<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________
Commission File Number 1-8972
INDYMAC MORTGAGE HOLDINGS, INC.
(formerly INMC Mortgage Holdings, Inc.)
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
DELAWARE 95-3983415
(State or other jurisdiction of incorporation or organization) (I. R. S. Employer Identification No.)
155 NORTH LAKE AVENUE, PASADENA, CALIFORNIA 91101-1857
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (800) 669-2300
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
requirements for the past 90 days. Yes X No _____
--------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of the period covered by this report.
Common stock outstanding as of June 30, 1998: 70,313,943 shares
<PAGE>
INDYMAC MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Loans held for sale, net
Mortgages-prime $ 1,323,564 $ 1,091,908
Mortgages-subprime 505,125 75,770
Manufactured housing 240,744 208,830
Home improvement 181,621 81,763
----------- -----------
2,251,054 1,458,271
Other loans, net
Loans held for investment 1,393,706 1,831,047
Construction 1,245,618 946,806
Revolving warehouse lines of credit 582,944 512,458
----------- -----------
3,222,268 3,290,311
Mortgage securities 912,520 558,445
Collateral for CMOs 208,057 245,474
Investment in and advances to IndyMac Operating 226,659 185,715
Cash and cash equivalents 4,586 13,676
Interest receivable 46,208 36,762
Other assets 68,095 60,456
----------- -----------
Total assets $ 6,939,447 $ 5,849,110
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Repurchase agreements and other credit facilities 5,815,860 $ 4,826,656
Collateralized mortgage obligations 184,220 221,154
Senior unsecured notes 59,958 59,888
Accounts payable and accrued liabilities 33,359 37,518
----------- -----------
Total liabilities 6,093,397 5,145,216
Shareholders' equity
Preferred stock - authorized, 10,000,000 shares of $.01 par value;
none issued - -
Common stock - authorized, 200,000,000 shares of
$.01 par value; issued and outstanding, 70,313,943 shares
at June 30, 1998 and 63,351,616 at December 31, 1997 703 634
Additional paid-in capital 911,670 773,475
Accumulated other comprehensive income (1,276) (1,505)
Cumulative earnings 311,926 243,430
Cumulative distributions to shareholders (376,973) (312,140)
----------- -----------
Total shareholders' equity 846,050 703,894
----------- -----------
Total liabilities and shareholders' equity $ 6,939,447 $ 5,849,110
=========== ===========
</TABLE>
2
<PAGE>
INDYMAC MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollar amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
-------------------------- --------------------------
1998 1997 1998 1997
-------------------------- --------------------------
<S> <C> <C> <C> <C>
REVENUES
Interest income
Loans held for sale
Mortgages-prime $ 30,427 $12,398 $ 53,371 $23,479
Mortgages-subprime 6,188 3,842 8,676 7,933
Manufactured housing 4,965 3,208 9,398 5,468
Home improvement 3,922 - 6,692 -
-------------- ----------- ------------ -------------
45,502 19,448 78,137 36,880
Other loans
Loans held for investment 26,717 28,951 58,365 56,517
Construction 30,243 17,506 56,926 32,218
Revolving warehouse lines of credit 13,686 4,395 24,474 8,424
-------------- ----------- ------------ -------------
70,646 50,852 139,765 97,159
Mortgage securities 18,925 5,516 34,306 8,838
Collateral for CMOs 3,898 5,195 8,322 10,596
Advances to IndyMac Operating 4,865 2,530 7,786 5,240
Other 142 340 247 385
-------------- ----------- ------------ -------------
Total interest income 143,978 83,881 268,563 159,098
Interest expense
Repurchase agreements and other credit facilities 88,553 49,654 165,829 91,219
Collateralized mortgage obligations 3,944 4,898 8,247 10,103
Senior unsecured notes 1,382 1,379 2,763 2,757
-------------- ----------- ------------ -------------
Total interest expense 93,879 55,931 176,839 104,079
Net interest income 50,099 27,950 91,724 55,019
Provision for loan losses 9,357 3,900 15,607 7,800
-------------- ----------- ------------ -------------
Net interest income after provision for loan losses 40,742 24,050 76,117 47,219
Equity in earnings of IndyMac Operating 2,002 2,735 4,891 6,994
Unrealized gain(loss) on securities (1,214) 1,413 (1,510) 1,119
Other income 1,294 1,461 2,363 3,066
-------------- ----------- ------------ -------------
Net revenues 42,824 29,659 81,861 58,398
EXPENSES
Salaries 5,299 2,869 10,268 5,858
General and Administrative 1,593 2,036 3,097 4,132
Management fees to affiliate - 2,098 - 4,407
-------------- ----------- ------------ -------------
Total expenses 6,892 7,003 13,365 14,397
-------------- ----------- ------------ -------------
NET EARNINGS $ 35,932 $22,656 $ 68,496 $44,001
============= =========== ============ =============
EARNINGS PER SHARE
Basic EPS $ 0.53 $ 0.43 $ 1.03 $ 0.85
Diluted EPS 0.53 0.42 1.03 0.83
WEIGHTED AVERAGE SHARES OUTSTANDING (in thousands)
Basic 68,175 53,296 66,404 51,675
Diluted 68,381 53,481 66,742 53,013
</TABLE>
<PAGE>
INDYMAC MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30
--------------------------------
1998 1997
----------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 68,496 $ 44,001
Adjustments to reconcile net earnings
to net cash provided by (used in) operating activities:
Amortization and depreciation 22,492 12,952
Provision for loan losses 15,607 7,800
Equity in earnings of IndyMac Operating (4,891) (6,994)
Purchases of mortgage loans held for sale (5,336,970) (1,865,673)
Sale of and payments from mortgage loans held for sale 4,514,299 1,537,190
Net purchases of manufactured housing loans held for sale (52,232) (71,286)
Net purchases of home improvement loans held for sale (100,999) -
Purchases of trading securities (54,055) (38,009)
Principal payments on trading securities 12,287 27
Net increases in other assets (24,754) (13,862)
Net (decreases)/increases in other liabilities (2,649) 5,197
----------- -----------
Net cash used in operating activities (943,369) (388,657)
Cash flows from investing activities:
Purchases of mortgage loans held for investment (180,836) (520,602)
Payments from mortgage loans held for investment 479,768 195,927
Net increase in construction loans receivable (284,525) (225,939)
Purchases of mortgage securities (240,680) (153,316)
Sales and payments of mortgage securities 207,641 18,877
Net increase in revolving warehouse lines of credit (71,094) (17,409)
Net purchases of manufactured housing loans held for investment (3,197) (814)
(Increase) /decrease in advances to IndyMac Operating, net of cash payments (35,191) 23,764
Payments from collateral for CMOs 37,781 19,718
Net change in GICs held by trustees as collateral for CMOs (369) 1,195
----------- -----------
Net cash used in investing activities (90,702) (658,599)
Cash flows from financing activities:
Net increase in repurchase agreements and other credit facilities 989,204 1,038,997
Net proceeds from issuance of common stock 138,264 80,152
Cash dividends paid (64,833) (42,797)
Principal payments on collateralized mortgage obligations (37,654) (20,749)
----------- -----------
Net cash provided by financing activities 1,024,981 1,055,603
Net (decrease)/increase in cash and cash equivalents (9,090) 8,347
Cash and cash equivalents at beginning of period 13,676 12,450
----------- -----------
Cash and cash equivalents at end of period $ 4,586 $ 20,797
=========== ===========
Supplemental cash flow information:
Cash paid for interest $ 176,215 $ 102,122
=========== ===========
</TABLE>
4
<PAGE>
INDYMAC MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
(Dollar amounts in thousands) Six months ended
June 30, 1998 June 30, 1997
----------------------------- ----------------------------
<S> <C> <C> <C> <C>
Cumulative Earnings
Balance, beginning of year $243,430 $219,135
Net earnings 68,496 $68,496 44,001 $44,001
------------- -------------
Balance, end of quarter 311,926 263,136
Cumulative Distribution to Shareholders
Balance, beginning of year (312,140) (216,315)
Dividends paid (64,833) (42,795)
------------- -------------
Balance, end of quarter (376,973) (259,110)
Accumulated Other Comprehensive Income
Balance, beginning of year
IndyMac REIT (2,006) (7,166)
IndyMac Operating 501 (8,427)
Unrealized gain/(loss) on securities,
net of reclassification adjustment
IndyMac REIT (426) 4,745
IndyMac Operating, net of tax 655 8,649
------------ ------------
Other comprehensive income 229 229 13,394 13,394
------------- ------------ ------------ ------------
Comprehensive income $68,725 $57,395
Balance, end of quarter
IndyMac REIT (2,432) (2,421)
IndyMac Operating 1,156 222
Common Stock
Balance, beginning of year 634 502
Common stock issued 59 38
Common stock options exercised 10 1
------------- -------------
Balance, end of quarter 703 541
Additional Paid in Capital
Balance, beginning of year 773,475 490,695
Director's and officer's notes receivable (21,083) 0
Common stock issued 142,585 79,574
Common stock options exercised 16,693 540
------------- -------------
Balance, end of quarter 911,670 570,809
------------- -------------
Total Stockholders' Equity $846,050 $573,177
============= =============
</TABLE>
5
<PAGE>
INDYMAC MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
IndyMac Mortgage Holdings, Inc. ("IndyMac REIT"), has elected to be treated as a
real estate investment trust ("REIT") under the Internal Revenue Code of 1986,
as amended. The consolidated financial statements include the accounts of
IndyMac REIT and its qualified REIT subsidiaries. The mortgage lending and
securitization operations are primarily conducted through IndyMac, Inc.
("IndyMac Operating"), a taxable corporation, which is not consolidated with
IndyMac REIT for financial reporting or income tax purposes. IndyMac REIT owns
all of the preferred stock and a 99% economic interest in IndyMac Operating.
IndyMac REIT's investment in IndyMac Operating is accounted for under a method
similar to the equity method. As used herein, "IndyMac" includes IndyMac REIT
and IndyMac Operating and their respective subsidiaries.
All significant intercompany balances and transactions have been eliminated in
consolidation of IndyMac REIT. Certain reclassifications have been made to the
financial statements for the period ended June 30, 1997 to conform to the June
30, 1998 financial statement presentation.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three months ended June 30, 1998 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1998. For further information, refer to the consolidated financial statements
and footnotes thereto included in IndyMac REIT's annual report on Form 10-K for
the year ended December 31, 1997.
NOTE B - ALLOWANCE FOR CREDIT LOSSES
During the three months ended June 30, 1998, IndyMac REIT added $9.4 million to
its allowance for credit losses. IndyMac REIT's allowance for credit losses
totaled $36.4 million at June 30, 1998, and primarily includes reserves for
residential loans held for investment, construction loans, warehouse lines of
credit, manufactured housing loans and home improvement loans in the amounts of
$18.5 million, $11.9 million, $2.5 million, $1.4 million and $1.2 million
respectively. IndyMac REIT recorded chargeoffs of $4.5 million and $1.7 million
during the three months ended June 30, 1998 and 1997, respectively.
6
<PAGE>
NOTE C - MORTGAGE SECURITIES
Mortgage securities consist of REMIC senior securities, adjustable rate agency
securities, subordinated securities, principal-only securities, AAA-rated
interest-only securities and inverse floater securities. Interest-only
securities are comprised primarily of interest-only strips sold by IndyMac
Operating to IndyMac REIT and subsequently securitized and held by IndyMac REIT,
which are classified and accounted for as available for sale, and also include
interest-only securities acquired by IndyMac REIT in connection with the
securitization of mortgage loans held for sale by IndyMac Operating, which are
classified and accounted for as trading securities. Contractual maturities on
the mortgage securities range from 10 to 30 years.
Following is the estimated fair value of IndyMac REIT's mortgage securities as
of June 30, 1998 and December 31, 1997:
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
--------------------------------------- -----------------------------------------
(Dollar amounts in thousands) Available Available
Trading for sale Trading for sale
-------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
Amortized cost $174,411 $740,541 $93,199 $467,252
Gross unrealized gains -- 9,391 -- 5,711
Gross unrealized losses -- (11,823) -- (7,717)
-------- -------- ------- --------
Estimated fair value $174,411 $738,109 $93,199 $465,246
======== ======== ======= ========
</TABLE>
As of June 30, 1998, all of IndyMac REIT's mortgage securities were pledged to
secure repurchase borrowings intended to finance the holding of such securities.
NOTE D - INVESTMENT IN INDYMAC OPERATING (Unaudited)
- ----------------------------------------------------
Summarized financial information for IndyMac Operating follows:
<TABLE>
<CAPTION>
(Dollars in thousands) June 30, 1998 December 31, 1997
--------------------------------------------------------
<S> <C> <C>
Loans held for sale, net $ 173,673 $ 98,834
Mortgage securities 721,130 601,669
Mortgage servicing rights 110,079 72,784
Other assets 33,188 47,766
---------- --------
Total assets $1,038,070 $821,053
========== ========
Repurchase agreements and other credit facilities $ 737,485 $578,763
Due to IndyMac REIT 153,108 117,917
Accounts payable, income taxes payable and
accrued liabilities 73,183 55,891
Shareholders' equity 74,294 68,482
---------- --------
Total liabilities and shareholders' equity $1,038,070 $821,053
========== ========
</TABLE>
7
<PAGE>
NOTE D - INVESTMENT IN INDYMAC OPERATING (Unaudited)-continued
- --------------------------------------------------------------
<TABLE>
<CAPTION>
Quarter ended Six months ended
June 30, June 30,
-------------------------------- --------------------------------
(Dollars in thousands) 1998 1997 1998 1997
----------------------------------------------------------------------
Interest income
<S> <C> <C> <C> <C>
Loans held for sale $ 3,056 $ 3,740 $ 6,019 $ 5,269
Mortgage securities 11,667 10,321 24,018 20,526
Mortgage servicing rights 3,570 2,835 1,947 4,823
------- ------- ------- -------
Total interest income 18,293 16,896 31,984 30,618
Interest expense 15,295 12,335 28,197 23,061
------- ------- ------- -------
Net interest income 2,998 4,561 3,787 7,557
Provision for loan losses - - 36 -
Gain on sale of loans and securities 19,438 11.575 41,029 28,086
Other 6,085 763 8,867 1,095
------- ------- ------- -------
Net revenues 28,521 16,899 53,647 36,738
Salaries and related expenses 14,131 7,663 26,138 14,770
General and administrative expenses 10,873 4,511 18,917 8,698
Management fees to affiliate - - - 757
------- ------- ------- -------
Total expenses 25,004 12,174 45,055 24,225
Earnings before income tax provision 3,517 4,725 8,592 12,513
Income tax provision 1,495 1,962 3,652 5,242
------- ------- ------- -------
Net earnings $ 2,022 $ 2,763 $ 4,940 $ 7,271
======= ======= ======= =======
</TABLE>
Mortgage Securities. Mortgage securities consist primarily of REMIC subordinated
securities, AAA rated principal-only securities and AAA rated interest-only
securities. Interest-only securities are comprised primarily of interest only
strips retained in connection with the securitization of mortgage loans
previously held for sale. Contractual maturities on the mortgage securities
range from 10 to 30 years. Following is the estimated fair value of IndyMac
Operating's mortgage securities as of June 30, 1998 and December 31, 1997:
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
---------------------------------------- ----------------------------------------
(Dollar amounts in thousands) Available Available
Trading for sale Trading for sale
------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
Amortized cost $680,578 $38,537 $544,743 $56,053
Gross unrealized gains -- 2,553 -- 2,321
Gross unrealized losses -- (538) -- (1,448)
-------- ------- -------- -------
Estimated fair value $680,578 $40,552 $544,743 $56,926
======== ======= ======== =======
</TABLE>
As of June 30, 1998, all of IndyMac Operating's mortgage securities were pledged
to secure repurchase borrowings intended to finance the holding of such
securities.
8
<PAGE>
NOTE E - NEW ACCOUNTING PRONOUNCEMENT
During 1997, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income",
which is effective for fiscal years beginning after December 15, 1997 and
requires restatement of earlier financial statements for comparative purposes.
SFAS No. 130 requires that items meeting the criteria of a component of
comprehensive income, such as foreign currency items and unrealized gains and
losses on certain investments in debt and equity securities classified as
available for sale, be shown in the financial statements as adjustments to
reported net income to arrive at a disclosure of comprehensive income, as
defined. SFAS No. 130 provides informative disclosure but does not and will not
impact previously reported or future net earnings and earnings per share.
IndyMac REIT has reported comprehensive income in the accompanying Consolidated
Statements of Shareholders' Equity and Consolidated Balance Sheets.
NOTE F - SUBSEQUENT EVENTS
On July 22, 1998, the Board of Directors of IndyMac REIT declared a cash
dividend of $0.53 per share payable on September 8, 1998 to shareholders of
record on August 3, 1998.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
GENERAL
IndyMac Mortgage Holdings, Inc. ("IndyMac REIT"), was incorporated in the state
of Maryland in July 1985 and reincorporated in the state of Delaware in March
1987. References to "IndyMac REIT" mean either the parent company alone or the
parent company and the entities consolidated for financial reporting purposes,
while references to "IndyMac" mean the parent company, its consolidated
subsidiaries and IndyMac REIT's affiliate, IndyMac, Inc. ("IndyMac Operating")
and its consolidated subsidiaries, which are not consolidated with IndyMac REIT
for financial reporting or tax purposes.
In its mortgage lending and securitization business, IndyMac acts as an
intermediary between the originators of mortgage loans and permanent investors
in mortgage-backed securities ("MBS") secured by or representing an ownership
interest in such mortgage loans. IndyMac purchases primarily "jumbo" and other
"nonconforming" mortgage loans from mortgage originators, and also purchases to
a lesser extent subprime mortgage loans (i.e., "A- through D paper" mortgages).
IndyMac and its customers ("Sellers") negotiate whether such Sellers will
retain, or IndyMac will purchase, the rights to service the mortgage loans
delivered by such Sellers to IndyMac. All loans purchased by IndyMac REIT, for
which a Real Estate Mortgage Investment Conduit ("REMIC") transaction or whole
loan sale is contemplated, are committed for sale to IndyMac Operating at the
same price at which the loans were acquired by IndyMac REIT pursuant to a Master
Forward Commitment and Services Agreement. At present, IndyMac Operating does
not purchase any loans from entities other than IndyMac REIT. Additionally,
IndyMac's lending and securitization operations include the purchase or
origination, securitization and sale of consumer or mortgage loans for
manufactured housing and home improvements.
IndyMac's principal sources of income from its lending and securitization
operations are gains recognized on the sale or securitization of mortgage and
consumer loans, the net spread between interest earned on mortgage and consumer
loans and the interest costs associated with the borrowings used to finance such
loans pending their sale or securitization, and servicing and master servicing
fee income.
In addition to its lending and securitization operations, IndyMac earns fee
income and net interest income through its construction and warehouse lending
programs and net interest income on its investment portfolio of mortgage and
manufactured housing loans and mortgage securities. Construction Lending
Corporation of America ("CLCA") provides acquisition, development and
construction, builder custom home, model home, construction-to-permanent and lot
loan financing on a nationwide basis to builders, while IndyMac Construction
Lending Division ("IndyMac CLD") provides the same products as CLCA to IndyMac
Operating's third party customers. Warehouse
10
<PAGE>
Lending Corporation of America ("WLCA"), IndyMac REIT's warehouse lending
division, provides financing to small-to-medium-size mortgage originators for
the origination and sale of mortgage loans. IndyMac Operating's Loanworks
Division offers a full-service menu of consumer mortgage products directly to
consumers via phone, fax and the Internet. IndyMac Operating's Manufactured
Housing Division originates and purchases loans secured by manufactured housing.
IndyMac Operating's Home Improvement Division offers various types of home
improvement loans to consumers.
FINANCIAL CONDITION
Lending and Securitization Operations: During the first six months of 1998,
IndyMac REIT purchased $5.5 billion of non-conforming mortgage loans, including
$446 million of subprime mortgage loans. In addition, IndyMac REIT purchased
$220 million of manufactured housing loans and $106 million of home improvement
loans during this same period. These loans were financed on an interim basis
using equity and short-term financing in the form of repurchase agreements and
other credit facilities. In general, IndyMac, through IndyMac Operating, sells
the loans in the form of REMIC securities or whole loan sales or, alternatively,
IndyMac REIT invests in the loans on a long-term basis using financing provided
by CMOs or repurchase agreements and other credit facilities. During the first
six months of 1998, IndyMac Operating sold $4.3 billion of residential loans
(including $149 million manufactured housing loans) through the issuance of nine
series of multiple-class MBS in the form of REMIC securities and sold $147
million of mortgage loans in the form of whole loan sales transactions. At June
30, 1998, IndyMac was committed to purchase $1.5 billion of mortgage loans from
various mortgage originators. IndyMac Operating's master servicing portfolio at
June 30, 1998 had an aggregate outstanding principal balance of $14.6 billion
with a weighted average coupon of 8.3%. Delinquencies (30 days and over) for
loans held for sale were 2.3% of principal at June 30, 1998 and December 31,
1997.
Residential Loans Held For Investment: The $1.4 billion portfolio of
residential loans held for investment (inclusive of $34 million of manufactured
housing loans) at June 30, 1998 consisted of $719 million of varying types of
adjustable-rate products which contractually reprice in monthly, semi-annual or
annual periods; $365 million of loans which have a fixed rate for a period of
three, five, seven or ten years and subsequently convert to adjustable-rate
mortgage loans that reprice annually and $310 million of fixed-rate loans. The
weighted average coupon of the mortgage loans held for investment at June 30,
1998 was 8.1%. IndyMac utilizes interest rate swap agreements to manage the
interest rate exposure on its portfolio of loans held for investment. IndyMac
finances loans held for investment with repurchase agreements and other credit
facilities which reprice from overnight to one month, as of June 30, 1998. The
allowance for losses related to loans held for investment by IndyMac REIT
totaled $18.5 million at June 30, 1998. Chargeoffs related to loans held for
investment totaled $6.8 million for the six months ended June 30, 1998.
Delinquencies (30 days and over) for loans held for investment were 7.0% of
principal at June 30, 1998 compared with 6.3% at December 31, 1997.
CONSTRUCTION LENDING OPERATIONS: At June 30, 1998, CLCA had commitments to fund
construction loans of $1.5 billion, with outstanding principal balances of $845
million. The allowance for losses related to CLCA loans totaled $11.3 million
at June 30, 1998, and there were $227,000 in chargeoffs related to CLCA loans
for the six months ended June 30, 1998. Delinquencies (30 days and over) for
CLCA were 0.5% and 0.9% of principal at June 30, 1998 and December 31, 1997,
respectively.
11
<PAGE>
At June 30, 1998, IndyMac CLD had commitments to fund construction-to-permanent
and home improvement loans of $653 million with outstanding principal balances
of $423 million. The allowance for losses related to IndyMac CLD loans totaled
$647,000 at June 30, 1998, and there were $24,000 of chargeoffs for the six
months ended June 30, 1998. Delinquencies for IndyMac CLD were 1.8% and 1.5% of
principal, at June 30, 1998 and December 31, 1997, respectively.
WAREHOUSE LENDING OPERATIONS: At June 30, 1998, IndyMac REIT had extended
commitments to make warehouse and related lines of credit in an aggregate amount
of $1.0 billion, of which $583 million was outstanding, net of reserves. The
allowance for loan losses related to warehouse lines of credit totaled $2.5
million at June 30, 1998. There were no chargeoffs against such allowance
during the six months ended June 30, 1998. As of June 30, 1998 and December
31, 1997, there were no delinquent (30 days and over) warehouse lines of credit.
CMO PORTFOLIO: As of June 30, 1998, IndyMac REIT had a portfolio comprised of
nine series of CMOs (the "CMO Portfolio"). Collateral for CMOs decreased to
$208.1 million at June 30, 1998 from $245.5 million at December 31, 1997. This
decrease of $37.4 million is primarily the result of repayments (including
prepayments and premium and discount amortization) of $37.8 million and an
increase in guaranteed investment contracts ("GICs") held by trustees of
$400,000. IndyMac REIT's CMOs outstanding decreased to $184.2 million at June
30, 1998 from $221.2 million at December 31, 1997. This decrease of $37.0
million resulted from principal payments and discount amortization on CMOs.
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1998 COMPARED TO QUARTER ENDED JUNE 30, 1997
Net Earnings: IndyMac REIT's net earnings were $35.9 million, or $0.53 basic and
diluted earnings per share, based on 68,175,010 and 68,380,717 weighted average
shares outstanding, respectively, for the three months ended June 30, 1998,
compared to $22.7 million, or $0.43 basic earnings per share and $0.42 diluted
earnings per share, based on 53,296,345 and 53,480,858 weighted average shares
outstanding, respectively, for the three months ended June 30, 1997.
The increase in net earnings of $13.2 million was principally due to an increase
in net interest income of $22.1 million and a decrease in management fees to
affiliate of $2.1 million, offset, in part, by increases in the provision for
loan losses, decreases in unrealized gains on securities and increases in
salaries, general and administrative expenses of $5.5 million, $2.6 million and
$2.0 million, respectively.
INTEREST INCOME: Total interest income was $144.0 million for the three months
ended June 30, 1998 and $83.9 million for the three months ended June 30, 1997.
The increase in interest income of $60.1 million was primarily the result of
increases in interest earnings on the following: loans held for sale, $26.1
million; mortgage securities, $13.4 million; construction loans, $12.7 million;
revolving warehouse lines of credit, $9.3 million; and advances to IndyMac
Operating, $2.3 million. These increases were partially offset by a reduction
in the interest income related to mortgage loans held for investment of $2.2
million and collateral for CMOs of $1.3 million.
Interest income on residential loans held for sale totaled $36.6 million and
$16.2 million, resulting in effective yields of 8.1% and 8.7%, for the three
months ended June 30, 1998 and 1997, respectively. The average principal
balance of such loans increased to $1.8 billion for the three months ended June
30, 1998, from $747.8 million for the three months ended June 30, 1997.
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Interest income on manufactured housing loans held for sale totaled $5.0 million
and $3.2 million, with interest earned at effective yields of 10.8% and 10.3%,
for the three months ended June 30, 1998 and 1997, respectively. The average
principal balance of such loans increased by $34.0 million to $184.2 million
during the first three months of 1998, from $150.2 million for the three months
of 1997.
Interest income on loans held for investment totaled $26.7 million and $29.0
million for the three months ended June 30, 1998 and 1997, respectively. This
decrease was the result of a decrease in the average amount of loans held for
investment during the year of $75.1 million and a decrease in the average yield.
The average principal balance of mortgage loans held for investment was $1.5
billion during the second quarter of 1998 with interest earned at an effective
yield of 7.3%, compared to the average principal balance of mortgage loans held
for investment for the second quarter of 1997 of $1.5 billion with interest
earned at an effective yield of 7.7%.
Interest income on construction loans totaled $30.2 million and $17.5 million,
with interest earned at an effective yield of 10.3% and 11.0% for the three
months ended June 30, 1998 and 1997, respectively. The average principal
balance of construction loans outstanding increased $535.7 million to $1.2
billion during the second quarter of 1998 from $640.1 million during the second
quarter of 1997.
Interest income on revolving warehouse lines of credit totaled $13.7 million and
$4.4 million, with interest earned at effective yields of 9.5% and 9.0% for the
three months ended June 30, 1998 and June 30, 1997, respectively. The average
principal balance outstanding increased to $578.8 million from $195.2 million
for the three months ended June 30, 1998 and June 30, 1997, respectively.
Interest income on mortgage securities totaled $18.9 million and $5.5 million,
with interest earned at effective yields of 7.9% and 6.5% for the three months
ended June 30, 1998 and 1997, respectively. During the second quarter of 1998,
the average principal balance increased to $957.7 million from $336.1 million
during the second quarter of 1997. Mortgage securities consisted of REMIC
senior securities, adjustable rate agency securities, subordinated securities,
AAA rated principal-only securities, AAA rated interest-only securities and
inverse floater securities. Interest-only securities were comprised primarily
of interest-only strips sold by IndyMac Operating to IndyMac REIT and
subsequently securitized by IndyMac REIT, which were classified and accounted
for as available for sale, and also include interest-only securities acquired by
IndyMac REIT in connection with the securitization of mortgage loans held for
sale by IndyMac Operating, which were classified and accounted for as trading
securities.
Interest income on collateral for CMOs was $3.9 million and $5.2 million for the
three months ended June 30, 1998 and 1997, respectively. This decrease was
primarily attributable to a decrease in the average aggregate principal amount
of collateral for CMOs outstanding to $217.7 million from $272.9 million for the
three months ended June 30, 1998 and 1997, respectively. Interest income on
collateral for CMOs includes the impact of amortization of net premiums paid in
connection with acquiring the CMO Portfolio and the impact of the delay in the
receipt of prepayments and temporary investment in lower yielding short-term
holdings (GICs) until such amounts are used to repay CMOs.
