<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for use of
[X] Definitive Proxy Statement Commission only
[_] Definitive Additional Materials (as permitted by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INDYMAC Mortgage Holdings, Inc.
(Name of Registrant as Specified in its Charter)
INDYMAC Mortgage Holdings, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Title of
each Class Aggregate
of Number of Per Unit Price Proposed
Securities Securities to or Other Maximum
to which which Underlying Aggregate Amount of
Transaction Transaction Value of Value of Filing
Applies Applies(1) Transaction(1) Transaction(1) Fee(1)(2)
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
N/A N/A N/A N/A N/A
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
----------------
[_] Fee paid previously with preliminary materials:
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount previously paid: N/A
2) Form, Schedule or Registration Statement No.: Schedule 14A
3) Filing Party: IndyMac Mortgage Holdings, Inc.
4) Date Filed: April 8, 1999
<PAGE>
[LOGO OF INDYMAC MORTGAGE]
April 8, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
IndyMac Mortgage Holdings, Inc., a real estate investment trust ("IndyMac
REIT"). The meeting will be held on Thursday, June 3, 1999 at 10:00 a.m. at
the Pasadena Hilton Hotel, 150 South Los Robles Avenue, Pasadena, California.
The formal notice and proxy statement for this meeting are attached to this
letter.
We hope you can attend the Annual Meeting. It is important that you sign,
date and return your proxy, or submit your voting instructions electronically
or via telephone in the manner indicated on the enclosed proxy card, as soon
as possible, even if you currently plan to attend the meeting. You may still
attend the Annual Meeting and vote in person if you desire, but returning your
proxy card or submitting your voting instructions electronically or via
telephone now will assure that your vote is counted if you are unable to
attend. Your vote, regardless of the number of shares you own, is important.
We urge you to indicate your approval by voting FOR the matters indicated in
the notice.
On behalf of the Board of Directors, I thank you for your cooperation.
Sincerely,
/s/ David S. Loeb
David S. Loeb
Chairman of the Board
<PAGE>
INDYMAC MORTGAGE HOLDINGS, INC.
155 North Lake Avenue
Pasadena, California 91109-7211
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 3, 1999
----------------
To the Stockholders of INDYMAC MORTGAGE HOLDINGS, INC.,
Notice is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of IndyMac Mortgage Holdings, Inc., a real estate investment trust
("IndyMac REIT"), will be held at the Pasadena Hilton Hotel, 150 South Los
Robles Avenue, Pasadena, California on June 3, 1999 at 10:00 a.m., local time,
for the following purposes:
1. To elect the Board of Directors for the ensuing year;
2. To amend the IndyMac Mortgage Holdings, Inc. 1998 Stock Incentive Plan
to increase the annual per person limit for benefits under such plan;
3. To ratify the selection by the Board of Directors of Grant Thornton
LLP as independent accountants for IndyMac REIT for the year ending
December 31, 1999; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Each of the proposals referred to above is more fully described in the
accompanying Proxy Statement and Appendix thereto, which form a part of this
Notice.
The Board of Directors has fixed the close of business on April 5, 1999 as
the record date (the "Record Date") for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting or any adjournment or
postponement thereof. Only stockholders of record on the Record Date will be
entitled to notice of and to vote at the Annual Meeting or any adjournments or
postponements thereof. A list of such stockholders will be available for
inspection at the offices of IndyMac REIT at 155 North Lake Avenue, Pasadena,
California 91101, at least ten days prior to the Annual Meeting.
If you plan to be present at the Annual Meeting, please notify the
undersigned so that identification can be prepared for you. Whether or not you
plan to attend the Annual Meeting, please execute, date and return the
enclosed proxy card, or submit your voting instructions electronically or via
telephone in the manner prescribed on the enclosed proxy card. If you choose
to return the enclosed proxy card via United States mail, a return envelope is
enclosed for this purpose and requires no postage for mailing in the United
States. If you are present at the Annual Meeting you may, if you wish,
withdraw your proxy and vote in person. Thank you for your interest and
consideration of the proposals listed above.
By Order of the Board of Directors
/s/ Melissa K. Gerard
Melissa K. Gerard
Secretary
April 8, 1999
EACH VOTE IS IMPORTANT. TO VOTE YOUR SHARES, PLEASE SIGN, DATE AND COMPLETE
THE ENCLOSED PROXY CARD AND MAIL IT IN THE ENCLOSED RETURN ENVELOPE, OR SUBMIT
YOUR VOTING INSTRUCTIONS ELECTRONICALLY OR VIA TELEPHONE IN THE MANNER
INDICATED ON THE ENCLOSED PROXY CARD.
<PAGE>
INDYMAC MORTGAGE HOLDINGS, INC.
155 North Lake Avenue
Pasadena, California 91109-7211
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 3, 1999
This Proxy Statement is furnished to stockholders of IndyMac Mortgage
Holdings, Inc., a real estate investment trust ("IndyMac REIT"), in connection
with the solicitation by the Board of Directors of IndyMac REIT of proxies to
be voted at the 1999 Annual Meeting of Stockholders (the "Annual Meeting") to
be held at the Pasadena Hilton Hotel, 150 South Los Robles Avenue, Pasadena,
California on June 3, 1999, at 10:00 a.m. or at any adjournment or
postponement thereof. IndyMac REIT expects to mail the proxy solicitation
materials for the Annual Meeting on or about April 8, 1999.
The principal solicitation of proxies is being made by mail. However,
certain officers, directors and employees of IndyMac REIT, none of whom will
receive additional compensation therefor, may solicit proxies by telephone or
other personal or electronic contact. IndyMac REIT has retained Morrow & Co.,
Inc. to assist in the solicitation of proxies for an estimated fee of $8,000
plus reimbursement for certain expenses. IndyMac REIT will bear the cost of
the solicitation of the proxies, including postage, printing and handling, and
will reimburse brokerage firms and other record holders of shares beneficially
owned by others for their reasonable expenses incurred in forwarding
solicitation material to beneficial owners of shares.
A stockholder may revoke his or her proxy at any time before it is voted by
delivering a later dated, signed proxy or other written notice of revocation
to IndyMac REIT. Any stockholder present at the Annual Meeting may also
withdraw his or her proxy and vote in person on each matter brought before the
Annual Meeting. All shares represented by each properly signed and returned
proxy in the accompanying form, unless revoked, will be voted at the Annual
Meeting or at any adjournment thereof, in accordance with the instructions
thereon. If no instructions are given, the shares will be voted in favor of
Proposals One through Three described herein.
