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As filed with the Securities and Exchange Commission on August 30, 1996
Registration No. 333-_________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
____________________
Form S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
___________________
SOUTHERN PACIFIC FUNDING CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
California 6199 33-0636924
(State of Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
One Centerpointe Drive, Suite 500
Lake Oswego, Oregon 97035
(Address of Principal Executive Offices)
1995 SENIOR MANAGEMENT STOCK OPTION PLAN
(Full Title of the Plan)
Robert W. Howard
President
Southern Pacific Funding Corporation
One Centerpointe Drive, Suite 500
Lake Oswego, Oregon 97035
(503) 684-4700
(Name, Address, and Telephone Number, Including Area Code, of Agent for Service)
Copies to:
Thomas J. Poletti, Esq.
Susan B. Kalman, Esq.
Freshman, Marantz, Orlanski,
Cooper & Klein
9100 Wilshire Boulevard, 8-East
(310) 273-1870
Telecopy: (310) 274-8357
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ X ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================================================================================================
Proposed Proposed
Maximum Maximum
Offering Aggregate Amount of
Amount to be Price per Offering Registration
Title of Securities to be Registered Registered Share(1) Price(1) Fee
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Common Stock, no par value 647,400 shares $10.50 $6,797,700 $2,344.03
- ------------------------------------------------------------------------------------------------------
Common Stock, no par value 647,400 shares $10.50 $6,797,700 $2,344.03
- ------------------------------------------------------------------------------------------------------
Common Stock, no par value $4,688.06
======================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(h)(1).
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The documents containing information specified in this Part I are being
separately provided to the Registrant's employees, officers, directors and
consultants as specified by Rule 428(b)(1).
<PAGE>
PROSPECTUS
1,294,800 SHARES
SOUTHERN PACIFIC FUNDING CORPORATION
COMMON STOCK
REOFFER PROSPECTUS
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus relates to up to 1,294,800 shares of Common Stock of
Southern Pacific Funding Corporation (the "Company"), subject to purchase by
certain affiliates of the Company (the "Option Holders") pursuant to the
exercise of Senior Management Stock Options granted to such persons under the
Company's 1995 Senior Management Stock Option Plan and the Senior Management
Stock Option Agreements (the "Stock Options"). Pursuant to their present terms,
the Stock Options held by the option holders vest at the rate of 20% per annum
on the anniversary date of the grant of such stock options. The first vesting is
the earlier of (i) November 1, 1996; or (ii) the death or disability of the
Option Holder; or (iii) the dissolution or complete liquidation of the Company;
or (iv) the occurrence of a "Change in Control" of the Company meaning the
occurrence of any of the following events (each a "Change in Control Event"):
(A) Any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") (other than the Company;
any trustee or other fiduciary holding securities under an employee benefit plan
of the Company; or any company owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of the Common Stock of the Company) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person or any securities acquired directly from the
Company or its affiliates) representing 30% or more of the combined voting power
of the Company's then outstanding securities; or (B) the shareholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than (x) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity), in combination with the
ownership of any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, at least 75% of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (y) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no person acquires more than 50% of the combined voting power of the
Company's then outstanding securities; or (C) the shareholders of the Company
approve a plan of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the Company's
assets. The Company will not receive any proceeds from the sale of the shares of
Common Stock underlying the Stock Options by the Option Holders.
SEE "RISK FACTORS" FOR DISCUSSION OF CERTAIN FACTORS THAT SHOULD
BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
COMMON STOCK OFFERED HEREBY.
__________________________________________________
THE AMOUNT OF SECURITIES WHICH MAY BE OFFERED OR RESOLD BY MEANS OF THIS
PROSPECTUS BY EACH PERSON AND ANY OTHER PERSON WITH WHOM HE OR SHE IS ACTING IN
CONCERT FOR THE PURPOSE OF SELLING THE COMPANY'S SECURITIES MAY NOT EXCEED,
DURING ANY THREE MONTH PERIOD THE VOLUME LIMITATIONS SPECIFIED IN RULE 144(e)
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, UNTIL SUCH TIME, IF
ANY, AS THE COMPANY BECOMES ELIGIBLE TO REGISTER ITS SECURITIES ON FORM S-3.
The date of this Prospectus is August 30, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington D.C., a Registration Statement on Form S-8 under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities offered by this Prospectus. This Prospectus does not contain all the
information set forth in the Registration Statement, certain items of which are
contained in schedules and exhibits to the Registration Statement, as permitted
by the rules and regulations of the Commission.
The Company is subject to the information requirements of the Exchange
Act, and in accordance therewith files reports and other information with the
Commission. Such reports and other information can be inspected and copied at
the public reference facil ities maintained by the Commission at Room 1024, 450
Fifth Street N.W., Washington , D.C. 20549; Everett McKinley Dirksen Building,
219 S. Dearborn Street, Chicago, Illinois 60604; and Federal Building, 26
Federal Plaza, New York, New York 10278. Copies of such material can be obtained
from the Public Reference Section of the Commission, Room 1024, 450 Fifth Street
N.W., Washington, D.C. 20549, at prescribed rates.
The Company's Common Stock is listed on the New York Stock Exchange. The
Company's reports, proxy and information statements prepared pursuant to Section
14(a) and 14(c) of the Exchange Act and other information concerning the Company
can be inspected at the New York Stock Exchange, 20 Broad Street, New York, New
York 10005.
The Company hereby undertakes to provide to each person to whom this
Prospectus is delivered, without charge, upon written or oral request of such
person, a copy of any or all documents that have been incorporated by reference
in this Prospectus. Such documents may be obtained by contacting Gary A. Palmer,
Executive Vice President, Chief Financial Officer and Secretary, Southern
Pacific Funding Corporation, One Centerpointe Drive, Suite 500, Lake Oswego,
Oregon 97035, telephone number (503) 684-4700.
2
<PAGE>
PROSPECTUS SUMMARY
This Prospectus covers the resale of up to 1,294,800 shares of the
Company's Common Stock by certain Option Holders who may purchase such Common
Stock upon exercise of Stock Options as more fully described in the Option Plan.
Pursuant to their present terms, the Stock Options held by the Option Holders
vest at the rate of 20% per annum on the anniversary date of the grant of such
stock options. The first vesting is the earlier of (i) November 1, 1996; or (ii)
the death or disability of the Option Holder; or (iii) the dissolution or
complete liquidation of the Company; or (iv) the occurrence of a Change in
Control Event.
Purchasers of the Common Stock offered by this Prospectus should carefully
consider the information set forth under the heading "Risk Factors" below.
The Company commenced operations in January 1993 as a division of Southern
Pacific Thrift and Loan Association ("SPTL"), a wholly owned subsidiary of
Imperial Credit Industries, Inc. ("ICII"), a diversified specialty finance
company offering financial products in the following four sectors: non-
conforming residential mortgage banking, commercial mortgage banking, business
lending and consumer lending. In October 1994, ICII incorporated the Company as
part of a strategic decision to form a separate subsidiary through which to
operate SPTL's residential lending division. To further this strategy, in
December 1994, ICII made a capital contribution of $250,000 to the Company in
exchange for 100% of its outstanding capital stock., and in April 1995, ICII
caused SPTL to contribute to the Company certain customer lists of SPTL's
residential lending division relating to the ongoing operations of such
division. In addition, in April 1995 all employees of SPTL's residential lending
division became employees of the Company. SPTL retained all other assets and
all liabilities related to the contributed operations including all residual
interests generated in connection with securitizations effected by SPTL's
residential lending division. All information set forth herein has been adjusted
to reflect a 4,150 for one stock split effected in April 1996.
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this Prospectus.
The Company's principal executive offices are located at One Centerpointe
Drive, Suite 500, Lake Oswego, Oregon 97035, and its telephone number is (503)
684-4700.
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be carefully considered before making an
investment in the Company.
LIMITED HISTORY OF INDEPENDENT OPERATIONS
The Company commenced operations in January 1993 as a division of SPTL and
became an operating subsidiary of ICII in April 1995. Although the Company has
been profitable for each year since inception and has experienced substantial
growth in mortgage loan originations and total revenues, there can be no
assurance that the Company will be profitable in the future or that these rates
of growth will be sustainable or indicative of future results. Prior to June 13,
1996, the date of the Company's initial public offering, the Company benefited
from the financial, administrative and other resources of SPTL and ICII.