INTEREST EXPENSE: For the three months ended June 30, 1998 and 1997,
respectively, total interest expense was $93.9 million and $55.9 million. This
increase in interest expense of $38.0 million was primarily due to an increase
in interest expense on repurchase agreements and other credit facilities of
$38.9 million, offset in part by a decline in interest expense on CMOs of $1.0
million.
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Interest expense on repurchase agreements and other credit facilities used to
finance residential loans held for sale and investment, revolving warehouse
lines of credit, construction loans and mortgage securities totaled $88.6
million and $49.7 million for the three months ended June 30, 1998 and 1997,
respectively. This increase of $38.9 million was primarily the result of an
increase in the aggregate average balance of indebtedness outstanding to $5.7
billion from $3.1 billion for the three months ended June 30, 1998 and 1997,
respectively. The effective interest rate on such borrowings was 6.2% and 6.5%
for the three months ended June 30, 1998 and 1997, respectively.
Interest expense on CMOs was $3.9 million and $4.9 million for the three months
ended June 30, 1998 and 1997, respectively. This decrease was primarily
attributable to a decrease in average aggregate CMOs outstanding to $196.0
million from $249.8 million for the three months ended June 30, 1998 and 1997,
respectively. The effective interest rate was 8.1% and 7.9% for the three
months ended June 30, 1998 and 1997, respectively.
Interest expense on senior unsecured notes totaled $1.4 million for each of the
three months ended June 30, 1998 and 1997. The weighted average interest rate
of 9.2% and average outstanding balance of $59.9 million were also the same for
each of the three months ended June 30, 1998 and 1997.
EQUITY IN EARNINGS OF INDYMAC OPERATING: For the three months ended June 30,
1998 earnings for IndyMac Operating of $2.0 million, in which IndyMac REIT has a
99% economic interest, resulted principally from net interest income of $3.0
million, gain on sale of loans and securities of $19.4 million and servicing fee
and other income of $6.1 million, offset by salaries, general and administrative
expenses of $25.0 million, and income taxes of $1.5 million. During the three
months ended June 30, 1997, earnings for IndyMac Operating of $2.8 million
resulted principally from net interest income of $4.6 million and gains on sale
of loans and securities of $11.6 million, offset by salaries, general and
administrative expenses of $12.2 million and income taxes of $2.0 million.
SALARIES, GENERAL AND ADMINISTRATIVE EXPENSES: The IndyMac REIT increase in
salaries, general and administrative expenses of $2.0 million for the three
months ended June 30, 1998 compared to the three months ended June 30, 1997 is
primarily the result of the increased personnel and expenses required to support
the growth in the operations of IndyMac REIT, including CLCA, IndyMac CLD, and
WLCA as well as the expense of putting in place certain administrative and
accounting functions as part of IndyMac REIT becoming self-managed.
MANAGEMENT FEES: For the three months ended June 30, 1998, there were no
management fees compared to $2.1 million for the three months ended June 30,
1997. This decrease in the management fee was due to IndyMac REIT's acquisition
of its manager on July 1, 1997, as a result, IndyMac REIT and IndyMac Operating
became self-managed, and the management fee was eliminated.
RESULTS OF OPERATIONS
SIX MONTH ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Net Earnings: IndyMac REIT's net earnings were $68.5 million, or $1.03 basic and
diluted earnings per share, based on 66,404,010 and 66,741,978 weighted average
shares outstanding, respectively, for the six months ended June 30, 1998,
compared to $44.0 million, or $0.85 basic earnings per share and $0.83 diluted
earnings per share, based on 51,674,810 and 53,012,967 weighted average shares
outstanding, respectively, for the six months ended June 30, 1997.
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The increase in net earnings of $24.5 million was principally due to an increase
in net interest income of $36.7 million and a decrease in management fees to
affiliate of $4.4 million, offset, in part, by increases in the provision for
loan losses, a decrease in equity in earnings of IndyMac Operating, and
increases in salaries, general and administrative expenses of $7.8 million, $2.1
million, and $3.4 million, respectively.
INTEREST INCOME: Total interest income was $268.6 million for the six months
ended June 30, 1998 and $159.1 million for the six months ended June 30, 1997.
The increase in interest income of $109.5 million was primarily the result of
increases in interest earnings on the following: loans held for sale, $41.3
million; mortgage securities, $25.5 million; construction loans, $24.7 million;
revolving warehouse lines of credit, $16.1 million; and loans held for
investment, $1.8 million. These increases were partially offset by a reduction
in the interest income related to collateral for CMOs of $2.3 million.
Interest income on residential loans held for sale totaled $62.0 million and
$31.4 million, resulting in effective yields of 8.1% and 8.0%, for the six
months ended June 30, 1998 and 1997, respectively. The average principal
balance of such loans increased to $1.5 billion for the six months ended June
30, 1998, from $728 million for the six months ended June 30, 1997.
Interest income on manufactured housing loans held for sale totaled $9.4 million
and $5.5 million, with interest earned at effective yields of 9.7% and 9.9%, for
the six months ended June 30, 1998 and 1997, respectively. The average
principal balance of such loans increased by $83 million to $194 million during
the first six months of 1998, from $111 million for the first six months of
1997.
Interest income on loans held for investment totaled $58.4 million and $56.5
million for the six months ended June 30, 1998 and 1997, respectively. This
increase was the result of an increase in the average amount of loans held for
investment during the year of $128 million partially offset by a decrease in the
average yield. The average principal balance of mortgage loans held for
investment was $1.6 billion during the first six months of 1998 with interest
earned at an effective yield of 7.4%, compared to the average principal balance
of mortgage loans held for investment for the six months ended June 30, 1997 of
$1.5 billion with interest earned at an effective rate of 8.0%.
Interest income on construction loans totaled $56.9 million and $32.2 million,
with interest earned at an effective yield of 10.4% and 11.7% for the six months
ended June 30, 1998 and 1997, respectively. The average principal balance of
construction loans outstanding increased $549 million to $1.1 billion during the
first six months of 1998 from $554 million during the first six months of 1997.
Interest income on revolving warehouse lines of credit totaled $24.5 million and
$8.4 million, with interest earned at effective yields of 9.2% and 9.1% for the
six months ended June 30, 1998 and June 30, 1997, respectively. The average
principal balance outstanding increased to $535 million from $187 million for
the six months ended June 30, 1998 and June 30, 1997, respectively.
Interest income on mortgage securities totaled $34.3 million and $8.8 million,
with interest earned at effective yields of 8.1% and 6.1% for the six months
ended June 30, 1998 and 1997, respectively. During the first six months of
1998, the average principal balance increased to $847 million from $287 million
during the first six months of 1997.
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Interest income on collateral for CMOs was $8.3 million and $10.6 million for
the six months ended June 30, 1998 and 1997, respectively. This decrease was
primarily attributable to a decrease in the average aggregate principal amount
of collateral for CMOs outstanding to $228 million from $277 million for the six
months ended June 30, 1998 and 1997, respectively. Interest income on collateral
for CMOs includes the impact of amortization of net premiums paid in connection
with acquiring the CMO Portfolio and the impact of the delay in the receipt of
prepayments and temporary investment in lower yielding short-term holdings
(GICs) until such amounts are used to repay CMOs.
INTEREST EXPENSE: For the six months ended June 30, 1998 and 1997,
respectively, total interest expense was $176.8 million and $104.1 million.
This increase in interest expense of $72.7 million was primarily due to an
increase in interest expense on repurchase agreements and other credit
facilities of $74.6 million, offset in part by a decline in interest expense on
CMOs of $1.9.
Interest expense on repurchase agreements and other credit facilities used to
finance residential loans held for sale and investment, revolving warehouse
lines of credit, construction loans and mortgage securities totaled $165.8
million and $91.2 million for the six months ended June 30, 1997 and 1998,
respectively. This increase of $74.6 million was primarily the result of an
increase in the aggregate average balance of indebtedness outstanding to $5.4
billion from $3.0 billion for the six months ended June 30, 1998 and 1997,
respectively. The effective interest rate on such borrowings was 6.2% and 6.1%
for the six months ended June 30, 1998 and 1997, respectively.
Interest expense on CMOs was $8.2 million and $10.1 million for the six months
ended June 30, 1998 and 1997, respectively. This decrease was primarily
attributable to a decrease in average aggregate CMOs outstanding to $205 million
from $255 million for the six months ended June 30, 1998 and 1997, respectively.
The effective interest rate of 8.0% was the same for the six months ended June
30, 1998 and 1997.
Interest expense on senior unsecured notes totaled $2.8 million for each of the
six months ended June 30, 1998 and 1997. The weighted average interest rate of
9.2% and average outstanding balance of $59 million were also the same for each
of the six months ended June 30, 1998 and 1997.
EQUITY IN EARNINGS OF INDYMAC OPERATING: For the six months ended June 30, 1998
earnings for IndyMac Operating of $4.9 million, in which IndyMac REIT has a 99%
economic interest, resulted principally from net interest income of $3.8
million, gain on sale of loans and securities of $41.0 million and servicing
fees and other income of $8.9 million, offset by salaries, general and
administrative expenses of $45.1 million, and income taxes of $3.7 million.
During the six months ended June 30, 1997, earnings for IndyMac Operating of
$7.3 million resulted principally from net interest income of $7.6 million and
gains on sale of loans and securities of $28.1 million, offset by salaries,
general and administrative expenses of $23.5 million, management fee expense of
$757,000 and income taxes of $5.2 million.
SALARIES, GENERAL AND ADMINISTRATIVE EXPENSES: The IndyMac REIT increase of
$3.4 million for the six months ended June 30, 1998 compared to the six months
ended June 30, 1997 is primarily the result of the increased personnel and
expenses required to support the growth in the operations of IndyMac REIT,
including CLCA, IndyMac CLD, and WLCA as well as the expense of putting in place
certain administrative and accounting functions as part of IndyMac REIT becoming
self-managed.
MANAGEMENT FEES: For the six months ended June 30, 1998, there were no
management fees compared to $4.4 million for the six months ended June 30, 1997.
This decrease in the management fee was due to IndyMac REIT's acquisition of its
manager on July 1, 1997, as a result, IndyMac REIT and IndyMac Operating became
self-managed, and the management fee was eliminated.
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LIQUIDITY AND CAPITAL RESOURCES
IndyMac's primary source of funds includes monthly principal and interest
payments on its investment portfolio, short-term borrowings, proceeds from the
sales of assets and issuance of REMIC and asset-backed securities, master
servicing fees and other servicing-related revenues and proceeds from IndyMac's
Dividend Reinvestment and Stock Purchase Plan ("DRIP"). Additionally, IndyMac
incurs certain charges to earnings, including amortization and depreciation,
loan loss provisions and unrealized losses on trading securities, which do not
require an outlay of funds. IndyMac believes these funds are sufficient for
growth of its lending activities, acquisition of investment assets, repayment of
short-term borrowings and the payment of cash dividends. It is IndyMac's policy
to maintain adequate capital and to comply with leverage and other financial
covenants set forth in IndyMac's debt covenants.
IndyMac has entered into a repurchase facility with Merrill Lynch, Pierce,
Fenner & Smith Incorporated and certain of its affiliates, in an aggregate
committed principal amount of $2.0 billion. The agreement is committed for a
period of at least two years from the date of execution and currently permits
IndyMac to finance its mortgage conduit, mortgage portfolio, warehouse lending,
IndyMac CLD lending and manufactured housing lending assets and operations. The
repurchase facility carries a floating rate of interest based on LIBOR, plus an
applicable margin, which varies by the type of asset financed. IndyMac is
permitted to borrow additional uncommitted amounts under this repurchase
facility, and as of June 30, 1998, the total balance of outstanding loans from
Merrill Lynch was $3.7 billion.
IndyMac has entered into a repurchase facility with Nomura Asset Capital
Corporation in an aggregate principal amount of $300 million. Such repurchase
facility is committed for a two-year period from the date of execution and
currently permits IndyMac to finance its mortgage conduit, mortgage portfolio,
warehouse lending and IndyMac CLD lending assets and operations. This
repurchase facility carries a floating rate of interest based on LIBOR, plus an
applicable margin, which varies by the type of asset financed. As of June 30,
1998, the total balance of outstanding loans from Nomura Asset Capital
Corporation was $516 million.
IndyMac has entered into a repurchase facility with Paine Webber Real Estate
Securities, Inc. in an aggregate principal amount of $500 million. Such
repurchase facility is committed for a two-year period from the date of
execution and currently permits IndyMac to finance its mortgage conduit,
warehouse lending and mortgage portfolio assets and operations. Such repurchase
facility carries a floating rate of interest based on LIBOR, plus an applicable
margin, which varies by the type of asset financed. As of June 30, 1998, the
total balance of outstanding loans from Paine Webber Real Estate Securities,
Inc. was $1.1 billion.
In May, 1995, IndyMac entered into a two-year committed credit facility with a
syndicate of nine commercial banks led by First Union National Bank of North
Carolina. This facility primarily finances mortgage loans, construction loans,
and master servicing assets. The interest rates under this credit facility are
based, at IndyMac's election, on LIBOR or the federal funds rate, plus an
applicable margin, which varies by the type of asset financed. On February 25,
1998, IndyMac amended this facility, by among other things, increasing the
available committed borrowings from $500 million to $900 million, expanding the
types of collateral which can be financed thereunder and extending the term of
the commitment to three years. As of June 30, 1998, the total balance of
outstanding loans from this syndicate was $782 million.
In May, 1998, the IndyMac REIT entered into a $100 million revolving credit
facility with NationsBank that permits IndyMac REIT to finance its portfolio of
builder construction loans. The interest rates under this credit facility are
based, at IndyMac REIT's election, on LIBOR or the federal funds rate, plus an
applicable margin. This loan is intended to constitute bridge financing pending
final documentation of a $200 million commercial paper conduit facility secured
by the same type of assets.
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During the fourth quarter of 1995, IndyMac raised $59.6 million in connection
with the private placement of senior notes with certain institutional lenders.
These senior notes are unsecured, and the proceeds are utilized by IndyMac in
connection with its working capital needs. The effective rate of interest on
such senior notes is fixed at 9.2% for a period of seven years from the date of
issuance. In 1995, the notes were rated "BBB-" by Duff & Phelps Credit Rating
Co., and subsequently raised to "BBB" in 1997. At December 31, 1997, the notes
were rated "BBB " by Fitch IBCA Inc., and "BB+" by Standard & Poor's Rating
Services, Inc.
IndyMac has from time to time raised additional capital through secondary public
offerings, the most recent of which involved the issuance of IndyMac's common
stock with net proceeds totaling $68.7 million in February, 1995. IndyMac also
raises new equity capital primarily through the optional cash payment feature of
its Dividend Reinvestment and Stock Purchase Plan. During the second quarter of
1998, IndyMac raised $74.7 million through the Dividend Reinvestment and Stock
Purchase Plan. During 1997 and 1996, IndyMac raised $206 million and $133
million, respectively, through such Dividend Reinvestment and Stock Purchase
Plan.
IndyMac has filed a shelf registration statement with the Securities and
Exchange Commission in an aggregate amount of $500 million which became
effective in January, 1998. Under the terms of the registration statement,
IndyMac is permitted to offer a variety of debt and or equity instruments.
IndyMac has not determined what debt or equity instruments it may offer pursuant
to the shelf registration statement or when any such offerings may occur.
The REIT provisions of the Internal Revenue Code restrict IndyMac REIT's ability
to retain earnings and thereby replenish the capital committed to its mortgage
portfolio, conduit operations, commercial lending and other operations by
requiring IndyMac REIT to distribute to its shareholders substantially all of
its taxable income from operations. Certain of IndyMac's material businesses,
including its mortgage conduit are known to require significant and continuing
commitments of capital resources in order to continue their growth.
Management believes that IndyMac's cash flow from operations and IndyMac's
existing financing arrangements are currently sufficient to meet IndyMac's
current short-term liquidity requirements. To the extent IndyMac possesses
working capital in excess of its current liquidity requirements, such working
capital is as a general matter utilized to repay borrowings under those tranches
of IndyMac's lines of credit which carry higher rates of interest, which
borrowings would typically remain available for reborrowing by IndyMac pursuant
to the terms and conditions of the applicable credit facility.
IndyMac's ability to meet its long-term liquidity requirements is subject to the
renewal of its repurchase and credit facilities and/or obtaining other sources
of financing, including issuing additional debt or equity from time to time.
Any decision by IndyMac's lenders and/or investors to make additional funds
available to IndyMac in the future will depend upon a number of factors, such as
IndyMac's compliance with the terms of its existing credit arrangements,
IndyMac's financial performance, industry and market trends in IndyMac's various
businesses, the general availability of and rates applicable to financing and
investments, such lenders' and/or investors' own resources and policies
concerning loans and investments, and the relative attractiveness of alternative
investment or lending opportunities.
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Effect of Interest Rate Changes
Due to the characteristics of certain financial assets and liabilities of
IndyMac, and the nature of IndyMac's business activities, IndyMac's financial
position and results of operations may be materially affected by changes in
interest rates in various ways. With respect to its financial assets and
liabilities, IndyMac has devised and implemented a general asset/liability
investment management strategy which seeks, on an economic basis, to mitigate
significant fluctuations in the financial position and results of operations of
IndyMac likely to be caused by changes in market interest rates. This strategy
attempts, among other things, to balance investments in various types of
financial instruments whose values could be expected to move inversely to each
other in response to movements in market interest rates. However, there can be
no assurance that this strategy (including assumptions concerning the
correlation thought to exist between different types of instruments) or its
implementation will be successful in any particular interest rate environment.
Financial assets of IndyMac that tend to increase in value as interest rates
increase, and decline in value as interest rates decrease, would include
interest-only securities. These financial assets carry an implicit yield that
is based upon estimates of future cash flows on an underlying pool of mortgage
loans. As interest rates increase, the prepayments on the underlying pool of
mortgage loans tends to slow, resulting in higher residual cash flows than would
otherwise have been obtained, and therefore, results in higher implicit yields.
As of June 30, 1998, IndyMac REIT and IndyMac Operating on a combined basis held
$431 million of interest-only securities. Of the $431 million aggregate amount,
$331 million of such assets are classified as trading securities in accordance
with the requirements of SFAS No. 115, since they were acquired in connection
with the securitization of loans held for sale by IndyMac Operating.
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Financial instruments of IndyMac that tend to decrease in value as interest
rates increase, and increase in value as interest rates decline, would include
REMIC senior securities, fixed rate subordinated securities, adjustable rate
agency securities, principal-only securities, US Treasury bonds and inverse-
floater securities. Similar to the interest-only securities, the principal-only
and inverse floater securities carry an implicit yield based upon estimates of
future cash flows on an underlying pool of mortgage loans. However, the
principal-only and inverse-floater securities generally sell at a discount,
similar to a "zero-coupon" bond, in order to yield an estimated return. If
interest rates increase and prepayments slow in comparison to assumed prepayment
rates, the repayment rate of the principal-only and inverse-floater security
would tend to lengthen and thus reduce the implicit yield on the security.
Conversely, if interest rates decrease, the rate of prepayment on the underlying
pool of loans would tend to increase, resulting in a more rapid rate of
repayment on the principal-only security and inverse floater security and
therefore a higher implicit yield. To a lesser extent, any mortgage securities
held by IndyMac and supported by adjustable rate mortgage loans may decline in
value as interest rates increase, if the timing or absolute level of interest
rate adjustments on the underlying loans do not correspond to applicable
increases in market interest rates. As of June 30, 1998, IndyMac held $1.2
billion of REMIC senior securities, fixed and adjustable rate subordinated
securities, adjustable rate agency securities, principal-only securities, US
Treasury bonds and inverse floater securities. Of the $1.2 billion aggregate
amount, $524 million of such securities are classified as trading securities.
In addition to the inherent risks in seeking to manage fluctuations in the value
of certain assets due to interest rate changes, there may be timing differences
in the recognition of the offsetting effects of gains and losses which are
attributable to specific instruments, depending upon whether a security is
classified as trading or available for sale. The unrealized holding gains and
losses on trading securities are recognized in earnings of the period for
IndyMac. By comparison, the unrealized holding gains and losses of securities
available for sale are excluded from earnings of IndyMac and included as a
separate component of accumulated other comprehensive income. Therefore, to the
extent that IndyMac is required under GAAP to classify certain securities as
trading, such identification and the resulting accounting could cause additional
volatility in IndyMac's future reported earnings in periods where interest rates
fluctuate.
IndyMac is also subject to certain business and credit risks in connection with
interest rate changes. Increases in interest rates may discourage potential
mortgagors from borrowing or refinancing mortgage or manufactured housing loans,
thus decreasing the volume of loans available to be purchased through IndyMac's
conduit operations, or financed through IndyMac's construction and warehouse
lending operations. Additionally, with respect to adjustable rate loans, the
rate of delinquency may increase in periods of increasing interest rates as
borrowers face higher mortgage payments.
IndyMac's liquidity position and net interest income could also be adversely
impacted by significant interest rate fluctuations. Each of IndyMac's
collateralized borrowing facilities described above in Liquidity and Capital
Resources permits the lender or lenders thereunder to require IndyMac to repay
amounts outstanding and/or pledge additional assets in the event that the value
of the pledged collateral declines due to changes in market interest rates. In
the event of such a decrease in collateral values, it could be necessary for
IndyMac to provide additional funds and/or pledge additional assets to maintain
financing for its holdings that have not been financed to maturity through the
issuance of CMOs or other longer-term debt securities. In addition, increases
in short-term borrowing rates relative to rates earned on asset holdings that
have not been financed to maturity through the issuance of CMOs or other debt
securities may also adversely affect IndyMac's "spread income" on such assets
and thus reduce IndyMac's earnings.
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SYSTEMS ISSUES ASSOCIATED WITH THE YEAR 2000
IndyMac is conducting a comprehensive review of its computer systems to
determine if they will be affected by the Year 2000 issue - computer programs
and embedded logic devices that utilize two digits rather than four to define
the applicable year may fail to properly recognize date sensitive information
when the year changes to 2000. Generally, IndyMac is not affected by issues
resulting from the use of "legacy" computer systems and software because it
commenced its active operating businesses within the past five years.
Accordingly, IndyMac does not anticipate incurring Year 2000 systems compliance
costs that would be material to its financial position, results of operations,
or cash flows in future periods. However, there can be no assurance that
IndyMac's depository institutions, lenders, custodians, vendors, and clients
will timely resolve their own Year 2000 compliance issues or that any failure by
these other parties to resolve such issues would not have an adverse effect on
IndyMac's operations and financial condition. Management believes it is
devoting the necessary resources to timely address all Year 2000 issues over
which it has control.
ADOPTION OF ADVANCE NOTICE BYLAW PROVISIONS
On July 21, 1998, IndyMac REIT's Board of Directors adopted an amendment to
IndyMac REIT's Bylaws generally requiring that advance notice be given to
IndyMac REIT in the event a stockholder desires to nominate a person for
election to the Board of Directors or to transact any other business at an
annual meeting of stockholders. Notice of any such nomination or business must
be delivered to or received at the principal executive offices of IndyMac REIT
not less than 90 calendar days and not more than 120 calendar days prior to the
anniversary date of the prior year's annual meeting of stockholders. The
advance notice provisions were adopted to afford stockholders a fair opportunity
to present matters for consideration at stockholder meetings while assuring that
stockholders and directors will have a reasonable opportunity to thoughtfully
consider the matters proposed and to allow for full information to be
distributed to all stockholders about all sides of a particular issue.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Form 10-Q may be deemed to be forward-
looking statements within the meaning of the federal securities laws. Actual
results and the timing of certain events could differ materially from those
projected in or contemplated by the forward-looking statements due to a number
of factors, including general economic conditions and other risk factors
outlined in the reports that IndyMac REIT files with the Securities and Exchange
Commission, including its Annual Report on Form 10-K.
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------
At the annual meeting of IndyMac REIT's stockholders held on May 19, 1998, the
stockholders voted to re-elect IndyMac REIT's directors. The votes cast in this
regard were as follows: David S. Loeb - 61,970,877 for and 1,103,657 withheld;
Angelo R. Mozilo - 61,971,972 for and 1,102,562 withheld; Michael W. Perry -
62,764,459 for and 310, 075 withheld; Lyle E. Gramley - 61,996,927 for and
1,077,607 withheld; Thomas J. Kearns - 61,988,894 for and 1,085,640 withheld;
and Frederick J. Napolitano - 61,996,324 for and 1,078,210 withheld. In
addition, the stockholders voted to approve an amendment to the Certificate of
Incorporation to change IndyMac REIT's name from "INMC Mortgage Holdings, Inc."
to "IndyMac Mortgage Holdings, Inc." The votes cast on this proposal were as
follows: 62,263,688 in favor; 437,365 against; 373,481 abstaining; and 0
representing broker non-votes. The stockholders voted to approve an amendment
to the Certificate of Incorporation to increase the number of authorized shares
of Common Stock from 100 million shares to 200 million shares. The votes cast
on this proposal were as follows: 58,224,750 in favor; 4,278,171 against;
571,613 abstaining; and 0 representing broker non-votes. The stockholders voted
to approve an amendment to the Certificate of Incorporation to create 10 million
shares of Preferred Stock. The votes cast on this proposal were as follows:
38,334,099 in favor; 10,056,929 against; 683,120 abstaining; and 14,000,386
representing broker non-votes. The stockholders voted to approve the 1998 Stock
Incentive Plan. The votes cast on this proposal were as follows: 38,088,166 in
favor; 10,139,161 against; 846,821 abstaining; and 14,000,386 representing
broker non-votes. Finally, the stockholders voted to ratify the selection of
Grant Thornton LLP as IndyMac REIT's independent certified public accountants
for the fiscal year ending December 31, 1998. The votes cast on this proposal
were as follows: 62,583,469 in favor; 160,314 against; 330,751 abstaining; and 0
representing broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
3.1 Certificate of Incorporation of IndyMac REIT, as amended
3.2 Bylaws of IndyMac REIT, as amended
4.1 1998 Stock Incentive Plan adopted May 19, 1998, as amended
10.1 Employment Agreement dated January 1, 1998 between IndyMac REIT and
Carmella Grahn
27 Financial Data Schedule
(b) Reports on Form 8-K.
--------------------
None
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Pasadena, State of California, on August 14, 1998 for the six months ended June
30, 1998.
INDYMAC MORTGAGE HOLDINGS, INC.
By: /Michael W. Perry
-------------------
Michael W. Perry
President and Chief Operating Officer
By: /Carmella Grahn
-----------------
Carmella Grahn
Executive Vice President and
Chief Financial Officer
23
<PAGE>
Exhibit 3.1
-----------
CERTIFICATE OF INCORPORATION
OF
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.
THE UNDERSIGNED, in order to form a corporation for the purposes
hereinafter stated, under and pursuant to the provisions of the General
Corporation Law of the State of Delaware, does hereby certify as follows:
ARTICLE I
NAME
----
The name of the Corporation is: Countrywide Mortgage Investments, Inc.
(the "Corporation").
ARTICLE II
REGISTERED AGENT
----------------
The address of the registered office of the Corporation in the State of
Delaware is: Corporation Trust Center, 1209 Orange Street, New Castle County,
Wilmington, Delaware 19801. The name of the Corporation's registered agent at
such registered office is The Corporation Trust Company.
<PAGE>
ARTICLE III
PURPOSE
-------
The purpose for which the Corporation is formed is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware as now or hereafter in force.
ARTICLE IV
CAPITAL STOCK
-------------
Section 1. The total number of shares of capital stock which the
Corporation shall have authority to issue is Thirty Million (30,000,000),
consisting of Thirty Million (30,000,000) shares of Common Stock having a par
value of $0.01 per share.
Section 2. All persons who shall acquire stock in the Corporation
shall acquire the same subject to the provisions of this Certificate of
Incorporation and the Bylaws of the Company.
Section 3. Each share of Common Stock shall entitle the owner
thereof to vote at the rate of one (1) vote for each share of Common Stock
held.
2
<PAGE>
ARTICLE V
PROVISIONS FOR DEFINING, LIMITING AND
REGULATING CERTAIN POWERS OF THE
CORPORATION AND OF THE DIRECTORS
AND STOCKHOLDERS
----------------
Section 1. The number of Directors shall be determined by or in the
manner provided in the Bylaws of the Corporation, as they may be amended from
time to time. The names and mailing addresses of the persons who shall serve as
directors until the first annual meeting of stockholders or until their
successors are duly elected and qualified are:
David S. Loeb
Countrywide Mortgage Investments, Inc.