Only holders of IndyMac REIT shares of Common Stock, par value $0.01 per
share (the "Common Stock"), are entitled to vote at the Annual Meeting. Each
holder of record of Common Stock at the close of business on April 5, 1999 is
entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof. On that date, there were 80,134,179 shares of Common Stock
outstanding and entitled to one vote per share.
Votes cast in person or by proxy at the meeting will be tabulated by the
inspector of elections appointed for the meeting. Pursuant to IndyMac REIT's
Bylaws and the Delaware General Corporation Law (the "DGCL"), the presence of
the holders of shares representing a majority of the outstanding shares of
Common Stock entitled to vote, whether in person or by properly executed or
otherwise voted proxy, is necessary to constitute a quorum for the transaction
of business at the Annual Meeting. Under the DGCL, abstentions and "broker
non-votes" (in general, proxies from brokers or nominees indicating that such
persons have not received instructions from the beneficial owner or other
persons entitled to vote with respect to a matter on which the brokers or
nominees do not have the discretionary power to vote) will be treated as
present for purposes of determining the presence of a quorum. For purposes of
determining approval of a matter presented at the meeting, abstentions will be
deemed present and entitled to vote and will, therefore, have the same legal
effect as a vote "against" a matter presented at the meeting. With respect to
any proposal requiring the affirmative vote of a majority of the shares of
Common Stock present or represented by proxy and entitled to vote on the
matter at the Annual Meeting, a broker non-vote will be deemed "not entitled
to vote" on the subject matter for which the non-vote is indicated and will,
therefore, have no legal effect on the vote on that particular matter.
Therefore, with respect to Proposals One through Three described herein,
broker non-votes will have no legal effect on the vote on such proposals.
1
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table shows, with respect to each person or entity known by
IndyMac REIT to be the beneficial owner of more than 5% of IndyMac REIT Common
Stock as of February 28, 1999, (i) the number of shares of IndyMac REIT Common
Stock so owned, and (ii) the percentage of all shares outstanding represented
by such ownership (based upon the number of shares outstanding as of February
28, 1999).
<TABLE>
<CAPTION>
Name and Address of
Beneficial Owner Number of Shares Percent of Class
------------------- ---------------- ----------------
<S> <C> <C>
Neuberger & Berman LLC (1)................. 5,451,950 6.9%
Neuberger Berman Management Inc.
605 Third Avenue
New York, NY 10158
Capital Guardian Trust Company and Capital
International S.A. (2).................... 5,327,700 6.7%
11100 Santa Monica Boulevard
Los Angeles, California 90025
Countrywide Credit Industries, Inc. (3).... 4,420,860 5.6%
4500 Park Granada Boulevard
Calabasas, California 91302
Citigroup Inc. (4)......................... 4,163,075 5.3%
Salomon Smith Barney Holdings Inc.
Mutual Management Corp.
153 East 53rd Street
New York, New York 10043
</TABLE>
- --------
(1) Based upon a Schedule 13G dated February 10, 1999 filed with the
Securities and Exchange Commission.
(2) Based upon a Schedule 13G dated February 8, 1999 filed with the Securities
and Exchange Commission.
(3) Based upon a Schedule 13G dated March 3, 1998 filed with the Securities
and Exchange Commission.
(4) Based upon a Schedule 13G dated February 10, 1999 filed with the
Securities and Exchange Commission. Salomon Smith Barney Holdings Inc. is
a wholly owned subsidiary of Citigroup Inc. and Mutual Management Corp. is
a wholly owned subsidiary of Salomon Smith Barney Holdings Inc. Citigroup
Inc. and Salomon Smith Barney Holdings Inc. disclaim beneficial ownership
of such shares.
PROPOSAL ONE
ELECTION OF DIRECTORS
IndyMac REIT currently has six directors. The six current directors are
nominees for election as directors to serve until the next annual meeting
after their election and until their successors are elected and have
qualified. In the absence of contrary instructions, it is the intention of the
persons named in the accompanying proxy to vote for the nominees listed below.
In the event any nominee becomes unavailable for any reason, an event the
Board of Directors does not anticipate, the proxies will be voted for the
election of the person, if any, who is designated by the Board of Directors to
replace the nominee.
Director Nominees
The following persons have been nominated to serve as a director for IndyMac
REIT for the ensuing year:
David S. Loeb has been Chairman of the Board of Directors of IndyMac REIT
since its formation in 1985. From 1985 to January 1997, Mr. Loeb served as
Chief Executive Officer of IndyMac REIT. He is also a co-founder of
Countrywide Credit Industries, Inc. ("CCI"), an affiliate of IndyMac REIT, and
has been
2
<PAGE>
President of CCI since its formation in March 1969. Mr. Loeb also served as
Chairman of CCI since its formation until March 1999. Mr. Loeb continues to
serve as a director of CCI and is also a director of Countrywide Home Loans,
Inc. ("CHL"), a subsidiary of CCI that has engaged in certain transactions
with IndyMac REIT. Age: 75.
Angelo R. Mozilo is currently President of IndyMac REIT. From January 1997
to February 1999, Mr. Mozilo served as the Chief Executive Officer of IndyMac
REIT. Prior to becoming the Chief Executive Officer, Mr. Mozilo served as
President of IndyMac REIT since its formation in 1985. Mr. Mozilo has been
Vice Chairman of the Board of Directors since 1993 and a director since 1985.
Mr. Mozilo is also a co-founder of CCI, was Vice Chairman of the Board of
Directors and Executive Vice President of CCI since its formation in March
1969, and was appointed Chief Executive Officer of CCI in February 1998 and
Chairman of CCI in March 1999. Mr. Mozilo served as President of CHL from 1978
to March 1995, and Chief Executive Officer of CHL from March 1995 to March
1999. Mr. Mozilo currently serves as Chairman of CHL. Age: 60.
Michael W. Perry is currently Chief Executive Officer of IndyMac REIT. He
became a director of IndyMac REIT in October 1997. From January 1997 to
February 1999, Mr. Perry served as President of IndyMac REIT, and from January
1993 to January 1997, Mr. Perry served as Executive Vice President and Chief
Operating Officer of IndyMac REIT. Mr. Perry is also the President and Chief
Executive Officer and a director of IndyMac, Inc. ("IndyMac Operating"), an
affiliate of IndyMac REIT. Mr. Perry has been with IndyMac REIT since January
1993 and has direct responsibility for the management of IndyMac REIT, its
subsidiaries and IndyMac Operating. From May 1987 to December 1992, he served
as Senior Executive Vice President in charge of the Mortgage Banking Division
of Commerce Security Bank and as Chief Financial Officer of Commerce Security
Bank. He has 14 years of business experience with financial institutions, real
estate firms and mortgage banking companies, including four years as a
certified public accountant with KPMG Peat Marwick LLP. Age: 36.