Since inception in January 1993, the Company's growth in originating and
purchasing loans has been significant. In light of this growth, the historical
financial performance of the Company may be of limited relevance in predicting
future performance. Also, the loans originated and purchased by the Company and
3
<PAGE>
included in the Company's securitizations as of the date of this Prospectus have
been outstanding for a relatively short period of time. The delinquency and loss
experience of the Company's loans to date may not be indicative of future
results. It is unlikely that the Company will be able to maintain delinquency
and loan loss ratios at their present levels as the Company's loan portfolio
becomes more seasoned.
RECENT AND PLANNED EXPANSION
The Company's total revenues and net income have grown significantly since
inception, primarily due to increased mortgage origination, purchasing and sales
activities. The Company intends to continue to pursue a growth strategy for the
foreseeable future, and its future operating results will depend largely upon
its ability to expand its mortgage origination, purchasing and sales activities.
The Company plans to continue its growth of loan originations and purchases
through the expansion of its Wholesale Division, Bulk Purchase Program and
Institutional Division and through the development and implementation of its
recently formed Retail/Telemarketing Division. Each of these plans requires
additional personnel and assets and there can be no assurance that the Company
will be able to successfully expand and operate such divisions and programs
profitably. There can be no assurance that the Company will anticipate and
respond effectively to all of the changing demands that its expanding operations
will have on the Company's management, information and operating systems, and
the failure to adapt its systems could have a material adverse effect on the
Company's results of operations and financial condition. There can be no
assurance that the Company will successfully achieve its planned expansion or,
if achieved, that the expansion will result in profitable operations.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity. The Company anticipates that it will continue operating on a
negative cash flow basis as long as it continues to sell loans through
securitizations and it continues to retain interest-only and residual
certificates in the loans sold. The Company's primary operating cash
requirements include the funding or payment of: (i) loan originations and
purchases; (ii) investments in interest-only and residual certificates;
(iii) fees and expenses incurred in connection with securitizations;
(iv) interest expense incurred on borrowings under its warehouse facilities;
(v) income taxes; (vi) capital expenditures; and (vii) other operating and
administrative expenses. The Company funds these cash requirements primarily
through warehouse financing and whole loan sales and securitizations.
Need for Additional Equity Financing. The Company's ability to implement
its business strategy will depend upon its ability to continue to effect
securitizations, establish alternative long-term financing arrangements and
obtain sufficient financing under warehousing facilities upon acceptable terms.
There can be no assurance that such financing will be available to the Company
on favorable terms, if at all. If such financing were not available or the
Company's capital requirements exceeded anticipated levels, then the Company
would be required to obtain additional equity financing. The Company cannot
presently estimate the amount and timing of additional equity financing
requirements because such requirements are tied to, among other things, the
growth of the Company. If the Company were unable to raise such additional
capital, its results of operations and financial condition would be adversely
affected.
Dependence on Warehouse Financing. The Company relies significantly upon
its access to warehouse credit facilities in order to fund new originations and
purchases. The Company expects to be able to maintain existing warehouse lines
of credit (or to obtain replacement or additional financing) as current
arrangements expire or become fully utilized; however, there can be no assurance
that such financing will be obtainable on favorable terms, if at all. To the
extent that the Company is unable to arrange new warehouse lines of credit, the
Company may have to curtail loan origination and purchasing activities, which
could have a material adverse effect on the Company's operations and financial
condition.
4
<PAGE>
Dependence on Securitizations. Since March 1994, the Company has pooled and
sold through securitizations senior interests in an increasing percentage of the
loans which it originates or purchases. The Company relies significantly upon
securitizations to generate cash proceeds for repayment of its warehouse lines
and to create credit availability to purchase additional loans. Further, gains
on sales from the Company's securitizations represent a significant portion of
the Company's revenues. Several factors affect the Company's ability to complete
securitizations of its loans, including conditions in the securities markets
generally, conditions in the asset-backed securities market specifically, the
credit quality of the Company's portfolio of loans and the Company's ability to
obtain credit enhancement. If the Company were unable to profitably securitize a
sufficient number of its loans in a particular financial reporting period, then
the Company's revenues for such period would decline which could result in lower
income or a loss for such period. In addition, unanticipated delays in closing a
securitization could also increase the Company's interest rate risk by
increasing the warehousing period for its loans.
In order to gain access to the securitization market, the Company has
relied on credit enhancements provided by monoline insurance carriers to
guarantee senior interests in the related trusts to enable it to obtain an
"AAA/Aaa" rating for such interests. Any substantial reductions in the size or
availability of the securitization market for the Company's loans or the
unwillingness of insurance companies to guarantee the senior interests in the
Company's loan pools could have a material adverse effect on the Company's
results of operations and financial condition.
The Company endeavors to effect quarterly public securitizations of its
loan pools. However, market and other considerations, including the conformity
of such loan pools to the requirements of monoline insurance companies and
rating agencies, affect the timing of such transactions. Any delay in the sale
of a loan pool beyond a quarter-end would postpone the recognition of gain
related to such loans and would likely result in lower income or a loss for such
quarter being reported by the Company.
INTEREST-ONLY AND RESIDUAL CERTIFICATES
The Company records as an investment its retained interest in its
securitized loans (both interest-only and residual certificates) and derives a
substantial portion of its income by recognizing gains upon sales of senior
interests in loans through securitizations. Realization of these interest-only
and residual certificates in cash is subject to the prepayment and loss
characteristics of the underlying loans and to the timing and ultimate
realization of the stream of cash flows associated therewith. The Company
estimates future cash flows from these interest-only and residual certificates,
and values them utilizing assumptions that it believes are consistent with those
that would be utilized by an unaffiliated third party purchaser and records them
as trading securities at fair value in accordance with SFAS No. 115, "Accounting
for Certain Debt and Equity Securities." If actual experience differs from the
assumptions used in the determination of the asset value, future cash flows and
earnings could be negatively impacted and the Company could be required to write
down the value of its interest-only and residual certificates. To the Company's
knowledge, there is no active market for the sale of these interest-only and
residual certificates. No assurance can be given that interest-only and residual
certificates could be sold at their reported value, if at all.
Credit Risk Exposure. The documents governing the Company's securitizations
require the trustee of the securitization to build over-collateralization levels
through retention of cash otherwise payable to the interest only and residual
certificate holders ("residual interest distributions") and application thereof
to reduce the principal balances of the senior interests issued by the related
trust. This application causes the aggregate principal amount of the loans in
the related pool to exceed the aggregate principal balance of the outstanding
senior interests. Such excess amounts serve as credit enhancement for the
related senior interests and are available to fund losses realized on loans held
by such trust. The Company continues to be subject to the risks of default and
foreclosure following the sale of loans through securitizations to the extent
residual interest
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distributions are reduced by losses. If losses exceed the current period
residual interest distributions, an insurance policy will fund the losses and
the insurer will be reimbursed from future residual interest distributions. Such
over-collateralization levels are pre-determined by the entity issuing the
guarantee on the related senior interests and are a condition to obtaining an
"AAA/Aaa" rating thereon. In addition, such retention diverts cash which would
otherwise flow to the Company.
ECONOMIC CONDITIONS
General. The Company's business may be adversely affected by periods of
economic slowdown or recession which may be accompanied by decreased demand for
consumer credit and declining real estate values. Any material decline in real
estate values reduces the ability of borrowers to use home equity to support
borrowings and increases the loan-to-value ratios of loans previously made by
the Company, thereby weakening collateral coverage and increasing the
possibility of a loss in the event of default. Further, delinquencies,
foreclosures and losses generally increase during economic slowdowns or
recessions. Because of the Company's focus on borrowers who are unable or
unwilling to obtain mortgage financing from conventional mortgage sources,
whether for reasons of credit impairment, income qualification or credit history
or a desire to receive funding on an expedited basis ("Non-conventional
Borrowers"), the actual rates of delinquencies, foreclosures and losses on such
loans could be higher under adverse economic conditions than those currently
experienced in the mortgage lending industry in general. Any sustained period of
such increased delinquencies, foreclosures or losses could adversely affect the
pricing of the Company's loan sales whether through whole loan sales or
securitizations.
Changes in Interest Rates. Profitability may be directly affected by the
level of and fluctuations in interest rates which affect the Company's ability
to earn a spread between interest received on its loans held for sale and rates
paid on warehouse lines. The Company's profitability may be adversely affected
during any period of unexpected or rapid change in interest rates. A substantial
and sustained increase in interest rates could adversely affect the Company's
ability to originate and purchase loans. A significant decline in interest rates
could increase the level of loan prepayments and require the Company to write
down the value of its interest-only and residual certificates, thereby adversely
impacting earnings.
Substantially all variable-rate mortgage loans originated or purchased by
the Company include a "teaser" rate, i.e., an initial interest rate
significantly below the fully indexed interest rate at origination. Although
these loans are underwritten at the fully indexed rate at origination, borrowers
may encounter financial difficulties as a result of increases in the interest
rate over the life of the loan.