155 North Lake Avenue
Pasadena, California 91101
Angelo R. Mozilo
Countrywide Mortgage Investments, Inc.
155 North Lake Avenue
Pasadena, California 91101
Frederick J. Napolitano
Pembroke Enterprises, Inc.
281 Independence Boulevard
Suite 626
Virginia Beach, Virginia 23462
Harley W. Snyder
Harley Snyder Company
407 East Lincoln Way
Valparaiso, Indiana 46383
Jack Carlson
9901 Bluegrass Road
Potomac, Maryland 20854
3
<PAGE>
Robert J. Donato
PaineWebber Incorporated
700 South Flower Street
Los Angeles, California 90017
The powers of the Incorporator shall terminate upon the filing of this
Certificate of Incorporation.
Section 2. The Board of Directors of the Corporation is hereby
empowered to authorize the issuance from time to time of shares of capital
stock, whether now or hereafter authorized, for such consideration as the Board
of Directors may deem advisable, subject to such limitations as may be set forth
in this Certificate of Incorporation or in the Bylaws of the Corporation or in
the Delaware General Corporation Law.
Section 3. No holder of shares of capital stock of the Corporation
shall, as such holder, have any right to purchase or subscribe for any shares of
the capital stock of the Corporation or any other security of the Corporation
which it may issue or sell (whether out of the number of shares authorized by
this Certificate of Incorporation, or out of any shares of the capital stock of
the Corporation hereafter authorized or acquired by it after the issue thereof,
or otherwise) other than such right, if any, as the Board of Directors, in its
discretion, may determine.
4
<PAGE>
Section 4. A Director of this Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except for liability (i) for any breach of the
Directors's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the Director derived any
improper personal benefit. If the Delaware General Corporation Law is amended
after the date hereof to permit the further elimination or limitation of the
personal liability of directors, then the liability of a Director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended. Any repeal or modification
of this Section 4 of Article V by the stockholders of the Corporation shall not
adversely affect any right or protection of a Director of the Corporation in
respect of any act or omission occurring prior to the time of such repeal or
modification.
Section 5. The Corporation shall indemnify and shall advance expenses
to each Director, officer, employee and agent of this Corporation to the fullest
extent permitted by the Delaware General Corporation Law as now or hereafter in
5
<PAGE>
force. The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, and the Board of Directors
is expressly authorized to adopt bylaws and/or enter into agreements whereby the
Corporation agrees to indemnify and advance expenses to its Directors, officers,
employees and agents.
Section 6. The Board of Directors of the Corporation may make, alter
or repeal from time to time any of the Bylaws of the Corporation except any
particular Bylaw which is specified in the Bylaws as not subject to alteration
or repeal by the Board of Directors.
Section 7. The Board of Directors may authorize, subject to such
approval of stockholders and other conditions, if any, as may be required by any
applicable statute, bylaw, rule or regulation, the execution and performance by
the Corporation of one or more agreements with any person, corporation,
association, company, trust, partnership (limited or general) or other
organization whereby, subject to the supervision and control of the Board of
Directors, any such other person, corporation, association, company, trust,
partnership (limited or general), or other organization shall
6
<PAGE>
render or make available to the Corporation managerial, investment, advisory
and/or related services, office space and other services and facilities
(including the management or supervision of the investments of the Corporation)
upon such terms and conditions as may be provided in such agreement or
agreements (including the compensation payable thereunder by the Corporation).
Section 8. The Board of Directors may authorize any agreement of the
character described in Section 7 of this Article V or other contract or
transaction with any one or more Directors or officers or between the
Corporation and any other corporation, partnership (limited or general),
association, trust, company or other organization in which one or more of the
Corporation's Directors or officers are directors or officers, or similar
parties, or otherwise have a financial interest, and no such agreement, contract
or transaction shall be void or voidable solely by reason of the existence of
any such relationship or solely because the Director or officer so interested is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the agreement, contract or transaction, or solely
because such Director's votes are counted for such purpose if: (i) the material
facts as to the Director's or officer's relationship or interest and as to the
agreement or transaction are disclosed or are known to the
7
<PAGE>
Board of Directors or such committee and the Board of Directors or committee in
good faith authorizes, approves or ratifies the agreement, contract or
transaction by the affirmative vote of a majority of the disinterested
Directors, even though the disinterested Directors be less than a quorum; or
(ii) the material facts as to such Director's or Officer's relationship or
interest and as to the agreement or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the agreement, contract or
transaction is authorized, approved or ratified in good faith by a majority of
votes cast by the stockholders entitled to vote other than the votes of shares
owned of record or beneficially by the interested Director or officer; or (iii)
the agreement, contract or transaction is fair to the Corporation as of the time
it is authorized, approved or ratified by the Board of Directors, a committee
thereof or the stockholders. Any Director of the Corporation who is also a
director, officer, stockholder or member of such other entity may be counted in
determining the existence of a quorum at any meeting of the Board of Directors
or of a committee which authorizes any such agreement, contract or transaction.
If such a Director votes at a meeting to approve or disapprove a transaction as
described in this Section, such vote shall not affect the validity of such a
transaction provided the provisions of this Section are otherwise satisfied.
8
<PAGE>
Section 9. Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual meeting
or at a special meeting of stockholders of the Corporation. No action may be
taken by the written consent of the stockholders. Action need not be by written
ballot unless the chairman of the meeting shall so direct.
Section 10. The enumeration and definition of particular powers of
the Board of Directors included in the foregoing shall in no way be limited or
restricted by reference to or inference from the terms of any other clause of
this or any other Article of the Certificate of Incorporation of the
Corporation, or construed as or deemed by inference or otherwise in any manner
to exclude or limit the powers conferred upon the Board of Directors under the
General Corporation Law of the State of Delaware as now or hereafter in force.
ARTICLE VI
RESTRICTION ON ACQUISITION AND TRANSFER OF SHARES
-------------------------------------------------
Section 1. Whenever it is deemed by the Board of Directors to be
prudent in protecting the status of the Corporation as a "real estate investment
trust" under the Internal Revenue Code of 1986, as amended (the "Code"), the
9
<PAGE>
Board of Directors may require to be filed with the Corporation as a condition
to permitting any proposed transfer, and/or the registration of any transfer, of
shares of the Corporation a statement or affidavit from any proposed
transferee setting forth the number of shares already owned after application of
the attribution rules (the "Attribution Rules") of Section 544 of the Code by
the transferee and any related person(s) specified in the form prescribed by the
Board of Directors for that purpose. All contracts for the sale or other
transfer of shares of the Corporation shall be subject to this provision.
Section 2. As a condition to the transfer and/or registration of
transfer of any shares of capital stock of the Corporation which would result in
any stockholder owning, directly or indirectly, shares in excess of 9% of the
outstanding shares of capital stock of the Corporation, the transferee of such
shares shall file with the Corporation an affidavit setting forth the number of
shares of capital stock of the Corporation owned directly and indirectly by the
person filing the affidavit. For purposes of this Section, shares of capital
stock not owned directly shall be deemed to be owned indirectly by a person if
that person or a group of which he is a member would be the beneficial owner of
such shares for purposes of Rule 13d-3, or any successor rule thereto,
promulgated by the Securities and Exchange Commission under
10
<PAGE>
the Securities Exchange Act of 1934 (the "Exchange Act"), and/or would be
considered to own such shares by reason of the Attribution Rules. The affidavit
to be filed with the Corporation shall set forth all information required to be
reported in returns filed by stockholders under Regulation 1.857-9 issued by the
Internal Revenue Service, or similar provisions of any successor regulation, and
in reports to be filed under Section 13(d) of the Exchange Act. The affidavit,
or an amendment thereto, must be filed with the Corporation within 10 days after
demand therefor and in any event at least 15 days prior to any transfer,
registration of transfer or transaction which, if consummated, would cause the
filing person to hold shares in excess of 9% of the outstanding shares of
capital stock of the Corporation. No transfer nor any registration of any
purported transfer in violation of the notice provisions of this Section shall
be valid or be given effect. Notwithstanding the foregoing, compliance with the
requirements of this Section 2 shall not validate any purported transfer which
would result in any stockholder owning, directly or indirectly, shares in excess
of the "Limit" as defined in Section 4 of this Article VI.
Section 3. Any acquisition of shares of capital stock of the
Corporation that would result in any stockholder owning, directly or indirectly,
shares in excess of the "Limit" as defined in Section 4 of this Article VI shall
be
11
<PAGE>
void ab initio to the fullest extent permitted under applicable law and the
intended transferee of "Excess Shares," as defined in Section 4 of this Article
VI, shall be deemed never to have had an interest therein. If the foregoing
provision is determined to be void, voidable or invalid by virtue of any legal
decision, statute, rule or regulation, then the transferee of such shares shall
be deemed to have acted as agent on behalf of the Corporation in acquiring such
shares and to hold such shares on behalf of the Corporation.
Section 4. Notwithstanding any other provision hereof to the contrary,
and subject to the provisions of Section 5 of this Article VI, no person, or
persons acting as a group, shall at any time directly or indirectly acquire
ownership in the aggregate of more than 9.8% of the outstanding shares of
capital stock of the Corporation (the "Limit"). Shares which would, but for this
Section 4, be owned by a person or a group of persons in excess of the Limit at
any time shall be deemed "Excess Shares." For the purposes of determining and
dealing with Excess Shares, the term "ownership" shall be defined to include
shares of capital stock constructively owned by a person under the Attribution
Rules and shall also include shares of capital stock beneficially owned by a
person for purposes of Rule 13d-3, or any successor rule thereto, promulgated by
the Securities and Exchange Commission under the Exchange Act and the term
12
<PAGE>
"group" shall have the same meaning as that term has for purposes of Section
13(d)(3) of such Act. All shares of the Corporation which any person has the
right to acquire upon exercise of outstanding rights, options and warrants, and
upon conversion of any securities convertible into shares, if any, shall be
considered outstanding for purpose of the Limit if such inclusion will cause
such person to own more than the Limit. Unless otherwise required by applicable
law, the Corporation shall refuse to transfer or register the transfer of, and
shall instruct the transfer agent of the Corporation to refuse to transfer or
register the transfer of, shares to the extent that, as a result of such
transfer or registration of transfer, any person would hold Excess Shares.
Section 5. The Limit set forth in Sections 3 and 4 of this Article VI
and the filing requirements of Section 2 of this Article VI shall not apply to
the acquisition of shares of the Corporation by the Corporation, by an
underwriter in connection with a public offering of shares of the Corporation,
or in any transaction involving the issuance of shares by the Corporation, in
which the Board of Directors determines that the underwriter or other person or
party initially acquiring such shares will timely distribute such shares to or
among others such that, following such distribution, none of such shares will be
Excess Shares. The Board of Directors in its discretion may exempt from the
Limit
13
<PAGE>
under Sections 3 and 4 of this Article VI and from the filing requirements
of Section 2 of this Article VI ownership or transfers of certain designated
shares while owned by or transferred to any subsidiary of this Corporation or to
any other person in connection with a reorganization, recapitalization, merger,
liquidation or similar transaction approved by the Board of Directors, provided
that such person has given the Board of Directors evidence and assurances
acceptable to the Board of Directors that the qualification of the Corporation
as a "real estate investment trust" under the Code would not be jeopardized
thereby.
Section 6. Notwithstanding Sections 3 and 4 of this Article VI, if at
any time more than 9.8% of the shares of capital stock of the Corporation has
become concentrated in the hands of a "beneficial owner" (as such term is
defined for purposes of Rule 13d-3, or any successor rule thereto promulgated by
the Securities and Exchange Commission, under the Exchange Act), such beneficial
owner and each of his "affiliates" (as such term is defined on December 1, 1986
in Rule 12b-2 under the Exchange Act) owning any shares of capital stock of the
Corporation shall be deemed to have offered to sell to the Corporation or its
designee, on a date fixed by the Corporation, as specified in the Corporation's
notice of its or its designee's acceptance of such offer of sale, such a number
of shares of capital stock sufficient, in
14
<PAGE>
the opinion of the Board of Directors, to maintain or bring the direct or
indirect ownership of shares of capital stock of the Corporation of such
beneficial owner to no more than the Limit. The price at which the Corporation
or its designee may purchase the outstanding shares of capital stock of the
Corporation pursuant to the preceding sentence of this Section (the "Purchase
Price") shall be equal to the closing sales price for the shares, if then listed
on a national securities exchange, or the average of the closing sales prices
for the shares if then listed on more than one national securities exchange, or
if the shares are not then listed on a national securities exchange, the latest
bid quotation for the shares if then traded over-the-counter, on the last
business day immediately preceding the day on which the Corporation's notice of
its acceptance of the beneficial owner's and/or his affiliates' offer of sale is
sent, or, if no such closing sales prices or quotations are available, then the
Purchase Price shall be equal to the net asset value of such stock (determined
on the basis of the fair market value of the assets of the Corporation) as
determined by the Board of Directors in accordance with the provisions of
applicable law. The Purchase Price of any shares acquired by the Corporation or
its designee shall be paid, at the option of the Corporation, in cash or in the
form of an unsecured, subordinated promissory note of the Corporation or its
designee bearing interest and having a term to maturity (to be
15
<PAGE>
not less than five nor more than twenty years) as shall be determined by the
Board of Directors. Payment of the Purchase Price shall be made at such time and
in such manner as may be determined by the Board of Directors and specified in
the notice of acceptance sent to the beneficial owner and/or his affiliates.
From and after the date fixed for purchase by the Board of Directors and the
tender by the Corporation of the Purchase Price therefor, each as specified in
the Corporation's notice of its acceptance of the offer of sale, the holder of
any shares to be so purchased shall cease to be entitled to any rights as a
holder of such shares, excepting only the right to payment of the Purchase Price
fixed as aforesaid.
Section 7. Nothing contained in this Article VI or in any other
provision hereof shall limit the authority of the Board of Directors to take
such other action as it deems necessary or advisable to protect the Corporation
and the interests of its stockholders by preservation of the Corporation's
status as a "real estate investment trust" under the Code.
Section 8. For purposes of this Article VI only, the term "person"
shall include individuals, corporations, limited partnerships, general
partnerships, joint stock companies or associations, joint ventures,
associations,
16
<PAGE>
consortia, companies, trusts, banks, trust companies, land trusts, common law
trusts, business trusts and other entities, and governments and agencies and
political subdivisions thereof; provided, however, that such term shall not
include this Corporation or any of its subsidiaries.
Section 9. If any provision of this Article VI or any application of
any such provision is determined to be invalid by any federal or state court
having jurisdiction over the issues, the validity of the remaining provisions
shall not be affected and other applications of such provision shall be affected
only to the extent necessary to comply with the determination of such court.
ARTICLE VII
AMENDMENTS
----------
The Corporation reserves the right to adopt, repeal, rescind, alter,
restate or amend in any respect any provision contained in this Certificate of
Incorporation in the manner now or hereafter prescribed by applicable law, and
all rights conferred on stockholders herein are granted subject to this
reservation.
17
<PAGE>
ARTICLE VIII
INCORPORATOR
------------
The name of the incorporator is Andrea J. Melville. The
Incorporator's mailing address is 400 South Hope Street, Los Angeles, California
90071-2899.
IN WITNESS WHEREOF, the undersigned incorporator of Countrywide
Mortgage Investments, Inc. hereby executes the foregoing Certificate of
Incorporation and acknowledges the same to be her act and further acknowledges
that, to the best of her knowledge, the matters and facts set forth therein are
true in all material respects under the penalties of perjury.
Dated this 19th day of January , 1987.
---- -------
/s/ Andrea Melville
- -------------------
18
<PAGE>
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER, dated as of Feb. 26, 1987, is entered into
between Countrywide Mortgage Investments, Inc., a Maryland corporation ("CMI
Maryland"), and Countrywide Mortgage Investments, Inc., a Delaware corporation
("CMI Delaware"). CMI Maryland and CMI Delaware are hereinafter sometimes
collectively referred to as the "Constituent Corporations."
W I T N E S S E T H:
WHEREAS, CMI Maryland is a corporation duly organized and existing under
the laws of the State of Maryland;
WHEREAS, CMI Delaware is a corporation duly organized and existing under
the laws of the State of Delaware;
WHEREAS, on the date of this Agreement, CMI Maryland has authority to issue
10,000,000 shares of capital stock, consisting of 10,000,000 shares of Common
Stock, par value $.01 per share ("Maryland Common Stock"), of which 7,875,000
shares are issued and outstanding or reserved for issuance;
WHEREAS, on the date of this Agreement, CMI Delaware has authority to issue
30,000,000 shares of capital stock, consisting of 30,000,000 shares of Common
Stock, par value $.01 per share ("Delaware Common Stock"), of which 100 shares
are issued and outstanding and owned by CMI Maryland;
WHEREAS, the respective Boards of Directors of CMI Maryland and CMI
Delaware have determined that it is advisable and in the best interests of each
of such corporations that CMI Maryland merge with and into CMI Delaware upon the
terms and subject to the conditions set forth in this Agreement for the purpose
of effecting the change of the state of incorporation of CMI Maryland from
Maryland to Delaware;
WHEREAS, the respective Boards of Directors of CMI Maryland and CMI
Delaware have, by resolutions duly adopted, approved this Agreement;
WHEREAS, CMI Maryland has approved this Agreement as the sole stockholder
of CMI Delaware; and
WHEREAS, the Board of Directors of CMI Maryland has directed that this
Agreement be submitted to a vote of its shareholders.
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, CMI Maryland and CMI Delaware hereby agree as follows:
1. Merger. CMI Maryland shall be merged with and into CMI Delaware (the
"Merger"), and CMI Delaware shall be the surviving corporation (hereinafter
sometimes referred to as the "Surviving Corporation"). The Merger shall
become effective upon the date and at the time of filing of appropriate
articles of merger, providing for the Merger, with the Maryland State
Department of Assessments and Taxation or an appropriate certificate of
merger, providing for the Merger, with the Secretary of State of the State of
Delaware, whichever later occurs (the "Effective Time").
2. Governing Documents. The Certificate of Incorporation of CMI Delaware,
as in effect immediately prior to the Effective Time, shall be the Certificate
of Incorporation of the Surviving Corporation without change or amendment
until thereafter amended in accordance with the provisions thereof and
applicable laws, and the Bylaws of CMI Delaware, as in effect immediately
prior to the
<PAGE>
Effective Time, shall be the Bylaws of the Surviving Corporation without
change or amendment until thereafter amended in accordance with the provisions
thereof, of the Certificate of Incorporation of the Surviving Corporation and
applicable laws.
3. Succession. At the Effective Time, the separate corporate existence of
CMI Maryland shall cease, and CMI Delaware shall posses all the rights,
privileges, powers and franchises, of a public and private nature and be
subject to all the restrictions, disabilities and duties of each of the
Constituent Corporations; and all and singular, the rights, privileges, powers
and franchises of each of the Constituent Corporations, and all property,
real, personal and mixed, and all debts due to each of the Constituent
Corporations on whatever account, as well for stock subscriptions as all other
things in action belonging to each of the Constituent Corporations, shall be
vested in the Surviving Corporation; and all property, rights, privileges,
powers and franchises, and all and every other interest shall be thereafter as
effectually the property of the Surviving Corporation as they were of the
respective Constituent Corporations, and the title to any real estate vested
by deed or otherwise, in either of such Constituent Corporations shall not
revert or be in any way impaired by reason of the Merger; but all rights of
creditors and all liens upon any property of CMI Maryland shall be preserved
unimpaired. To the extent permitted by law, any claim existing or action or
proceeding pending by or against either of the Constituent Corporations may be
prosecuted as if the Merger had not taken place. All debts, liabilities and
duties of the respective Constituent Corporations shall thenceforth attach to
the Surviving Corporation and may be enforced against it to the same extent as
if such debts, liabilities and duties had been incurred or contracted by it.
All corporate acts, plans, policies, agreements, arrangements, approvals and
authorizations of CMI Maryland, its shareholders, Board of Directors and
committees thereof, officers and agents which were valid and effective
immediately prior to the Effective Time, shall be taken for all purposes as
the acts, plans, policies, agreements, arrangements, approvals and
authorizations of the Surviving Corporation and shall be as effective and
binding thereon as the same were with respect to CMI Maryland. The employees
and agents of CMI Maryland shall become the employees and agents of the
Surviving Corporation and continue to be entitled to the same rights and
benefits which they enjoyed as employees and agents of CMI Maryland. The
requirements of any plans or agreements of CMI Maryland involving the issuance
or purchase by CMI Maryland of certain shares of its capital stock shall be
satisfied by the issuance or purchase of a like number of shares of the
Surviving Corporation.
4. Directors and Officers. The Directors and Officers of CMI Maryland on
the Effective Time shall be and become Directors and Officers, holding the
same titles and positions, of the Surviving Corporation on the Effective Time,
and after the Effective Time shall serve in accordance with the Bylaws of the
Surviving Corporation.
5. Further Assurances. From time to time, as and when required by the
Surviving Corporation or by its successors or assigns, there shall be executed
and delivered on behalf of CMI Maryland such deeds and other instruments, and
there shall be taken or caused to be taken by it all such further and other
action, as shall be appropriate, advisable or necessary in order to vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation the
title to and possession of all property, interests, assets, rights,
privileges, immunities, powers, franchises and authority of CMI Maryland, and
otherwise to carry out the purposes of this Agreement, and the officers and
directors of the Surviving Corporation are fully authorized in the name and on
behalf of CMI Maryland or otherwise, to take any and all such action and to
execute and deliver any and all such deeds and other instruments.
6. Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof:
<PAGE>
(a) each share of Maryland Common Stock outstanding immediately prior to
the Effective Time shall be changed and converted into and shall be one
fully paid and nonassessable share of Delaware Common Stock; and
(b) the 100 shares of Delaware Common Stock presently issued and
outstanding in the name of CMI Maryland shall be cancelled and retired and
resume the status of authorized and unissued shares of Delaware Common
Stock, and no shares of Delaware Common Stock or other securities of CMI
Delaware shall be issued in respect thereof.
7. Condition to Merger. The Merger shall have received the requisite
approval of the holders of Maryland Common Stock pursuant to the General
Corporation Law of the State of Maryland.
8. Stock Certificates. At and after the Effective Time, all of the
outstanding certificates which, immediately prior to the Effective Time,
represented shares of Maryland Common Stock shall, respectively, be deemed for
all purposes to evidence ownership of, and to represent, shares of Delaware
Common Stock into which the shares of Maryland Common Stock, formerly
represented by such certificates, have been convened as herein provided. The
registered owner on the books and records of the Surviving Corporation or its
transfer agents of any such outstanding stock certificate shall, until such
certificate shall have been surrendered for transfer or otherwise accounted
for to the Surviving Corporation or its transfer agents, have and be entitled
to exercise any voting and other rights with respect to, and to receive any
dividends and other distributions upon, the shares of Delaware Common Stock
evidenced by such outstanding certificate as above provided.
9. Options. Each option to purchase shares of Maryland Common Stock
granted under the 1985 Stock Option Plan (the "Plan") of CMI Maryland which is
outstanding immediately prior to the Effective Time, shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and become an option to purchase the same number of shares of Delaware
Common Stock at the same option price per share, and upon the same terms and
subject to the same conditions as set forth in the Plan, as in effect at the
Effective Time. The same number of shares of Delaware Common Stock shall be
reserved for purposes of said Plan as is equal to the number of shares of
Maryland Common Stock so reserved as of the Effective Time. As of the
Effective Time, CMI Delaware hereby assumes the Plan and all obligations of
CMI Maryland under the Plan, including the outstanding options or awards or
portions thereof granted pursuant to the Plan, and the shares subject to such
Plan shall thereafter be the shares of Delaware Common Stock reserved for
issuance thereunder.
10. Amendment. Subject to applicable law, this Agreement may be amended,
modified or supplemented by written agreement of the parties hereto at any
time prior to the Effective Time with respect to any of the terms contained
herein; provided, however, that no such amendment, modification or supplement
not adopted and approved by the shareholders of CMI Maryland and CMI Delaware
shall affect the rights of either or both of such shareholders in a manner
which is materially adverse to either or both of them.
11. Abandonment. At any time prior to the Effective Time, this Agreement
may be terminated and the Merger may be abandoned by the Board of Directors of
CMI Maryland, notwithstanding approval of this Agreement by the stockholder of
CMI Delaware or by the shareholders of CMI Maryland, or both, if, in the
opinion of the Board of Directors of CMI Maryland, circumstances arise which,
in the opinion of such Board of Directors, make the Merger for any reason
inadvisable.
12. Counterparts. In order to facilitate the filing and recording of this
Agreement, the same may be executed in two or more counterparts, each of which
shall be deemed to be an original and the same agreement.
<PAGE>
IN WITNESS WHEREOF, CMI Maryland and CMI Delaware have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
COUNTRYWIDE MORTGAGE
INVESTMENTS, INC.,
a Maryland corporation
By: /s/ Angelo R. Mozilo
--------------------
Angelo R. Mozilo,
President
ATTEST:
By: /s/ Thomas H. Boone
-------------------
Thomas H. Boone,
Secretary
COUNTRYWIDE MORTGAGE
INVESTMENTS, INC.,
a Delaware corporation
By: /s/ Angelo R. Mozilo
--------------------
Angelo R. Mozilo,
President
ATTEST:
By: /s/ Thomas H. Boone
-------------------
Thomas H. Boone,
Secretary
<PAGE>
CERTIFICATE OF APPROVAL
OF
AGREEMENT OF MERGER
Angelo R. Mozilo and Thomas H. Boone certify that:
1. They are the President and the Secretary, respectively, of Countrywide
Mortgage Investments, Inc., a Delaware corporation.
2. The Agreement of Merger in the form attached was duly approved by the
Board of Directors and the sole stockholder of this corporation.
3. There is only one class of shares of capital stock of this corporation
outstanding, Common Stock, $.01 par value. The number of shares of Common Stock
outstanding is 100.
4. The shareholder approval was by the holder of 100% of the outstanding
shares of this corporation. The approval of a majority of the outstanding
shares of Common Stock is required to approve the Agreement of Merger.
Date: Feb. 26, 1987
/s/ Angelo R. Mozilo
--------------------
Angelo R. Mozilo, President
ATTEST: /s/ Thomas H. Boone
-------------------
Thomas H. Boone, Secretary
(Delaware)
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On February 26, 1987 before me, the undersigned, a Notary Public in and for
said State, personally appeared ANGELO R. MOZILO personally known to me or
proved to me on the basis of satisfactory evidence to be the person who executed
the within instrument as the President, and THOMAS H. BOONE personally known to
me or proved to me on the basis of satisfactory evidence to be the person who
executed the within instrument as the Secretary, of COUNTRYWIDE MORTGAGE
INVESTMENT, INC., a Delaware corporation, one of the corporations that executed
the within instrument and acknowledged to me that COUNTRYWIDE MORTGAGE
INVESTMENTS, INC. executed the within instrument pursuant to its by-laws or a
resolution of its board of directors.
WITNESS my hand and official seal.
Signature /s/ Ayda Zenian
---------------
<PAGE>
CERTIFICATE OF CHANGE OF LOCATION OF REGISTERED OFFICE
AND OF REGISTERED AGENT
It is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation") is
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.
2. The registered office of the corporation within the State of Delaware is
hereby changed to 32 Loockerman Square, Suite L-100, City of Dover 19901,
County of Kent.
3. The registered agent of the corporation within the State of Delaware is
hereby changed to The Prentice-Hall Corporation System, Inc., the business
office of which is identical with the registered office of the corporation as
hereby changed.
4. The corporation has authorized the changes hereinbefore set forth by
resolution of its Board of Directors.
Signed on February 16, 1993.
\s\ Sandor E. Samuels
---------------------
SANDOR E. SAMUELS Sr. Vice - President
Attest:
\s\ Gwen J. Eells
- -----------------
GWEN J. EELLS Asst. Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.
Countrywide Mortgage Investments, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
hereby certifies as follows:
1. That at a meeting of the Board of Directors of Countrywide Mortgage
Investments, Inc., (the "Corporation") resolutions were duly adopted setting
forth a proposed amendment of the Certificate of Incorporation of said
corporation, declaring said amendment to be advisable and calling for the
proposal to be presented to the shareholders of the Corporation at a Special
Meeting of the Shareholders. The resolution setting forth the proposed
amendment is as follows:
RESOLVED, That the Certificate of Incorporation of the Corporation be
amended by revising Article IV, Section 1 thereof so that, as amended,
Article IV, Section 1 shall read as follows:
"CAPITAL STOCK
-------------
Section 1. The total number of shares of capital stock which the
Corporation shall have authority to issue is Sixty Million (60,000,000),
consisting of Sixty Million (60,000,000) shares of Common Stock having a
par value of $0.01 per share."