Lyle E. Gramley became a director of IndyMac REIT in January 1993. He is a
former member of the Board of Governors of the Federal Reserve System. Since
September 1985, he has been employed by the Mortgage Bankers Association of
America as its chief economist and more recently as a consulting economist,
and during that period he has also been self-employed as an economic
consultant. He serves on the Board of Trustees of the following mutual funds
distributed by Dreyfus Service Corporation: Cash Management, Cash Management
Plus, Inc., Government Cash Management, Treasury Cash Management, Treasury
Prime Cash Management, Tax Exempt Cash Management, Municipal Cash Management
Plus and New York Municipal Cash Management. He also serves on the Board of
Directors and the Compensation Committee of the Board of Directors of NuWave
Technologies, Inc., a company specializing in video imaging. Age: 72.
Thomas J. Kearns has been a director of IndyMac REIT since June 1990. Since
April 1995, he has been a consultant for Josephthal Lyon & Ross, Inc. He has
been in the securities business for 30 years and he spent approximately 16
years with Merrill Lynch Capital Markets as a First Vice President. He was
also a Managing Director of Commonwealth Associates from April 1994 to
February 1995. Age: 60.
Frederick J. Napolitano has been a director of IndyMac REIT since its
formation in 1985 and has been Chairman of the Board of Pembroke Enterprises,
Inc., a real estate development company located in Virginia, since 1973. He
was also a director of Home Mortgage Access Corporation and serves on the
Board of Directors and executive committee of the National Association of Home
Builders and was President of the National Association of Home Builders in
1982. He served on the Federal Home Loan Bank Board Advisory Council from 1983
to 1985, Federal Home Loan Mortgage Corporation Advisory Committee from 1981
to 1983, Federal National Mortgage Association Advisory Board from 1984 to
1985, was chairman of the Hampton Roads Chamber of Commerce in 1989, and was a
member of the Industrial Development Services Advisory Board for the
Commonwealth of Virginia. Age: 69.
Vote Required; Board Recommendation
A majority of the votes cast at the Annual Meeting, at which a quorum is
present, is sufficient to elect a director.
3
<PAGE>
The Board of Directors recommends that stockholders vote FOR each of the
nominees. Proxies solicited by the Board of Directors will be so voted unless
the stockholder specifies otherwise.
Board Meetings and Attendance
During the fiscal year ended December 31, 1998, the Board of Directors held
eight meetings, in person or by telephone. Each Board member attended 75% or
more of the board and applicable committee meetings held during the fiscal
year ended December 31, 1998.
The Audit Committee of the Board of Directors consults with and reviews
reports and recommendations of IndyMac REIT's independent certified public
accountants and reports thereon to the Board. The Audit Committee held three
meetings during the fiscal year ended December 31, 1998. This committee
consists of Messrs. Gramley, Kearns and Napolitano, all of whom are outside
directors of IndyMac REIT. The chairman of the committee is Mr. Kearns.
The Compensation Committee of the Board of Directors administers IndyMac
REIT's Stock Option Plans as well as IndyMac REIT's Deferred Compensation Plan
and Loan Plans, and approves the compensation of IndyMac REIT's executive
officers. The Compensation Committee held eight meetings during the fiscal
year ended December 31, 1998. This committee consists of Messrs. Gramley,
Kearns and Napolitano, all of whom are outside directors of IndyMac REIT. The
chairman of the committee is Mr. Napolitano.
The Board of Directors does not have a nominating committee.
Director Compensation
During 1998, each director (other than Mr. Perry, who was compensated as an
executive officer of IndyMac REIT during 1998) was paid an annual retainer of
$35,917 and was reimbursed for expenses related to attendance at each meeting.
On June 1, 1998, each outside director received a grant of stock options
covering 35,563 shares, with an exercise price of $23.4063 per share. These
options will become exercisable one year after the grant date. On June 1,
1998, Messrs. Loeb and Mozilo, who were both officers of IndyMac REIT during
the fiscal year ended December 31, 1998, received a grant of stock options
covering 151,699 shares, with an exercise price of $23.4063 per share and a
grant of 26,702 shares of restricted Common Stock. Messrs. Loeb's and Mozilo's
stock options will become exercisable one year after the grant date, and
Messrs. Loeb's and Mozilo's shares of restricted Common Stock will vest over a
period of three years, one-third each on the first three anniversaries of the
grant date. During 1998, Mr. Perry received a grant of stock options and
restricted Common Stock pursuant to the terms of his employment as an
executive officer under his employment agreement with IndyMac REIT. See
"Executive Compensation--Employment Agreements."
Effective July 18, 1995, the Board of Directors adopted a Director Emeritus
program for retiring members of the Board of Directors. Under the program, a
retiring director who has attained at least the age of 65, has served as
director of IndyMac REIT for at least five years, and is in good standing can
provide consulting and advisory services to IndyMac REIT in exchange for a
percentage of the annual retainer paid to the director during the preceding
twelve months, depending on length of service prior to becoming a Director
Emeritus. The program also requires that a Director Emeritus refrain from
competing with IndyMac REIT and becoming affiliated with any competitor of
IndyMac REIT. Currently, no director is participating in the Director Emeritus
program.
Effective May 1, 1998, directors of IndyMac REIT became eligible to
participate in IndyMac REIT's Deferred Compensation Plan, which allows
directors to defer all or a portion of their annual retainer, subject to an
annual minimum amount of $2,000, for a number of years designated by each
participating director, subject to a minimum deferral of five years. Except
for Mr. Mozilo, who deferred $24,000 of his directors' fees earned in fiscal
year 1998 to fiscal year 2003, no directors' fees earned in the fiscal year
ended December 31, 1998 were deferred.
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information concerning the beneficial
ownership of IndyMac REIT Common Stock by each director nominee, IndyMac
REIT's Chief Executive Officer, each of IndyMac REIT's other four most highly
compensated executive officers (two of whom are also members of the Board of
Directors of IndyMac REIT), and all executive officers and directors as a
group, as of February 28, 1999. Except as otherwise indicated, all persons
listed below have (i) sole voting power and investment power with respect to
their shares, except to the extent that authority is shared by spouses under
applicable law, and (ii) record and beneficial ownership with respect to their
shares. The shares and percentages set forth below include shares of IndyMac
REIT Common Stock that were outstanding or issuable within 60 days upon the
exercise of options outstanding as of February 28, 1999.
