 (the "Offering Circular") and a Letter of Transmittal (the "Letter of
Transmittal") which together constitute the offer (the "Exchange Offer") by
Impac Mortgage Holdings, Inc., a Maryland corporation (the "Company"), to
exchange its 11% Senior Subordinated Debentures due February 15, 2004 (the
"Debentures") for up to 5,000,000 shares of its Common Stock, $.01 par value per
share ("Common Stock") (including the associated Preferred Share Purchase Rights
(the "Rights," and together with the Common Stock, the "Shares")). Unless the
Rights become exercisable or separately tradeable prior to the Expiration Date,
a tender of Shares will also constitute a tender of the associated Rights.
This material is being forwarded to you as the beneficial owner of Shares
held by us in your account but not registered in your name. A TENDER WITH
RESPECT TO SUCH SHARES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND
PURSUANT TO YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to tender
any or all of your Shares held by us for your account pursuant to the terms and
conditions of the Exchange Offer, as set forth in the Offering Circular and the
Letter of Transmittal. We urge you to read the enclosed Offering Circular and
related Letter of Transmittal carefully before instructing us to tender your
Shares. If you wish to have us tender any or all of your Shares, please so
instruct us by completing, executing, detaching and returning to us the attached
instruction form. The accompanying form of Letter of Transmittal is furnished to
you for your information only and may not be used by you to tender your Shares.
Your instructions to us should be forwarded as promptly as possible in order to
permit us to tender your Shares on your behalf in accordance with the provisions
of the Exchange Offer.
Tenders of Shares pursuant to the Exchange Offer may be withdrawn by
holders at any time prior to the Expiration Date and, if the Company has not
accepted such Shares for exchange, after the expiration of 40 business days from
the date of the Offering Circular.
<PAGE>
The Company will determine an exchange price (the "Exchange Price") of no
greater than 120% nor less than 105% of the average closing sales price of the
Shares as reported by the American Stock Exchange ("AMEX") for the two trading
day period ending two trading days prior to the Expiration Date (the "Average
Price"), provided that the Exchange Price shall not exceed $7.00 per share. By
way of example, if the Expiration Date is not extended, the two trading days
that will be used to determine the Average Price will be Monday, March 22, 1999
and Tuesday, March 23, 1999. The exact maximum principal amount of Debentures to
be exchanged will be a function of the Average Price. The Company will exchange
validly tendered Shares for a principal amount of Debentures equal to the number
of Shares tendered at or below the Exchange Price multiplied by the Exchange
Price. The Company will select as the final Exchange Price the lowest Exchange
Price which would permit the maximum number of Shares to be exchanged in the
Exchange Offer.
The Exchange Offer will be conducted such that each stockholder will be
able to specify the Exchange Price (in increments of 1%) that such stockholder
is willing to accept in exchange for his or her Shares. Whether and to what
extent a tendering stockholder will have his or her tendered Shares accepted for
exchange in the Exchange Offer will depend on how the Exchange Price specified
by such stockholder compares to Exchange Prices specified by other tendering
stockholders. The Exchange Price specified by each tendering stockholder must
be no greater than 120% nor less than 105% of the Average Price. The Company
will, upon the terms and subject to the conditions of the Exchange Offer,
determine the final Exchange Price, taking into account the number of Shares
tendered and the Exchange Prices specified by tendering stockholders. The final
Exchange Price will be announced by press release by the Company promptly after
the Expiration Date. All Shares validly tendered at prices at or below the
Exchange Price will be exchanged at the Exchange Price, subject to proration if
the Exchange Offer is oversubscribed. Shares tendered at prices above the
Exchange Price will be excluded from the Exchange Offer. Therefore, to maximize
the possibility that Shares will be exchanged at the Exchange Price stockholders
should check the box in the Letter of Transmittal marked "Shares Tendered at
Exchange Price Determined by Dutch Auction" or indicate their minimum Exchange
Price is 105%. The minimum number of Shares that may be exchanged is 100
Shares.
The Exchange Offer is contingent upon the tender of at least 1,000,000
Shares at or below the Exchange Price. If more than 5,000,000 Shares are
tendered at or below the Exchange Price, the Company will accept no more than
5,000,000 of the tendered Shares, to be allocated among tendering stockholders
on a pro rata basis. The Company reserves the right, in its sole discretion, to
accept a greater or lesser number of Shares pursuant to the Exchange Offer.