2. That thereafter, the Special Meeting of the Stockholders, held on
December 9, 1993, of said corporation was duly called and held, upon notice in
accordance with Section 222 of the General Corporation Law of the State of
Delaware at which meeting the necessary number of shares as required by statue
were voted in favor of the amendment.
3. That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, said Countrywide Mortgage Investments, Inc. has caused
this certificate to be signed by Angelo R. Mozilo, its President, and Sandor E.
Samuels, its Secretary, this 11th day of December, 1993.
BY: /s/ Angelo R. Mozilo
---------------------------
Angelo R. Mozilo
President
ATTEST:
/s/ Sandor E. Samuels
- -----------------------
Sandor E. Samuels
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.
Countrywide Mortgage Investments, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
hereby certifies as follows:
1. That at a meeting of the Board of Directors of Countrywide Mortgage
Investments, Inc., (the "Corporation") resolutions were duly adopted setting
forth proposed amendments of the Certificate of Incorporation of said
Corporation, declaring said amendments to be advisable and calling for the
proposal to be presented to the stockholders of the Corporation at the Annual
Meeting of the Stockholders. The resolutions setting forth the proposed
amendments are as follows:
RESOLVED, That the Certificate of Incorporation of the Corporation be
amended by revising ARTICLE I so that, as amended, ARTICLE I shall read as
follows:
ARTICLE I
"NAME"
------
The name of the Corporation is: CWM Mortgage Holdings, Inc. (the
"Corporation").
RESOLVED FURTHER, That the Certificate of Incorporation of the Corporation
be further amended by adding a new ARTICLE VII to read as follows and by
renumbering the existing ARTICLES VII and VIII as ARTICLES VIII and IX,
respectively:
ARTICLE VII
ACQUISITION OF SHARES BY CERTAIN ORGANIZATIONS
----------------------------------------------
Section 1. Whenever it is deemed by the Board of Directors to be
prudent in avoiding
(a) the direct or indirect imposition of a penalty tax on the
Corporation (including the imposition of an entity-level tax on one or
more real estate mortgage investment conduits ("REMICs") or one or
more taxable mortgage pools in which the Corporation has acquired or
plans to acquire an interest) or
<PAGE>
(b) the endangerment of the tax status of one or more REMICs or
one or more taxable mortgage pools in which the Corporation has
acquired or plans to acquire an interest, the Board of Directors may
require to be filed with the Corporation a statement or affidavit from
any holder or proposed transferee of capital stock of the Corporation
stating whether the holder or proposed transferee is
(i) the United States, any state or political subdivision
thereof, any possession of the United States, any foreign
government, any international organization, or any agency or
instrumentality of the foregoing, or any other organization that
is exempt from federal income taxation (including taxation under
the unrelated business taxable income provisions of the Code) (a
"Disqualified Organization") or
(ii) a partnership, trust, real estate investment trust,
regulated investment company, or other pass-through entity in
which a Disqualified Organization holds or is permitted to hold a
direct or indirect beneficial interest (a "Pass-Through Entity").
Any contract for the sale or other transfer of shares of capital
stock of the Corporation shall be subject to this provision.
Furthermore, the Board of Directors shall have the right, but shall
not be required, to refuse to transfer any shares of capital stock of
the Corporation purportedly transferred, if either
(a) a statement or affidavit requested pursuant to this Section 1
has not been received, or
(b) the proposed transferee is a Disqualified Organization or
Pass-Through Entity.
Section 2. Any acquisition of shares of capital stock of the
Corporation that could or would
(a) result in the direct or indirect imposition of a penalty tax
on the Corporation (including the imposition of an entity-level tax on
one or more REMICs or one or more taxable mortgage pools in which the
Corporation has acquired or plans to acquire an interest) or
(b) endanger the tax status of one or more REMICs or one or more
taxable mortgage pools in which the Corporation has acquired or plans
to acquire an interest shall be void ab initio to the fullest extent
permitted under applicable law and the intended transferee of the
subject shares shall be deemed never to have had an interest therein.
2
<PAGE>
If the foregoing provision is determined to be void or invalid by
virtue of any legal decision, statute, rule or regulation, then the
transferee of those shares shall be deemed, at the option of the
Corporation, to have acted as agent on behalf of the Corporation in
acquiring those shares and to hold those shares on behalf of the
Corporation.
Section 3. Whenever it is deemed by the Board of Directors to be
prudent in avoiding
(a) the direct or indirect imposition of a penalty tax on the
Corporation (including the imposition of an entity-level tax on one or
more REMICs or one or more taxable mortgage pools in which the
Corporation has acquired or plans to acquire an interest) or
(b) the endangerment of the tax status of one or more REMICs or
one or more taxable mortgage pools in which the Corporation has
acquired or plans to acquire an interest, the Corporation may redeem
shares of its capital stock.
Any such redemption shall be conducted in accordance with the
procedures set forth in Section 6 of Article VI.
Section 4. Nothing contained in this Article or in any other
provision hereof shall limit the authority of the Board of Directors to
take any and all other action as it in its sole discretion deems necessary
or advisable to protect the Corporation or the interests of its
stockholders by avoiding
(a) the direct or indirect imposition of a penalty tax on the
Corporation (including the imposition of an entity-level tax on one or
more REMICs or one or more taxable mortgage pools in which the
Corporation has acquired or plans to acquire an interest) or
(b) the endangerment of the tax status of one or more REMICs or
one or more taxable mortgage pools in which the Corporation has
acquired or plans to acquire an interest.
Section 5. If any provision of this Article or any application of any
such provision is determined to be invalid by any federal or state court
having jurisdiction over the issue, the validity of the remaining
provisions shall be affected only to the extent necessary to comply with
the determination of that court.
2. That thereafter, the Annual Meeting of the Stockholders of the
Corporation was duly called and held on May 17, 1994, upon notice in accordance
with Section 222
3
<PAGE>
of the General Corporation Law of the State of Delaware at which meeting the
necessary number of shares as required by statute were voted in favor of the
amendments.
3. That said amendments were duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Countrywide Mortgage Investments, Inc. has caused
this certificate to be signed by Sterling Blair Albernathy, its Senior Vice
President, and Richard H. Wohl, its Secretary, this 20th day of May, 1994.
BY: /s/ Sterling Blair Abernathy
-----------------------------------
Sterling Blair Abernathy
Senior Vice President
ATTEST:
/s/ Richard H. Wohl
- --------------------------
Richard H. Wohl
Secretary
4
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CWM MORTGAGE HOLDINGS, INC.
CWM Mortgage Holdings, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, hereby
certifies as follows:
1. That at a meeting of the Board of Directors of CWM Mortgage Holdings,
Inc. (the "Corporation") resolutions were duly adopted setting forth a proposed
amendment of the Certificate of Incorporation of said Corporation, declaring
said amendment to be advisable and calling for the proposal to be presented to
the shareholders of the Corporation at the Annual Meeting of the Shareholders.
The resolution setting forth the proposed amendment is as follows:
RESOLVED, That the Certificate of Incorporation of the Corporation be
amended by revising Article IV, Section 1 thereof so that, as amended,
Article IV, Section 1 shall read in full as follows:
"CAPITAL STOCK
-------------
Section 1. The total number of shares of capital stock which the
Corporation shall have authority to issue is One Hundred Million
(100,000,000), consisting of One Hundred Million (100,000,000) shares of
Common Stock having a par value of $0.01 per share."
2. That thereafter, the Annual Meeting of the Shareholders of the
Corporation was duly called and held on May 17, 1995, upon notice in accordance
with Section 222 of the General Corporation Law of the State of Delaware at
which meeting the necessary number of shares as required by statute were voted
in favor of the amendment.
3. That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Michael W. Perry, its Executive Vice President, and Richard H. Wohl,
its Secretary, this 18th day of May, 1995.
\s\ Michael W. Perry
--------------------
Michael W. Perry
Executive Vice President
ATTEST:
\s\ Richard H. Wohl
- -------------------
Richard H. Wohl
Secretary
-2-
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
INDEPENDENT LENDING CORPORATION
INTO CWM MORTGAGE HOLDINGS, INC.
(PURSUANT TO SECTION 253 OF THE GENERAL
CORPORATION LAW OF DELAWARE)
CWM Mortgage Holdings, Inc. a Delaware corporation (the "Company"), does
hereby certify:
FIRST: That the Company is incorporated pursuant to the General
Corporation Law of the State of Delaware.
SECOND: That the Company owns all of the outstanding shares of the capital
stock of Independent Lending Corporation, a Delaware corporation.
THIRD: That the Company, by the following resolutions of its Board of
Directors, duly adopted on the 20th day of January, 1997, determined to merge
into itself Independent Lending Corporation:
"WHEREAS, The Board of Directors has been presented with a proposal by
the Company to merge Independent Lending Corporation, a wholly owned subsidiary,
with and into the Company (the "ILC Merger");
WHEREAS, Section 253 of the Delaware General Corporation Law
authorizes the merger of a wholly owned subsidiary with and into its parent
corporation; and
WHEREAS, It is the determination of the Board of Directors that the
ILC Merger would be in the best interests of the Company;
NOW, THEREFORE, BE IT RESOLVED, That the merger of Independent Lending
Corporation with and into the Company is hereby approved;
RESOLVED FURTHER, That the officers of the Company be, and each of
them hereby is, authorized, empowered and directed to execute such documents and
to take or cause to be taken any and all such other actions as he or they may
deem necessary, appropriate or advisable in order to carry out the intent and
purposes of the foregoing resolution; and
RESOLVED FURTHER, That any actions heretofore taken by any officer of
the Company in connection with the ILC Merger be, and they hereby are, ratified,
confirmed and approved."
<PAGE>
IN WITNESS WHEREOF, CWM Mortgage Holdings, Inc. has caused its corporate
seal to be affixed and this certificate to be signed by Michael W. Perry, its
authorized officer, this 31st day of January, 1997.
CWM MORTGAGE HOLDINGS, INC.
\s\ Michael W. Perry
--------------------
Michael W. Perry
President and Chief Operating
Officer
2
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
CWM MORTGAGE HOLDINGS, INC.
CWM Mortgage Holdings, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Company"), hereby certifies as follows:
1. That at a meeting of the Board of Directors of the Company
resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of the Company, declaring said amendment to be
advisable and calling for the proposal to be presented to the shareholders of
the Company at the Annual Meeting of the Shareholders. The resolution setting
forth the proposed amendment is as follows:
NOW, THEREFORE, BE IT RESOLVED, That subject to the requisite
approval of the shareholders of the Company at the Annual Meeting of
Shareholders, Article I of the Company's Certificate of Incorporation be amended
to read in full as follows:
"ARTICLE I
NAME
----
The name of the Corporation is: INMC Mortgage Holdings, Inc. (the
"Corporation")."
2. That thereafter, the Annual Meeting of the Shareholders of the
Company was duly called and held on June 24, 1997, upon notice in accordance
with Section 222 of the General Corporation Law of the State of Delaware, at
which meeting the necessary number of shares as required by statute were voted
in favor of the amendment.
3. That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Company has caused this certificate to be signed
by Michael W. Perry, its President, and Richard H. Wohl, its Secretary, this 1st
day of July, 1997.
/s/ Michael W. Perry
--------------------
Michael W. Perry
President
ATTEST:
/s/ Richard H. Wohl
- -------------------
Richard H. Wohl
Secretary
<PAGE>
CERTIFICATE OF MERGER OF
COUNTRYWIDE ASSET MANAGEMENT CORPORATION
INTO CWM MORTGAGE HOLDINGS, INC.
Pursuant to Section 251 of the
General Corporation Law of the State of Delaware
The undersigned hereby certifies as follows:
FIRST: The names of the constituent corporations are CWM Mortgage
Holdings, Inc. ("CWM") and Countrywide Asset Management Corporation ("CAMC").
Each constituent corporation is incorporated under the laws of the State of
Delaware.
SECOND: An Agreement and Plan of Merger (the "Merger Agreement") dated
as of January 29, 1997 by and among CWM, CAMC, and Countrywide Credit
Industries, Inc. has been approved, adopted, certified, executed and
acknowledged by each of the constituent corporations in accordance with Section
251 of the General Corporation Law of the State of Delaware.
THIRD: The name of the corporation surviving the merger is CWM Mortgage
Holdings, Inc. The Certificate of Incorporation of CWM as in effect at the
Effective Time shall be the Certificate of Incorporation of the corporation
surviving the Merger (the "Surviving Corporation").
FOURTH: An executed copy of the Merger Agreement is on file at the
principal place of business of the Surviving Corporation at 155 North Lake
Avenue, Pasadena, California 91101, and a copy of the Merger Agreement will be
furnished by the Surviving Corporation, on request and without cost, to any
stockholder of either constituent corporations.
IN WITNESS WHEREOF, CWM has caused this Certificate of Merger to be
executed in its corporate name by its President and Chief Operating Officer and
attested by its Secretary this 1st day of July, 1997.
CWM MORTGAGE HOLDINGS, INC.
/s/ Michael W. Perry
----------------------------
Michael W. Perry
President and Chief Operating Officer
Attest:
/s/ Richard H. Wohl
- -------------------
Richard H. Wohl
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
INMC MORTGAGE HOLDINGS, INC.
INMC Mortgage Holdings, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Company"), hereby certifies as follows:
1. That at a meeting of the Board of Directors of the Company
resolutions were duly adopted setting forth proposed amendments of the
Certificate of Incorporation of the Company, declaring said amendments to be
advisable and calling for the proposals to be presented to the shareholders of
the Company at the Annual Meeting of the Shareholders. The resolutions setting
forth the proposed amendments are as follows:
NOW, THEREFORE, BE IT RESOLVED, That subject to the requisite
approval of the shareholders of the Company at the Annual Meeting of
Shareholders, Article I of the Company's Certificate of Incorporation be amended
to read in full as follows:
"ARTICLE I
NAME
----
The name of the Corporation is: IndyMac Mortgage Holdings, Inc. (the
"Corporation")."
NOW THEREFORE, BE IT RESOLVED, That subject to the requisite approval
of the shareholders of the Company at the Annual Meeting of Shareholders,
Article IV, Section 1 of the Company's Certificate of Incorporation be amended
to read in full as follows:
"ARTICLE IV
CAPITAL STOCK
-------------
Section 1. The total number of shares of capital stock which INMC shall have
authority to issue is Two Hundred Ten Million (210,000,000), consisting of (i)
Two Hundred Million (200,000,000) shares of Common Stock having a par value of
$0.01 per share and (ii) Ten Million (10,000,000) shares of preferred stock
("Preferred Stock") having a par value of $0.01 per share.
The Board of Directors is authorized, subject to limitations
prescribed by law and the provisions of Article IV, to provide for the issuance
of shares of Preferred Stock in series, and by filing a certificate pursuant to
the applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the designation,
powers, preferences and
<PAGE>
rights of the shares of each such series and the qualifications, limitations or
restrictions thereof.
The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not be limited to, determination of the
following:
(a) the number of shares constituting that series and the
distinctive designation of that series;
(b) the dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or
dates, and the relative rights of priority, if any, of payment
of dividends on shares of that series;
(c) whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such
voting rights;
(d) whether that series shall have conversion privileges, and, if
so, the terms and conditions of such conversion, including
provision for adjustment of the conversion rate in such events
as the Board of Directors shall determine;
(e) whether or not the shares of that series shall be redeemable,
and, if so, the terms and conditions of such redemption,
including the date or date upon or after which they shall be
redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and
at different redemption dates;
(f) whether that series shall have a sinking fund for the redemption
or purchase of shares of that series, and, if so, the terms and
amount of such sinking fund;
(g) the rights of the shares of that series in the event of
voluntary or in voluntary liquidation, dissolution or winding up
of the corporation, and the relative rights of priority, if any,
of payment of shares of that series;
(h) any other relative rights, preferences and limitations of that
series.
Dividends on outstanding shares of Preferred Stock shall be paid or
declared and set apart for payment before any dividends shall be paid or
declared and set apart for payment on the common shares with respect to the
same dividend period.
If upon any voluntary or involuntary liquidation, dissolution or
winding up of the corporation, the assets available for distribution to
holders of shares of Preferred Stock of all series shall be insufficient to
pay such holders the full preferential amount to which they are entitled,
then such assets shall be distributed
<PAGE>
ratably among the shares of all series of Preferred Stock in accordance
with the respective preferential amounts (including unpaid cumulative
dividends, if any) payable with respect thereto."
2. That thereafter, the Annual Meeting of the Shareholders of the Company
was duly called and held on May 19, 1998, upon notice in accordance with Section
222 of the General Corporation Law of the State of Delaware, at which meeting
the necessary number of shares as required by statute were voted in favor of the
amendment.
3. That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this certificate to be signed by
Michael W. Perry, its President, and Richard H. Wohl, its Secretary, this 19th
day of May, 1998.
/s/ Michael W. Perry
--------------------
Michael W. Perry
President
ATTEST:
/s/ Richard H. Wohl
- -------------------
Richard H. Wohl
Secretary
<PAGE>
Exhibit 3.2
-----------
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.
A DELAWARE CORPORATION
___________________
BYLAWS
___________________
ARTICLE I
Offices
SECTION 1. Registered Office. The registered office of the Corporation in
the State of Delaware shall be located at the principal place of business in
that state of the entity acting as the corporation's registered agent in the
State of Delaware.
SECTION 2. Principal Executive Office. The principal executive office of
the Corporation shall be in the City of Pasadena, State of California.
SECTION 3. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
Meetings of Stockholders
SECTION 1. Place of Meetings. Meetings of stockholders shall be held on
such date, at such time and at such place within the United States as shall be
determined from time to time by the Board of Directors and stated in the notice
of meeting or in a duly executed waiver of notice thereof.
SECTION 2. Annual Meeting. The annual meeting of stockholders of the
Corporation shall be held on such date, at such time and at such place as shall
be designated annually by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof, at which meeting the
stockholders shall elect a Board of Directors and transact such other business
as may properly be brought before the meeting.
SECTION 3. Special Meetings. At any time in the interval between annual
meetings, special meetings of the stockholders, unless otherwise provided by law
or by the Certificate of Incorporation, may be called by a majority of the Board
of Directors, a majority of the Unaffiliated Directors (as defined in Article
III, Section 3), the President or the Chairman of the Board of Directors. The
date, time and place of a special meeting shall be determined by the Board of
Directors or the officer calling the meeting and shall be stated in the written
notice of the meeting, which notice shall state the purpose or purposes for
which the meeting is called. Business of the Corporation transacted at any
special meeting of stockholders by whomever called shall be limited to the
purposes stated in the written notice thereof.
SECTION 4. Notice of Meetings; Waiver of Notice; Adjournment. Not less
than ten nor more than sixty days before the date of every stockholders'
meeting, the Secretary shall give to each stockholder of record entitled to vote
at such meeting, and to each stockholder not entitled to vote who is entitled by
statute to notice, written or printed notice stating the date, time and place of
the meeting and the purpose or purposes for which the meeting is called, either
by mail or by presenting it personally to the stockholder or by leaving it at
his residence or usual place of business. If mailed with postage thereon
prepaid, such notice shall be deemed to be given when deposited in the United
States mail addressed to the stockholder at his address as it appears on the
records of the Corporation.
Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting. When a meeting is adjourned to another
time and place, unless the Board of Directors after the adjournment shall fix a
new record date for an adjourned meeting or the adjournment is
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for more than thirty days after the original record date, notice of such
adjourned meeting need not be given if the time and place to which the meeting
shall be adjourned were announced at the meeting at which the adjournment is
taken.
SECTION 5. Quorum. At any meeting of stockholders the presence in person
or by proxy of stockholders entitled to cast a majority of the shares of stock
entitled to vote at the meeting shall constitute a quorum, unless otherwise
provided by any statute or by the Certificate of Incorporation. In the absence
of a quorum no business may be transacted, except that the holders of a majority
of the shares of stock present in person or by proxy and entitled to vote may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, except as required by Section 4 above, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the meeting as originally noticed.
SECTION 6. Voting. The affirmative vote of a majority of the shares of
common stock which are present in person or represented by proxy and entitled to
vote on the matter at a meeting of stockholders, duly called and at which a
quorum is present, shall be sufficient to constitute the act of the stockholders
as to any matter which properly comes before the meeting, unless more than a
majority of the votes shall be required by statute or by the Certificate of
Incorporation. If a vote shall be taken on any question other than the election
of directors (which shall be by written ballot), then unless required by statute
or these bylaws, or determined by the chairman of the meeting to be advisable,
any such vote need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholders voting, or by his proxy, and shall state the number
of shares voted.
Unless a statute or the Certificate of Incorporation provides otherwise,
each holder of record of outstanding shares of stock of the Corporation having
voting power shall be entitled to one vote for every share of such stock on each
matter submitted to a vote at a meeting of stockholders. A stockholder may vote
only the shares owned by him as shown an the record of stockholders of the
Corporation as of the record date determined pursuant to Section 7 below or
pursuant to applicable law and may cast his shares in person or by proxy
executed in writing by the stockholder or by his duly authorized attorney-in-
fact, but no proxy shall be valid after three years from its date, unless
otherwise provided in the proxy. At all meetings of stockholders, unless the
voting is conducted by inspectors, all questions relating to the qualification
of voters and the validity of proxies and the acceptance or rejection of votes
shall be decided by the chairman of the meeting.
SECTION 7. Fixing of Record Date. The Board of Directors may fix, in
advance, a record date not more than sixty not less than ten days before the
date then fixed for the action requiring determination by the stockholders. All
persons who were holders of record of shares at such time, and no others, shall
be entitled to vote at such meeting and any adjournment thereof.
SECTION 8. Organization and Order of Business. At each meeting of the
stockholders, the Chairman of the Board of Directors, or in his absence or
inability to act, the President, or in the absence or inability to act of the
Chairman of the Board and the President, a Vice President, shall act as chairman
of the meeting. The Secretary, or in his absence or inability to act, any
person appointed by the chairman of the meeting, shall act as secretary of the
meeting and keep the minutes thereof. The order of business at all meetings of
the stockholders shall be as determined by the chairman of the meeting.
SECTION 9. Inspectors. The Board of Directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If the inspectors shall not be so appointed or if
any of them shall fail to appear or act, the chairman of the meeting may, and on
the request of any stockholder entitled to vote thereat shall, appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath to execute faithfully the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the chairman of the meeting or any stockholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, request or matter
determined by them and
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shall execute a certificate of any fact found by them. No director or candidate
for the office of director shall act as inspector of an election of directors.
Inspectors need not be stockholders.
ARTICLE III
Board of Directors
SECTION 1. Number of Directors. The number of directors of the
Corporation shall be six. By vote of a majority of the entire Board of
Directors, the number of directors fixed by these Bylaws may be increased or
decreased by resolution from time to time, but may not exceed nine nor be less
than three. The tenure of office of a director shall not be affected by any
decrease in the number of directors so made by the Board.
SECTION 2. General Powers. The business and affairs of the Corporation
shall be managed under the direction of its Board of Directors, which may
exercise all of the powers of the Corporation, except such as are by law or by
the Certificate of Incorporation or by these Bylaws conferred upon or reserved
to the stockholders.
SECTION 3. Affiliations of Board Members. A majority of the members of
the Board of Directors shall at all times be persons who are not Affiliates of
an individual or corporate management company to whom the Board has delegated
management duties as permitted in Section 18 of this Article and Article V,
Section 7 of the Certificate of Incorporation (a "Management Company") (such
directors being referred to as "Unaffiliated Directors").
As used in these Bylaws, the term "Affiliate" of another person means any
person directly or indirectly owning, controlling, or holding with power to
vote, five percent (5%) or more of the outstanding voting securities of such
other person or of any person directly or indirectly controlling, controlled by
or under common control with such other person; any person five percent (5%) or
more of whose outstanding voting securities are directly or indirectly owned,
controlled or held with power to vote by such other person; any person directly
or indirectly controlling, controlled by or under common control with, such
other person, and, any officer, director, partner, or employee of such other
person. The term "person" includes a natural person, corporation, partnership,
trust, company or other entity.
SECTION 4. Election and Term. Until the first annual meeting of
stockholders or until successors are duly elected and qualified, the Board shall
consist of the persons named as such in the Certificate of Incorporation. At
the first annual meeting of stockholders and at each annual meeting thereafter,
the stockholders shall elect directors, who need not be stockholders in the
Corporation, to hold office until the next annual meeting and until their
successors are elect and qualified or until their earlier resignation or
removal. Directors are eligible for re-election, and a director may resign at
any time by giving written notice to the Corporation.
SECTION 5. Vacancies. Any vacancy occurring in the Board of Directors for
any cause other than by reason of increase in the number of directors may be
filled by a majority of the remaining members of the Board of Directors,
although such majority is less than a quorum. Any vacancy occurring by reason
of an increase in the number of directors may be filled by action of a majority
of the entire Board of Directors. The vacancy for any reason of any director
who is not an Affiliate of a Management Company shall be filled by a majority
vote of the remaining members of the Board of Directors, including a majority
vote of the remaining Unaffiliated Directors. A director elected by the Board
of Directors to fill a vacancy shall be elected to hold office until the next
annual meeting of stockholders and until his or her successor is elected and
qualifies.
SECTION 6. Removal of Directors. Any director may be removed either with
or without cause, as provided by the General Corporation Law of the State of
Delaware.
SECTION 7. Place of Meetings. Meetings of the Board of Directors, regular
or special, may be held in or out of the State of Delaware at such place as the
Board of Directors may from time to time determine or as shall be specified in
the notice of such meeting.
SECTION 8. Annual Meeting. The first meeting of each newly elected Board
of Directors shall be held as soon as practicable after the annual meeting of
the stockholders at which the directors were elected. The meeting
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may be held at such time and place as shall be specified in a notice given as
hereinafter provided for special meetings of the Board of Directors. or as shall
be specified in a written waiver signed by all of the directors, except that no
notice shall be necessary if such meeting is held immediately after the
adjournment, and at the site, of the annual meeting of stockholders.
SECTION 9. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.
SECTION 10. Special Meetings. Special meetings of the Board of Directors
may be called by two or more directors of the Corporation or by the Chairman of
the Board of Directors or the President.
SECTION 11. Notice of Special Meetings. Notice of each special meeting of
the Board of Directors shall be given by the Secretary as hereinafter provided.
Such notice shall state the time and place of the meeting. Notice of each such
meeting shall be delivered to each director, either personally or by telephone,
telegraph, cable or wireless, at least twenty-four hours before the time at
which such meeting is to be held, or by first-class mail, postage prepaid, or
established nationwide courier service, delivery cost prepaid, addressed to each
director at his or her post-office address as it appears on the records of the
Corporation, at least four days before the day on which such meeting is to be
held. If mailed, such notice shall be deemed to be given when deposited in the
United States mail addressed to the director at his or her address as it appears
in the records of the Secretary. Special meetings of the Board of Directors may
be held at any time without notice if all directors are present or if those
directors not present waive notice of the meeting in writing either before or
after the date of the meeting.
SECTION 12. Quorum and Voting. At all meetings of the Board of Directors,
a majority of the entire Board of Directors shall constitute a quorum for the
transaction of business, and the action of a majority of the directors present
at any meeting at which a quorum is present shall be the action of the Board of
Directors unless the concurrence of a greater proportion is required for such
action by statute, the Certificate of Incorporation or these Bylaws. If a quorum
shall not be present at any meeting of directors, the directors present at the
meeting may by a majority vote adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Notwithstanding the first paragraph of this Section 12, any action
pertaining to a transaction involving the Corporation in which any Management
Company, any director or officer of the Corporation or any Affiliate of any of
the foregoing persons has an interest shall be approved in specific as to any
isolated transactions or in general as to any series of similar transactions by
a majority of the members of the Board of Directors who are not Affiliates of
such interested party, even if the non-interested directors constitute less than
a quorum. In approving any such transaction or series of transactions the non-
interested directors must determine that
(a) the transaction as contemplated is fair as to the Corporation and
its stockholders at the time it is authorized, approved or ratified;
(b) if an acquisition of property other than mortgage loans is
involved, the total consideration is not in excess of the appraised value
of such property being acquired; and
(c) if the transaction involves compensation to any Management Company
or its Affiliates for services rendered in a capacity other than that
contemplated by the management arrangements, to the knowledge of the
directors such compensation is not greater than the customary charges for
comparable services generally available from other competent unaffiliated
persons.
SECTION 13. Organization. The Chairman of the Board shall preside at each
meeting of the Board. In the absence or inability of the Chairman of the Board
to preside at a meeting, the President, or, in his absence or inability to act,
another director chosen by a majority of the directors present, shall act as
chairman of the meeting and preside thereat. The Secretary (or, in his absence
or inability to act, any person appointed by the Chairman) shall act as
secretary of the meeting and keep the minutes thereof.