<TABLE>
<CAPTION>
Shares of Common
Stock Owned
Beneficially as of Percent
Name February 28, 1999(1)(2) of Class
---- ----------------------- --------
<S> <C> <C>
David S. Loeb................................ 137,502(3) *
Angelo R. Mozilo............................. 287,339(4) *
Lyle E. Gramley.............................. 157,952(5) *
Thomas J. Kearns............................. 158,677(6) *
Frederick J. Napolitano...................... 153,102 *
Michael W. Perry............................. 203,408(7) *
Richard H. Wohl.............................. 18,045(8) *
Kathleen H. Rezzo............................ 40,627(9) *
All directors and executive officers as a
group (10 persons).......................... 1,189,572 1.5%
</TABLE>
- --------
* Less than one percent of class.
(1) Unless otherwise indicated, sole voting and investment power.
(2) Includes shares which may be purchased through stock options exercisable
within 60 days of February 28, 1999 held by the following persons: Mr.
Mozilo, 135,206 shares; Mr. Gramley, 34,318 shares; Mr. Kearns, 66,927
shares; Mr. Napolitano, 34,318 shares; Mr. Perry, 175,001 shares; Mr.
Wohl, 13,334 shares; Ms. Rezzo, 34,168 shares; all directors and
executive officers as a group, 513,274 shares.
(3) Includes 10,000 shares owned by Heidi Loeb, the wife of David Loeb.
(4) Includes 1,000 shares owned by Phyllis Mozilo, the wife of Angelo Mozilo,
as to which shares he disclaims any beneficial interest.
(5) Includes 13,225 shares owned by Marlys Gramley, the wife of Lyle Gramley.
(6) Includes 890 shares owned by Gabrielle Kearns, the daughter of Thomas
Kearns.
(7) Includes 346 shares held in Mr. Perry's 401(k) account.
(8) Includes 402 shares held in Mr. Wohl's 401(k) account.
(9) Includes 335 shares held in Ms. Rezzo's 401(k) account.
EXECUTIVE OFFICERS
The current executive officers of IndyMac REIT are:
<TABLE>
<CAPTION>
Officer
Name Age Office Since
---- --- ------ -------
<S> <C> <C> <C>
David S. Loeb........... 75 Chairman of the Board of Directors 1985
Angelo R. Mozilo........ 60 Vice Chairman of the Board of Directors and 1985
President
Michael W. Perry........ 36 Chief Executive Officer 1993
Richard H. Wohl......... 40 Senior Executive Vice President and Chief 1994
Operating Officer
Kathleen H. Rezzo....... 45 Senior Executive Vice President, Commercial 1994
Lending
S. Blair Abernathy...... 37 Executive Vice President and Chief 1994
Investment Officer
Carmella L. Grahn....... 35 Executive Vice President and Chief 1993
Financial Officer
</TABLE>
5
<PAGE>
Biographical information with respect to Messrs. Loeb, Mozilo and Perry is
set forth above under "Election of Directors--Director Nominees."
Richard H. Wohl is currently the Senior Executive Vice President and Chief
Operating Officer of IndyMac REIT. Mr. Wohl is responsible for all of IndyMac
REIT's principal financial and administrative areas including: accounting,
corporate finance and treasury, secondary marketing, IndyMac REIT's investment
portfolio, interest rate and credit risk management, financial planning,
strategic planning, technology, human resources and administration. Mr. Wohl
was General Counsel and Secretary of IndyMac REIT from April 1994 until
February, 1999, and has managed IndyMac REIT's corporate finance and treasury
operations areas since 1997. Mr. Wohl is also Senior Executive Vice President
and Chief Operating Officer and a director of IndyMac Operating. Prior to
joining IndyMac REIT in April 1994, Mr. Wohl practiced as an attorney with
Morrison & Foerster in Los Angeles. Mr. Wohl graduated with distinction from
Stanford University and received his J.D. from the Harvard Law School, where
he was an editor of the Harvard Law Review.
Kathleen H. Rezzo is currently the Senior Executive Vice President,
Commercial Lending of IndyMac REIT and the President of IndyMac Commercial
Lending, a division of IndyMac REIT that includes Construction Lending
Corporation of America ("CLCA"), IndyMac REIT's construction lending division.
Prior to joining IndyMac REIT in August 1994, Ms. Rezzo held various positions
at Security Pacific National Bank, which included Real Estate Chief Credit
Officer and positions within the Commercial Lending Group and the Real Estate
Industries Group. Ms. Rezzo also managed the Participating Mortgage Unit, and
held the position of Senior Vice President/Los Angeles Division Manager for
Real Estate Industries Division, of Bank of America, where she was responsible
for a loan portfolio in excess of $2 billion.
Sterling Blair Abernathy is currently the Executive Vice President and Chief
Investment Officer of IndyMac REIT and Executive Vice President of Secondary
Marketing of IndyMac Operating. Mr. Abernathy is responsible for the hedging,
trading, asset/liability management, and secondary market functions of IndyMac
REIT and IndyMac Operating. Prior to joining IndyMac REIT in February 1994,
Mr. Abernathy managed the accounting and investment functions of Commerce
Security Bank, a state chartered bank in Sacramento, California, as its Senior
Vice President and Chief Financial Officer. From July 1988 to January 1993,
Mr. Abernathy served as the Vice President and Controller of Sunrise Bancorp
of California, a publicly traded bank holding company with banking and
mortgage banking subsidiaries.