The Company has historically originated variable-rate mortgage loans which
do not carry the inherent interest rate risk of fixed-rate loans. As the
Company's production of fixed-rate mortgage loans has increased, the Company has
begun to implement various hedging strategies to mitigate the change in market
value of fixed rate mortgage loans held for sale between the date of origination
and sale. Commencing in August 1995, these strategies have included selling
short and selling forward United States Treasury securities and prefunding loan
originations in its securitizations. The Company currently hedges its fixed-rate
mortgage loans held for sale by selling forward a combination of United States
Treasury securities of various maturities whose combined change in value due to
a change in interest rates closely approximates the change in value of the
mortgage loans hedged. In the future the Company may hedge its variable-rate
mortgage loans and interest-only and residual certificates with hedging
transactions which may include forward sales of mortgage loans or mortgage-
backed securities, interest rate caps and floors and buying and selling of
futures and options on futures. The nature and quantity of hedging transactions
are determined by the Company's management based on various factors, including
market conditions and the expected volume of mortgage loan originations and
purchases. No assurance can be given that such hedging transactions will offset
the risks of changes in
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interest rates, and it is possible that there will be periods during which the
Company could incur losses after accounting for its hedging activities.
RISKS RELATED TO LOWER CREDIT GRADE BORROWERS
Loans made to Non-conventional Borrowers may entail a higher risk of
delinquency and higher losses than loans made to borrowers who utilize
conventional mortgage sources. While the Company believes that the underwriting
criteria it employs enable it to mitigate the higher risks inherent in loans
made to Non-conventional Borrowers, no assurance can be given that such criteria
or methods will afford adequate protection against such risks. In the event that
pools of loans sold by the Company in which the Company retains interest-only
and residual certificates experience higher losses than anticipated, the
Company's results of operations or financial condition could be adversely
affected.
The Company currently offers multiple mortgage loan products to Non-
conventional Borrowers which it classifies as A through D credit levels. The
Company intends to increase its focus on lower credit levels such as C and D
credit loans. The Company requires a higher interest rate and a lower loan-to-
value ratio on C and D loans than it requires for higher grade non-conforming
mortgage loans. The Company believes that higher interest rates and lower loan-
to-value ratios required for lower credit grade borrowers should offset the
risks inherent in lower credit grade lendings. There can be no assurance that
the Company will not experience loan losses in connection with such lending
activities which could have a material adverse effect on the Company's results
of operations or financial condition.
RISKS OF CONTRACTED SERVICING
The Company currently contracts for the servicing of all loans it
originates, purchases and holds for sale with Advanta Mortgage Corp. USA
("Advanta"). This arrangement allows the Company to increase the volume of
loans it originates and purchases without incurring the overhead investment in
servicing operations. As with any external service provider, the Company is
subject to risks associated with inadequate or untimely services. The Company
regularly reviews the delinquencies of its servicing portfolio. Many of the
Company's borrowers require notices and reminders to keep their loans current
and to prevent delinquencies and foreclosures. A substantial increase in the
Company's delinquency rate or foreclosure rate could adversely affect its
ability to profitably access the capital markets for its financing needs,
including future securitizations. Although the Company periodically reviews the
costs associated with establishing servicing operations to service the loans it
originates and purchases, it has no plans to establish and perform servicing
operations at this time.
The Company's servicing agreement with Advanta provides that if the Company
desires to terminate the agreement without cause (as defined in the agreement)
upon 90 days' written notice, the Company will be required to pay Advanta an
amount equal to 1% of the aggregate principal balance of the mortgage loans
being serviced by Advanta at such time. Further, the agreement provides that the
Company shall pay Advanta a transfer fee of $100 per loan for any mortgage loan
which the Company transfers from Advanta to another servicer, without
terminating the agreement. Depending upon the size of the Company's loan
portfolio serviced by Advanta at any point in time, the termination penalty that
the Company would be obligated to pay Advanta may be substantial.
The Company has transferred its servicing rights and obligations to ICII
for loans it securitized in 1994 and 1995. The Company has transferred its
servicing rights and obligations directly to Advanta for loans securitized in
1996. The Company currently plans to have Advanta service its future securitized
loans. Effective May l, 1996, ICII transferred the servicing for all of the
Company's loans it serviced to Advanta or subcontracted with Advanta to perform
such servicing functions.
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DEPENDENCE ON A LIMITED NUMBER OF KEY PERSONNEL
The Company's growth and development to date have been largely dependent
upon the services of Robert W. Howard and Bernard A. Guy, President and
Executive Vice President of the Company, respectively. The Company does not have
and does not presently intend to acquire key-man life insurance on any of its
key personnel. The loss of Messrs. Howard's or Guy's services for any reason
could have a material adverse effect on the Company. The Company has entered
into five-year employment agreements effective January 1, 1996 with Messrs.
Howard and Guy.
CONTROL BY EXISTING SHAREHOLDER; POTENTIAL CONFLICTS OF INTEREST; LIMITATIONS
IMPOSED
As of the date of this Prospectus ICII beneficially owns over 50% of the
outstanding Common Stock of the Company. ICII is able to control the election of
at least a majority of the members of the Company's Board of Directors and to
determine all corporate actions. The Company's Board of Directors will
independently approve ordinary corporate transactions, including, but not
limited to, financing arrangements between the Company and non-ICII entities,
without the prior approval of ICII. Under the Company's bylaws, as long as ICII
directly owns at least 25% of the Company's outstanding voting stock, the Audit
Committee of the Company's Board of Directors (consisting of directors
independent of both management and ICII) must independently approve all
transactions between the Company and ICII.
On November 20, 1995, ICII sold certain assets to Imperial Credit Mortgage
Holdings, Inc. ("IMH"), a real estate investment trust. In connection therewith,
ICII executed a non-compete agreement (the "Non-Compete Agreement") and a right
of first refusal agreement (the "Right of First Refusal Agreement"), each having
a term of two years. Pursuant to the Non-Compete Agreement, except as set forth
below, ICII and any entity of which ICII owns more than twenty-five percent
(25%) of the voting securities (a "25% Entity'') may not (i) compete with the
warehouse lending operations of IMH (whereby IMH provides short-term lines of
credit to approved mortgage banks to finance mortgage loans during the time from
the closing of the loans to their sale or other settlement with pre-approved
investors), (ii) establish a network of third party correspondent loan
originators and (iii) establish another end-investor in non-conforming mortgage
loans. The Non-Compete Agreement provides explicitly, however, that the Company
"may continue its business which is primarily to act as a wholesale originator
and bulk purchaser of non-conforming mortgage loans." Pursuant to the Right of
First Refusal Agreement, ICII granted ICI Funding Corporation, a subsidiary of
IMH ("ICIFC"), a right of first refusal to purchase all non-conforming mortgage
loans that ICII or any 25% Entity desires to sell. Under this Agreement, the
Company must give ICIFC 24 hours' prior written notice of the terms of any
proposed sales of non-conforming mortgage loans.
In January 1994, ICII, the Company's parent, issued $90 million principal
amount of Senior Notes due 2004 (the "Notes"). The Indenture for the Notes
contains financial and operating covenants of ICII whereby ICII agrees to take
or refrain from taking, and to cause its subsidiaries, including the Company, to
take or refrain from taking, certain actions regarding the financial operations
of ICII and its subsidiaries. The Indenture provides that ICII will not and will
not permit its subsidiaries to create, incur, assume, guarantee or otherwise
become liable with respect to any indebtedness in an aggregate consolidated
principal amount outstanding at any one time in excess of $5 million, unless (i)
such indebtedness is under a mortgage loan repurchase agreement or repurchase
facility with an original maturity not to exceed 180 days, (ii) such
indebtedness is under any warehouse line of credit or similar facility secured
primarily by mortgage loans held for sale or (iii) no default shall have
occurred and be continuing under the Indenture and (A) such indebtedness is not
subordinated in right of payment to the Notes and does not require any principal
payment, redemption payment or sinking fund payment thereon, in whole or in
part, to be made on or prior to the stated maturity date of the Notes and (B)
immediately after giving effect thereto, the aggregate principal amount of
ICII's adjusted consolidated indebtedness (as defined in the Indenture) would
not exceed 200% of ICII's adjusted net worth (as defined in the Indenture) as of
the last day of the immediately preceding fiscal quarter. The Indenture does not
permit either ICII's or the Company's Board of Directors to waive such
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covenants. While the Company is not a party to the Indenture, the Company has
agreed not to take any action which would cause a violation of the terms of the
Indenture. Therefore, as long as the Notes remain outstanding, the Company may
be adversely affected by limitations on its ability to incur indebtedness. These
limitations could (i) cause the Company to operate in a manner which generated
cash but was less profitable than it otherwise could be, (ii) curtail its growth
plans or (iii) otherwise adversely affect its operations.