Shares validly tendered at or below the Exchange Price will be accepted on or
promptly after the Expiration Date. The Exchange Offer is subject to a number
of additional conditions and may be amended or withdrawn in certain
circumstances. See the section of the Offering Circular entitled "The Exchange
Offer--Conditions to and Amendment of the Exchange Offer."
INSTRUCTIONS
The undersigned acknowledges receipt of your letter enclosing the Offering
Circular and the Letter of Transmittal relating to the Exchange Offer by Impac
Mortgage Holdings, Inc. to exchange its 11% Senior Subordinated Debentures for
up to 5,000,000 Shares.
[_] Please TENDER ________ Shares held by you for my account/(1)/. (Please
complete the following, as applicable.)
[_] Please DO NOT tender outstanding Shares held by you for my account.
________________________________
/(1)/ I/we understand that if I/we sign without indicating a lesser amount in
the space above, the entire number of Shares held by you for my/our
account will be tendered.
2
<PAGE>
- --------------------------------------------------------------------------------
TENDER PRICE
If Shares are being tendered at more than one Exchange Price, a separate
instruction form for each Exchange Price specified must be used.
CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED,
THERE IS NO VALID TENDER OF SHARES.
Shares Tendered at Price Determined by Dutch Auction
[_] The undersigned wants to maximize the chance of having the Company purchase
all the Shares the undersigned is tendering (subject to the possibility of
proration). Accordingly, by checking this one box INSTEAD OF ONE OF THE
PRICE BOXES BELOW, the undersigned hereby tenders Shares at, and is willing
to accept, the Exchange Price resulting from the Dutch Auction tender
process. This action could result in receiving an Exchange Price as low as
105% or as high as 120%.
***CHECK EITHER THE BOX ABOVE OR CHECK ONE BOX BELOW***
------
Shares Tendered at Exchange Price Determined Shares by Stockholder
[_] 105%
[_] 106%
[_] 107%
[_] 108%
[_] 109%
[_] 110%
[_] 111%
[_] 112%
[_] 113%
[_] 114%
[_] 115%
[_] 116%
[_] 117%
[_] 118%
[_] 119%
[_] 120%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The method of delivery of this document is at the election and risk of the
tendering stockholders. If delivery is by mail, it is suggested that the mailing
be made by registered mail with return receipt requested, properly insured and
sufficiently in advance of the Expiration Date to permit delivery to the
Exchange Agent on or before the Expiration Date. In all cases, sufficient time
should be allowed to assure delivery.
SIGN HERE
Signature(s): ______________________________________________
Name(s): ___________________________________________________
Address(es): _______________________________________________
_____________________________________________________
City, State Zip Code
Area Code and Telephone No(s).: ____________________________
____________________________________________________________
Taxpayer Identification or Social Security No(s).
Dated: _____________________________________________________
- --------------------------------------------------------------------------------
3
<PAGE>
EXHIBIT 99(A)(6)
IMPAC MORTGAGE HOLDINGS, INC.
20371 Irvine Avenue
Santa Ana Heights, California 92707
February 24, 1999
To the Holders of
Shares of Common Stock, Par Value $.01
of Impac Mortgage Holdings, Inc.
We are offering, upon the terms and subject to the conditions set forth in
the enclosed Offering Circular (the "Offering Circular"), and in the
accompanying Letter of Transmittal (the "Letter of Transmittal" which, together
with the Offering Circular constitutes the "Exchange Offer"), to exchange up tp
$35,000,000 million aggregate principal amount of our 11% Senior Subordinated
Debentures due February 15, 2004 (the "Debentures") in exchange for up to
5,000,000 shares of our Common Stock, par value $.01 share ("Common
Stock")(including the Preferred Share Purchase Rights (the "Rights" and together
with the Common Stock, the "Shares")). Unless the Rights become exercisable or
separately tradeable prior to March 26, 1999, unless extended ( the "Expiration
Date"), a tender of Shares will also constitute a tender of the associated
Rights.