Carmella L. Grahn is currently the Executive Vice President and Chief
Financial Officer of IndyMac REIT and IndyMac Operating. Ms. Grahn is
responsible for accounting, tax, financial planning, analysis and reporting,
and master servicing. Prior to joining the Company in October 1993, Ms. Grahn
worked for Price Waterhouse as an audit manager in the Financial Services
Special Practice Group. At Price Waterhouse, her clientele included commercial
banks, savings and loans, mortgage banks, mutual funds and real estate
developers. She also served as Senior Vice President and Chief Financial
Officer of Olympic National Bank, a publicly traded bank. Ms. Grahn is a
Certified Public Accountant. She received a B.A. in accounting from Ohio
University and the Elijah Watt Sells award for ranking in the top 1% of
candidates sitting for the CPA exam nationwide.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the cash and other compensation paid by
IndyMac REIT and its affiliates to the named executive officers of IndyMac
REIT for all services in all capacities during the years indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
--------------------------
Annual Compensation Awards
------------------------------------- --------------------------
Other Restricted Securities
Annual Stock Underlying All Other
Name and Principal Position Year Salary(1) Bonus(1) Compensation(2) Awards($) Options(#) Compensation(3)
- --------------------------- ---- --------- ----------- --------------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
David S. Loeb(4)........ 1998 $ 35,917 $ 1,100,000 $ -- $ 1,622,185(5) 303,398(5) $ --
Chairman of 1997 35,000 -- -- -- 285,660 --
the Board 1996 35,000 -- -- -- 200,000 --
Angelo R. Mozilo(6)..... 1998 35,917 1,100,000 -- 1,629,685(7) 438,604(7) 2,155
Vice Chairman of 1997 35,000 -- -- -- 285,660 --
the Board and Chief 1996 35,000 -- -- -- 200,000 --
Executive Officer
Michael W. Perry(8)..... 1998 695,750 562,500 -- 622,341(9) 959,000(9) 22,746
President and Chief 1997 605,000 850,000 2,083 -- 125,000 39,673
Operating Officer 1996 475,000 817,500 3,092 -- 200,000 25,823
Richard H. Wohl(10)..... 1998 265,000 210,000 -- 169,387(11) 185,000(11) 22,248
Senior Executive 1997 225,000 325,000 -- -- 40,000 4,750
Vice President, 1996 200,000 205,000 17 -- 20,000 5,625
General Counsel and
Secretary
Kathleen H. Rezzo(12)... 1998 225,000 325,000 -- 144,364(13) 178,000(13) 16,769
Senior Executive Vice 1997 180,000 354,000 217 49,992 25,000 4,750
President, CLCA 1996 165,000 200,000 129 -- 20,000 4,500
</TABLE>
- --------
(1) Salary and bonus amounts deferred at the election of the named executive
officer to a subsequent year are included for the fiscal year in which
such amounts were earned.
(2) The amount of other annual compensation consists of interest accrued on
deferred compensation in excess of the applicable federal rate.
(3) Amounts shown for 1998 consist of the following: (i) Mr. Mozilo: IndyMac
REIT contribution to deferred compensation account--$2,155; (ii) Mr.
Perry: split-dollar life insurance premiums paid by IndyMac REIT--$18,427;
IndyMac REIT contribution to 401(k) Plan--$4,319; (iii) Mr. Wohl: split-
dollar life insurance premiums paid by IndyMac REIT--$14,942; IndyMac REIT
contribution to 401(k) Plan--$7,306; and (iv) Ms. Rezzo: split-dollar life
insurance premiums paid by IndyMac REIT--$11,972; IndyMac REIT
contribution to 401(k) Plan--$4,797.
(4) Mr. Loeb is a director and executive officer of IndyMac REIT. The amount
of salary for 1998 represents fees paid for his service as a director of
IndyMac REIT, and the amount of bonus for 1998 represents a bonus paid in
connection with the signing of an employment agreement with IndyMac REIT
on December 30, 1998. See "Employment Agreements" and "Compensation
Committee Report on Executive Compensation." The amount of salary for 1997
and 1996 represents fees paid for Mr. Loeb's service as a director of
IndyMac REIT. In 1997 and 1996, Mr. Loeb received no salary or bonus for
his service as an officer of IndyMac REIT.
(5) Restricted stock awards include 26,702 shares of restricted Common Stock
granted on June 1, 1998 valued at $23.4063 per share as of such date,
vesting over a period of three years, one-third each on the first three
anniversaries of the grant date; and 100,000 shares of restricted Common
Stock granted on December 30, 1998 (in connection with the execution of an
employment agreement with IndyMac REIT on such date, see "Employment
Agreements" and "Compensation Committee Report on Executive Compensation")
valued at $9.9719 per share as of such date, vesting over a period of five
years, one-fifth each on the first five
7
<PAGE>
anniversaries of the grant date. As of December 31, 1998, Mr. Loeb held
126,702 shares of restricted Common Stock, with an aggregate value of
$1,298,695. Dividends will accrue on the shares of restricted Common Stock
and will be paid at the time the related shares of restricted Common Stock
vest. Securities underlying options represent a grant of 151,699 stock
options on June 1, 1998 (which were subsequently cancelled), and the
reissuance of 151,699 stock options on December 14, 1998 in connection with
IndyMac REIT's Replacement Option Program. See "Stock Option Plans--
Replacement Option Program." For further information regarding stock
options granted in 1998, see "Stock Option Plans--General."
(6) Mr. Mozilo is currently Vice Chairman and President of IndyMac REIT. The
amount of salary for 1998 represents fees paid for his service as a
director of IndyMac REIT, and the amount of bonus for 1998 represents a
bonus paid in connection with the signing of an employment agreement with
IndyMac REIT on December 23, 1998. See "Employment Agreements" and
"Compensation Committee Report on Executive Compensation." The amount of
salary for 1997 and 1996 represents fees paid for Mr. Mozilo's service as a
director of IndyMac REIT. In 1997 and 1996, Mr. Mozilo received no salary
or bonus for his service as an officer of IndyMac REIT.
(7) Restricted stock awards include 26,702 shares of restricted Common Stock
granted on June 1, 1998 valued at $23.4063 per share as of such date,
vesting over a period of three years, one-third each on the first three
anniversaries of the grant date; and 100,000 shares of restricted Common
Stock granted on December 30, 1998 (in connection with the execution of an
employment agreement with IndyMac REIT on such date, see "Employment
Agreements" and "Compensation Committee Report on Executive Compensation")
valued at $10.0469 per share as of such date, vesting over a period of five
years, one-fifth each on the first five anniversaries of the grant date. As
of December 31, 1998, Mr. Mozilo held 126,702 shares of restricted Common
Stock, with an aggregate value of $1,298,695. Dividends will accrue on the
shares of restricted Common Stock and will be paid at the time the related
shares of restricted Common Stock vest. Securities underlying options
represent a grant of 151,699 stock options on June 1, 1998 (which were
subsequently cancelled), and the reissuance of 286,905 stock options on
December 14, 1998 in connection with IndyMac REIT's Replacement Option
Program. See "Stock Option Plans--Replacement Option Program." For further
information regarding stock options granted in 1998, see "Stock Option
Plans--General."
(8) Mr. Perry is currently Chief Executive Officer and a director of IndyMac
REIT. Mr. Perry, who became a director of IndyMac REIT in the fourth
quarter of 1997, is compensated as an executive officer of IndyMac REIT.