RISKS RELATED TO REPRESENTATIONS AND WARRANTIES IN LOAN SALES AND
SECURITIZATIONS
In connection with its securitizations, the Company transfers loans
originated or purchased by the Company to a trust in exchange for cash and
interest-only and residual certificates issued by the trust. The trustee will
have recourse to the Company with respect to the breach of a standard
representation or warranty made by the Company at the time such loans are
transferred. While the Company generally has recourse to the sellers of mortgage
loans for any such breaches, there can be no assurance of the sellers' abilities
to honor their respective obligations. Also, the Company engages in bulk whole
loan sales pursuant to agreements that generally provide for recourse by the
purchaser against the Company in the event of a breach of a representation or
warranty made by the Company, any fraud or misrepresentation during the mortgage
loan origination process or upon early default on such mortgage loans. The
Company generally limits the potential remedies of such purchasers to the
potential remedies the Company receives from the persons from whom the Company
purchased such mortgage loans. However, in some cases, the remedies available to
a purchaser of mortgage loans from the Company may be broader than those
available to the Company against the sellers of such loans, and should a
purchaser enforce its remedies against the Company, the Company may not always
be able to enforce whatever remedies the Company may have against such sellers.
In the ordinary course of its business, the Company is subject to claims
made against it by borrowers and trustees in the Company's securitizations
arising from, among other things, losses that are claimed to have been incurred
as a result of alleged breaches of fiduciary obligations, misrepresentations,
errors and omissions of employees, officers and agents of the Company (including
its appraisers), incomplete documentation and failures by the Company to comply
with various laws and regulations applicable to its business. The Company
believes that liability with respect to any currently asserted claims or legal
actions is not likely to be material to the Company's results of operations or
financial condition; however, any claims asserted in the future may result in
legal expenses or liabilities which could have a material adverse effect on the
Company's results of operations and financial condition.
COMPETITION
As a marketer of mortgage loans, the Company faces intense competition,
primarily from mortgage banking companies, commercial banks, credit unions,
thrift institutions and finance companies. Many of these competitors are
substantially larger and have more capital and other resources than the Company.
Competition can take many forms, including convenience in obtaining a loan,
customer service, marketing distribution channels and loan pricing. Furthermore,
the current level of gains realized by the Company and its competitors on the
sale of the type of loans they originate and purchase is attracting and may
continue to attract additional competitors into this market with the possible
effect of lowering gains that may be realized on the Company's loan sales.
Competition may be affected by fluctuations in interest rates and general
economic conditions. During periods of rising rates, competitors which have
locked in low borrowing costs may have a competitive advantage. During periods
of declining rates, competitors may solicit the Company's customers to refinance
their loans.
9
<PAGE>
DEPENDENCE ON WHOLESALE BROKERS
The Company depends largely on independent mortgage brokers, financial
institutions and mortgage bankers for its originations and purchases of mortgage
loans. The Company's competitors also seek to establish relationships with such
independent mortgage brokers, financial institutions and mortgage bankers, none
of whom is contractually obligated to continue to do business with the Company.
In addition, the Company expects the volume of wholesale loans that it
originates and purchases to increase. The Company's future results may become
more exposed to fluctuations in the volume and cost of its wholesale loans
resulting from competition from other originators and purchasers of such loans,
market conditions and other factors.
ENVIRONMENTAL LIABILITIES
In the course of its business, the Company may acquire real property
securing loans that are in default. There is a risk that hazardous substances or
waste, contaminants, pollutants or sources thereof could be discovered on such
properties after acquisition by the Company. In such event, the Company might be
required to remove such substances from the affected properties at its sole cost
and expense. There can be no assurances that the cost of such removal would not
substantially exceed the value of the affected properties or the loans secured
by such properties or that the Company would have adequate remedies against the
prior owners or other responsible parties, or that the Company would not find it
difficult or impossible to sell the affected real properties either prior to or
following any such removal.
LEGISLATIVE OR REGULATORY RISKS
Members of Congress and government officials have from time to time
suggested the elimination of the mortgage interest deduction for federal income
tax purposes, either entirely or in part, based on borrower income, type of loan
or principal amount. Because many of the Company's loans are made to borrowers
for the purpose of consolidating consumer debt or financing other consumer
needs, the competitive advantages of tax deductible interest, when compared with
alternative sources of financing, could be eliminated or seriously impaired by
such government action. Accordingly, the reduction or elimination of these tax
benefits could have a material adverse effect on the demand for loans of the
kind offered by the Company.
The Company's domestic business is subject to extensive regulation,
supervision and licensing by federal, state and local governmental authorities
and is subject to various laws and judicial and administrative decisions
imposing requirements and restrictions on a substantial portion of its
operations. The Company's consumer lending activities are subject to the Federal
Truth-in-Lending Act and Regulation Z (including the Home Ownership and Equity
Protection Act of 1994), the Federal Equal Credit Opportunity Act and Regulation
B, as amended ("ECOA"), the Fair Credit Reporting Act of 1970, as amended, the
Federal Real Estate Settlement Procedures Act ("RESPA") and Regulation X, the
Fair Housing Act, the Home Mortgage Disclosure Act and the Federal Debt
Collection Practices Act, as well as other federal and state statutes and
regulations affecting the Company's activities. The Company is also subject to
the rules and regulations of and examinations by the Department of Housing and
Urban Development ("HUD") and state regulatory authorities with respect to
originating, processing, underwriting, selling, securitizing and servicing
loans. These rules and regulations, among other things, impose licensing
obligations on the Company, establish eligibility criteria for mortgage loans,
prohibit discrimination, provide for inspections and appraisals of properties,
require credit reports on loan applicants, regulate assessment, collection,
foreclosure and claims handling, investment and interest payments on escrow
balances and payment features, mandate certain disclosures and notices to
borrowers and, in some cases, fix maximum interest rates, fees and mortgage loan
amounts. Failure to comply with these requirements can lead to loss of approved
status, termination or suspension of servicing contracts without compensation to
the servicer, demands for indemnifications or mortgage loan repurchases, certain
rights of rescission for mortgage loans, class action lawsuits and
administrative enforcement actions.
10
<PAGE>
Although the Company believes that it has systems and procedures to
facilitate compliance with these requirements and believes that it is in
compliance in all material respects with applicable local, state and federal
laws, rules and regulations, there can be no assurance that more restrictive
laws, rules and regulations will not be adopted in the future that could make
compliance more difficult or expensive.
POSSIBLE VOLATILITY OF STOCK PRICE; EFFECT OF FUTURE OFFERINGS ON MARKET PRICE
OF COMMON STOCK
The market price of the Common Stock may experience fluctuations that are
unrelated to the Company's operating performance. In particular, the price of
the Common Stock may be affected by general market price movements as well as
developments specifically related to the consumer finance industry such as,
among other things, interest rate movements. In addition, the Company's
operating income on a quarterly basis is significantly dependent upon the
successful completion of the Company's loan sales and securitizations in the
market, and the Company's inability to complete these transactions in a
particular quarter may have a material adverse impact on the Company's results
of operations for that quarter and could, therefore, negatively impact the price
of the Common Stock.
The Company may increase its capital by making additional private or public
offerings of its Common Stock, securities convertible into its Common Stock,
preferred stock or debt securities. The actual or perceived effect of such
offerings, the timing of which cannot be predicted, may be the dilution of the
book value or earnings per share of the Common Stock outstanding, which may
result in the reduction of the market price of the Common Stock.
11
<PAGE>
USE OF PROCEEDS
All of the shares of Common Stock offered hereby are being sold by the
Option Holders. The Company will not receive any proceeds from the sale of
Common Stock underlying the Stock Options by the Option Holders. Pursuant to
their current terms, the Stock Options held by an Option Holder vest at the rate
of 20% per annum on the anniversary date of the grant of such Stock Options. The
first vesting is the earlier of (i) November 1, 1996; or (ii) the death or
disability of the Option Holder; or (iii) the dissolution or complete
liquidation of the Company; or (iv) the occurrence of a Change in Control Event.