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SECTION 14. Meeting by Conference Telephone. Members of the Board of
Directors may participate in a meeting of the Board of Directors or any
committee thereof by means of a conference telephone or similar communications
equipment if all persons participating in the meeting can hear each other at the
same time. Participation in a meeting by these means constitutes presence in
person at a meeting.
SECTION 15. Consent in Lieu of Meeting. Any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if a written consent to such action is signed by
all members of the Board of Directors or of such committee, as the case may be,
and such written consent is filed with the minutes of proceedings of the Board
or committee.
SECTION 16. Compensation. Directors may receive compensation for services
to the Corporation in their capacities as directors in such manner and in such
amounts as may be fixed from time to time by the Board of Directors, and
expenses of attendance at each regular or special meeting of the Board of
Directors, or of any committee thereof.
SECTION 17. Investment Policies and Restrictions. The investment policies
of the Corporation and the restrictions thereon shall be established from time
to time by the Board of Directors, including a majority of the Unaffiliated
Directors; provided, however, that the investment policies of the Corporation
and the limitations thereon shall be at all times in compliance with the
restrictions applicable to real estate investment trusts pursuant to the
Internal Revenue Code of 1986, as it may be amended from time to time. The
Unaffiliated Directors shall review the investment policies of the Corporation
at least annually to determine that the policies then being followed by the
Corporation are in the best interests of its stockholders. Each such
determination and the basis therefor shall be set forth in the minutes of the
Board of Directors.
SECTION 18. Management Arrangements. The Board may delegate the duty of
management of the assets and the administration of the Corporation's day-to-day
operations to a Management Company pursuant to a written contract or contracts,
or any renewal thereof, which have obtained the requisite approvals of the Board
of Directors, including a majority of the Unaffiliated Directors, or the
stockholders of the Corporation, as provided in the Certificate of
Incorporation.
The Board of Directors shall evaluate the performance of the Management
Company before entering into or renewing any management arrangement. The
minutes of meetings with respect to such evaluation shall reflect the criteria
used by the Board of Directors in making such evaluation. Upon any termination
of the initial management arrangements reflected in the Registration Statement,
the Board of Directors shall determine that any successor Management Company
possess sufficient qualifications (a) to perform the management function for the
Corporation and (b) to justify the compensation provided for in its contract
with the Corporation. Each contract for the services of a Management Company
entered into by the Board of Directors shall have a term of no more than one
year, but may be renewed annually at or prior to the expiration of the contract.
Each contract shall be terminable by a majority of the Unaffiliated Directors,
or the Management Company on sixty (60) days' written notice without cause.
The Unaffiliated Directors shall determine at least annually that the
compensation which the Corporation contracts to pay the Management Company is
reasonable in relation to the nature and quality of services performed and shall
also supervise performance of the Management Company and the compensation paid
to it by the Corporation to determine that the provisions of such contract are
being carried out. Each such determination shall be based upon the following
factors and all other factors the Unaffiliated Directors may deem relevant and
the findings of the Unaffiliated Directors on each of such factors shall be
recorded in the minutes of the Board of Directors:
(a) The size of the management fee in relation to the size,
compensation and profitability of the investment portfolio of the
Corporation;
(b) The success of the Management Company in generating opportunities
that meet the investment objectives of the Corporation;
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(c) The rates charged to other corporations similar to the Corporation
and to other investors by advisers performing similar services;
(d) Additional revenues realized by the Management Company and its
Affiliates through their relationship with the Corporation, including loan
administration, underwriting or broker commissions, servicing, engineering,
inspection and other fees, whether paid by the Corporation or by others
with whom the Corporation does business;
(e) The quality and extent of service and advice furnished to the
Corporation;
(f) The performance of the investment portfolio of the Corporation,
including income, conservation or appreciation of capital, frequency of
problem investments and competence in dealing with distress situations; and
(g) The quality of the investment portfolio or the Corporation in
relationship to the investments generated by the Management Company for its
own account.
SECTION 19. Total Expenses. The Unaffiliated Directors shall determine,
from time to time but at least annually, that the total fees and expenses of the
Corporation are reasonable in light of all relevant factors. Within sixty days
after the end of any fiscal quarter of the Corporation for which "Total
Operating Expenses" (for the twelve months then ended) exceed two percent (2%)
of "Average Invested Assets" or twenty-five percent (25%) of the "Net Income",
whichever is greater, there shall be sent to the stockholders of the Corporation
a written disclosure of such fact, together with an explanation of the factors
the Unaffiliated Directors considered in arriving at the conclusion that such
higher operating expenses were justified. The Corporation shall also publish to
the stockholders quarterly (i) the ratio of the cost of raising capital during
the quarter to the capital raised and (ii) the aggregate amount of advisory fees
and the aggregate amount of other fees paid to any Management Company and all
Affiliates of such Management Company by the Corporation and including fees or
charges paid to such Management Company and all of its Affiliates by third
parties doing business with the Corporation.
As used herein, the following terms shall have the following meanings:
(a) "Total Operating Expenses" for any period shall mean the aggregate
expenses of every character which constitute ordinary operating expenses,
including additional expenses paid directly or indirectly by the
Corporation to a Management Company, its Affiliates or third parties based
upon their relationship with the Corporation, including loan
administration, servicing, and all other expenses paid by the Corporation,
exclusive of expenses related to raising capital, for interest, taxes and
direct property acquisition, disposition, operation, maintenance and
management costs.
(b) "Average Invested Assets" for any period shall mean the average of
the aggregate book value of the assets of the Corporation, determined on a
consolidated basis, invested, directly or indirectly, in loans secured by
real estate, before deduction of reserves for depreciation and similar non-
cash reserves, computed taking the average of such values at the end of
each calendar month during such period.
(c) "Net Income" for any period shall mean total revenues applicable
to such period, less the expenses applicable to such period determined in
accordance with generally accepted accounting principles.
ARTICLE IV
Committees of Directors
SECTION 1. Executive and Other Committees. The Board of Directors may, by
resolution adopted by a majority of the Board, appoint from among its members an
Executive Committee, an Audit Committee or other committees each composed of two
or more directors. At least a majority of the members of any such committee
shall be composed of directors who are Unaffiliated Directors. Any such
committee shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation
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and may authorize the seal of the Corporation to be affixed to all papers which
may require it except that no such committee shall have such power or authority
with respect to amending the Bylaws or Certificate of Incorporation, adopting an
agreement of merger or consolidation, recommending to shareholders the sale,
lease or exchange of all or substantially all of the Corporation's property or
assets or the dissolution or the revocation of a dissolution of the Corporation,
and, unless the resolution or the Bylaws or Certificate of Incorporation
specifically so provides, no such committee shall have the power or authority to
declare a dividend, to authorize the issuance of stock or to adopt a certificate
of ownership and merger.
SECTION 2. Minutes and Reports. The committees shall keep minutes of
their proceedings and shall report the same to the Board of Directors when
requested to do so, and any action taken by the committees shall be subject to
revision and alteration by the Board of Directors, provided that no rights of
third persons shall be affected by any such revision or alteration.
SECTION 3. Notice. Notice of committee meetings shall be given in the
same manner as notice for special meetings of the Board, and a waiver thereof in
writing, signed by the directors entitled to such notice and filed with the
records of the meeting, whether before or after the holding thereof, or actual
attendance at the committee meeting in person shall be deemed equivalent to the
giving of such notice to such director.
SECTION 4. Quorum, Voting and General. One-third, but not less than two,
of the members of any committee shall be present in person at any meeting of
such committee in order to constitute a quorum for the transaction of business.
The act of a majority of the committee members present at such meeting shall be
an act of the committee. The Board may designate a chairman of any committee and
such chairman or any two members of any committee may fix the time and place of
its meetings unless the Board shall otherwise provide. In the event of the
absence or disqualification of any member of any committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he, she or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member. The Board shall have the power at any time to
change the membership of any committee, to fill all vacancies, to designate
alternate members, to replace any absent or disqualified member or to dissolve
any such committee.
ARTICLE V
Officers and Agents
SECTION 1. Number and Qualification. The officers of the Corporation
shall be chosen by the Board of Directors and shall be a Chairman of the Board,
a President, one or more Vice Presidents, a Secretary and a Treasurer. The
Corporation may also have as officers one or more Assistant Secretaries and one
or more Assistant Treasurers. Two or more offices may be held by the same person
but no officer shall execute, acknowledge or verify any instrument in more than
one capacity, if such instrument is required by law, the Certificate of
Incorporation or these Bylaws to be executed, acknowledged or verified by two or
more officers. Such officers shall be elected by the Board of Directors at its
first meeting after each annual meeting of stockholders and shall serve at the
pleasure of the Board of Directors until resignation, removal, disqualification
or until their successors are chosen and qualified. The Board of Directors may
appoint such other officers and agents as it shall deem necessary, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board.
SECTION 2. Compensation. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors.
SECTION 3. Removal and Vacancies. Any officer or agent may be removed by
the Board of Directors whenever in its judgment the best interests of the
Corporation will be served thereby. If the office of any officer becomes vacant
for any reason, the vacancy shall be filled by the Board of Directors for the
unexpired portion of the term of the office which shall be vacant.
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SECTION 4. The Chairman of the Board. The Chairman of the Board shall be
the chief executive officer of the Corporation. He shall direct, coordinate and
control the Corporation's business and activities and its operating expenses and
capital expenditures, and shall have general authority to exercise all the
powers necessary for the chief executive officer of the Corporation, all in
accordance with basic policies established by and subject to the control of the
Board of Directors. He may employ and discharge employees and agents of the
Corporation, except such as shall be appointed by the Board, and he may delegate
these powers. He shall have general authority to execute bonds, deeds and
contracts in the name and on behalf of the Corporation. As provided in Section
8 of Article II, he shall act as chairman at all meetings of the stockholders at
which he is present, and, as provided in Section 13 of Article III, he shall
preside at all meetings of the Board of Directors at which he is present. In
the absence of the Chairman of the Board, his duties shall be performed and his
authority may be exercised by the President, and, in the absence of the Chairman
of the Board and the President, such duties shall be performed and such
authority may be exercised by the Vice Presidents in order of their rank as
fixed by the Board of Directors, or if not ranked, the Vice President designated
by the Board of Directors, or in the absence of such Vice President, by such
officer as may have been designated by the most senior officer of the
Corporation who has made any such designation, with the right reserved to the
Board of Directors to make the designation or supersede any designation so made.
SECTION 5. The President. The President shall be the chief operating
officer of the Corporation. He shall implement the general directives, plans
and policies formulated by the Chairman of the Board pursuant to the Bylaws, in
general shall have authority to exercise all powers delegated to him by the
Chairman of the Board and shall establish operating and administrative plans and
policies and direct and coordinate the Corporation's organizational components,
within the scope of the authority delegated to him by the Board of Directors or
the Chairman of the Board. He shall have general authority to execute bonds,
deeds and contracts in the name and on behalf of the Corporation and
responsibility for the employment or appointment and discharge of such
employees, agents and officers, except such as shall be appointed by the Board,
as may be required to carry on the operation of the business. As provided in
Section 4 of this Article V, in the absence of the Chairman of the Board, the
President shall perform all the duties and exercise the authority of the
Chairman of the Board. In the absence of the President, his duties shall be
performed and his authority may be exercised by the Vice Presidents in order of
their rank as fixed by the Board of Directors, or if not ranked, the Vice
President designated by the Board of Directors, and, in the absence of the
President and such Vice President, by such officer as may have been designated
by the most senior officer of the Corporation who has made any such designation,
with the right reserved to the Board of Directors to make the designation or
supersede any designation so made.
SECTION 6. Vice Presidents. The Vice Presidents in order of their rank as
fixed by the Board of Directors, or if not ranked, the Vice President designated
by the Board of Directors, shall, in the absence or disability of the President,
perform the duties and exercise the powers of the President, and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
SECTION 7. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and shall record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors, the Chairman of the Board or the President, under whose
supervision he shall act. He shall keep in safe custody the seal of the
Corporation and, when authorized by the Board of Directors, affix the same to
any instrument requiring it and, when so affixed, it shall be attested by his
signature.
SECTION 8. Assistant Secretaries. Each Assistant Secretary shall perform
such duties as may be assigned to him, and shall be under the supervision of
such officer, as the Board of Directors or, in the absence of action by it, as
the Chairman of the Board or the President may from time to time prescribe. In
the event of the absence or disability of the Secretary, the duties of the
Secretary shall be performed by such Assistant Secretary, or if there be more
than one such then by the one designated by the Chairman of the Board or the
President.
SECTION 9. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as
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may be designated by the Board of Directors. He shall disburse the funds of the
Corporation as may be ordered by the Board of Directors, taking proper vouchers
for such disbursements, and shall render to the President and the Board of
Directors at its regular meetings, or when the Board of Directors so requires,
an account of all his transactions as Treasurer and of the financial condition
of the Corporation. If required by the Board of Directors, he shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board for the faithful performance of the duties of his
office and for the restoration to the Corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the Corporation.
SECTION 10. Assistant Treasurers. Each Assistant Treasurer shall perform
such duties as may be assigned to him, and shall be under the supervision of
such officer, as the Board of Directors or, in the absence of action by it, as
the Chairman of the Board or the President may from time to time prescribe. In
the event of the absence or disability of the Treasurer, the duties of the
Treasurer shall be performed by such Assistant Treasurer, or if there be more
than one such then by the one designated by the Chairman of the Board or the
President.
SECTION 11. Delegation of Duties. In case of the absence of any officer
of the Corporation, or for any other reason that the Board may deem sufficient,
the Board may confer for the time being the powers or duties, or any of them, of
such officer upon any other officer or upon any director.
ARTICLE VI
Certificates of Stock
SECTION 1. Form and Number. Each stockholder shall be entitled upon
request to a certificate or certificates in such form as shall be approved by
the Board which shall represent and certify the number and kind and class of
shares owned by him in the Corporation; provided, however, that certificates for
fractional shares shall not be issued. Each certificate shall be signed by the
Chairman of the Board or the President or a Vice President and countersigned by
the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer and may be sealed with the corporate seal. The signatures may be
either manual or facsimile signatures and the seal may be either facsimile or
any other form of seal. In case any officer who has signed any certificate
ceases to be an officer of the Corporation before the certificate is issued, the
certificate may nevertheless be issued by the Corporation with the same effect
as if the officer had not ceased to be such officer as of the date of its issue.
Each stock certificate shall include on its face the name of the Corporation,
the name of the stockholder and the class of stock and number of shares
represented by the certificate. A stock certificate may not be issued by the
Corporation until the stock represented by it is fully paid by the stockholder.
SECTION 2. Legends. Every stock certificate representing shares of stock
which are restricted as to transferability by the Corporation shall contain a
full statement of the restriction or state that the Corporation will furnish
information about the restriction to the stockholder on request and without
charge.
SECTION 3. Transfers of Shares. No transfers of shares of stock of the
Corporation shall be made if (i) void ab initio pursuant to Article VI of the
Corporation's Certificate of Incorporation, or (ii) the Board of Directors,
pursuant to such Article VI, shall have refused to transfer such shares.
Permitted transfers of shares of stock of the Corporation shall be made on the
stock records of the Corporation only upon the instruction of the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary or with a transfer agent or transfer
clerk, and on surrender of the certificate or certificates, if issued, for such
shares properly endorsed or accompanied by a duly executed stock transfer power
and the payment of all taxes thereon. Upon Surrender to the Corporation or the
transfer agent of the Corporation of the certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, as to any transfers not prohibited by such Article VI of the
Certificate of Incorporation or by action of the Board of Directors thereunder,
it shall be the duty of the Corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon its
books.
SECTION 4. Regulations. The Board of Directors may make such additional
rules and regulations, not inconsistent with these Bylaws, as it may deem
expedient concerning the issue, transfer and registration of
9
<PAGE>
certificates for shares of stock of the Corporation. It may appoint, or
authorize any officer or officers to appoint, one or more transfer agents or one
or more transfer clerks and one or more registrars and may require all
certificates for shares of stock to bear the signature or signatures of any of
them.
SECTION 5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificates representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it upon the making of an
affidavit of that fact by the person claiming the certificate of stock to be
stolen, lost or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such stolen, lost or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and to give the Corporation a bond,
with sufficient surety, to indemnify it against any loss or claim which may
arise by reason of the issuance of a new certificate.
ARTICLE VII
Dividends
Dividends upon the capital stock of the Corporation, subject to the
provisions of the Certificate of Incorporation, if any, may be declared by the
Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in the Corporation's own shares,
subject to the provisions of any statute and of the Certificate of
Incorporation. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interests of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
The Board may fix, in advance, a date not more than sixty days preceding
the date fixed for the payment of any dividend or the making of any distribution
or the allotment of rights to subscribe for securities of the Corporation, or
for the delivery of evidences of rights or evidences of interests arising out of
any change, conversion or exchange of stock or other securities, as the record
date for the determination of the stockholders entitled to receive any such
dividend, distribution, allotment, rights or interests, and in such case only
the stockholders of record at the time so fixed shall be entitled to receive
such dividend, distribution, allotment, rights or interests.
ARTICLE VIII
Indemnification
SECTION 1. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director, officer,
employee or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or agent
or in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the General Corporation Law of the State of Delaware, as
the same exists or may hereafter be amended, (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than said law permitted the Corporation
to provide prior to such amendment) against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) actually and reasonably incurred
or suffered by such person in connection therewith and such indemnification
shall continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of his or her heirs, executors and
administrators.
10
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The right to indemnification conferred in this Section shall be a contract right
and shall include the right to be paid by the corporation the expenses incurred
in defending any such proceeding in advance of its final disposition; provided,
however, that, if the General Corporation Law of the State of Delaware requires,
the payment of such expenses incurred by a director or officer in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Section or
otherwise.
SECTION 2. Non-exclusivity of rights. The right to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Section shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
SECTION 3. Insurance. The corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the General Corporation Law of the State of Delaware.
ARTICLE IX
Fiscal Year
The fiscal year of the Corporation shall be the same as the calendar year
and shall end on December 31 of each year.
ARTICLE X
Depositories and Custodians
SECTION 1. Depositories. The funds of the Corporation shall be deposited
with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.
SECTION 2. Custodians. All securities and other investments shall be
deposited in the safe keeping of such banks or other companies as the Board of
Directors of the corporation may from time to time determine.
ARTICLE XI
Execution of Instruments
Checks, notes, drafts, acceptances, bills of exchange and other orders or
obligations for the payment of money shall be signed by such officer or officers
or person or persons as the Board of Directors by resolution shall from time to
time designate.
ARTICLE XII
Independent Public Accountants
A firm of independent public accountants shall sign or certify the annual
financial statements of the Corporation and shall be selected annually by the
Board of Directors.
ARTICLE XIII
11
<PAGE>
Stock ledger, List Of Shareholders, Books And Records
SECTION 1. Stock Ledger. The Corporation shall maintain at its principal
executive office, or at the office of its transfer agent or registrar, an
original stock ledger containing the names and addresses of all stockholders and
the number of shares held by each stockholder. Such stock ledger may be in
written form or any other form capable of being converted into written form
within a reasonable time for visual inspection.
SECTION 2. Stockholder List. The Secretary or other officer in charge of
the stock ledger of the Corporation shall prepare and make, at least ten (10)
days prior to a meeting of stockholders, a complete list of stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares of stock of the Corporation
registered in the name of each stockholder. Such list shall be open to
examination by any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list also shall be
produced and kept at the place and time of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 3. Inspection of Books and Records. There shall be kept at the
principal executive office of the Corporation correct and complete books and
records of account of all the business and transactions of the Corporation.
In accordance with the General Corporation Laws of Delaware, any
stockholder of the Corporation or his agent may inspect and copy during usual
business hours the Corporation's stock ledger, an existing list of stockholders
and other books and records.
ARTICLE XIV
Amendments
The Board of Directors shall have the power, at any regular meeting or at
any special meeting if notice thereof be included in the notice of such special
meeting, to alter, modify or repeal any Bylaws of the Corporation and to make
new Bylaws, except that the Board of Directors shall not alter, modify or repeal
any of the following provisions of the Bylaws
(a) Article III, Section 3;
(b) The third sentence of Article III, Section 5;
(c) The second paragraph of Article III, Section 12;
(d) Article III, Section 17-19;
(e) The second sentence of Article IV, Section 1; and
(f) This Article XIV.
The stockholders shall have the power, at any annual meeting or at any
special meeting if notice thereof be included in the notice of such special
meeting, to alter, modify or repeal any Bylaws of the Corporation and to make
new Bylaws.
12
<PAGE>
AMENDMENT TO BYLAWS OF
----------------------
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.
--------------------------------------
The following resolution was duly adopted by the Board of Directors of the
Company, by unanimous written consent without a meeting, effective as of July
22, 1993:
NOW, THEREFORE, BE IT RESOLVED, that the Bylaws of the Company be hereby
amended as follows:
Article VI of the Bylaws is hereby amended by deleting the first sentence
of Section 3 of said Article and adding in its place a new sentence to read in
full as set forth below:
"No transfers of shares of stock of the Company shall be made if (i) void
ab initio pursuant to Article VI of the Company's Certificate of Incorporation,
(ii) the Board of Directors, pursuant to such Article VI, shall have refused to
transfer such shares, or (iii) prohibited pursuant to Article XV of the Bylaws."
The Bylaws of the company are hereby further amended by adding a new
Article XV to read in full as set forth below:
"ARTICLE XV
ACQUISITION OF SHARES BY CERTAIN ORGANIZATIONS
Section 1. Affidavits of Stockholders and Transferees. Whenever it is
deemed by the Board of Directors to be prudent in avoiding
(a) the direct or indirect imposition of a penalty tax on the Company
(including the imposition of an entity-level tax on one or more real estate
mortgage investment conduits ("REMICs") or one or more taxable mortgage
pools in which the Company has acquired or plans to acquire an interest) or
(b) the endangerment of the tax status of one or more REMICs or one or
more taxable mortgage pools in which the Company has acquired or plans to
acquire an interest, the Board of Directors may require to be filed with
the Company a statement or affidavit from any holder or proposed transferee
of capital stock of the Company stating whether the holder or proposed
transferee is
(i) the United States, any state or political subdivision
thereof, any possession of the United States, any foreign government,
any international organization, or any agency or instrumentality of
the foregoing, or any other organization that is exempt from federal
income taxation (including taxation under
1
<PAGE>
the unrelated business taxable income provisions of the Code) (a
"Disqualified Organization") or
(ii) a partnership, trust, real estate investment trust,
regulated investment company, or other pass-through entity in which a
Disqualified Organization holds or is permitted to hold a direct or
indirect beneficial interest (a "Pass-Through Entity").
Any contract for the sale or other transfer of shares of capital stock of the
Company shall be subject to this provision. Furthermore, the Board of Directors
shall have the right, but shall not be required, to refuse to transfer any
shares of capital stock of the Company purportedly transferred, if either
(a) a statement or affidavit requested pursuant to this Section 1 has
not been received, or
(b) the proposed transferee is a Disqualified Organization or Pass-
Through Entity.
Section 2. Void Transfers. Any acquisition of shares of capital stock of
the Company that could or would
(a) result in the direct or indirect imposition of a penalty tax on
the Company (including the imposition of an entity-level tax on one or more
REMICs or one or more taxable mortgage pools in which the Company has
acquired or plans to acquire an interest) or
(b) endanger the tax status of one or more REMICs or one or more
taxable mortgage pools in which the company has acquired or plans to
acquire an interest
shall be void ab initio to the fullest extent permitted under applicable law and
the intended transferee of the subject shares shall be deemed never to have had
an interest therein.
If the foregoing provision is determined to be void or invalid by
virtue of any legal decision, statute, rule or regulation, then the transferee
of those shares shall be deemed, at the option of the Company, to have acted as
agent on behalf of the Company in acquiring those shares and to hold those
shares on behalf of the Company.
Section 3. Redemption of Shares. Whenever it is deemed by the Board of
Directors to be prudent in avoiding
(a) the direct or indirect imposition of a penalty tax on the Company
(including the imposition of an entity-level tax on one or more REMICs or one or
more taxable mortgage pools in which the Company has acquired or plans to
acquire an interest) or
2
<PAGE>
(b) the endangerment of the tax status of one or more REMICs or one or
more taxable mortgage pools in which the Company has acquired or plans to
acquire an interest,
the Company may redeem shares of its capital stock.
Any such redemption shall be conducted in accordance with the
procedures set forth in Article VI, Section 6 of the Certificate of
Incorporation of the Company regarding the repurchase of Excess Shares (as
defined therein).
Section 4. Application of Article. Nothing contained in this Article or in
any other provision hereof shall limit the authority of the Board of Directors
to take any and all other action as it in its sole discretion deems necessary or
advisable to protect the Company or the interests of its stockholders by
avoiding
(a) the direct or indirect imposition of a penalty tax on the Company
(including the imposition of an entity-level tax on one or more REMICs or
one or more taxable mortgage pools in which the Company has acquired or
plans to acquire an interest) or
(b) the endangerment of the tax status of one or more REMICs or one or
more taxable mortgage pools in which the Company has acquired or plans to
acquire an interest.
Section 5. Severability. If any provision of this Article or any
application of any such provision is determined to be invalid by any federal or
state court having jurisdiction over the issue, the validity of the remaining
provisions shall be affected only to the extent necessary to comply with the
determination of that court."
3
<PAGE>
AMENDMENT TO BYLAWS OF
----------------------
CWM MORTGAGE HOLDINGS, INC.
---------------------------
The following resolution was duly adopted by the Board of Directors of
the Corporation at a meeting duly called and held on May 17, 1995:
NOW, THEREFORE, BE IT RESOLVED, that the Bylaws of the Corporation be
amended by adding to ARTICLE II a new Section 10 to read as follows:
"SECTION 10. Nominations for Directors. Nominations for the election
of members of the Board of Directors at the annual meeting of stockholders
may be made by the Board of Directors or by any holder of any outstanding
class of voting stock of the Corporation entitled to vote for the election
of directors. Nominations for the election of members of the Board of
Directors shall be stated in writing and filed with the Secretary of the
corporation on or before thirty days prior to the date of the annual
meeting of stockholders, and such nominations so stated, proposed and filed
with the Secretary shall be considered at the annual meeting."
<PAGE>
AMENDMENT TO THE BYLAWS OF
--------------------------
CWM MORTGAGE HOLDINGS, INC.
---------------------------
(Adopted by the Board of Directors on January 20, 1997
and Approved by the Shareholders on June 24, 1997)
Article II, Section 3 of the Bylaws of the Company is hereby amended to delete
the clause, "a majority of the Unaffiliated Directors (as defined in Article
III, Section 3),"
Article III, Section 3 of the Bylaws of the Company is hereby amended to delete
the first sentence thereof, which reads:
"A majority of the members of the Board of Directors shall at all times be
persons who are not Affiliates of an individual or corporate management company
to whom the Board has delegated management duties as permitted in Section 18 of
this Article and Article V, Section 7 of the Certificate of Incorporation (a
'Management Company') (such directors being referred to as 'Unaffiliated
Directors')."
Article III, Section 5 of the Bylaws of the Company is hereby amended to delete
the third sentence thereof, which reads:
"The vacancy for any reason of any director who is not an Affiliate of a
Management Company shall be filled by a majority vote of the remaining members
of the Board of Directors, including a majority vote of the remaining
Unaffiliated Directors."
and replace such sentence with the following new sentence to read in full as set
forth below:
"The vacancy for any reason of any director shall be filled by a majority vote
of the remaining members of the Board of Directors."
Article III, Section 12 of the Bylaws of the Company is hereby amended to make
the following changes to the second paragraph:
(i) delete the clause, "Notwithstanding the first paragraph of this
Section 12, any action pertaining to a transaction involving the Corporation in
which any Management Company, any director or officer of the Corporation or any
Affiliate of any of the foregoing persons has an interest" and replace such
clause with the following new clause, "Notwithstanding the first paragraph of
this Section 12, any action pertaining to a transaction involving the
Corporation in which any director or officer of the Corporation or any Affiliate
of any of the foregoing persons has an interest";
(ii) add the word "and" after the semicolon in subsection (a);
(iii) remove the word "and" from after the semicolon in section (b); and
1
<PAGE>
(iv) delete subsection (c), which reads: "(c) if the transaction
involves compensation to any Management Company or its affiliates for services
rendered in a capacity other than that contemplated by the management
arrangements, to the knowledge of the directors such compensation is not greater
than the customary charges for comparable services generally available from
other competent unaffiliated persons."