We will determine an exchange price (the "Exchange Price") of no greater
than 120% nor less than 105% of the average closing sales price of the Shares as
reported by the American Stock Exchange ("AMEX") for the two trading day period
ending two trading days prior to the Expiration Date (the "Average Price"),
provided that the Exchange Price shall not exceed $7.00 per Share. By way of
example, if the Expiration Date is not extended, the two trading days that will
be used to determine the Average Price will be Monday, March 22, 1999 and
Tuesday, March 23, 1999. The exact maximum principal amount of Debentures to be
exchanged will be a function of the Average Price. We will exchange validly
tendered Shares for a principal amount of Debentures equal to the number of
Shares tendered at or below the Exchange Price multiplied by the Exchange Price.
We will select as the final Exchange Price the lowest Exchange Price which would
permit the maximum number of Shares to be exchanged in the Exchange Offer.
The Exchange Offer will be conducted such that each stockholder will be
able to specify the Exchange Price (in increments of 1%) that such stockholder
is willing to accept in exchange for his or her Shares. Whether and to what
extent a tendering stockholder will have his or her tendered Shares accepted for
exchange in the Exchange Offer will depend on how the Exchange Price specified
by such stockholder compares to Exchange Prices specified by other tendering
stockholders. The Exchange Price specified by each tendering stockholder must
be no greater than 120% nor less than 105% of the Average Price. We will, upon
the terms and subject to the conditions of the Exchange Offer, determine the
final Exchange Price, taking into account the
<PAGE>
number of Shares tendered and the Exchange Prices specified by tendering
stockholders. We will announce the final Exchange Price by press release
promptly after the Expiration Date. All Shares validly tendered at prices at or
below the Exchange Price will be exchanged at the Exchange Price, subject to
proration if the Exchange Offer is oversubscribed. Shares tendered at prices
above the Exchange Price will be excluded from the Exchange Offer. Therefore, to
maximize the possibility that Shares will be exchanged at the Exchange Price
stockholders should check the box in the Letter of Transmittal marked "Shares
Tendered at Exchange Price Determined by Dutch Auction" or indicate their
minimum Exchange Price is 105%. The minimum number of Shares that may be
exchanged is 100 Shares.
The Exchange Offer is contingent upon the tender of at least 1,000,000
Shares at or below the Exchange Price. If more than 5,000,000 Shares are
tendered at or below the Exchange Price, the Company will accept no more than
5,000,000 of the tendered Shares, to be allocated among tendering stockholders
on a pro rata basis. The Company reserves the right, in its sole discretion, to
accept a greater or lesser number of Shares pursuant to the Exchange Offer.
Shares validly tendered at or below the Exchange Price will be accepted on or
promptly after the Expiration Date. The Exchange Offer is subject to a number
of additional conditions and may be amended or withdrawn in certain
circumstances.
Please read carefully the Offering Circular and the other enclosed
materials relating to the Exchange Offer. If you require assistance, you should
consult your financial, tax or other professional advisors. Holders who wish to
participate in the Exchange Offer are asked to respond promptly by completing
and returning the enclosed Letter of Transmittal, and all other required
documentation, to IBJ Whitehall Bank & Trust Company, the Exchange Agent
for the Exchange Offer.
QUESTIONS REGARDING THE TERMS OF THE EXCHANGE OFFER MAY BE DIRECTED TO THE
INFORMATION AGENT: D.F. KING & CO., INC., 77 WATER STREET, NEW YORK, NEW YORK
10005, (212) 269-5550 or (800) 848-2998.
Very truly yours,
IMPAC MORTGAGE HOLDINGS, INC.
<PAGE>
EXHIBIT 99.(a)(7)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the Payer.