See "Compensation Committee Report on Executive Compensation."
(9) Restricted stock awards include 18,578 shares of restricted Common Stock
granted on June 1, 1998 valued at $23.4063 per share as of such date,
vesting over a period of five years, one-fifth each on the first five
anniversaries of the grant date; and 17,964 shares of restricted Common
Stock granted on March 5, 1999 (granted as a part of Mr. Perry's 1998
bonus) valued at $10.4375 per share as of such date, vesting over a period
of two years, one-half on January 1, 2000 and one-half on January 1, 2001.
As of December 31, 1998, Mr. Perry held 18,578 shares of restricted Common
Stock, with an aggregate value of $190,424. Dividends will accrue on the
shares of restricted Common Stock and will be paid at the time the related
shares of restricted Common Stock vest. Securities underlying options
represent a grant of 317,000 stock options on June 1, 1998 (which were
subsequently cancelled), and the reissuance of 642,000 stock options on
December 14, 1998 in connection with IndyMac REIT's Replacement Option
Program. See "Stock Option Plans--Replacement Option Program." For further
information regarding stock options granted in 1998, see "Stock Option
Plans--General."
(10) Mr. Wohl is currently Senior Executive Vice President and Chief Operating
Officer of IndyMac REIT.
(11) Restricted stock awards include 4,246 shares of restricted Common Stock
granted on June 1, 1998 valued at $23.4063 per share as of such date,
vesting over a period of five years, one-fifth each on the first five
anniversaries of the grant date; and 6,707 shares of restricted Common
Stock granted on March 5, 1999 (granted as a part of Mr. Wohl's 1998
bonus) valued at $10.4375 per share as of such date, vesting over a
period of two years, one-half on January 1, 2000 and one-half on January
1, 2001. As of December 31, 1998, Mr. Wohl held 4,246 shares of
restricted Common Stock, with an aggregate value of $43,521. Dividends
will accrue on the shares of restricted Common Stock and will be paid at
the time the related
8
<PAGE>
shares of restricted Common Stock vest. Securities underlying options
represent a grant of 75,500 stock options on June 1, 1998 (which were
subsequently cancelled), and the reissuance of 112,500 stock options on
December 14, 1998 in connection with IndyMac REIT's Replacement Option
Program. See "Stock Option Plans--Replacement Option Program." For further
information regarding stock options granted in 1998, see "Stock Option
Plans--General."
(12) Ms. Rezzo is currently Senior Executive Vice President, Commercial
Lending of IndyMac REIT.
(13) Restricted stock awards include 3,605 shares of restricted Common Stock
granted on June 1, 1998 valued at $23.4063 per share as of such date,
vesting over a period of five years, one-fifth each on the first five
anniversaries of the grant date; and 5,747 shares of restricted Common
Stock granted on March 5, 1999 (granted as a part of Ms. Rezzo's 1998
bonus) valued at $10.4375 per share as of such date, vesting over a
period of five years, one-fifth each on the first five anniversaries of
the grant date. As of December 31, 1998, Ms. Rezzo held 5,580 shares of
restricted Common Stock, with an aggregate value of $57,195. Dividends
will accrue on the shares of restricted Common Stock and will be paid at
the time the related shares of restricted Common Stock vest. Securities
underlying options represent a grant of 61,500 stock options on June 1,
1998 (which were subsequently cancelled), and the reissuance of 116,500
stock options on December 14, 1998 in connection with IndyMac REIT's
Replacement Option Program. See "Stock Option Plans--Replacement Option
Program." For further information regarding stock options granted in
1998, see "Stock Option Plans--General."
9
<PAGE>
Stock Option Plans
General. Pursuant to IndyMac REIT's 1985 Stock Option Plan (the "1985 Plan")
and IndyMac REIT's 1998 Stock Incentive Plan (the "1998 Plan"), stock options
have been granted to directors and officers of IndyMac REIT, among others.
Stock options also were granted previously to certain directors and executive
officers of IndyMac REIT under the 1996 Stock Incentive Plan (the "1996
Plan"), which was terminated in connection with IndyMac REIT's adoption of the
1998 Plan, and under the 1994 Stock Incentive Plan (the "1994 Plan"), which
was terminated in connection with IndyMac REIT's adoption of the 1996 Plan
(the 1985 Plan, the 1994 Plan, the 1996 Plan and the 1998 Plan are
collectively referred to herein as the "Stock Option Plans"). The termination
of the 1996 Plan and the 1994 Plan did not affect the validity of stock
options, certain of which are currently outstanding, granted thereunder prior
to such termination.
Stock Option Grants in Fiscal 1998
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------------------------------
Number of
Securities
Underlying % of Total
Options Options Granted Exercise
Granted to Employees Price Expiration Grant Date
Name (#)(1) in Fiscal Year ($/Share)(2) Date Present Value(3)
---- ---------- --------------- ------------ ---------- ----------------
<S> <C> <C> <C> <C> <C>
David S. Loeb........... 151,699(4) 3.14% $23.4063 6/1/08 $290,837
75,850(5) 1.56 9.7781 6/1/08 66,111
37,925(5) 0.79 12.2226 6/1/08 13,926
37,924(5) 0.79 14.6672 6/1/08 5,662
Angelo R. Mozilo........ 151,699(4) 3.14 23.4063 6/1/08 290,837
44,307(6) 0.92 9.7781 6/3/01 38,618
90,899(6) 1.88 9.7781 6/2/02 79,228
8,247(5) 0.17 9.7781 6/1/08 7,188
71,726(5) 1.49 12.2226 6/1/08 26,338
71,726(5) 1.49 14.6672 6/1/08 10,709
Michael W. Perry........ 317,000(7) 6.07 23.4063 6/1/08 607,752
200,000(8) 4.15 9.7781 12/10/01 174,280
121,000(9) 2.51 9.7781 6/1/08 105,464
160,500(9) 3.33 12.2226 6/1/08 58,936
35,500(9) 0.74 14.6672 6/1/08 5,300
125,000(10) 2.60 14.6672 7/1/02 18,663
Richard H. Wohl......... 72,500(7) 1.50 23.4063 6/1/08 138,997
56,250(9) 1.17 9.7781 6/1/08 49,028
16,250(9) 0.34 12.2226 6/1/08 5,967
11,875(10) 0.25 12.2226 7/1/02 4,361
28,125(10) 0.59 14.6672 7/1/02 4,199
Kathleen H. Rezzo....... 61,500(7) 1.27 23.4063 6/1/08 117,908
10,000(6) 0.21 9.7781 6/1/00 7,783
20,000(11) 0.41 9.7781 6/3/01 17,100
28,250(9) 0.59 9.7781 6/1/08 24,623
29,125(9) 0.60 12.2226 6/1/08 10,695
4,125(9) 0.09 14.6672 6/1/08 616
25,000(10) 0.52 14.6672 7/1/02 3,733
</TABLE>
- --------
(1) In the event of a "Change in Control" as defined in the Stock Option
Plans, all stock options become immediately exercisable.