SELLING SHAREHOLDERS
The Option Holders are affiliates of the Company (officers and members of
the Company's Board of Directors). The following table sets forth certain
information regarding the ownership of the Company's Common Stock by the Option
Holders as of June 30, 1996, after giving full effect to the exercise of the
Stock Options. Pursuant to their present terms, the Stock Options held by an
Option Holder vest at the rate of 20% per annum on the anniversary date of the
grant of such stock options. The first vesting is the earlier of (i) November 1,
1996; or (ii) the death or disability of the Option Holder; or (iii) the
dissolution or complete liquidation of the Company; or (iv) the occurrence of a
Change in Control Event.
<TABLE>
<CAPTION>
Amount of Common Amount of common
Stock beneficially Stock beneficially
owned owned
before offering after offering
Number of Percentage Number of Percentage
Shares of of Shares Shares of of
Name of Beneficial Holder Common Outstanding to be Common Outstanding
and Selling Shareholder Stock Shares Sold(1) Stock Shares
- ---------------------------- ------------------ ------------ ---------- ------------------ -----------
<S> <C> <C> <C> <C> <C>
Robert W. Howard 663,400 4.6% 647,400 16,000 *
Bernard A. Guy 666,400 4.6% 647,400 19,000 *
- ------------------
</TABLE>
* Less than one percent (1%)
(1) Represents shares issuable upon exercise of the Stock Options.
PLAN OF DISTRIBUTION
The shares of Common Stock being offered by this Prospectus will be sold in
standard dealers' transactions. The dealers who will be effecting such sales
have not yet been identified, nor have the time, date or place of such sales
been determined. The commissions and/or compensation to be payable to said
dealers will be the standard competitive broker's commissions prevalent in the
community where such dealers conduct their respective business. There is
currently no plan of distribution, agreement, arrangement or understanding with
any broker or dealer that has been entered into except for the standard
provisions and documentation involved in opening up a retail brokerage customer
account. The Company expects that the shares of Common Stock when sold, will be
sold for cash at the then-prevailing market price less the standard broker's
commission. It is expected that the shares of Common Stock will be sold on the
New York Stock Exchange either pursuant to this Prospectus or pursuant to Rule
144 under the Securities Act. No underwriter is currently expected to be
involved in the sale of the shares of Common Stock.
12
<PAGE>
INCORPORATION BY REFERENCE
The documents listed in Paragraphs (a) through (c) below are hereby
incorporated by reference in this Prospectus. All documents subsequently filed
by the Company pursuant to Section 13(a), 13(c), 14 and 15(d) of the Exchange
Act, prior to the termination of this offering shall be deemed to be
incorporated by reference in this Prospectus.
(a) The Company's latest prospectus filed pursuant to Rule 424(b) of the
Securities Act.
(b) All other reports filed by the Company pursuant to Sections 13(a) or
15(d) of the Exchange Act since the end of the fiscal year covered by
the above-referenced prospectus.
(c) The section of the Company's Registration Statement on Form S-1, filed
with the Commission on May 5, 1996, entitled "Description of Capital
Stock", as amended by Amendment Nos. 1 and 2, filed with the
Commission on May 20, 1996 and June 7, 1996, respectively.
13
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
AVAILABLE INFORMATION 2
PROSPECTUS SUMMARY 3
RISK FACTORS 3
USE OF PROCEEDS 12
SELLING SHAREHOLDERS 12
PLAN OF DISTRIBUTION 12
INCORPORATION BY REFERENCE 13
</TABLE>
14
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The documents listed in paragraphs (a) through (c) below are hereby
incorporated by reference in this Registration Statement. All documents
subsequently filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), prior to the
filing of a post-effective amendment which indicates that all securities offered
herein have been sold or which deregisters all securities then remaining unsold,
shall be deemed to be incorporated by reference in this Registration Statement
and to be a part hereto from the date of filing of such documents.
(a) The Registrant's latest prospectus filed pursuant to Rule 424(b)
of the Securities Act of 1933, as amended.
(b) All other reports filed by Registrant pursuant to Sections 13(a)
or 15(d) of the Exchange Act since the end of the fiscal year covered by
the above-referenced prospectus.
(c) The section of the Registrant's Registration Statement on Form
S-1, filed with the Commission on May 5, 1996, entitled "Description of
Securities", as amended by Amendment Nos. 1 and 2, filed with the
Commission on May 20, 1996 and June 7, 1996, respectively.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
Under Section 317 of the California General Corporation Law (the "CGCL"),
the Registrant is in certain circumstances permitted to indemnify its directors
and officers against certain expenses (including attorneys' fees), judgements,
fines, settlements and other amounts actually and reasonably incurred in
connection with threatened, pending or completed civil, criminal, administrative
or investigative actions, suits or proceedings (other than an action by or in
the right of the Registrant), in which such persons were or are parties, or are
threatened to be made parties, by reason of the fact that they were or are
directors or officers of the Registrant, if such persons acted in good faith and
in a manner they reasonably believed to be in the best interests of the
Registrant, and with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. In addition, the
Registrant is in certain circumstances permitted to indemnify its directors and
officers against certain expenses incurred in connection with the defense or
settlement of a threatened, pending or completed action by or in the right of
the Registrant, and against amounts paid in settlement of any such action, if
such persons acted in good faith and in a manner they believed to be in the best
interests of the Registrant and its shareholders provided that the specified
court approval is obtained.
As permitted by Section 317 of the CGCL, the Articles of Incorporation and
By-Laws of the Registrant provide that the Registrant is authorized to provide
indemnification for its directors and officers for breach of their duty to the
Registrant and its shareholders through bylaw provisions or through agreements
II-1
<PAGE>
with the directors and officers, or both, in excess of the indemnification
otherwise permitted by Section 317 of the CGCL. The Registrant's By-laws
provide for indemnification of its directors and officers to the maximum extent
permitted by Section 317 of the CGCL. In addition, agreements entered into by
the Registrant with its directors and its executive officers require the
Registrant to indemnify such persons against expenses, judgments, fines
settlements and other amounts reasonably incurred in connection with any
proceeding to which any such person may be made a party by reason of the fact
that such person was an agent of the Registrant (including judgments, fines and
settlements in or of a derivative action, unless indemnification is otherwise
prohibited by law), provided such person acted in good faith and in a manner he
reasonably believed to be in the best interests of the Registrant and, in the
case of a criminal proceeding, had no reason to believe his conduct was
unlawful. The indemnification agreements also set forth certain procedures that
will apply in the event of a claim for indemnification thereunder.
The Articles of Incorporation of the Registrant provide that the personal
liability of the directors of the Registrant for monetary damages shall be
eliminated to the fullest extent permissible under California law. Under
Section 204(a)(10) of the CGCL, the personal liability of a director for
monetary damages in an action brought by or in the right of the corporation for
breach of the director's duty to the corporation may be eliminated, except for
the liability of a director resulting from (i) acts or omissions involving
intentional misconduct or the absence of good faith, (ii) any transaction from
which a director derived an improper personal benefit, (iii) acts or omissions
showing a reckless disregard for the director's duty, (iv) acts or omissions
constituting an unexcused pattern of inattention to the director's duty or (v)
the making of an illegal distribution to shareholders or an illegal loan or
guaranty.
Item 7. Exemption From Registration Claimed.
Not applicable.
Item 8. Exhibits.
Exhibit
Numbers
-------
4.1 Form of Employment Agreement effective as of January 1, 1996 by and
between Registrant and Robert W. Howard incorporated by reference (and
filed as Exhibit 10.15) to the Registrant's Registration Statement on
Form S-1 (File No. 333-3270) and Amendment Nos. 1 and 2 filed with the
Securities and Exchange Commission on May 5, 1996 and June 7, 1996,
respectively).
4.2 Form of Employment Agreement effective as of January 1, 1996 by and
between Registrant and Bernard A. Guy incorporated by reference (and
filed as Exhibit 10.16) to the Registrant's Registration Statement on
Form S-1 (File No.33 333-3270) and Amendment Nos. 1 and 2 filed with
the Securities and Exchange Commission on May 5, 1996 and June 7,
1996, respectively).
4.4 Form of Senior Management Stock Option Agreement effective as of
November 1, 1995 by and between Registrant and Robert W. Howard.
4.5 Form of Senior Management Stock Option Agreement effective as of
November 1, 1995 by and between Registrant and Bernard A. Guy.
5 Opinion of Freshman, Marantz, Orlanski, Cooper & Klein.
II-2
<PAGE>
23.1 Consent of Freshman, Marantz, Orlanski, Cooper & Klein (included in
Exhibit 5).
23.2 Consent of KPMG Peat Marwick LLP.
24.1 Power of Attorney (included on signature page of Registration
Statement).
Item 9. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include
any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change
to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
---------
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's Annual Report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
---------
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions referenced in
Item 6 of this Registration Statement or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, "hereunto duly
authorized, in the City of Lake Oswego, State of Oregon, on this 30th day of
August, 1996.