- --Social Security numbers have nine digits separated by two hyphens: i.e., 000-
00-0000. Employer identification numbers have nine digits separated by only one
hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------- -----------------------------------------------------------
Give the Give the EMPLOYER
For this type of account: SOCIAL SECURITY For this type of account: IDENTIFICATION
number of-- number of--
<S> <C> <C> <C>
1. An individual's account The individual 9. A valid trust, estate, The legal entity (Do not
or pension trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title.)(5)
2. Two or more individuals (joint The actual owner of the 10. Corporate account The corporation
account) account or, if combined
funds, any one of the
individuals(1)
3. Husband and wife (joint account) The actual owner of the 11. Religious, charitable, The organization
account or, if joint or educational
funds, either person(1) organization account
4. Custodian account of a minor The minor(2) 12. Partnership account The partnership
(Uniform Gift to Minors Act) held in the name of
the business
5. Adult and minor (joint account) The adult or, if the 13. Association, club, or The organization
minor is the only other tax-exempt
contributor the organization
minor(1)
6. Account in the name of guardian The ward, minor, or 14. A broker or registered The broker or nominee
or committee for a designated incompetent person(3) nominee
ward, minor, or, incompetent
person
7. a. The usual revocable savings The grantor-trustee(1) 15. Account with the The public entity
trust account (grantor is also Department of Agriculture
trustee) in the name of a public
entity (such as a State
b. So-called trust account that is or local government,
not a legal or valid trust under The actual owner(1) school district, or
State law. prison) that receives
agriculture program
payments
8. Sole proprietorship account The owner (4)
- ------------------------------------------------------------------- -----------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
Page 2
<TABLE>
<S> <C>
Obtaining a Number . Payments of tax-exempt interest (including
If you don't have a taxpayer exempt-interest dividends under section 852).
identification number or you don't know . Payments described in section 6049(b)(5)
your number, obtain Form SS-5, to non-resident aliens.
Application for a Social Security . Payments on tax-free covenant bonds under
Number Card, or Form SS-4, Application section 1451.
for Employer Identification Number, at . Payments made by certain foreign organizations.
the local office of the Social Security . Payments made to a nominee.
Administration or the Internal Revenue Exempt payees described above should file Form W-9
Service and apply for a number. to avoid possible erroneous backup withholding.
FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER WRITE "EXEMPT" ON
Payees Exempt from Backup Withholding THE FACE OF THE FORM, AND RETURN IT TO THE PAYER.
Payees specifically exempted from backup IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR
withholding on ALL payments include the PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
following: Certain payments other than interest, dividends,
and patronage dividends, that are not subject to
.A corporation. information reporting are also not subject to
.A final institution. backup withholding. For details, see the
.An organization exempt from tax under regulations under sections 6041, 6041A(a), 6045,
section 501(a), or an individual and 6050A. Privacy Act Notice. --Section 6109
retirement plan. requires most recipients of dividend, interest, or
.The United States or any agency or other payments to give taxpayer identification
instrumentality thereof. numbers to payers who must report the payments to
.A State, the District of Columbia, a IRS. IRS uses the numbers for identification
possession of the United States, or purposes. Payers must be given the numbers whether
any subdivision or instrumentality or not recipients are required to file tax
thereof. returns. Beginning January 1, 1984, payers must
.A foreign government, a political generally withhold 20% of taxable interest,
subdivision of a foreign government, dividend, and certain other payments to a payee
or any agency or instrumentality who does not furnish a taxpayer identification
thereof. number to a payer. Certain penalties may also
.An international organization or any apply.
agency, or instrumentality thereof.
.A registered dealer in securities or Penalties
commodities registered in the U.S. or (1) Penalty for Failure to Furnish Taxpayer
a possession of the U.S. Identification Number. -- If you fail to furnish
.A real estate investment trust. your taxpayer identification number to a payer,
.A common trust fund operated by a you are subject to a penalty of $50 for each such
bank under section 584(a) failure unless your failure is due to reasonable
.An exempt charitable remainder trust, cause and not to willful neglect.
or a non-exempt trust described in (2) Failure to Report Certain Dividend and
section 4947(a)(1). Interest Payments. -- If you fail to include any
.An entity registered at all times portion of an includible payment for interest,
under the Investment Company Act of dividends, or patronage dividends in gross income,
1940. such failure will be treated as being due to
.A foreign central bank of issue. negligence and will be subject to a penalty of 5%
Payments of dividends and patronage on any portion of an under-payment attributable to
dividends not generally subject to that failure unless there is clear and convincing
backup withholding include the evidence to the contrary.
following: (3) Civil Penalty for False Information With
.Payments to nonresident aliens Respect to withholding. -- If you make a false
subject to withholding under section statement with no reasonable basis which results
1441. in no imposition of backup withholding, you are
.Payments to partnerships not engaged subject to a penalty of $500.
in a trade or business in the U.S. (4) Criminal Penalty for Falsifying Information. --
and which have at least one Falsifying certifications or affirmations may
nonresident partner. subject you to criminal penalties including fines
.Payments or patronage dividends where and/or imprisonment. FOR ADDITIONAL INFORMATION
the amount received is not paid in CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
money. REVENUE SERVICE
.Payments made by certain foreign
organizations.