Article III, Section 17 of the Bylaws of the Company is hereby amended:
(i) to delete the clause, ", including a majority of the Unaffiliated
Directors"; and
(ii) to delete the following sentences, "The Unaffiliated Directors
shall review the investment policies of the Corporation at least annually to
determine that the policies then being followed by the Corporation are in the
best interests of its stockholders. Each such determination and the basis
therefor shall be set forth in the minutes of the Board of Directors."
Article III, Section 18 of the Bylaws of the Company is hereby deleted in its
entirety and replaced with the following statement: "Section 18. [RESERVED]".
Article III, Section 19 of the Bylaws of the Company is hereby deleted in its
entirety and replaced with the following statement: "Section 19. [RESERVED]".
Article IV, Section 1 of the Bylaws of the Company is hereby amended to delete
the second sentence, which reads:
"At least a majority of the members of any such committee shall be composed of
directors who are Unaffiliated Directors."
Article XIV of the Bylaws of the Company is hereby amended:
(i) to delete subsection (b);
(ii) to re-letter subsection (c) as subsection (b);
(iii) to replace subsection (d) with the following, "(c) Article III,
Section 17; and";
(iv) to delete subsection (e); and
(v) to re-letter subsection (f) as subsection (d).
2
<PAGE>
AMENDMENT TO THE BYLAWS OF
INDYMAC MORTGAGE HOLDINGS, INC.
(Adopted by the Board of Directors on July 21, 1998)
The Bylaws of IndyMac Mortgage Holdings, Inc. are hereby amended to revise
ARTICLE II so that the current Section 10 shall be deleted and the following
Section 10 and Section 11 shall be added to the end of ARTICLE II:
"Section 10. Nomination of Directors. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors of the Corporation, except as may be otherwise provided in the
Certificate of Incorporation of the Corporation with respect to the right of
holders of preferred stock of the Corporation to nominate and elect a specified
number of directors in certain circumstances. Nominations of persons for
election to the Board of Directors may be made at any annual meeting of
stockholders, or at any special meeting of stockholders called for the purpose
of electing directors, (a) by or at the direction of the Board of Directors (or
any duly authorized committee thereof) or (b) by any stockholder of the
Corporation (i) who is a stockholder of record on the date of the giving of the
notice provided for in this Section 10 and on the record date for the
determination of stockholders entitled to vote at such meeting and (ii) who
complies with the notice procedures set forth in this Section 10.
In addition to any other applicable requirements, for a nomination to be
made by a stockholder, such stockholder must have given timely notice thereof in
proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the Corporation (a)
in the case of an annual meeting, not less than ninety (90) days nor more than
one hundred twenty (120 ) days prior to the anniversary date of the immediately
preceding annual meeting of stockholders; provided, however, that in the event
-------- -------
that the annual meeting is called for a date that is not within thirty (30) days
before or after such anniversary date, notice by the stockholder in order to be
timely must be so received not later than the close of business on the tenth
(10th) day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure of the date of the annual meeting
was made, whichever first occurs; and (b) in the case of a special meeting of
stockholders called for the purpose of electing directors, not later than the
close of business on the tenth (10th) day following the day on which notice of
the date of the special meeting was mailed or public disclosure of the date of
the special meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary must
set forth (a) as to each person whom the stockholder proposes to nominate for
election as a director (i) the name, age, business address and residence address
of the person, (ii) the principal occupation or employment of the person, (iii)
the class or series and number of shares of capital stock of the
<PAGE>
Corporation which are owned beneficially or of record by the person and (iv) any
other information relating to the person that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder; and (b) as to the stockholder giving the
notice (i) the name and record address of such stockholder, (ii) the class or
series and number of shares of capital stock of the Corporation which are owned
beneficially or of record by such stockholder, (iii) a description of all
arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or by proxy at
the meeting to nominate the persons named in its notice and (v) any other
information relating to such stockholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Exchange Act and the rules and regulations promulgated thereunder. Such notice
must be accompanied by a written consent of each proposed nominee to being named
as a nominee and to serve as a director if elected.
No person shall be eligible for election as a director of the Corporation
unless nominated in accordance with the procedures set forth in this Section 10.
If the Chairman of the meeting determines that a nomination was not made in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the nomination was defective and such defective nomination shall be
disregarded.
Section 11. Notice of Meetings. No business may be transacted at an
annual meeting of stockholders, other than business that is either (a) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the Board of Directors (or any duly authorized committee thereof),
(b) otherwise properly brought before the annual meeting of stockholders by or
at the direction of the Board of Directors (or any duly authorized committee
thereof) or (c) otherwise properly brought before the annual meeting by any
stockholder of the Corporation (i) who is a stockholder of record on the date of
the giving of the notice provided for in this Section and on the record date for
the determination of stockholders entitled to vote at such annual meeting and
(ii) who complies with the notice procedures set forth in this Section.
In addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than ninety (90) days nor more than one hundred twenty (120) days prior to
the anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the annual meeting is
-------- -------
called for a date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the close
<PAGE>
of business on the tenth (10th) day following the day on which such notice of
the date of the annual meeting was mailed or such public disclosure of the date
of the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary must
set forth as to each matter such stockholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and record address of such stockholder, (iii) the class
or series and number of shares of capital stock of the Corporation which are
owned beneficially or of record by such stockholder, (iv) a description of all
arrangements or understandings between such stockholder and any other person or
persons (including their names) in connection with the proposal of such business
by such stockholder and any material interest of such stockholder in such
business and (v) a representation that such stockholder intends to appear in
person or by proxy at the annual meeting to bring such business before the
meeting.
No business shall be conducted at the annual meeting of stockholders except
business brought before the annual meeting in accordance with the procedures set
forth in this Section 11, provided, however, that, once business has been
-------- -------
properly brought before the annual meeting in accordance with such procedures,
nothing in this Section 11 shall be deemed to preclude discussion by any
stockholder of any such business. If the Chairman of an annual meeting
determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted."
<PAGE>
Exhibit 4.1
-----------
INMC MORTGAGE HOLDINGS, INC.
1998 STOCK INCENTIVE PLAN
1. Purpose of Plan. The purpose of this 1998 Stock Incentive Plan
---------------
("Plan") of INMC Mortgage Holdings, Inc. (dba IndyMac Mortgage Holdings, Inc.),
formerly known as CWM Mortgage Holdings, Inc., a Delaware corporation (the
"Company"), is to enable the Company, IndyMac, Inc. ("IndyMac") and any of their
respective subsidiaries or affiliates to attract, retain and motivate their
employees, consultants, agents, officers and directors by providing incentives
related to equity interests in and the financial performance of the Company.
2. Persons Eligible Under Plan. Any person, including any director of
---------------------------
the Company or IndyMac, who is an officer or employee of the Company, IndyMac,
or any of their respective subsidiaries or affiliates or an individual who
performs services for the Company, IndyMac, or any of their respective
subsidiaries or affiliates of a nature similar to those performed by officers or
employees, such as consultants and agents, and any non-employee director of
IndyMac who is not also a member of the Board (as hereinafter defined) (any of
the foregoing, an "Employee") shall be eligible to be considered for the grant
of an Award (as defined in Section 5 below) or Awards under Section 5 of this
Plan. No member of the Board of Directors of the Company (the "Board") who is
not an officer or employee of the Company, IndyMac, or any of their respective
subsidiaries or affiliates (a "Non-Employee Director") shall be eligible to
receive any Awards under this Plan, except for nonqualified stock options
granted automatically under the provisions of Section 10 of this Plan ("Director
Options").
3. Stock Subject to Plan.
---------------------
(a) ISO Limit. The maximum number of Common Shares, $0.01 par value
---------
per share, of the Company (the "Common Shares") that may be issued pursuant
to options intended to qualify as incentive stock options ("Incentive Stock
Options") under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), granted under this Plan is 6,000,000, and provided
further that, except as otherwise provided herein, the aggregate Fair
Market Value (as defined in Section 10) of Common Shares with respect to
which options intended to qualify as Incentive Stock Options are
exercisable for the first time by any individual during any calendar year
shall not exceed the limit, if any, set forth in Section 422(d) of the Code
or any successor provision thereto. For purposes of this subsection (a),
the Fair Market Value (as defined in Section 10) of any Common Shares shall
be determined as of the time the Incentive Stock Option with respect to the
Common Shares is granted. Pursuant to Section 422(a)(2) of the Code, only
employees (as that term is used in Section 422(a)(2) of the Code) of the
Company or the Company's wholly-owned subsidiaries may receive options
intended to qualify as Incentive Stock Options under this Plan.
1
<PAGE>
(b) Aggregate/Individual Share Limit.
--------------------------------
(i) The maximum number of Common Shares that may be issued
pursuant to all Awards (including Incentive Stock Options, as set
forth in subsection (a) above) granted under this Plan, other than
Common Shares that are issued pursuant to Awards and subsequently
reacquired by the Company pursuant to the terms and conditions of such
Awards ("Reacquired Common Shares"), is 6,000,000, subject to
adjustment as provided in or pursuant to Section 6 or 10 hereof (such
maximum number, as so adjusted, shall be referred to as the "Share
Limit").
(ii) Notwithstanding anything contained herein to the contrary,
the aggregate number of Common Shares subject to options, stock
appreciation rights, and awards of restricted stock granted during any
calendar year to any individual shall be limited to 500,000.
(c) Share Reservation. No Award may be granted under this Plan
-----------------
unless, on the date of grant, the sum of (i) the maximum number of Common
Shares issuable at any time pursuant to such Award, plus (ii) the number of
Common Shares that have previously been issued pursuant to Awards granted
under this Plan, other than Reacquired Common Shares available for reissue,
plus (iii) the maximum number of Common Shares that may be issued at any
time after such date of grant pursuant to Awards that are outstanding on
such date, does not exceed the Share Limit. Common Shares distributed
under the Plan may be treasury shares, authorized but unissued shares or
shares purchased in the open market for this purpose.
(d) Reissue of Awards and Common Shares. Awards payable in cash or
-----------------------------------
Common Shares that are forfeited or for any reason are not so paid under
this Plan, as well as Common Shares subject to Awards that expire or for
any reason are terminated and are not issued or constitute Reacquired
Common Shares, shall again be available for subsequent Awards under the
Plan.
(e) Fractional Shares/Minimum Issue. Fractional share interests shall
-------------------------------
be disregarded, but may be accumulated. No fewer than 100 Common Shares
may be purchased on exercise of any option granted under this Plan
("Option") at one time unless the number purchased is the total number at
the time available for purchase under the Option.
(f) Privileges of Stock Ownership. Except as otherwise expressly
-----------------------------
authorized by this Plan, an Award recipient shall not be entitled to any
privilege of stock ownership as to any Common Shares subject to an Option
granted under this Plan prior to the satisfaction of all conditions to the
valid exercise of the Option.
4. Administration of Plan.
----------------------
(a) The Committee. Except for the provisions of Section 10 (which to
-------------
the maximum extent feasible shall be self-effectuating), this Plan shall be
administered by a committee of the Board (the "Committee") consisting of
two or more directors, each of whom is a "Non-Employee Director," as such
term is defined in Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and an "Outside Director," as such term is
defined for purposes of Section 162(m) of the Code.
2
<PAGE>
(b) Powers of the Committee. Subject to the express provisions of
-----------------------
this Plan, the Committee shall be authorized and empowered to do all things
necessary or desirable in connection with the administration of this Plan
including, without limitation, the following:
(i) adopt, amend and rescind rules and regulations relating to
this Plan;
(ii) determine which persons meet the requirements of Section 2
hereof for eligibility under this Plan and to which of such eligible
persons, if any, Awards will be granted hereunder;
(iii) grant Awards to eligible persons and determine the terms
and conditions thereof, including, but not limited to, the number of
Common Shares issuable pursuant thereto, the time not more than ten
(10) years after the date of an Award at which time the Award shall
expire or (if not vested) terminate, and the conditions upon which
Awards become exercisable or vest or shall expire or terminate, and
the consideration, if any, to be paid upon receipt, exercise or
vesting of Awards;
(iv) determine whether, and the extent to which, adjustments are
required pursuant to Section 6 hereof;
(v) interpret and construe this Plan and the terms and conditions
of any Award granted under Section 5, whether before or after the date
set forth in Section 7; and
(vi) determine the circumstances under which, consistent with the
provisions of Section 7, any outstanding Award under Section 5 may be
amended;
which authority (except as to clauses (ii) and (iii) above) shall remain in
effect so long as any Award remains outstanding under this Plan.
(c) Specific Committee Responsibility and Discretion Regarding Awards.
-----------------------------------------------------------------
Subject to the express provisions of this Plan, the Committee, in its sole
and absolute discretion, shall determine all of the terms and conditions of
each Award granted under Section 5 of this Plan, which terms and conditions
may include, subject to such limitations as the Committee may from time to
time impose, among other things, provisions that:
(i) permit the recipient of such Award, including any recipient
who is a director or officer of the Company, to pay the purchase price
of the Common Shares or other property issuable pursuant to such
Award, or such recipient's tax withholding obligation upon such
issuance or in respect of such Award or Shares, in whole or in part,
by any one or more of the following:
(A) the delivery of previously owned shares of capital
stock of the Company (including shares acquired as or pursuant to
Awards) then having been owned by the recipient for at least six
(6) months (or such other period required under applicable law)
or the delivery of other
3
<PAGE>
property, or
(B) the delivery of a promissory note, under any applicable
financing plan or on such other terms and conditions, as in
either case authorized by the Committee, consistent with
applicable law;
(ii) accelerate the receipt of benefits pursuant to such Award
upon the occurrence of specified events, including, without
limitation, a change of control of the Company, an acquisition of a
specified percentage of the voting power of the Company, the
dissolution or liquidation of the Company, a sale of substantially all
of the property and assets of the Company or an event of the type
described in Section 6 hereof, or pursuant to the provisions of an
employment contract not inconsistent with the terms of this Plan, or
in other circumstances or upon the occurrence of other events as
deemed appropriate by the Committee;
(iii) qualify such Award as an Incentive Stock Option;
(iv) extend the exercisability or term of any or all such
outstanding Awards, change the price of any or all such outstanding
Awards or otherwise change previously imposed terms and conditions, in
the specified events described in clause (ii) above or in other
circumstances or upon the occurrence of other events as deemed
appropriate by the Committee, in each case subject to Section 7;
(v) authorize the conversion, succession or substitution of
outstanding Awards under Section 5 upon the occurrence of any event of
the type described in Section 6, or in other circumstances or upon the
occurrence of other events as deemed appropriate by the Committee;
and/or
(vi) provide for automatic grants of Awards or successive Awards.
(d) Binding Determinations. Any action taken by, or inaction of, the
----------------------
Company, the Board or the Committee relating or pursuant to this Plan shall
be within the absolute discretion of that entity or body and shall be
conclusive and binding upon all persons. No member of the Board or officer
of the Company shall be liable for any such action or inaction of the
entity or body, of another person or, except in circumstances involving bad
faith, of himself or herself.
(e) Reliance on Experts. In making any determination or in taking or
-------------------
not taking any action under this Plan, the Board and the Committee may
obtain and may rely upon the advice of experts, including professional
advisors to the Company. No director, officer or agent of the Company
shall be liable for any such action or determination taken or made or
omitted in good faith.
(f) Delegation. The Committee may delegate ministerial, non-
----------
discretionary functions to individuals who are officers or employees of the
Company. The Committee also may delegate to certain officer(s) of the
Company (i) the authority to grant Awards pursuant to Section 5 of the
Plan, provided that such delegation is set forth in writing and includes
--------
all applicable limitations and parameters to such Awards, and provided
--------
further that such Awards are subsequently ratified by the Committee; and
-------
4
<PAGE>
(ii) with respect to unvested Awards that are Incentive Stock Options that
have been granted to an employee of the Company (other than an employee who
is subject to Section 16 of the Exchange Act), the authority to accelerate
the exercisability of such Incentive Stock Options to allow them to be
exercised within the three-month period commencing upon the date that the
employee's employment by the Company terminates by reason of the transfer
of such employee to employment by IndyMac, provided, however, that to the
-------- -------
extent (A) such accelerated Options are not exercised prior to the
expiration of such three-month period, or (B) the acceleration of the
exercisability of such Options causes such Options to fail to satisfy the
requirements of Section 422(d) of the Code, such Options shall
automatically be converted into non-qualified Options and shall continue to
be exercisable in accordance with their terms (as accelerated Options)
until they expire or otherwise terminate under the terms of the Plan.
5. Awards.
------
(a) Types of Awards. The Committee, on behalf of the Company, is
---------------
authorized under this Plan to enter into any type of arrangement with an
Employee that is not inconsistent with the provisions of this Plan and that
by its terms, involves or might involve the issuance of (i) Common Shares,
(ii) an option, warrant, convertible security, stock appreciation right or
similar right with an exercise or conversion privilege at a fixed or
variable price related to the Common Shares or other equity securities of
the Company and/or the passage of time, the occurrence of one or more
events, or the satisfaction of performance criteria or other conditions, or
any combination of these variables, or any similar security contemplated by
subsection (b) below, or (iii) any similar security with a value derived
from the value of the Common Shares or other equity securities of the
Company, all of which may or may not involve the payment of cash
consideration, subject to subsection (e) below. The authorization of any
such arrangement (including any benefits described in Section 5(e)) is
referred to herein as the grant of an "Award". The date of grant may be at
or after (but not before) the date the Committee authorizes the Award. All
Awards shall be evidenced by a writing with a schedule memorializing the
grant of the Award to the recipient and setting forth certain specifics
with respect to the terms and conditions of the Award ("Award Memorandum").
(b) Form of Awards. Awards are not restricted to any specified form
--------------
or structure and may include, without limitation, sales or bonuses of
stock, restricted stock, performance restricted stock, stock options,
reload stock options, stock purchase warrants, other rights to acquire
stock, securities convertible into or redeemable for stock, stock
appreciation rights, limited stock appreciation rights, phantom stock,
dividend equivalents, performance units or performance shares, and an Award
may consist of one such security or benefit, or two or more of them in any
combination or alternative. In addition, any Award that is intended to
qualify as an Incentive Stock Option will automatically be converted into a
non-qualified stock option to the extent that such Award does not satisfy
any applicable requirement under Section 422 of the Code.
(c) Restricted Stock Awards. If expressly provided by the Committee,
-----------------------
and without limiting subsection (b) above, Awards of restricted Common
Shares ("Restricted Stock") may be made to the holder of any Option, based
upon dividends or distributions that would have been received had the
Common Shares covered by the Option been issued and outstanding on the
applicable dividend record date. The terms
5
<PAGE>
and conditions of any such Awards of Restricted Stock shall be specified in
the applicable Award Memorandum.
(d) Time and Method of Exercise. Awards may be exercised in whole or
---------------------------
in part at such time or times as shall be determined by the Committee and
set forth in the applicable Award Memorandum. Awards shall be exercised in
accordance with procedures established by the Committee, subject to Section
4(c)(i) and any holding periods required under applicable law.
(e) Price; Consideration; Option Pricing Limit. Common Shares may be
------------------------------------------
issued pursuant to an Award for any lawful consideration as determined by
the Committee, including, without limitation, cash, Common Shares (valued
at then Fair Market Value, as defined in Section 10), or services rendered
by the recipient of such Award; provided that no Common Shares shall be
--------
issued for less than the minimum lawful consideration and no Option which
is intended to be an Incentive Stock Option shall be granted with an
exercise price that is less than the Fair Market Value (as defined in
Section 10) of the underlying Common Shares on the date of grant.
(f) Effect of Termination of Service or Death; Change in Subsidiary
---------------------------------------------------------------
Status. Subject to Section 4(c)(ii), each Option and all other rights
------
thereunder, to the extent not exercised (whether or not presently
exercisable), shall terminate and become null and void at such time as the
holder of such Option terminates service as an Employee, except that
(i) if the holder terminates service as an Employee for a reason
other than cause (as determined by the Committee in its sole
discretion), death or permanent and total disability (as defined in
clause (ii) below), the holder may at any time within a period of
three months after such termination exercise such Option to the extent
such Option was exercisable on the date of such termination;
(ii) if the holder terminates service as an Employee by reason of
permanent and total disability (within the meaning of Section 22(e)(3)
of the Code), or if the holder becomes permanently and totally
disabled within three months after termination described in clause
(i), the holder may at any time within a period of twelve (12) months
after such termination exercise such Option to the extent such Option
was exercisable on the date of such termination; and
(iii) if the holder terminates service as an Employee by reason
of death, or within three months after a termination described in
clauses (i) or (ii), then such Option may be exercised within a period
of twelve (12) months after the holder's termination of service as an
Employee, to the extent such Option was exercisable on the date of
such termination;
provided, however, that in no event may any such Option be exercised by any
-------- -------
holder after its expiration date.
Notwithstanding any of the foregoing provisions of this subsection
(f), if the holder of an Option is an Employee of IndyMac or one of its
subsidiaries or affiliates and IndyMac or the Employee ceases to provide
services to the Company, or if the
6
<PAGE>
holder of an Option is an Employee of an entity which is a subsidiary or
affiliate of the Company or IndyMac and such entity ceases to be such a
subsidiary or affiliate, such event shall be deemed for purposes of this
subsection (f) to be a termination of the holder's service as an Employee
described in clause (i) above. Absence from work caused by military service
or authorized sick leave shall not be considered a termination of service
as an Employee for purposes of this subsection (f).
(g) Cash Awards; Loans. The Committee shall have the express
------------------
authority to create, add or include a cash payment or benefit under this
Plan, whether in lieu of, in addition to or as an Award or as a component
of another type of Award, and to make or authorize loans to finance, or to
otherwise accommodate the financing, acquisition or exercise of an Award or
the satisfaction of any related tax liability.
(h) Transfer Restrictions. Unless otherwise permitted in the
---------------------
applicable Award Memorandum pursuant to the discretion of the Committee, no
Award granted hereunder shall be transferable other than by will or the
laws of descent and distribution or pursuant to a qualified domestic
relations order.
(i) Tax Withholding. Upon the issuance of Common Shares, the payment
---------------
of cash or any other taxable event in respect of an Award under this Plan,
such number of shares or amount of cash or other consideration, as the case
may be, otherwise issuable or payable may be reduced by the amount
necessary to satisfy the minimum applicable tax withholding requirements
imposed on the Company, IndyMac or any of their respective subsidiaries or
affiliates in respect of such Award or event, all to the extent and in such
manner as the Committee may determine.
6. Adjustments and Acceleration.
----------------------------
(a) Adjustments. If (i) the outstanding securities of the class then
-----------
subject to this Plan (the "outstanding shares") (A) are increased,
decreased, exchanged or converted as a result of a stock split
(including a split in the form of a stock dividend), reverse stock
split, recapitalization, or similar event or (B) are exchanged for or
converted into cash, property or a different number or kind of
securities (or if cash, property or securities are distributed in
respect of the outstanding shares), as a result of a reorganization,
merger, consolidation, exchange, recapitalization, restructuring or
reclassification, or (ii) substantially all of the property and assets
of the Company are sold as an entirety, or (iii) the Company is
liquidated and dissolved, then, the Committee (or, in the case of
Director Options, the Board) shall, in such manner and to such extent
(if any) as is equitable and appropriate, make proportionate
adjustments in (x) the number and type of shares or other securities
or cash or other property that may be acquired pursuant to Options and
other Awards previously granted under this Plan (and, where
applicable, the exercise price thereof so as to maintain the same
aggregate exercise price), (y) the maximum number and type of shares
or other securities, cash, or property that may be issued or delivered
pursuant to Options (including Incentive Stock Options and Director
Options) and other Awards thereafter granted under this Plan, and (z)
such other terms as necessarily are affected by such event. In the
case of an extraordinary distribution, merger, reorganization,
consolidation, combination, sale of assets, exchange or spin off, the
Committee (or the Board, in the case of Director Options) may make
provisions for a substitution or exchange of any or all
7
<PAGE>
outstanding Options or other Awards or rights (or for the securities,
cash or property deliverable upon exercise of such outstanding Options
or other Awards or rights), based upon the distribution or
consideration payable to holders of the Common Shares of the Company
upon or in respect of such event.
(b) Acceleration.
------------
(i) A "Change in Control" for purposes of this Plan shall mean
the occurrence of any one of the following events:
(A) An acquisition (other than directly from the Company) of
any common stock or other "Voting Securities" (as hereinafter
defined) of the Company by any "Person" (as the term person is
used for purposes of Sections 13(d) or 14(d) of the Exchange Act,
immediately after which such Person has "Beneficial Ownership"
(within the meaning of Rule 13d-3 under the Exchange Act) of
twenty five percent (25%) or more of the then outstanding shares
of the Company's common stock or the combined voting power of the
Company's then outstanding Voting Securities; provided, however,
-------- -------
that in determining whether a Change in Control has occurred,
Voting Securities which are acquired in a "Non-Control
Acquisition" (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. For purposes
of this Plan, (1) "Voting Securities" shall mean the Company's
outstanding voting securities entitled to vote generally in the
election of directors and (2) a "Non-Control Acquisition" shall
mean an acquisition by (a) an employee benefit plan (or a trust
forming a part thereof) maintained by (x) the Company, (y)
IndyMac or, (z) any corporation or other Person of which a
majority of its voting power or its voting equity securities or
equity interest is owned, directly or indirectly, by the Company
(for purposes of this definition, a "Subsidiary"), (b) the
Company or any of its Subsidiaries, or (c) any Person in
connection with a "Non-Control Transaction" (as hereinafter
defined);
(B) The individuals who as of January 27, 1998 are members
of the Board (the "Incumbent Board") cease for any reason to
constitute at least two-thirds of the members of the Board;
provided, however, that if the election, or nomination for
-------- -------
election by the Company's common stockholders, of any new
director was approved by a vote of at least two-thirds of the
Incumbent Board, such new director shall, for purposes of this
Plan, be considered as a member of the Incumbent Board; provided
--------
further, however, that no individual shall be considered a member
------- -------
of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened "Election
Contest" (as described in Rule 14a-11 under the Exchange Act) or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board (a "Proxy Contest")
including by reason of any agreement intended to avoid or settle
any Election Contest or Proxy Contest; or
(C) The consummation of: (1) A merger, consolidation or
reorganization involving the Company, unless such
8
<PAGE>
merger, consolidation or reorganization is a "Non-
Control Transaction." A "Non-Control Transaction"
shall mean a merger, consolidation or reorganization of
the Company where: (a) the stockholders of the Company,
immediately before such merger, consolidation or
reorganization, own directly or indirectly immediately
following such merger, consolidation or reorganization,
at least seventy percent (70%) of the combined voting
power of the outstanding Voting Securities of the
corporation resulting from such merger, consolidation
or reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership of
the Voting Securities immediately before such merger,
consolidation or reorganization; (b) the individuals
who were members of the Incumbent Board immediately
prior to the execution of the agreement providing for
such merger, consolidation or reorganization constitute
at least two-thirds of the members of the board of
directors of the Surviving Corporation, or in the event
that, immediately following the consummation of such
transaction, a corporation beneficially owns, directly
or indirectly, a majority of the Voting Securities of
the Surviving Corporation, the board of directors of
such corporation; and (c) no Person other than (w) the
Company, (x) any Subsidiary, (y) any employee benefit
plan (or any trust forming a part thereof) maintained
by the Company, IndyMac, the Surviving Corporation, or
any Subsidiary, or (z) any Person who, immediately
prior to such merger, consolidation or reorganization
had Beneficial Ownership of twenty-five percent (25%)
or more of the then outstanding Voting Securities or
common stock of the Company, has Beneficial Ownership
of twenty-five percent (25%) or more of the combined
voting power of the Surviving Corporation's then
outstanding Voting Securities or its common stock;
(2) A complete liquidation or dissolution of the
Company, or
(3) The sale or other disposition of all or
substantially all of the assets of the Company to any
Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing provisions of this Section 6(b)(i),
a Change in Control shall not be deemed to occur solely because any
Person (the "Subject Person") acquired Beneficial Ownership of more
than the permitted amount of the then outstanding common stock or
Voting Securities as a result of the acquisition of common stock or
Voting Securities by the Company which, by reducing the number of
shares of common stock or Voting Securities then outstanding,
increases the proportional number of shares Beneficially Owned by
9
<PAGE>
the Subject Persons; provided, however, that if a Change in Control
-------- -------
would occur (but for the operation of this sentence) as a result of
the acquisition of common stock or Voting Securities by the Company,
and after such share acquisition by the Company, the Subject Person
becomes the Beneficial Owner of any additional common stock or Voting
Securities which increases the percentage of the then outstanding
common stock or Voting Securities Beneficially Owned by the Subject
Person, then a Change in Control shall occur.