SOUTHERN PACIFIC FUNDING
CORPORATION
By: /s/ Robert W. Howard
------------------------------------
ROBERT W. HOWARD
President
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Robert W. Howard, Bernard A. Guy and Gary
A. Palmer, and each of them, as his or her true and lawful attorneys-in-fact and
agents with full power of substitution and resubstitution, for such person and
in such person's name, place and stead, in any and all capacities, to sign any
and all amendments (including posteffective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any one of them, or his, her or their
substitutes, may lawfully do or cause to done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ H. Wayne Snavely
- --------------------------- Chairman of the Board August 30, 1996
H. WAYNE SNAVELY
/s/ Robert W. Howard
- --------------------------- President and Director August 30, 1996
ROBERT W. HOWARD (Principal Executive Officer)
- --------------------------- Executive Vice President and August __, 1996
BERNARD A. GUY Director
/s/ Gary A. Palmer
- --------------------------- Chief Financial Officer August 30, 1996
GARY A. PALMER (Principal Financial and
Accounting Officer)
/s/ Stephen J. Shugerman
- ---------------------------- Director August 30, 1996
STEPHEN J. SHUGERMAN
/s/ John D. Dewey
- ---------------------------- Director August 30, 1996
JOHN D. DEWEY
/s/ A. Van Ruiter
- ----------------------------- Director August 30, 1996
A. VAN RUITER
/s/ Frank P. Willey
- ----------------------------- Director August 30, 1996
FRANK P. WILLEY
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit
Numbers Description Page
- ------- ----------- ----
<S> <C> <C>
4.1 Form of Employment Agreement effective as of January 1,
1996 by and between Registrant and Robert W. Howard
incorporated by reference (and filed as Exhibit
10.15) to the Registrant's Registration Statement on
Form S-1 (File No. 333-3270) and Amendment Nos. 1 and
2 filed with the Securities and Exchange Commission
on May 5, 1996 and June 7, 1996, respectively).
4.2 Form of Employment Agreement effective as of January 1,
1996 by and between Registrant and Bernard A. Guy
incorporated by reference (and filed as Exhibit 10.16)
to the Registrant's Registration Statement on Form S-1
(File No.33 333-3270) and Amendment Nos. 1 and 2 filed
with the Securities and Exchange Commission on May 5, 1996
and June 7, 1996, respectively).
4.3 Form of Senior Management Stock Option Agreement effective
as of November 1, 1995 by and between Registrant and
Robert W. Howard.
4.4 Form of Senior Management Stock Option Agreement effective
as of November 1, 1995 by and between Registrant and
Bernard A. Guy.
5 Opinion of Freshman, Marantz, Orlanski, Cooper & Klein.
23.1 Consent of Freshman, Marantz, Orlanski, Cooper & Klein
(included in Exhibit 5).
23.2 Consent of KPMG Peat Marwick LLP.
24.1 Power of Attorney (included on signature page of
Registration Statement).
</TABLE>
II-5
<PAGE>
EXHIBIT 4.3
SOUTHERN PACIFIC FUNDING CORPORATION
SENIOR MANAGEMENT STOCK OPTION AGREEMENT
This AGREEMENT is made effective as of the 1st day of November, 1995, (the
"Option Grant Date"), by and between Southern Pacific Funding Corporation, a
California corporation (the "Company") and Robert W. Howard (the "Optionee").
RECITALS
WHEREAS, the Board of Directors of the Company has established the 1995
Senior Management Stock Option Plan (the "Plan") effective as of November 1,
1995, and
WHEREAS, pursuant to the provisions of said Plan, the Committee (as defined
in the Plan) of the Board of Directors of the Company, by action duly taken as
of November 1, 1995, granted to the Optionee an option or options (the
"Option(s)") to purchase shares of the Common Stock of the Company on the terms
and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants set forth herein and other good and valuable consideration, the
parties hereto agree as follows:
1. The Option(s). The Optionee may, at his option, purchase all or any
-------------
part of an aggregate of 156 shares of Common Stock (the "Optioned Shares"), at
the price of $43,575 per share (the "Option Price"), on the terms and conditions
set forth herein.
2. Plan Type; Exercise Dates and Exercise. Options intended to qualify as
--------------------------------------
Incentive Stock Options are designated by an "A" under the category "Plan."
Options intended as separate nonstatutory options are designated by a "B" under
the category "Plan." The Option(s) shall be exercisable as to the specified
number of Optioned Shares on and after the "First" dates and on or before the
"Last" dates set forth below:
1
<PAGE>
<TABLE>
<CAPTION>
Plan Number of Shares Exercise Dates
- ---- ---------------- ---------------------------
First Last
---------- ----------
<S> <C> <C> <C>
B 31 11/1/1996 10/31/2005
- ----- -------- --------- ----------
B 31 11/1/1997 10/31/2005
- ----- -------- --------- ----------
B 31 11/1/1998 10/31/2005
- ----- -------- --------- ----------
B 31 11/1/1999 10/31/2005
- ----- -------- --------- ----------
B 32 11/1/2000 10/31/2005
- ----- -------- --------- ----------
</TABLE>
Optionee acknowledges that he understands he has no right whatsoever to exercise
the Option(s) granted hereunder with respect to any Optioned Shares covered by
any installment until such installment accrues as provided above. Optionee
acknowledges that notwithstanding anything to the foregoing set forth herein, in
the event that Company's initial public offering is not consummated, any Stock
Options granted hereunder shall be deemed terminated and without force and
effect and Optionee shall be in no way entitled to any of said Stock Options.
Optionee further understands that the Option(s) granted hereunder shall expire
and become unexercisable as provided in Section 3(c) below.
This Option shall be deemed exercised as to the shares to be purchased when
written notice of such exercise has been given to the Company at its principal
business office by the Optionee with respect to the Common Stock to be
purchased. Such notice shall be accompanied by (i) full payment in cash or cash
equivalents, (ii) unrestricted Stock owned by the Optionee, (iii) cancellation
of any indebtedness owed by the Company to the Optionee, or (iv) by any
combination of the foregoing as may be determined by the Committee with respect
to the shares to be purchased.
3. Governing Plan. This Agreement hereby incorporates by reference the
--------------
Plan and all of the terms and conditions of the Plan as heretofore amended and
as the same may be amended from time to time hereafter in accordance with the
terms thereof, but no such subsequent amendment shall adversely affect the
Optionee's rights under this Agreement and the Plan except as may be required by
applicable law. The Optionee expressly acknowledges and agrees that the
provisions of this Agreement are subject to the Plan; the terms of this
Agreement shall in no manner limit or modify the controlling provisions of the
Plan, and in case of any conflict between the provisions of the Plan and this
Agreement, the provisions of the Plan shall be controlling and binding upon the
parties hereto. The Optionee also hereby expressly acknowledges, represents and
agrees as follows:
2
<PAGE>
(a) Acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto and by reference incorporated herein, and represents that he is
familiar with the terms and provisions of said Plan, and hereby accepts this
Agreement subject to all the terms and provisions of said Plan.
(b) Agrees to accept as binding, conclusive and final all decisions or
interpretations of the Committee upon any questions arising under the Plan.
(c) Acknowledges that he is familiar with Sections of the Plan regarding
the exercise of the Option(s) and represents that he understands that said
Option(s) must be exercised on or before the earliest of the following dates,
whichever is applicable: (i) the "Last" exercise date noted above in Section 2;
(ii) the day prior to the fifth anniversary of the Option(s) Grant Date with
respect to Options granted as Incentive Stock Options and the day prior to the
tenth anniversary of the Option(s) Grant Date with respect to Options granted as
Non-Qualified Stock Options; (iii) the dates as descended in Subsections 5(f)
through 5(i) of the Plan.
(d) Acknowledges, understands and agrees that the existence of the Plan
and the execution of this Agreement are not sufficient by themselves to cause
any exercise of any Option(s) granted as an Incentive Stock Option to qualify
for favorable tax treatment through the application of Section 422(A) of the
Internal Revenue Code; that Optionee must, in order to so qualify, individually
meet by his own action all applicable requirements of Section 422A, including
without limitation the following holding period and employment requirements:
(1) holding period requirement: no disposition of an Optioned
--------------------------
Share may be made by Optionee within two (2) years from the date of the
granting of the Option(s) nor within one (1) year after the transfer of
such Optioned Share to him, and
(2) employment requirement: at all times during the period
----------------------
beginning on the date of the granting of the Option(s) and ending on the
day three (3) months before the date of exercise, the Optionee must have
been an employee of the Company, its parent, or a subsidiary of the Company
or a parent or subsidiary of such corporation issuing or assuming the
Option(s) in a transaction to which Section 425(a) of the Internal
3
<PAGE>
Revenue Code applies, except where the termination of employment is by
means of the employee's disability, in which case said three month period
may be extended to one year, as provided under Internal Revenue Code
Section 422A.