.Payments made to a nominee.
Payments of interest not generally
subject to backup withholding include
the following:
.Payments of interest on obligations
issued by individuals. Note: You may
be subject to backup withholding if
this interest is $600 or more and is
paid in the course of the payer's
trade or business and you have not
provided your correct taxpayer
identification number to the payer.
</TABLE>
<PAGE>
EXHIBIT 99.(a)(8)
[LOGO OF IMPAC MORTGAGE HOLDINGS, INC.]
Impac
Mortgage
Holdings, Inc.
Exchange Offer
Expires March 26, 1999*
Important Dates:
Offering Period February 24, - March 26, 1999
Expiration Date March 26, 1999*
. unless extended
(NOT PART OF THE OFFERING CIRCULAR)
<PAGE>
EXHIBIT 99.(a)(8)
Highlights of the Offering
Impac Mortgage Holdings, Inc., (the "Company" or "IMH"), is offering to
exchange, upon the terms and subject to the conditions set forth herein and in
the accompanying Letter of Transmittal, up to $35,000,000 aggregate principal
amount of its 11% Senior Subordinated Debentures due February 15, 2004 (the
"Debentures"), for up to 5,000,000 shares of its Common Stock, $.01 par value
per share (including the associated Preferred Share Purchase Rights the
"Shares").
How will the Exchange Price be determined?
The Company will determine an exchange price (the "Exchange Price") of no
greater than 120% nor less than 105% of the average closing sales price of the
Shares as reported by the American Stock Exchange ("AMEX") for the two trading
day period ending two trading days prior to the Expiration Date (the "Average
Price") provided that the Exchange Price shall not exceed $7.00 per share. By
way of example, if the Expiration Date is not extended, the two trading days
that will be used to determine the Average Price will be Monday, March 22, 1999
and Tuesday, March 23, 1999. The Company will select as the final Exchange Price
the lowest Exchange Price which would permit the maximum number of Shares to be
exchanged in the Exchange Offer.
What is the coupon of the Debentures and when will interest payments be paid?
The Debentures will bear interest at 11% per annum from their date of issuance,
payable quarterly, commencing May 15, 1999.
Is there a limit to the amount of Shares I can tender?
No. You are entitled to tender all of your Shares. However, the Exchange Offer
is contingent upon the tender of at least 1,000,000 Shares at or below the
Exchange Price. If more than 5,000,000 Shares are tendered at or below the
Exchange Price, the Company will accept no more than 5,000,000 of the tendered
Shares, to be allocated among tendering stockholders on a pro rata basis.
Although the Company reserves the right to accept a greater or lesser number of
Shares. The minimum number of Shares that may be tendered is 100 Shares.
How can I tender my Shares?
Stockholders wishing to accept the Exchange Offer must either (a) complete the
accompanying Letter of Transmittal and forward it with the certificates
representing the Shares to be tendered to IBJ Whitehall Bank & Trust Company
(the "Exchange Agent") or (b) request a broker or commercial bank to effect the
transaction. Holders of Shares registered in the name of a broker, dealer,
commercial bank, trust company, or other nominee must contact such institution
to tender their Shares.
(continued on back flap)
For more information call the Information Agent at 1-800-848-2998
(NOT PART OF THE OFFERING CIRCULAR)
<PAGE>
[LOGO OF IMPAC MORTGAGE HOLDINGS, INC.]
Highlights of the Offering
Why is the Company conducting an Exchange Offer?
The Company completed its initial public offering in November 1995 with the sale
of 3,750,000 shares of its Common Stock at a price of $8.67 per share. Following
the initial public offering, the price of the Company's Common Stock increased
significantly, to a high of $19.17 per share in the fourth quarter of 1997,
reflecting a stock market with generally increasing stock prices, a healthy
mortgage lending and finance industry, and growth in the Company's revenues and
earnings. In recent periods, however, the mortgage lending and finance industry
has encountered difficulties, with several mortgage lending companies announcing
downward adjustments to their financial statements or projected operating
results, violations of loan covenants, related litigation, and other events. In
addition, certain of these companies have filed for bankruptcy protection. These
difficulties have corresponded with a general decline in the stock prices of
companies involved in this industry. Consistent with this market decline, the
price of the Company's Common Stock has decreased to $5.75 as of February 23,
1999, a price that is toward the low end of its 52-week trading range.