(ii) Except as otherwise provided in Section 10(j), prior to a
Change in Control, the Committee may determine in respect of Awards
held by Employees that upon or in anticipation of the occurrence of
the Change in Control benefits under Awards shall be accelerated only
for a limited period of time, which period of time shall not be less
than a period of time reasonably necessary to realize the benefits of
such acceleration nor more than one year after the Change in Control.
If such a determination is not made, then (subject to the last
sentence of this clause) upon the occurrence of a Change in Control
and without further action by the Board or the Committee, (A) each
Option and stock appreciation right shall become immediately
exercisable, (B) performance Restricted Stock shall immediately vest
free of restrictions, and (C) each performance share Award shall
become payable to the Employee. The Committee may override the
limitations on acceleration in this Section 6(b)(ii) by express
provision in the Award Memorandum or otherwise, and may accord any
holder of an Award a right to refuse any acceleration, whether
pursuant to the Award Memorandum or otherwise, in such circumstances
as the Committee may approve. Any acceleration of Awards shall comply
with any applicable regulatory and financial accounting requirements,
including without limitation Section 422 of the Code.
(iii) Any Awards that are (or but for a holder's rejection of
acceleration would have been) accelerated under this Section 6 and
that are not exercised or vested prior to a dissolution of the Company
or a reorganization event described in Section 6(a) that the Company
does not survive shall terminate, provided that if provision has been
--------
made, consistent with the terms hereof, for the substitution, exchange
or other settlement of Awards, such Awards shall be substituted,
exchanged or otherwise settled in accordance with such provision.
(iv) Any Awards that are (or but for the holder's rejection of
the acceleration would have been) accelerated that are not exercised
or vested prior to an abandonment or termination of a transaction
subject to shareholder approval that triggered the Change in Control
(as evidenced by public announcement, Board resolution, execution of
documents terminating the transaction, or other action or document
objectively confirming such abandonment or termination), shall be
restored to their prior status (except for the effects of the passage
of time) as if no Change in Control had occurred.
7. Amendment and Termination of Plan.
---------------------------------
(a) No Award shall be granted under this Plan after January 27,
2008. Although Common Shares may be issued after January 27, 2008 pursuant
to Awards granted prior to such date, no Common Shares otherwise shall be
issued under this Plan
10
<PAGE>
after such date. Notwithstanding the foregoing, any Award granted prior to
such date may vest or be amended after such date in any manner that would
have been permitted prior to such date, except that (except as provided
herein) no such amendment shall increase the number of shares subject to or
comprising such Award, or extend the final expiration date of the Award or
reduce (below the Fair Market Value (as defined in Section 10) on the date
of the amendment) the exercise price of or under such Award.
(b) The Board may, without shareholder approval, at any time and from
time to time, suspend, discontinue or amend this Plan in any respect
whatsoever, except that no such amendment shall impair any rights under any
Award theretofore made under the Plan without the consent of the holder of
such Award. Furthermore, and except as and to the extent otherwise
permitted by the provisions hereof, no such amendment shall, without
shareholder approval, cause the Plan to cease to satisfy any applicable
condition of Rule 16b-3 under the Exchange Act or cause any Award under the
Plan to cease to qualify for any applicable exception under Section 162(m)
of the Code.
8. Effective Date of Plan: Shareholder Approval. This Plan shall be
--------------------------------------------
effective as of January 27, 1998, the date upon which it was approved by the
Board; provided, however, that no Common Shares may be issued under this Plan
-------- -------
until it has been approved by the affirmative votes of the holders of a majority
of the Common Shares of the Company present, or represented, and entitled to
vote at a meeting duly held in accordance with applicable law.
9. Legal Issues.
------------
(a) Compliance and Choice of Law: Severability. This Plan, the
------------------------------------------
granting and vesting of Awards under this Plan and the issuance and
delivery of Common Shares and/or the payment of money under this Plan or
under Awards granted hereunder are subject to compliance with all
applicable federal and state laws, rules and regulations (including but not
limited to state and federal securities law and federal margin
requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company,
be necessary or advisable in connection therewith. Any securities
delivered under this Plan shall be subject to such restrictions as the
Company may deem necessary or desirable to assure compliance with all
applicable legal requirements. This Plan, the Awards, all documents
evidencing Awards and all other related documents shall be governed by, and
construed in accordance with, the laws of the State of Delaware. If any
provision shall be held by a court of competent jurisdiction to be invalid
and unenforceable, the remaining provisions of this Plan (subject to
Section 9(b)) shall continue in effect.
(b) Plan Construction. It is the intent of the Company that this Plan
-----------------
and Awards hereunder satisfy and be interpreted in a manner that in the
case of recipients who are or may become persons subject to Section 16 of
the Exchange Act satisfies the applicable requirements of Rule 16b-3 under
the Exchange Act so that such persons will be entitled to the benefits of
Rule 16b-3 or other exemptive rules under Section 16 of the Exchange Act
and will not be subjected to avoidable liability thereunder. If any
provision of this Plan or of any Award would otherwise frustrate or
conflict with the intent expressed above, that provision to the extent
possible shall be interpreted and deemed amended so as to avoid such
conflict, but to the extent of any remaining irreconcilable conflict with
such intent as to such persons in the circumstances, such provision shall
be deemed inoperative.
11
<PAGE>
(c) REIT Qualification.
------------------
(i) It is the intent of the Company that this Plan and Awards
hereunder satisfy and be interpreted in a manner consistent with the
Company's continued status as a "qualified real estate investment
trust" under the Code. If any provision of this Plan or any Award
would otherwise frustrate or conflict with the intent expressed above,
that provision to the extent possible shall be interpreted and deemed
amended so as to avoid such conflict, but to the extent of any
remaining irreconcilable conflict with such intent as to the Company,
such provision shall be deemed inoperative.
(ii) Notwithstanding anything contained herein to the contrary,
no participant may receive any Common Shares upon the grant, exercise
or vesting of an option or right or other Award to the extent it will
cause such person to beneficially or constructively own equity shares
in excess of 9.8% of the equity shares of the Company. In the event
that a participant would be otherwise entitled to claim or seek to
exercise any right which upon delivery of Common Shares would cause
such participant to beneficially or constructively own equity shares
in excess of the ownership limit, the Company shall have the right,
notwithstanding any option or right previously granted to the
participant, to deliver a check or cash to the participant in lieu
thereof.
(d) Non-Exclusivity of Plan. Nothing in this Plan shall limit or be
-----------------------
deemed to limit the authority of the Board or the Committee to grant awards
or authorize any other compensation, with or without reference to the
Common Shares, under any other plan or authority.
10. Non-Employee Director Options
-----------------------------
(a) Participation. Awards relating to the Common Shares authorized
-------------
under this Plan shall be made under this Section 10 only to Non-Employee
Directors.
(b) Certain Definitions. The following definitions shall apply to
-------------------
this Section 10:
(i) "Business Day" shall mean any day, other than Saturday,
Sunday or any statutory holiday in the state of California.
(ii) "Director Option" shall mean an Option granted to a Non-
Employee Director pursuant to this Section 10.
(iii) "Disability" shall mean a "permanent and total disability"
within the meaning of Section 22(e)(3) of the Code.
(iv) "Fair Market Value" on a specified date shall mean (A) if
the Common Shares are listed or admitted to trade on a national
securities exchange, the average of the high and low reported sales
prices of the Common Shares on the Composite Tape on such date, as
published in the Western Edition of The Wall Street Journal, on the
principal national securities exchange on which the Common Shares are
so listed or admitted to trade, or, if there is no trading of the
Shares on such date, then the average of the high and low reported
12
<PAGE>
sales prices of the Common Shares as quoted on such Composite Tape on
the next preceding date on which there was trading in such Shares; (B)
if the Common Shares are not listed or admitted to trade on a national
securities exchange, the average of the high and low reported prices
for the Common Shares on such date, as furnished by the National
Association of Securities Dealers, Inc. ("NASD") through the NASDAQ
National Market Reporting System (or a similar organization, if the
NASD is no longer reporting such information); (C) if the Common
Shares are not listed or admitted to trade on a national securities
exchange and are not reported on the National Market Reporting System,
the arithmetic mean between the bid and asked prices for the Shares on
such date, as furnished by the NASD or a similar organization; or (D)
if the Common Shares are not listed or admitted to trade on a national
securities exchange nor reported on the National Market Reporting
System and if bid and asked prices for the stock are not furnished by
the NASD or a similar organization, the value as established by the
Board at such time for purposes of this Plan.
(v) "Retirement" shall mean retirement or resignation as a
director after at least five (5) years service as a director.
(c) Annual Awards. On the first Business Day in June in each calendar
-------------
year during the term of the Plan, commencing in June 1998, there shall be
granted automatically (without any action by the Committee or the Board) a
nonqualified stock option (the grant date of which shall be such date in
June) to each Non-Employee Director then in office to purchase the number
of Common Shares equal to 30,000 multiplied by a fraction, the numerator of
which is the earnings per Common Share (on a fully diluted basis, excluding
the one time charge to earnings resulting from the acquisition by the
Company of its manager in June 1997) of the Company for the fiscal year of
the Company ended immediately before the date of grant of the Non-Employee
Director option (as reported in the audited Financial Statements included
in the Company's Annual report on Form 10-K filed with the Securities and
Exchange Commission ("SEC"), but in no event less than zero) (the "EPS
Numerator Amount") and the denominator of which is (i) in 1998, $1.51; and
(ii) in each year after 1998, the greater of (A) $1.79 compounded at a rate
of 15% per year (i.e., in 1999, $2.06; in 2000, $2.37; in 2001, $2.72; in
2002, $3.13), or (B) the EPS Numerator Amount for the fiscal year of the
Company ended immediately before the fiscal year used in determining the
EPS Numerator Amount. The number 30,000 and the specific dollar amounts
herein are subject to adjustment in those events set forth in subsection
(h) below. The formula contained in this Section 10(c) may be amended by
subsequent action of the Board to provide either for an alternative formula
for calculating the number of Common Shares to be awarded annually, or to
provide for the annual award of a fixed number of Common Shares; provided
--------
that, in either case, (i) the number of Common Shares to be awarded
----
annually to Non-Employee Directors under such alternative formula or fixed
number is no greater than that provided for under the formula set forth
herein, and (ii) each Non-Employee Director receives the same number of
Common Shares as every other Non-Employee Director under such alternative
formula or fixed number.
(d) Maximum and Minimum Number of Shares. Notwithstanding anything to
------------------------------------
the contrary contained herein, a Non-Employee Director shall not receive
Options for less than 20,000 nor more than 50,000 Common Shares pursuant to
this Section 10
13
<PAGE>
in any year.
(e) Purchase Price. The exercise price for Shares under each Non-
--------------
Employee Director option shall be equal to 100% of the Fair Market Value of
a Common Share on the date the Director Option is granted. The exercise
price of any option granted under this Section 10 shall be paid in full at
the time of each purchase in cash equivalent or in Common Shares valued at
their Fair Market Value on the date of exercise of such option, or partly
in such shares and partly in cash, provided that any such Common Shares
-------- ----
used in payment shall have been owned by the Non-Employee Director at least
six months prior to the date of exercise.
(f) Option Period and Exercisability. Each Director Option granted
--------------------------------
under this Section 10 shall become fully exercisable, in whole or in part,
on the first anniversary of the grant date. Each option granted under this
Section 10 and all rights or obligations thereunder shall expire on the
earlier of the tenth anniversary of the date of grant or the liquidation or
dissolution of the Company and shall be subject to earlier termination as
provided below.
(g) Termination of Directorship. If a Non-Employee Director's
---------------------------
services as a member of the Board terminate by reason of death, Disability
or Retirement, an option granted pursuant to this Section 10 then held by
such Non-Employee Director shall immediately become and shall remain
exercisable for one year after the date of such termination or until the
expiration of the stated term of such option, whichever first occurs. If a
Non-Employee Director's services as a member of the Board terminate for any
other reason (other than Cause), any option granted pursuant to this
Section 10 which is not then exercisable shall terminate and any such
option which is then exercisable may be exercised for three months after
the date of such termination or until the expiration of the stated term,
which ever first occurs. If a Non-Employee Director is terminated for
Cause, all Director Options granted to such Non-Employee Director shall be
forfeited and shall no longer be exercisable, effective on the date of such
termination for Cause. For purposes of this Section 10, "Cause" shall
mean, with respect to any Non-Employee Director, termination on account of
any act of (i) fraud or intentional misrepresentation, (ii) embezzlement,
misappropriation or conversion of assets or opportunities of the Company or
any affiliate, or (iii) conviction of a felony.
(h) Adjustments. The provisions of this Section 10 and Director
-----------
Options granted hereunder shall be subject to Section 6. If there shall
occur any event described in Section 6(a), then in addition to the matters
contemplated thereby, the Board shall, in such manner and to such extent
(if any) as is appropriate and equitable, proportionately adjust the dollar
amounts set forth elsewhere in this Section 10.
(i) Loans. Subject to the requirements of applicable law, the Board
-----
may authorize loans to Non-Employee Directors to finance the exercise of
Awards; provided, however, that no loan shall be made to any Non-Employee
-------- -------
Director to finance the exercise of an Award made under this Section 10
unless (i) such loan is made pursuant to a full recourse promissory note,
and (ii) such loan, if secured by Common Shares (whether issuable under the
Award in question or otherwise), is made in compliance with Regulation G of
the Federal Reserve Board.
(j) Acceleration Upon a Change in Control. Upon the occurrence of a
-------------------------------------
Change in Control referred to in Section 6(b), each Director Option granted
under this
14
<PAGE>
Section 10 shall become immediately exercisable in full subject to the
terms thereof (other than with respect to the Committee's discretion). To
the extent that any Director Option granted under this Section 10 is not
exercised prior to (i) a dissolution of the Company or (ii) a merger or
other corporate event that the Company does not survive, and no provision
is (or consistent with the provisions of Section 9 or 10 can be) made for
the assumption, conversion, substitution or exchange of the option, the
Director Option shall terminate upon the occurrence of such event.
(k) Other Provisions. The provisions of Sections 3(e)-(f), 5(h) and 7
----------------
through 9 are incorporated herein by this reference.
15
<PAGE>
AMENDMENT TO THE 1998 STOCK INCENTIVE PLAN OF
INDYMAC MORTGAGE HOLDINGS, INC.
(Adopted by the Board of Directors on July 21, 1998)
The 1998 Stock Incentive Plan of IndyMac Mortgage Holdings, Inc. is hereby
amended to revise Section 10(b)(iv) so that, as amended, Section 10(b)(iv) shall
read as follows:
"Fair Market Value" on a specified date shall mean (A) if the Common Shares
are listed or admitted to trade on a national securities exchange, the average
of the average of the high and low reported sales prices of the Common Shares on
the Composite Tape, as published in the Western Edition of The Wall Street
Journal, on the ten days preceding such date on which the Common Shares trade on
such principal national securities exchange; (B) if the Common Shares are not
listed or admitted to trade on a national securities exchange, the average of
the average of the high and low reported prices for the Common Shares on the ten
days preceding such date on which such prices for the Common Shares are
furnished by the National Association of Securities Dealers, Inc. ("NASD")
through the NASDAQ National Market Reporting System (or a similar organization,
if the NASD is no longer reporting such information); (C) if the Common Shares
are not listed or admitted on a national securities exchange and are not
reported on the National Market Reporting System, the arithmetic mean of the
arithmetic mean between the bid and asked prices for the Common Shares on the
ten days preceding such date on which bid and asked prices for the Common Shares
are furnished by the NASD or a similar organization; or (D) if the Common Shares
are not listed or admitted to trade on a national securities exchange nor
reported on the National Reporting System, and if bid and asked prices for the
Common Shares are not furnished by the NASD or a similar organization, the value
as established by the Board at such time for purposes of this Plan."
<PAGE>
Exhibit 10.1
------------
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") has been executed as of January 1,
1998 by and between IndyMac Mortgage Holdings, Inc. ("Employer") and Carmella
Grahn ("Officer").
WITNESSETH:
WHEREAS, Employer desires to obtain the benefit of continued services of Officer
and Officer desires to continue to render services to Employer and its
affiliates.
WHEREAS, Employer and Officer desire to set forth the terms and conditions of
Officer's employment with Employer and its affiliates under this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained, the parties hereto agree as follows:
1. TERM. Employer agrees to employ Officer and Officer agrees to serve Employer
and its affiliates, in accordance with the terms hereof, for a term beginning
on the date first written above and ending on December 31, 2000, unless
earlier terminated in accordance with the provisions hereof.
2. POSITION, DUTIES AND RESPONSIBILITIES. Employer and Officer hereby agree
that, subject to the provisions of this Agreement, Employer will employ
Officer and Officer will serve Employer, as a senior manager of either
IndyMac, Inc. ("IndyMac") or Employer, or a similarly structured entity in
which Employer owns the majority of the economic interest, as determined in
the sole discretion of Employer. Officer's role may, from time to time, be
redefined by Employer, except that Officer shall at all times remain a senior
manager. Employer agrees that Officer's duties hereunder shall be the usual
and customary duties of such office and such further duties shall not be
inconsistent with the provisions of applicable law. Officer agrees that
Employer may add to or change Officer's duties as business considerations
dictate, as determined by the President of Employer. Officer shall have such
official power and authority as shall reasonably be required to enable her to
discharge her duties in the offices which she may hold. All compensation
paid to Officer by Employer or any of its affiliates shall be aggregated in
determining whether Officer has received the benefits provided for herein,
but without prejudice to the allocation of costs among the entities to which
Officer renders services hereunder. If Employer requests Officer to relocate
outside of Los Angeles County, Ventura County or Orange County in connection
with the relocation of Employer's headquarters, Officer shall have the option
of agreeing to such relocation and the terms of this contract shall continue
in full force and effect. If Officer declines to relocate, either Officer or
Employer shall provide the other party with a Notice of Termination in
accordance with Section 5(f) and all of the rights and obligations of both
parties under this Agreement shall cease upon such termination and no
provisions shall survive (including, without limitation, Sections 5(d) and
8(k)), except for Section 8(g) and the right to enforce that provision
through injunctive relief pursuant to Section 8(h). If Employer requests
Officer to relocate outside of
<PAGE>
Los Angeles County, Ventura County or Orange County and Employer's
headquarters are not also relocating, Officer shall have the option of
agreeing to such relocation and the terms of this contract shall continue in
full force and effect. If Officer declines to relocate, Employer's request to
relocate shall be deemed a termination other than for Cause pursuant to
Section 5(d).
3. SCOPE OF THIS AGREEMENT AND OUTSIDE AFFILIATIONS. During the term of this
Agreement, Officer shall devote her full business time and energy, except as
expressly provided below, to the business, affairs and interests of Employer
and its affiliates, and matters related thereto, and shall use her best
efforts and abilities to promote their respective interests. Officer agrees
that she will diligently endeavor to promote the business, affairs and
interests of Employer and its affiliates and perform services contemplated
hereby, in accordance with the policies established by the Board of the
applicable entity, which policies shall be consistent with this Agreement.
Officer agrees to serve without additional remuneration as an officer of one
or more (direct or indirect) subsidiaries or affiliates of Employer as
Employer may from time to time request, subject to appropriate authorization
by the affiliate or subsidiary involved and any limitation under applicable
law.
During the course of Officer's employment as a full-time officer hereunder,
Officer shall not, without the consent of Employer, compete, directly or
indirectly, with Employer in the business then conducted by Employer or any
of its affiliates.
Officer may make and manage personal business investments of her choice and
serve in any capacity with any civic, educational or charitable organization,
or any governmental entity or trade association, without seeking or obtaining
approval by the Board, provided such activities and services do not
materially interfere or conflict with the performance of her duties
hereunder.
4. COMPENSATION AND BENEFITS.
a. BASE SALARY. Employer shall pay to Officer a base salary in respect of the
fiscal year of Employer (a "Fiscal Year") ending December 31, 1998 at the
annual rate as set forth on Appendix A (the "Annual Rate"). In respect of
the Fiscal Years ending in 1999 and 2000, the Compensation Committee of
the Board (the "Compensation Committee) may, based upon the recommendation
of Michael W. Perry and the performance of Officer and Employer, increase
the Annual Rate. While any such increase shall be at the discretion of the
Compensation Committee, it is anticipated that, for any Fiscal Year, a
performance rating of good would result in an increase in the Annual Rate
of between 5% and 15%. During the term of this Agreement, Employer may not
decrease the Annual Rate below the amount set forth in Appendix A unless
decreased by the same percentage for all officers at Officer's level.
b. INCENTIVE COMPENSATION. Employer shall pay to Officer for each of the
Fiscal Years ending during the term of this Agreement an incentive
compensation award in an amount determined pursuant to the Annual
Incentive Plan attached hereto as Appendix A. The terms of the Annual
Incentive Plan shall be determined in the first quarter of each Fiscal
year during the term of this Contract, as mutually agreed upon by Employer
and Officer. The incentive compensation award payable to
2
<PAGE>
Officer for any Fiscal Year shall be paid no later than thirty (30) days
after completion and publication of the applicable audited financial
statements for such Fiscal Year.
c. STOCK OPTIONS. Beginning with the 1998 Fiscal Year and in respect of each
of the following Fiscal Years during the term of this Agreement, Employer
may grant to Officer stock options for such number of shares of Employer's
common stock as the Compensation Committee in its sole discretion
determines, taking into account Officer's and Employer's performance and
the competitive practices then prevailing regarding the granting of stock
options. Subject to the foregoing, it is anticipated that the number of
shares in respect of each annual stock option grant shall be in accordance
with the number of shares granted to officers of Employer at a level
similar to Officer's level. The stock options described in this Section
4(c) in respect of a Fiscal Year shall be granted at the same time as
Employer grants stock options to its other officers in respect of such
Fiscal Year.
All stock options granted in accordance with this Section 4(c): (i) shall
be granted pursuant to Employer's current stock option plan, or such other
stock option plan or plans as may be or come into effect during the term of
this Agreement, (ii) shall have a per share exercise price equal to the
fair market value (as defined in the current Plan or such other plan or
plans) of the common stock at the time of grant, (iii) shall become
exercisable in three equal installments on each of the first three
anniversaries of the date of grant, (iv) shall become immediately and fully
exercisable in the event of a Change in Control (as defined in Appendix B)
or in the event that Officer's employment is terminated due to death or
Disability or by Employer other than for Cause (as defined in Section
5(c)), and (v) shall be subject to such other reasonable and consistent
terms and conditions as may be determined by the Compensation Committee and
set forth in the agreement evidencing the award.
d. ADDITIONAL BENEFITS. Officer shall also be entitled to all rights and
benefits for which she is otherwise eligible under any bonus plan, stock
purchase plan, participation or extra compensation plan, executive
compensation plan, pension plan, profit-sharing plan, life and medical
insurance policy, or other plans or benefits, which Employer or its
subsidiaries may provide for her, or provided she is eligible to
participate therein, for senior officers generally or for employees
generally, during the term of this Agreement (collectively, "Additional
Benefits"). Officer shall also be entitled to three (3) weeks of vacation
each Fiscal Year, subject to all applicable policies of Employer relating
to vacation time. This Agreement shall not affect the provision of any
other compensation, retirement or other benefit program or plan of
Employer. If Officer's employment is terminated hereunder, pursuant to
Section 5(a), 5(b) or 5(d), Employer shall continue for the period
specified in Section 5(a), 5(b) or 5(d) hereof, to provide benefits
substantially equivalent to Additional Benefits (other than qualified
pension or profit sharing plan benefits and option, equity or stock
appreciation or other incentive plan benefits as distinguished from health,
disability and welfare type benefits) on behalf of Officer and her
dependents and beneficiaries which were being provided to them immediately
prior to Officer's Termination Date, but only to the extent that Officer is
not entitled to comparable benefits from other employment.
3
<PAGE>
5. TERMINATION. The compensation and benefits provided for herein and the
employment of Officer by Employer shall be terminated only as provided for
below in this Section 5:
a. DISABILITY. In the event that Officer shall fail, because of illness,
injury or similar incapacity ("Disability"), to render for four (4)
consecutive calendar months, or for shorter periods aggregating eighty
(80) or more business days in any twelve (12) month period, services
contemplated by this Agreement, Officer's full-time employment hereunder
may be terminated, by written Notice of Termination from Employer to
Officer; and thereafter, Employer shall continue, from the Termination
Date until Officer's death or December 31, 2000, whichever first occurs
(the "Disability Payment Period"), (i) to pay compensation to Officer, in
the same manner as in effect immediately prior to the Termination Date, in
an amount equal to (1) fifty percent (50%) of the then existing base
salary payable immediately prior to the termination, minus (2) the amount
of any cash payments due to her under the terms of Employer's disability
insurance or other disability benefit plans or Employer's tax-qualified
Defined Benefit Pension Plan, and any compensation she may receive
pursuant to any other employment, and (ii) to provide during the
Disability Payment Period the additional benefits specified in the last
sentence of Section 4(d) hereof.
The determination of Disability shall be made only after 30 days' notice
to Officer and only if Officer has not returned to performance of her
duties during such 30-day period. In order to determine Disability, both
Employer and Officer shall have the right to provide medical evidence to
support their respective positions, with the ultimate decision regarding
Disability to be made by a majority of the members of Employer's Benefits
Committee.
b. DEATH. In the event that Officer shall die during the term of this
Agreement, Employer shall pay Officer's base salary for a period of twelve
(12) months following the date of Officer's death and in the manner
otherwise payable hereunder, to such person or persons as Officer shall
have directed in writing or, in the absence of a designation, to her
estate (the "Beneficiary"). Employer shall also (1) pay to such
Beneficiary (x) an amount equal to the incentive compensation that would
have been payable to Officer pursuant to Section 4(b) in respect of the
Fiscal Year in which the Officer's death occurs multiplied by a fraction,
the numerator of which is the number of days in such Fiscal Year through
the date of Officer's death and the denominator of which is 365 and (y)
any unpaid incentive compensation payable to Officer pursuant to Section
4(b) in respect of the Fiscal Year immediately preceding the Fiscal Year
in which her death occurs and (2) provide during the twelve-month period
following the date of Officer's death the additional benefits specified in
the last sentence of Section 4(d) hereof. If Officer's death occurs while
she is receiving payments for Disability under Section 5(a) above, such
payments shall cease and the Beneficiary shall be entitled to the payments
and benefits under this Section 5(b), which shall continue for a period of
twelve months thereafter at the full rate of base salary in effect
immediately prior to the Disability. This Agreement in all other respects
will terminate upon the death of Officer; provided, however, that (i) the
termination of the Agreement shall not affect Officer's entitlement to all
other benefits in which she has become vested or which are otherwise
payable in respect of periods ending prior to its termination, and (ii) to
the extent not otherwise vested, all outstanding stock options granted to
Officer pursuant to Section 4(c) will vest upon her death.
4
<PAGE>
c. CAUSE. Employer may terminate Officer's employment under this Agreement for
"Cause." A termination for Cause is a termination by reason of (i) a
material breach of this Agreement by Officer (other than as a result of
incapacity due to physical or mental illness) which is committed in bad
faith or without reasonable belief that such breach is in the best
interests of Employer and which is not remedied within a reasonable period
of time after receipt of written notice from Employer specifying such
breach, or (ii) Officer's conviction by a court of competent jurisdiction
of a felony or misdemeanor carrying a jail term, or (ii) entry of an order
duly issued by any federal or state regulatory agency having jurisdiction
in the matter removing Officer from office of Employer or its affiliates or
permanently prohibiting her from participation in the conduct of the
affairs of Employer of any of its affiliates. If Officer shall be
convicted of a felony or misdemeanor carrying a jail term, or shall be
removed from office and/or temporarily prohibited from participating in the
conduct of Employer's or any of its affiliates' affairs by any federal or
state regulatory authority having jurisdiction in the matter, Employer's
obligations under Sections 4(a), 4(b), and 4(c) hereof shall be
automatically suspended provided, however, that if the charges resulting in
such removal or prohibition are finally dismissed or if a final judgment on
the merits of such charges is issued in favor of Officer, or if the
conviction is overturned on appeal, then Officer shall be reinstated in
full with back pay for the removal period plus accrued interest at the rate
then payable on judgments. During the period that Employer's obligations
under Sections 4(a), 4(b), and 4(c) hereof are suspended, Officer shall
continue to be entitled to receive Additional Benefits under Section 4(d)
until the conviction of the felony, or misdemeanor carrying a jail term,
or removal from office has become final and non-appealable. When the
conviction of the felony or removal from office has become final and non-
appealable, all of Employer's obligations hereunder shall terminate;
provided, however, that the termination of Officer's employment pursuant to
this Section 5(c) shall not affect Officer's entitlement to all benefits in
which she has become vested or which are otherwise payable in respect of
periods ending prior to her termination of employment.
d. SEVERANCE.