4. Representations and Warranties. As a condition to the exercise
------------------------------
of any portion of an Option, the Company may require the person exercising
such Option to make any representation and/or warranty to the Company as
may, in the judgment of counsel to the Company, be required under any
applicable law or regulation, including but not limited to a representation
and warranty that the shares are being acquired only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required under
the Securities Act of 1933 or any other applicable law, regulation or rule
of any governmental agency. Optionee hereby represents to the Company that
each of the Option evidenced hereby and the shares purchasable upon
exercise thereof is being acquired only for investment and without any
present intention to sell or distribute such securities.
5. Options Not Transferable. The Option(s) may be exercised during
------------------------
the lifetime of the Optionee only by the Optionee. The Optionee's rights
and interests under this Agreement and in and to the Option(s) may not be
sold, pledged, hypothecated, assigned, encumbered, gifted or otherwise
transferred in any manner, either voluntarily or involuntarily by operation
of law, except by will or the laws of descent or distribution.
6. No Enlargement of Employee Rights. Nothing in this Agreement
---------------------------------
shall be construed to confer upon the Optionee (if an employee) any right
to continued employment with the Company or any Subsidiary, or to restrict
in any way the right of the Company or any Subsidiary, to terminate his
employment. Optionee acknowledges that in the absence of an express written
employment agreement to the contrary, Optionee's employment with the
Company may be terminated by the Company at any time, with or without
cause.
7. Withholding of Taxes. Optionee authorizes the Company to
--------------------
withhold, in accordance with any applicable law, from any compensation
payable to him any taxes required to be withheld by federal, state or local
law as a result of the grant of the Option(s) or the issuance of stock
pursuant to the exercise of such Option(s).
8. Laws Applicable to Construction. This Agreement shall be
-------------------------------
construed and enforced in accordance with the laws of the State of
California.
4
<PAGE>
9. Agreement Binding on Successors. The terms of this Agreement
-------------------------------
shall be binding upon the executors, administrators, heirs, successors,
transferees and assignees of the Optionee.
10. Costs of Litigation. In any action at law or in equity to enforce
-------------------
any of the provisions or rights under this Agreement or the Plan, the
unsuccessful party to such litigation, as determined by the court in a
final judgment or decree, shall pay the successful party or parties all
costs, expenses and reasonable attorneys' fees incurred by the successful
party or parties (including without limitation costs, expenses end fees
on any appeals), and if the successful party recovers judgment in any
such action or proceeding such costs, expenses and attorneys' fees shall
be included as part of the judgment.
11. Necessary Acts. The Optionee agrees to perform all acts and
--------------
execute and deliver any documents that may be reasonably necessary to carry
out the provisions of this Agreement, including but not limited to all acts
and documents related to compliance with federal and/or state securities
laws.
12. Counterparts. For convenience this Agreement may be executed in
------------
any number of identical counterparts, each of which shall be deemed a
complete original in itself and may be introduced in evidence or used for
any other purpose without the production of any other counterparts.
13. Invalid Provisions. In the event that any provision of this
------------------
Agreement is found to be invalid or otherwise unenforceable under any
applicable law, such invalidity or unenforceability shall not be construed
as rendering any other provisions contained herein invalid or
unenforceable, and all such other provisions shall be given full force and
effect to the same extent as though the invalid and unenforceable provision
was not contained herein.
14. Limitation on Value of Optioned Shares. Optionee acknowledged
--------------------------------------
that the Plan provides that the aggregate fair market value (determined as
of the date hereof) of the shares of Common Stock to which Options granted
as Incentive Stock Options are exercisable for the first time by Optionee
during any calendar year under all incentive stock option plans of the
Company and any Subsidiary shall not exceed $100,000. It is understood and
agreed that should it be determined that an Option if granted as an
Incentive Stock Option hereunder would exceed such maximum, such Option
shall be considered granted as a Non-Qualified Stock Option to the extent,
but only to the extent of such excess. This limitation shall not apply to
any option granted as a Non-Qualified Stock Option.
5
<PAGE>
IN WITNESS WHEREOF, the Company and the Optionee have executed this Senior
Management Stock Option Agreement effective as of the date first written
hereinabove.
SOUTHERN PACIFIC FUNDING OPTIONEE
CORPORATION
By:_______________________ _________________________
Name: Bernard A. Guy Robert W. Howard
Title: Vice President
--------------------------
Street Address
--------------------------
City and State
--------------------------
Social Security No.
By his or her signature below, the spouse of the Optionee, of such Optionee
be legally married as of the date of his execution of this Agreement,
acknowledges that he or she has read this Agreement and the Plan and is familiar
with the terms and provisions thereof, and agrees to be bound by all the terms
and conditions of said Agreement and said Plan document.
___________________________________
Spouse
Dated: ____________________________
By his or her signature below the Optionee represents that he or she is not
legally married as of the date of execution of this Agreement.
___________________________________
Optionee
Dated: ____________________________
6
<PAGE>
EXHIBIT 4.4
SOUTHERN PACIFIC FUNDING CORPORATION
SENIOR MANAGEMENT STOCK OPTION AGREEMENT
This AGREEMENT is made effective as of the 1st day of November, 1995, (the
"Option Grant Date"), by and between Southern Pacific Funding Corporation, a
California corporation (the "Company") and Bernard A. Guy (the "Optionee").
RECITALS
WHEREAS, the Board of Directors of the Company has established the 1995
Senior Management Stock Option Plan (the "Plan") effective as of November 1,
1995, and
WHEREAS, pursuant to the provisions of said Plan, the Committee (as defined
in the Plan) of the Board of Directors of the Company, by action duly taken as
of November 1, 1995, granted to the Optionee an option or options (the
"Option(s)") to purchase shares of the Common Stock of the Company on the terms
and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants set forth herein and other good and valuable consideration, the
parties hereto agree as follows:
1. The Option(s). The Optionee may, at his option, purchase all or any
-------------
part of an aggregate of 156 shares of Common Stock (the "Optioned Shares"), at
the price of $43,575 per share (the "Option Price"), on the terms and conditions
set forth herein.
2. Plan Type; Exercise Dates and Exercise. Options intended to qualify as
--------------------------------------
Incentive Stock Options are designated by an "A" under the category "Plan."
Options intended as separate nonstatutory options are designated by a "B" under
the category "Plan." The Option(s) shall be exercisable as to the specified
number of Optioned Shares on and after the "First" dates and on or before the
"Last" dates set forth below:
1
<PAGE>
<TABLE>
<CAPTION>
Plan Number of Shares Exercise Dates
- ---- ---------------- --------------------------
First Last
----- ----
<S> <C> <C> <C>
B 31 11/1/1996 10/31/2005
- ------ -------- --------- ----------
B 31 11/1/1997 10/31/2005
- ------ -------- --------- ----------
B 31 11/1/1998 10/31/2005
- ------ -------- --------- ----------
B 31 11/1/1999 10/31/2005
- ------ -------- --------- ----------
B 32 11/1/2000 10/31/2005
- ------ -------- --------- ----------
</TABLE>
Optionee acknowledges that he understands he has no right whatsoever to exercise
the Option(s) granted hereunder with respect to any Optioned Shares covered by
any installment until such installment accrues as provided above. Optionee
acknowledges that notwithstanding anything to the foregoing set forth herein, in
the event that Company's initial public offering is not consummated, any Stock
Options granted hereunder shall be deemed terminated and without force and
effect and Optionee shall be in no way entitled to any of said Stock Options.
Optionee further understands that the Option(s) granted hereunder shall expire
and become unexercisable as provided in Section 3(c) below.
This Option shall be deemed exercised as to the shares to be purchased when
written notice of such exercise has been given to the Company at its principal
business office by the Optionee with respect to the Common Stock to be
purchased. Such notice shall be accompanied by (i) full payment in cash or cash
equivalents, (ii) unrestricted Stock owned by the Optionee, (iii) cancellation
of any indebtedness owed by the Company to the Optionee, or (iv) by any
combination of the foregoing as may be determined by the Committee with respect
to the shares to be purchased.