(2) The exercise price of $23.4063 is the average of the high and low sales
prices for the Common Stock, as published in the Western Edition of The
Wall Street Journal, on the date of grant. The exercise price of $9.7781
is the average of the high and low sales prices for the Common Stock, as
published in the Western Edition of The Wall Street Journal, on the ten
trading days preceding the grant date (the "Base Exercise Price"). The
exercise price of $12.2226 is 125% of the Base Exercise Price. The
exercise price of $14.6672 is 150% of the Base Exercise Price.
(3) The present value of the options as of the grant date was calculated
using the Black-Scholes options pricing model, which has been modified to
consider estimated cash dividends to be paid. The assumptions used in
10
<PAGE>
the model were: expected volatility of 21%, risk-free rate of return
(approximately equal to the three-year Treasury rate at the grant date) of
4.59%, dividend yield of 8% and time to exercise of three years. No
discounting was done to account for non-transferability or vesting. The
actual value, if any, an executive officer may realize will depend on the
excess of the stock price over the exercise price on the date the option
is exercised.
(4) Option was granted on June 1, 1998 and was cancelled in connection with
IndyMac REIT's Replacement Option Program. See "Replacement Option
Program." Prior to cancellation, the option would have become exercisable
on June 1, 1999.
(5) Option was granted on December 14, 1998 to replace outstanding option in
connection with IndyMac REIT's Replacement Option Program. See
"Replacement Option Program." Option becomes exercisable on June 1, 1999.
(6) Option was granted on December 14, 1998 to replace outstanding option in
connection with IndyMac REIT's Replacement Option Program. See
"Replacement Option Program." Option became immediately exercisable on
the date of grant.
(7) Option was granted on June 1, 1998 and was cancelled in connection with
IndyMac REIT's Replacement Option Program. See "Replacement Option
Program." Prior to cancellation, the option would have become exercisable
as follows: one-third on the first anniversary of the grant date, one-
third on the second anniversary of the grant date, and one-third on the
third anniversary of the grant date.
(8) Option was granted on December 14, 1998 to replace outstanding option in
connection with IndyMac REIT's Replacement Option Program. See
"Replacement Option Program." Two-thirds of option became immediately
exercisable on the date of grant and one-third becomes exercisable on
December 10, 1999.
(9) Option was granted on December 14, 1998 to replace outstanding option in
connection with IndyMac REIT's Replacement Option Program. See
"Replacement Option Program." Option becomes exercisable as follows: one
third on June 1, 1999, one-third on June 1, 2000 and one-third on June 1,
2001.
(10) Option was granted on December 14, 1998 to replace outstanding option in
connection with IndyMac REIT's Replacement Option Program. See
"Replacement Option Program." One-third of option became immediately
exercisable on the date of grant, one-third becomes exercisable on July
1, 1999 and one-third becomes exercisable on July 1, 2000.
(11) Option was granted on December 14, 1998 to replace outstanding option in
connection with IndyMac REIT's Replacement Option Program. See
"Replacement Option Program." Two-thirds of option became immediately
exercisable on the date of grant and one-third becomes exercisable on
June 3, 1999.
Aggregated Option Exercises in Fiscal Year 1998 and Fiscal Year End Option
Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at FY-End(#) at FY-End($)
Acquired Value ------------------------- -------------------------
Name on Exercise(#) Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David S. Loeb........... 485,660 $1,721,370 0 151,699 $ 0 $35,794
Angelo R. Mozilo........ 386,159 1,922,367 135,206 151,699 63,804 3,892
Michael W. Perry........ 42,096 648,061 175,001 466,999 62,920 88,560
Richard H. Wohl......... 8,334 86,466 13,334 99,166 0 26,544
Kathleen H. Rezzo....... 0 0 34,168 84,832 14,918 16,477
</TABLE>
Loan Plans. The Board of Directors previously adopted three loan plans (the
"Loan Plans") under which loans may be made to officers, directors and
employees of IndyMac REIT in connection with the exercise of stock options
granted under the 1985 Plan, the 1994 Plan and the 1996 Plan. In 1997, the
Board of Directors amended and restated the Loan Plans in an Amended and
Restated Loan Plan that pertained to the 1985 Plan,
11
<PAGE>
the 1994 Plan and the 1996 Plan ("Amended and Restated Loan Plan"), and in
1998, the Board of Directors amended the Amended and Restated Loan Plan to
provide financing for the exercise of stock options granted under the 1998
Plan, among other things. Under the Amended and Restated Loan Plan, the
principal of any loan may not exceed (x) the purchase price required to be
paid to IndyMac REIT upon the exercise of one or more options, plus (y) any
applicable withholding taxes (so long as the sum of the preceding (x) and (y)
does not exceed the fair market value of the stock on the date of the loan),
less (z) any margin or other legally required amount, and any loan proceeds
must be paid directly to IndyMac REIT in connection with the sale of the stock
underlying such options. Under the Amended and Restated Loan Plan, loans may
be extended for a period of five years, which term may be renewed, at an
interest rate determined by the Compensation Committee and is, at the option
of the borrower, either fixed for the term of the loan or adjustable annually
by IndyMac REIT, with such interest rate to be at all times at least
sufficient to avoid imputed interest under the Internal Revenue Code of 1986,
as amended (the "Code"). The loans under the Amended and Restated Loan Plan
are recourse loans and are secured by pledges of the Common Stock purchased
upon the exercise of the stock options to which they relate. In the event of
the sale or transfer of any of the shares of Common Stock pledged as security,
except under certain limited conditions, the unpaid principal balance and
accrued interest become immediately due and payable to the extent of the
proceeds (net of brokerage fees) realized from such sale or transfer. The
principal and interest on the loans made under the Amended and Restated Loan
Plan are payable quarterly, with any dividends paid on the pledged stock being
applied against such installments. To the extent that a dividend for any
quarter is insufficient to pay the accrued interest for a quarterly
installment, the difference is added to the principal of the loan, and to the
extent a quarterly dividend is insufficient to pay a quarterly installment of
principal, the difference is payable at the end of the term of the loan.