(i) Except as provided in Section 5(d)(ii) below, if during the term of this
Agreement, Officer's employment shall be terminated by Employer other than
for Cause, or by Officer because Employer has committed a "Material Breach"
of this Agreement, then Employer shall (1) pay Officer in a single payment
as soon as practicable after the Termination Date, but in no event later
than thirty (30) days thereafter, (A) an amount in cash equal to six months
of Officer's base salary at the Annual Rate at the Termination Date and (B)
an amount equal to one-half the incentive compensation paid or payable to
Officer pursuant to Section 4(b) in respect of the Fiscal Year immediately
preceding the Fiscal Year in which Officer's Termination Date occurs (the
"Bonus Rate"); provided, however, that in the event the first anniversary
of the Termination Date occurs on a date prior to the end of a Fiscal Year,
Employer shall also pay Officer an amount equal to the product of (x) the
Bonus Rate and (y) a fraction, the numerator of which is (I) the number of
days elapsed since the end of the immediately preceding Fiscal Year through
the end of the Severance Period and (II) the denominator of which is 365,
and (2) until the first anniversary of the Termination Date, provide the
benefits specified in the last sentence of Section 4(d) hereof. Employer
shall also pay in a single payment as soon as practicable after the
Termination Date, but in no event later than thirty (30) days thereafter,
any unpaid incentive compensation payable to Officer pursuant to Section
4(b) in respect of the
5
<PAGE>
Fiscal Year immediately preceding the Fiscal Year in which Officer's
Termination Date occurs, as calculated pursuant to the terms and
conditions of this Agreement, including, but not limited to, the terms of
Appendix A. For the purpose of this provision, the term "Material Breach"
shall mean a material breach of this Agreement by Employer which is
committed in bad faith and which is not remedied within a reasonable
period of time after receipt of written notice from Officer specifying
such breach.
(ii) If within two (2) years after a "Change in Control" (as defined in
Appendix B to this Agreement) and during the term of this Agreement,
Officer's employment shall be terminated by Employer other than for Cause
or by Officer for Good Reason, then (A) Employer shall pay Officer in a
single payment as soon as practicable after the Termination Date, but in
no event later than thirty (30) days thereafter, (x) as severance pay and
in lieu of any further salary and incentive compensation for periods
subsequent to the Termination Date, an amount in cash equal to one-half
times the sum of (1) Officer's base salary at the Annual Rate at the
Termination Date and (2) the incentive compensation paid or payable to
Officer pursuant to Section 4(b) in respect of the Fiscal Year immediately
preceding the Fiscal Year in which Officer's Termination Date occurs and
(y) any unpaid incentive compensation payable to Officer pursuant to
Section 4(b) in respect of the Fiscal Year immediately preceding the
Fiscal Year in which Officer's Termination Date occurs, and (B) Employer
shall continue to provide for six months from the Termination Date the
benefits specified in the last sentence of Section 4(d) hereof.
(iii) For purposes of this Agreement, "Good Reason" shall be deemed to occur if
Employer (x) commits a Material Breach of this Agreement (as defined in
Section 5(d)(i)) or (y) takes any other action which results in the
substantial diminution in Officer's status, title, position, authority and
responsibilities.
(iv) Notwithstanding anything in this Agreement to the contrary, in the event
it shall be determined that any payment or distribution by Employer or any
other person or entity to or for the benefit of Officer (within the
meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as
amended (the "Code"), whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise in
connection with, or arising out of, her employment with Employer or a
change in ownership or effective control of Employer or a substantial
portion of its assets (a "Payment"), would be subject to the excise tax
imposed by Section 4999 of the Code (the "Excise Tax"), the Payments shall
be reduced (but not below zero) to the extent necessary so that no Excise
Tax would be imposed. If the application of the preceding sentence should
require a reduction in Payments or other "parachute payment" (within the
meaning of Section 280G of the Code), unless Officer shall have designated
otherwise, such reduction shall be implemented, first, by reducing any
non-cash benefits (other than stock options) to the extent necessary,
second, by reducing any cash benefits to the extent necessary and, third,
by reducing any stock options to the extent necessary. In each case, the
reductions shall be made starting with the payment or benefit to be made
on the latest date following the Termination Date and reducing payments or
benefits in reverse chronological order therefrom. All determinations
concerning the application of this paragraph shall be made by a nationally
recognized firm of independent accountants, selected by Officer and
6
<PAGE>
satisfactory to Employer, whose determination shall be conclusive and
binding on all parties. The fees and expenses of such accountants shall
be borne by Employer.
e. RESIGNATION. If during the term of this Agreement, Officer shall resign
voluntarily, all of her rights to payment or benefits hereunder shall
immediately terminate; provided, however, that the termination of Officer's
employment pursuant to this Section 5(e) shall not affect Officer's
entitlement to all benefits in which she has become vested or which are
otherwise payable in respect of periods ending prior to her termination of
employment, and all obligations of Officer under Sections 8(g) and 8(k)
shall expressly survive such termination.
f. NOTICE OF TERMINATION. Any purported termination by Employer or by Officer
shall be communicated by a written Notice of Termination to the other party
hereto which indicates the specific termination provision in this
Agreement, if any, relied upon and which sets forth in reasonable detail
the facts and circumstances, if any, claimed to provide a basis for
termination of Officer's employment under the provision so indicated
(except in the event of Officer's death or physical incapacity, in which
case such written Notice of Termination shall be provided by Officer's
executor or legal representative). For purposes of this Agreement, no such
purported termination shall be effective without such Notice of
Termination. The "Termination Date" shall mean the date specified in the
Notice of Termination, which shall be no less than 30 or more than 60 days
from the date of the Notice of Termination. Notwithstanding any other
provision of this Agreement, in the event of any termination of Officer's
employment hereunder for any reason, Employer shall pay Officer her full
base salary through the Termination Date, plus any Additional Benefits
which have been earned or become payable, but which have not yet been paid,
as of such Termination Date.
6. REIMBURSEMENT OF BUSINESS EXPENSES. During the term of this Agreement,
Employer shall reimburse Officer promptly for all business expenditures to
the extent that such expenditures meet the requirements of the Code for
deductibility by Employer for federal income tax purposes or are otherwise in
compliance with the rules and policies of Employer and are substantiated by
Officer as required by the Internal Revenue Service and rules and policies of
Employer.
7. INDEMNITY. To the extent permitted by applicable law, the Certificate of
Incorporation and the By-Laws of Employer (as from time to time in effect)
and any indemnity agreements entered into from time to time between Employer
and Officer, Employer shall defend and indemnify Officer and hold her
harmless for any acts or decisions made by her in good faith while performing
services for Employer (including any subsidiary or affiliate of Employer),
and shall use reasonable efforts to obtain coverage for her under liability
insurance policies now in force or hereafter obtained during the term of this
Agreement covering the other officers or directors of Employer.
8. MISCELLANEOUS.
a. SUCCESSION. This Agreement shall inure to the benefit of and shall be
binding upon Employer, its successors and assigns, but without the prior
written consent of Officer, this Agreement may not be assigned other than
in connection with a merger or sale of substantially all the assets of
Employer or similar transaction. Notwithstanding the foregoing, Employer
may assign, whether by assignment agreement, merger, operation of law or
otherwise, this Agreement to Employer or
7
<PAGE>
IndyMac, or to any successor or affiliate of either of them, subject to
such assignee's express assumption of all obligations of Employer
hereunder, and Officer hereby consents to any such assignment. The failure
of any successor to or assignee of the Employer's business and/or assets in
such transaction to expressly assume all obligations of Employer hereunder
shall be deemed a material breach of this Agreement by Employer, triggering
the severance provision of Section 5(d).
The obligations and duties of Officer hereby shall be personal and not
assignable.
b. NOTICES. Any notices provided for in this Agreement shall be sent to
Employer at its corporate headquarters, Attention: Chief Administrative
Officer, with a copy to the Director of Human Resources at the same
address, or to such other address as Employer may from time to time in
writing designate, and to Officer at such address as she may from time to
time in writing designate (or her business address of record in the absence
of such designation). All notices shall be deemed to have been given two
(2) business days after they have been deposited as certified mail, return
receipt requested, postage paid and properly addressed to the designated
address of the party to receive the notices.
c. ENTIRE AGREEMENT. This instrument contains the entire agreement of the
parties relating to the subject matter hereof, and it replaces and
supersedes any prior agreements between the parties relating to said
subject matter. No modifications or amendments of this Agreement shall be
valid unless made in writing and signed by the parties hereto.
d. WAIVER. The waiver of the breach of any term or of any condition of this
Agreement shall not be deemed to constitute the waiver of any other breach
of the same or any other term or condition.
e. CALIFORNIA LAW. This Agreement shall be construed and interpreted in
accordance with the laws of California, without reference to its conflicts
of laws principles.
f. ATTORNEYS' FEES IN ACTION ON CONTRACT. If any litigation shall occur
between the Officer and Employer, which litigation arises out of or as a
result of this Agreement or the acts of the parties hereto pursuant to this
Agreement, or which seeks an interpretation of this Agreement, the
prevailing party in such litigation, in addition to any other judgment or
award, shall be entitled to receive such sums as the court hearing the
matter shall find to be reasonable as and for the attorneys' fees of the
prevailing party.
g. CONFIDENTIALITY. Officer hereby acknowledges and agrees that Employer and
its affiliates have developed and own valuable information related to their
business, personnel and customers, including, but not limited to, concepts,
ideas, customer lists, business lists, business and strategic plans,
financial data, accounting procedures, secondary marketing and hedging
models, trade secrets, computer programs and plans, and information related
to officers, directors, employees and agents. Officer hereby agrees that
all such information, and all codes, concepts, copies and forms relating to
such information, Employer's plans and intentions with respect thereto, and
any information provided by Employer or its affiliates to Officer with
respect to any of the foregoing, shall be considered "Confidential
Information" for the purpose of this Agreement. Officer acknowledges and
agrees that all such Confidential Information is a valuable asset of
Employer, and
8
<PAGE>
if developed by Officer, is developed by Officer in the course of Officer's
employment with Employer, and is the sole property of Employer. Officer
agrees that she will not divulge or otherwise disclose, directly or
indirectly, any Confidential Information concerning the business or
policies of Employer or any of its affiliates which she may have learned as
a result of her employment during the term of this Agreement or prior
thereto as an employee, officer or director of or consultant to Employer or
any of its affiliates, except to the extent such use or disclosure is (i)
necessary or appropriate to the performance of this Agreement and in
furtherance of Employer's best interests, (ii) required by applicable law
or in response to a lawful inquiry from a governmental or regulatory
authority, (iii) lawfully obtainable from other sources, or (iv) authorized
by Employer. The provisions of this subsection shall survive the
expiration, suspension or termination, for any reason, of this Agreement.
h. REMEDIES OF EMPLOYER. Officer acknowledges that the services she is
obligated to render under the provisions of this Agreement are of a
special, unique, unusual, extraordinary and intellectual character, which
gives this Agreement peculiar value to Employer. The loss of these
services cannot be reasonably or adequately compensated in damages in an
action at law and it would be difficult (if not impossible) to replace
these services. By reason thereof, Officer agrees and consents that if she
violates any of the material provisions of this Agreement, Employer, in
addition to any other rights and remedies available under this Agreement or
under applicable law, shall be entitled during the remainder of the term to
seek injunctive relief, from a tribunal of competent jurisdiction,
restraining Officer from committing or continuing any violation of this
Agreement. The provisions of this subsection shall survive the
expiration, suspension or termination, for any reason, of this Agreement.
i. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in
full force and effect, and if any provision is held invalid or
unenforceable with respect to particular circumstances, it shall
nevertheless remain in full force and effect in all other circumstances.
j. NO OBLIGATION TO MITIGATE. Officer shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other
employment or otherwise and, except as provided in Section 5(a)(i)(2)
hereof, no payment hereunder shall be offset or reduced by the amount of
any compensation or benefits provided to Officer in any subsequent
employment.
k. COVENANT NOT TO COMPETE
(i) IN GENERAL. Officer agrees that while she is employed by Employer
during the term of this Agreement and for a period of six months after
the termination of such employment for whatever reason other than (x)
any termination by Employer, either for Cause or other than for Cause
or (y) the expiration of this Agreement according to its terms (the
"Non-Compete Period"), she shall not, unless Officer shall have
received the prior written consent of Employer within North America:
(A) engage in any business, whether as an employee, consultant,
partner, principal, agent, representative or stockholder (other
than as a stockholder of less than a one percent (1%)
9
<PAGE>
equity interest) or in any other corporate or representative capacity
with any other business whether in corporate, proprietorship, or
partnership form or otherwise, where such business is engaged in any
activity which competes with the business of Employer (or its
subsidiaries or affiliates, excluding Countrywide Credit Industries
and its subsidiaries, other than IndyMac) as conducted on the date
Officer's employment terminated or which will compete with any
proposed business activity of Employer (or its subsidiaries or
affiliates) in the planning stage on such date;
(B) solicit business from, or perform services for, any company or other
business entity which at any time during the two-year period
immediately preceding Officer's termination of employment with
Employer was a client of Employer (or its subsidiaries or affiliates)
(including without limitation any lessee, vendor or supplier);
provided that Officer may solicit business from another company or
business entity during such time as Officer is employed by Employer
(and prior to a Notice of Termination being provided pursuant to
Section 5(f)), so long as such solicitation is solely for the
intended benefit of Employer and carried out in the ordinary course
of the performance of Officer's duties; or
(C) offer, or cause to be offered, employment, either on a full-time,
part-time or consulting basis, to any person who was employed by
Employer (or its subsidiaries or affiliates) on the date Officer's
employment terminated.
(ii) CONSIDERATION. The consideration for the foregoing covenant not to
compete, the sufficiency of which is hereby acknowledged, is
Employer's agreement to continue to employ Officer and provide
compensation and benefits pursuant to this Agreement, including but
not limited to Section 5(d).
10
<PAGE>
(iii) EQUITABLE RELIEF AND OTHER REMEDIES. Officer acknowledges and agrees
that Employer's remedies at law for a breach or threatened breach of any
of the provisions of this Section would be inadequate and, in
recognition of this fact, Officer agrees that, in the event of such a
breach or threatened breach, in addition to any remedies at law,
Employer, without posting any bond, shall be entitled to obtain
equitable relief in the form of specific performance, a temporary
restraining order, a temporary or permanent injunction or any other
equitable remedy which may then be available.
(iv) REFORMATION. If the foregoing covenant not to compete would otherwise be
determined invalid or unenforceable by a court of competent
jurisdiction, such court shall exercise its discretion in reforming the
provisions of this Section to the end that Officer be subject to a
covenant not to compete, reasonable under the circumstances, enforceable
by Employer.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
EMPLOYER
By: /s/ Michael W. Perry
---------------------
Name: Michael W. Perry
Title: President and Chief Operating Officer
Officer:
/s/ Carmella L. Grahn
---------------------
in her individual capacity
11
<PAGE>
APPENDIX A
ANNUAL INCENTIVE PLAN
Annual Base Rate for 1998: $189,750
Target Bonus for 1998: $155,000 Maximum Bonus for 1998: $173,988
Annual Incentive Award:
- ----------------------
Officer shall be eligible for an Annual Incentive Award which shall be
comprised of the following five components and their corresponding weightings:
1. Specific Objectives (45%)
2. Cost Control Goals (25%)
3. Earnings Per Share Growth (10%)
4. Survey Results of internal customers (10%)
5. Discretionary/Subjective (10%)
These components shall be measured as follows:
1. OBJECTIVES FOR 1998 (45%):
-------------------------
<TABLE>
<CAPTION>
Target Incentive Performance Percentage:
Goal Amount Excellent Good Satisfactory Poor
<S> <C> <C> <C> <C> <C>
I. EXTERNAL FINANCIAL REPORTING $27,900 110% 100% 50% 0%
A. Timeliness (33%)
B. Accuracy (33%)
C. No surprises (33%)
II. INTERNAL FINANCIAL REPORTING $10,463 110% 100% 50% 0%
A. Timeliness (25%)
B. Accuracy (25%)
C. Completeness (25%)
D. Senior Mgr Evaluation (25%)
III. FINANCIAL PLANNING $ 6,975 110% 100% 50% 0%
Timeliness (25%)
Accuracy (25%)
Completeness (25%)
Senior Mgr Evaluation (25%)
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Target Incentive Performance Percentage:
Goal Amount Excellent Good Satisfactory Poor
<S> <C> <C> <C> <C> <C>
IV. FINANCIAL SYSTEMS $ 6,975 110% 100% 50% 0%
A. Strong Team (50%)
B. Robust Use of PeopleSoft (50%)
V. GENERAL MANAGEMENT & ORGANIZATION $17,437 110% 100% 50% 0%
A. Organization Chart (33%)
B. Competent Leaders (33%)
C. Minimize turnover in 4 and 3 rated
employees, and shall have a minimum of
50% turnover in 2 rated employees, and
100% turnover in 1 rated employees.
Turnover includes an employee leaving
the company or being reclassified due
to either improved or decreased
performance (33%)
Total incentive amount: $69,750
(max. $76,725)
</TABLE>
The Incentive Award for Objectives for Officer shall be calculated by (1)
multiplying (x) the Performance Percentage for each Objective times (y) the
-----
Target Incentive Amount for such Objective, and (2) adding all sums determined
pursuant to the preceding clause (1) for each Objective. The Target Incentive
Award for Objectives for Officer for 1998 shall be $69,750 and the Maximum shall
be $76,725.
The Target Incentive Award for Objectives for Officer for 1999 shall be $80,213
and for 2000 shall be $92,245. The Objectives for 1999 and 2000 and the
Incentive Award amount applicable to each goal or objective shall be determined
by January 15 of each respective Fiscal Year, as mutually agreed upon by
Employer and Officer.
13
<PAGE>
2. COST CONTROL GOALS (25%):
------------------------
Attached hereto as Exhibit A, is the Financial Plan for 1998 for Officer's areas
of responsibilities. The Financial Plans for 1999 and 2000 shall be determined
by January 15 of each respective Fiscal Year, as mutually agreed upon by
Employer and Officer. FOR 1998 ONLY, EVALUATION OF COST CONTROL SHALL BE
SUBJECT TO THE DISCRETION OF THE PRESIDENT OF EMPLOYER.
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Department Target Incentive Amount Performance Percentage:
125% 110% 100% 90% 80% less than 80%
- ----------------------------------------------------------------------------------------------------------------------
Cost Control for the Company $29,063 125% 110% 100% 80% 70% 0%
(75%)
- ----------------------------------------------------------------------------------------------------------------------
Cost Control for Accounting/FPA $ 9,687 125% 110% 100% 80% 70% 0%
(25%)
- ----------------------------------------------------------------------------------------------------------------------
Total $38,750
(max. $48,438)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The Target Incentive Award for Cost Control Goals for Officer shall be
calculated by (1) multiplying (x) the Performance Percentage for each Department
times (y) the Target Incentive Amount for such Department, and (2) adding all
- -----
sums determined pursuant to the preceding clause (1) for each Department. The
Target Incentive Award for Cost Control Goals for Officer for 1998 shall be
$38,750 and the Maximum shall be $48,438. The Performance Percentage for Cost
Control Goals shall be calculated based on controllable variances between budget
and actual as calculated by FPA and President. Variances will be evaluated on a
line item basis and in total for the Department. In instances whereby Officer
is responsible for multiple departments, the Target Incentive Award shall be
prorated based on the relative size of the budget as indicated in Exhibit A.
The Target Incentive Award for Cost Control Goals for Officer for 1999 shall be
$44,563 and for 2000 shall be $51,247. The Cost Control Goals for 1999 and 2000
and the Incentive Award amount applicable to each goal shall be determined by
January 15 of each respective Fiscal Year, as mutually agreed upon by Employer
and Officer.
14
<PAGE>
3. EARNINGS PER SHARE GROWTH (10%):
-------------------------------
<TABLE>
<CAPTION>
1998 1999 2000
------- ------- -------
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
Earnings Per Share Target $ 2.10 TBD TBD
- -------------------------------------------------------------------------------------------------------
Target Incentive Award $15,500 $17,825 $20,499
- -------------------------------------------------------------------------------------------------------
Maximum Incentive Award $17,825 $20,499 $23,574
- -------------------------------------------------------------------------------------------------------
If Earnings Per Share $596 for each $.01 in $TBD for each $.01 in $TBD for each $.01 in
exceed target, incentive excess of target excess of target excess of target
award shall be increased earnings per share, earnings per share, earnings per share,
by: subject to Maximum subject to Maximum subject to Maximum
- -------------------------------------------------------------------------------------------------------
If Earnings Per Share do $1,192 for each $.01 $TBD for each $.01 $TBD for each $.01
not meet target, incentive below target earnings below target earnings below target earnings
award shall be decreased per share per share per share
by:
- -------------------------------------------------------------------------------------------------------
</TABLE>
4. SURVEY RESULTS OF INTERNAL CUSTOMERS (10%):
------------------------------------------
The Human Resources Department will conduct a customer service survey of the
various internal customers of Officer's areas of responsibilities, on or before
November 1st of each year. The Officer's bonus eligibility for this portion of
the Annual Incentive Compensation shall be determined as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Overall Average Survey Result % of 10% Portion of Target
Bonus Award
- --------------------------------------------------------------------
<S> <C>
Excellent 100%
- --------------------------------------------------------------------
Good 75%
- --------------------------------------------------------------------
Satisfactory 50%
- --------------------------------------------------------------------
Needs Improvement 0%
- --------------------------------------------------------------------
</TABLE>
The maximum Survey Incentive Award that Officer shall be eligible for is as
follows:
1998: up to $15,500
1999: up to $17,825
2000: up to $20,499
15
<PAGE>
5. DISCRETIONARY/SUBJECTIVE (10%):
------------------------------
Officer shall be eligible for an additional Discretionary/Subjective Incentive
Award. Whether a Discretionary/Subjective Incentive Award shall be granted and
the amount of any such award shall be determined by the President of Employer,
in his sole and absolute discretion. Factors which will be included in the
determination of a Discretionary/Subjective Incentive Award shall be Officer's
management skills, ability to be a corporate team player and such other factors
as shall be determined by the President of Employer, in his sole and absolute
discretion. The fact that a Discretionary/Subjective Incentive Award is granted
in any year is no indication whether any such award will be granted in following
years. The maximum Discretionary/Subjective Incentive Award that Officer shall
be eligible for is as follows:
1998: up to $15,500
1999: up to $17,825
2000: up to $20,499
6. COST CONTROL AND EPS DISCOUNT FACTORS
-------------------------------------
% of Cost Control Bonus to be Paid Cost Control Discount Factor
---------------------------------- ----------------------------
greater than 70% 100%
less than 70% 0%
% of EPS Target Met EPS Discount Factor
------------------- -------------------
greater than 90% 100%
80% - 89% 90%
70% - 79% 70%
less than 70% 0%
7. TOTAL ANNUAL INCENTIVE AWARD
----------------------------
The total Annual Incentive Award shall be calculated by multiplying (x) the sum
of the amounts determined pursuant to Paragraphs 1, 2, 3, 4 and 5 above times
(y) the Cost Control Discount Factor determined pursuant to Paragraph 6 above
and if this amount is greater than 0, then multiplying such amount times the EPS
Discount Factor.
16
<PAGE>
APPENDIX B
A "Change in Control" shall mean the occurrence during the term of the
Agreement, of any one of the following events:
A. An acquisition (other than directly from Employer) of any common stock or
other "Voting Securities" (as hereinafter defined) of Employer by any
"Person" (as the term person is used for purposes of Section 13(d) or 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
immediately after which such Person has "Beneficial Ownership" (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty five
percent (25%) or more of the then outstanding shares of Employer's common
stock or the combined voting power of Employer's then outstanding Voting
Securities; provided, however, in determining whether a Change in Control
has occurred, Voting Securities which are acquired in a "Non-Control
Acquisition" (as hereinafter defined) shall not constitute an acquisition
which would cause a Change in Control. For purposes of this Agreement, (1)
"Voting Securities" shall mean Employer's outstanding voting securities
entitled to vote generally in the election of directors and (2) a "Non-
Control Acquisition" shall mean an acquisition by (i) an employee benefit
plan (or a trust forming a part thereof) maintained by (A) Employer or (B)
any corporation or other Person of which a majority of its voting power or
its voting equity securities or equity interest is owned, directly or
indirectly, by Employer (for purposes of this definition, a "Subsidiary"),
(ii) Employer or any of its Subsidiaries, (iii) any Person in connection
with a "Non-Control Transaction" (as hereinafter defined) or (iv)
Countrywide Credit Industries, Inc. or any of its affiliates or
subsidiaries ("Countrywide Credit").
B. The individuals who, as of the date of the Agreement are members of the
Board (the "Incumbent Board"), cease for any reason to constitute at least
two-thirds of the members of the Board; provided, however, that if the
election, or nomination for election by Employer's common stockholders, of
any new director was approved by a vote of at least two-thirds of the
Incumbent Board, such new director shall, for purposes of this Agreement,
be considered as a member of the Incumbent Board; provided further,
however, that no individual shall be considered a member of the Incumbent
Board if such individual initially assumed office as result of either an
actual or threatened "Election Contest" (as described in Rule 14A-11
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board (a "Proxy Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest; or
17
<PAGE>
C. The consummation of:
(i) A merger, consolidation or reorganization involving Employer, unless
such merger, consolidation or reorganization is a "Non-Control
Transaction." A "Non-Control Transaction shall mean a merger,
consolidation or reorganization of Employer into, with or involving
Countrywide Credit, NDE or where:
a. the stockholders of Employer, immediately before such merger,
consolidation or reorganization, own directly or indirectly
immediately following such merger, consolidation or
reorganization, at least seventy percent (70%) of the combined
voting power of the outstanding Voting Securities of the
corporation resulting from such merger, consolidation or
reorganization (the "Surviving Corporation") in substantially
the same proportion as their ownership of the Voting
Securities immediately before such merger, consolidation or
reorganization;
b. the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing
for such merger, consolidation or reorganization constitute at
least two-thirds of the members of the board of directors of
the Surviving Corporation, or in the event that, immediately
following the consummation of such transaction, a corporation
beneficially owns, directly or indirectly, a majority of the
Voting Securities of the Surviving Corporation, the board of
directors of such corporation: and
c. no Person other than (i) Employer, (ii) any Subsidiary, (iii)
any employee benefit plan (or any trust forming a part
thereof) maintained by the Employer, the Surviving
Corporation, or any Subsidiary, (iv) Countrywide Credit, or
(v) any Person who, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of
twenty five percent (25%) or more of the combined voting power
of the Surviving Corporation's then outstanding Voting
Securities or its common stock, owns directly or indirectly
more than twenty five percent (25%) or more of the combined
voting power of the Surviving Corporation's then outstanding
Voting Securities or its common stock;
(ii) A complete liquidation or dissolution or Employer; or
(iii) The sale or other disposition of all or substantially all of
the assets of Employer to any Person (other than a transfer to
a Subsidiary of Countrywide Credit).
18
<PAGE>
Notwithstanding the foregoing, a Change of Control shall not be deemed to occur
solely because any Person (the "Subject Person") acquired Beneficial Ownership
of more than the permitted amount of the then outstanding common stock or Voting
Securities as a result of the acquisition of common stock or Voting Securities
by Employer which, by reducing the number of shares of common stock or Voting
Securities then outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Person; provided, however, that if a Change of
Control would occur (but for the operation of this sentence) as a result of the
acquisition of common stock or Voting Securities by Employer, and after such
share acquisition by Employer, the Subject Person becomes the Beneficial Owner
of any additional common stock or Voting Securities which increases the
percentage of the then outstanding common stock or Voting Securities
Beneficially Owned by the Subject Person, then a Change in Control shall occur.
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,586
<SECURITIES> 912,520
<RECEIVABLES> 6,058,694
<ALLOWANCES> (36,353)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,939,447
<CURRENT-LIABILITIES> 33,359
<BONDS> 6,060,038
0
0
<COMMON> 703
<OTHER-SE> 845,347
<TOTAL-LIABILITY-AND-EQUITY> 6,939,447
<SALES> 0
<TOTAL-REVENUES> 52,181<F1>
<CGS> 0
<TOTAL-COSTS> 6,892
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9,357
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 35,932
<INCOME-TAX> 0
<INCOME-CONTINUING> 35,932
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,932
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.53
<FN>
<F1>INCLUDES 93,879 OF INTEREST EXPENSE RELATED TO MORTGAGE LOAN ACTIVITIES.
</FN>
</TABLE>