The principal purposes of the Exchange Offer are to provide existing
stockholders the opportunity to obtain an alternative return on their investment
in the Company and to allow the Company to reduce the number of Shares
outstanding, thereby increasing the Company's overall book value per share and
creating the potential for increased earnings per share in the future. The
Company believes these developments could have a positive influence on the price
of its Common Stock. The increased indebtedness resulting from the Exchange
Offer, however, will increase the Company's debt service requirements and could
negatively affect earnings per share.
Common Stock vs. Debentures
Stockholders contemplating the Exchange Offer should take into account the
following considerations:
Characteristics of the Common Stock
- --------------------------------------------------------------------------------
. Equity; pro rata claim to assets of the Company after payment of all debt
obligations, plus right to share in capital appreciation.
. No interest payable on Common Stock, although dividends are possible.
. Voting rights on all matters submitted to stockholders.
. Shares are listed on AMEX and are subject to established trading market.
Characteristics of the Debentures
- --------------------------------------------------------------------------------
. Debt; right to receive specified principal amount with senior claim to
assets of the Company compared to holders of equity, but subordinated to all
other senior debt obligations of the Company (including its subsidiaries),
plus the right to receive interest, but no right to capital appreciation.
. Interest at 11% per annum, payable quarterly in cash on February 15, May 15,
August 15 and November 15, or in the event such 15th day is not a business
day, then on the business day immediately following such 15th day, commencing
May 15, 1999.
. No voting rights on matters submitted to stockholders.
. Although the Company intends to use its bet efforts to list the Debentures
on the AMEX, no assurance can be given that the Company will be able to list
the Debentures on any exchange or, whether or not the Debentures are listed,
that an active trading market will develop.
________________________________________________________________________________
For more information call the Information Agent at 1-800-848-2998
(NOT PART OF THE OFFERING CIRCULAR)
<PAGE>
[LOGO OF IMPAC MORTGAGE HOLDINGS, INC.]
The Company -- Impac Mortgage Holdings, Inc.
Unless the context otherwise requires, references herein to the "Company" refer
to Impac Mortgage Holdings, Inc. ("IMH"), Impac Funding Corporation ( together
with its wholly owned special purpose "bankruptcy remote" entity, Impac Secured
Assets Corp., ("IFC")), IMH Assets Corp. ("IMH Assets"), and Imperial Warehouse
Lending Group, Inc. ("IWLG"), collectively. Neither IFC nor Impac Secured
Assets Corp. is considered a subsidiary of IMH; IMH holds all of the preferred
stock of IFC and therefore owns a 99% economic interest in IFC. All of IFC's
common stock is owned by officers of IMH.
The Company is a mortgage loan investment company that originates, purchases,
sells, securitizes and invests in residential mortgage loans. To date, the
Company has purchased and invested primarily in non-conforming residential
mortgages. Non-conforming residential mortgage loans are residential mortgages
that do not qualify for purchase by government sponsored agencies such as the
Federal National Mortgage Association and the Federal Home Loan Mortgage
Corporation. The Company conducts its business through three operations:
. its Conduit Operations purchases, sells and securitizes residential
------------------
mortgages;
. its Long Term Investment Operations invests in mortgages and securities
-------------------------------
backed by mortgages; and
. its Warehouse Lending Operations provides warehouse and repurchase financing
----------------------------
facilities to originators of mortgage loans.
The Company has elected to be taxed at the corporate level as a real estate
investment trust ("REIT") for federal income tax purposes. This allows the
Company to pass through income to its stockholders without payment of federal
income tax at the corporate level.
These Highlights of the Exchange Offer should be read in conjunction with the
accompanying Offering Circular. The Offering Circular contains more detailed
information, including risk factors and special considerations about the
Exchange Offer and the Company. These Highlights of the Exchange Offer are
qualified in their entirety by reference to the information included in the
Offering Circular.
(NOT PART OF THE OFFERING CIRCULAR)