3. Governing Plan. This Agreement hereby incorporates by reference the
--------------
Plan and all of the terms and conditions of the Plan as heretofore amended and
as the same may be amended from time to time hereafter in accordance with the
terms thereof, but no such subsequent amendment shall adversely affect the
Optionee's rights under this Agreement and the Plan except as may be required by
applicable law. The Optionee expressly acknowledges and agrees that the
provisions of this Agreement are subject to the Plan; the terms of this
Agreement shall in no manner limit or modify the controlling provisions of the
Plan, and in case of any conflict between the provisions of the Plan and this
Agreement, the provisions of the Plan shall be controlling and binding upon the
parties hereto. The Optionee also hereby expressly acknowledges, represents and
agrees as follows:
2
<PAGE>
(a) Acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto and by reference incorporated herein, and represents that he is
familiar with the terms and provisions of said Plan, and hereby accepts this
Agreement subject to all the terms and provisions of said Plan.
(b) Agrees to accept as binding, conclusive and final all decisions or
interpretations of the Committee upon any questions arising under the Plan.
(c) Acknowledges that he is familiar with Sections of the Plan regarding
the exercise of the Option(s) and represents that he understands that said
Option(s) must be exercised on or before the earliest of the following dates,
whichever is applicable: (i) the "Last" exercise date noted above in Section 2;
(ii) the day prior to the fifth anniversary of the Option(s) Grant Date with
respect to Options granted as Incentive Stock Options and the day prior to the
tenth anniversary of the Option(s) Grant Date with respect to Options granted as
Non-Qualified Stock Options; (iii) the dates as descended in Subsections 5(f)
through 5(i) of the Plan.
(d) Acknowledges, understands and agrees that the existence of the Plan
and the execution of this Agreement are not sufficient by themselves to cause
any exercise of any Option(s) granted as an Incentive Stock Option to qualify
for favorable tax treatment through the application of Section 422(A) of the
Internal Revenue Code; that Optionee must, in order to so qualify, individually
meet by his own action all applicable requirements of Section 422A, including
without limitation the following holding period and employment requirements:
(1) holding period requirement: no disposition of an Optioned
--------------------------
Share may be made by Optionee within two (2) years from the date of the
granting of the Option(s) nor within one (1) year after the transfer of
such Optioned Share to him, and
(2) employment requirement: at all times during the period
----------------------
beginning on the date of the granting of the Option(s) and ending on the
day three (3) months before the date of exercise, the Optionee must have
been an employee of the Company, its parent, or a subsidiary of the
Company or a parent or subsidiary of such corporation issuing or
assuming the Option(s) in a transaction to which Section 425(a) of the
Internal
3
<PAGE>
Revenue Code applies, except where the termination of employment is by
means of the employee's disability, in which case said three month period
may be extended to one year, as provided under Internal Revenue Code
Section 422A.
4. Representations and Warranties. As a condition to the exercise of any
------------------------------
portion of an Option, the Company may require the person exercising such Option
to make any representation and/or warranty to the Company as may, in the
judgment of counsel to the Company, be required under any applicable law or
regulation, including but not limited to a representation and warranty that the
shares are being acquired only for investment and without any present intention
to sell or distribute such shares if, in the opinion of counsel for the Company,
such a representation is required under the Securities Act of 1933 or any other
applicable law, regulation or rule of any governmental agency. Optionee hereby
represents to the Company that each of the Option evidenced hereby and the
shares purchasable upon exercise thereof is being acquired only for investment
and without any present intention to sell or distribute such securities.
5. Options Not Transferable. The Option(s) may be exercised during the
------------------------
lifetime of the Optionee only by the Optionee. The Optionee's rights and
interests under this Agreement and in and to the Option(s) may not be sold,
pledged, hypothecated, assigned, encumbered, gifted or otherwise transferred in
any manner, either voluntarily or involuntarily by operation of law, except by
will or the laws of descent or distribution.
6. No Enlargement of Employee Rights. Nothing in this Agreement shall be
---------------------------------
construed to confer upon the Optionee (if an employee) any right to continued
employment with the Company or any Subsidiary, or to restrict in any way the
right of the Company or any Subsidiary, to terminate his employment. Optionee
acknowledges that in the absence of an express written employment agreement to
the contrary, Optionee's employment with the Company may be terminated by the
Company at any time, with or without cause.
7. Withholding of Taxes. Optionee authorizes the Company to withhold, in
--------------------
accordance with any applicable law, from any compensation payable to him any
taxes required to be withheld by federal, state or local law as a result of the
grant of the Option(s) or the issuance of stock pursuant to the exercise of such
Option(s).
8. Laws Applicable to Construction. This Agreement shall be construed and
-------------------------------
enforced in accordance with the laws of the State of California.
4
<PAGE>
9. Agreement Binding on Successors. The terms of this Agreement shall be
-------------------------------
binding upon the executors, administrators, heirs, successors, transferees and
assignees of the Optionee.
10. Costs of Litigation. In any action at law or in equity to enforce
-------------------
any of the provisions or rights under this Agreement or the Plan, the
unsuccessful party to such litigation, as determined by the court in a final
judgment or decree, shall pay the successful party or parties all costs,
expenses and reasonable attorneys' fees incurred by the successful party or
parties (including without limitation costs, expenses end fees on any appeals),
and if the successful party recovers judgment in any such action or proceeding
such costs, expenses and attorneys' fees shall be included as part of the
judgment.
11. Necessary Acts. The Optionee agrees to perform all acts and
--------------
execute and deliver any documents that may be reasonably necessary to carry out
the provisions of this Agreement, including but not limited to all acts and
documents related to compliance with federal and/or state securities laws.
12. Counterparts. For convenience this Agreement may be executed in
------------
any number of identical counterparts, each of which shall be deemed a complete
original in itself and may be introduced in evidence or used for any other
purpose without the production of any other counterparts.
13. Invalid Provisions. In the event that any provision of this
------------------
Agreement is found to be invalid or otherwise unenforceable under any applicable
law, such invalidity or unenforceability shall not be construed as rendering any
other provisions contained herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same extent as though the
invalid and unenforceable provision was not contained herein.
14. Limitation on Value of Optioned Shares. Optionee acknowledged
--------------------------------------
that the Plan provides that the aggregate fair market value (determined as of
the date hereof) of the shares of Common Stock to which Options granted as
Incentive Stock Options are exercisable for the first time by Optionee during
any calendar year under all incentive stock option plans of the Company and any
Subsidiary shall not exceed $100,000. It is understood and agreed that should
it be determined that an Option if granted as an Incentive Stock Option
hereunder would exceed such maximum, such Option shall be considered granted as
a Non-Qualified Stock Option to the extent, but only to the extent of such
excess. This limitation shall not apply to any option granted as a Non-
Qualified Stock Option.
5
<PAGE>
IN WITNESS WHEREOF, the Company and the Optionee have executed this Senior
Management Stock Option Agreement effective as of the date first written
hereinabove.
SOUTHERN PACIFIC FUNDING OPTIONEE
CORPORATION
By:_______________________ _________________________
Name: Robert W. Howard Bernard A. Guy
Title: President
--------------------------
Street Address
--------------------------
City and State
--------------------------
Social Security No.
By his or her signature below, the spouse of the Optionee, of such Optionee
be legally married as of the date of his execution of this Agreement,
acknowledges that he or she has read this Agreement and the Plan and is familiar
with the terms and provisions thereof, and agrees to be bound by all the terms
and conditions of said Agreement and said Plan document.
___________________________________
Spouse
Dated: ____________________________
By his or her signature below the Optionee represents that he or she is not
legally married as of the date of execution of this Agreement.
___________________________________
Optionee
Dated: ____________________________
6
<PAGE>
[LETTERHEAD]
EXHIBIT 5
August 30, 1996
Southern Pacific Funding Corporation
One Centerpointe Drive, Suite 500
Lake Oswego, Oregon 97035
Re: Senior Management Stock Options
Gentlemen:
As counsel for Southern Pacific Funding Corporation (the "Company"), we have
participated in the preparation of the Registration Statement which is to be
filed on Form S-8 under the Securities Act of 1933, as amended, relating to the
offering of up to 1,294,800 shares of the Company's Common Stock (the "Shares")
issuable upon the exercise of senior management stock options granted to certain
executive officers of the Company pursuant to the 1995 Senior Management Stock
Option Plan and Senior Management Stock Option Agreements (together, the
"Plan"). We have also examined the proceedings taken and the instruments
executed in connection with the issuance of the Shares.
It is our opinion that, when issued pursuant to the exercise of options under
the Plan, as contemplated in the Registration Statement, the Shares will be
legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement.
Very truly yours,
FRESHMAN, MARANTZ, ORLANSKI,
COOPER & KLEIN
a professional corporation
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report incorporated herein by reference.
KPMG Peat Marwick LLP
Los Angeles, California
August 30, 1996