In October 1998, the Compensation Committee determined to allow those
officers and employees, but not the non-employee directors, of IndyMac REIT
and its affiliates who had financed their exercises of stock options under the
Stock Option Plans to make a one-time election to: (1) change the interest
rate on their outstanding five-year loans under the Amended and Restated Loan
Plan (the "Original Notes") from an adjustable rate to a fixed rate of
interest set at the applicable market rate; (2) extend the maturity date of
their Original Notes to 20 years and to change from a fixed rate of interest
to an adjustable rate, or to change from an adjustable rate to a fixed rate of
interest (the "Amended Notes"); (3) sell back to IndyMac REIT at the then fair
market value the pledged shares of Common Stock securing the Original Notes
(as well as other IndyMac REIT Common Stock owned by the officer or employee)
and to finance any remaining balance of the Original Notes, if any, with a new
loan on an unsecured basis (the "New Notes") at a fixed rate based on the
applicable market rate; or (4) retain their Original Notes without change. For
a further discussion of the Compensation Committee's actions relating to the
foregoing program and certain other information regarding the program, see
"Compensation Committee Report on Executive Compensation." The terms of the
Amended Notes and the New Notes are more fully described below.
Under the foregoing program, IndyMac REIT did not forgive or discount any of
the outstanding loans, nor did IndyMac REIT suffer any losses in connection
with the program. As a result of the program, loans outstanding to directors,
officers and employees declined from approximately $22.3 million at September
30, 1998 to approximately $9.3 million at December 31, 1998. Pursuant to the
program, 1,100,870 shares of Common Stock were sold to IndyMac REIT at market
at an average price of $12.0625.
Subsequent to the implementation of the foregoing program, the Compensation
Committee amended the Amended and Restated Loan Plan to (i) authorize the
Compensation Committee to require, in its sole and absolute discretion,
borrowers with loans that become undersecured to pledge additional Common
Stock or to pay down the principal balance of the loan so that the market
value of the pledged Common Stock equals or exceeds the outstanding principal
balance of the loan, and (ii) add specified limits, by officer rank, with
respect to maximum aggregate loans outstanding pursuant to the Amended and
Restated Loan Plan at any time. These amendments are intended to provide
additional protection for IndyMac REIT against stock option exercise loans
that become undersecured in the future.
12
<PAGE>
Amended Notes. The Amended Notes are for a term of 20 years and are either
at a fixed rate of interest or an adjustable rate reset annually on each
anniversary date of the Amended Notes. Dividends on the Common Stock are
applied as they are paid, first, to pay accrued interest, and then, to pay
unpaid principal. To the extent that the payments of dividends, if any, are
insufficient to pay accrued interest, the borrower will be required to make an
annual payment of accrued interest only. Payment of principal, to the extent
not paid out of dividends, will be required only at maturity of the loan or,
if earlier, as a result of death, disability or other termination of
employment. In the event of the borrower's death, disability or other
termination, to the extent authorized by the borrower or the borrower's
estate, IndyMac REIT may offset any amounts contractually or legally owed to
such borrower by IndyMac REIT. Should a borrower fail to make payments on an
Amended Note when due, IndyMac REIT may (1) proceed against any collateral
pledged to secure the Amended Note, and (2) in the event of a shortfall,
proceed against the borrower for the amount of the shortfall. The Amended
Notes may be prepaid at any time without penalty.
New Notes. Borrowers who executed New Notes were required to sell back to
IndyMac REIT the shares of Common Stock securing their Original Note(s), and
were permitted to sell back additional shares of Common Stock held by them
that were not pledged to secure loans, at a price equal to the fair market
value of the Common Stock on the date of the sale (i.e., the day the election
took effect), determined by the average of the high and low sales prices of
the Common Stock on the New York Stock Exchange, Inc. (the "NYSE") on that
day. To the extent the fair market value of the Common Stock sold back to
IndyMac REIT was less than the principal amount of the Original Note(s), the
borrower's Original Note was replaced with a New Note with a principal amount
equal to the remaining balance on the Original Note. The New Notes, which may
be prepaid at any time without penalty, are unsecured loans with a fixed rate
of interest and a term of 20 years. The New Notes require annual payment of
accrued interest only, and payment of principal is required only at maturity
of the loan or, if earlier, as a result of death, disability or other
termination of employment. In the event of the borrower's death, disability or
other termination, to the extent authorized by the borrower or the borrower's
estate, IndyMac REIT may offset against outstanding loan obligations any
amounts contractually or legally owed to such borrower by IndyMac REIT. Should
a borrower fail to make payments on a New Note when due, IndyMac REIT may
proceed against the borrower for the amount of any shortfall.
13
<PAGE>
The following tables sets forth information as of December 31, 1998 relating
to loans made by IndyMac REIT to certain executive officers and directors of
IndyMac REIT under the Amended and Restated Loan Plan in connection with the
exercise of stock options under the Stock Option Plans, and the one-time
election with respect to Amended Notes and New Notes that was extended to the
executive officers and employees, but not the non-employee directors, of
IndyMac REIT.
<TABLE>
<CAPTION>
Highest
Notes Balance at Balance Interest
Name Outstanding December 31, 1998 During 1998 Rate(1)
- ---- ----------- ----------------- ----------- --------
<S> <C> <C> <C> <C>
S. Blair Abernathy(2)... Note 1 $ 0.00 $ 36,373 5.56%
Note 2 0.00 59,083 5.56%
Note 3 0.00 18,950 5.56%
Note 4 0.00 38,758 5.45%
Note 5 0.00 61,240 5.45%
Note 6 0.00 18,947 5.45%
Note 7 33,661 33,661 5.46%
Carmella L. Grahn(3).... Note 1 $ 0.00 $ 36,360 5.56%
Note 2 0.00 59,027 5.56%
Note 3 0.00 31,101 5.56%
Note 4 0.00 5,876 5.46%
Lyle E. Gramley(4)...... Note 1 $ 66,666 $ 92,424 5.56%
Note 2 377,797 424,925 5.56%
Note 3 531,034 563,998 5.56%
Thomas J. Kearns(5)..... Note 1 $ 176,762 $ 221,817 5.56%
Note 2 0.00 299,925 5.56%
David S. Loeb(6)........ Note 1 $ 0.00 $ 99,983 5.56%
Note 2 0.00 3,873,164 5.56%
Note 3 0.00 99,981 5.56%
Note 4 0.00 6,032,693 5.56%
Note 5 4,248,302 4,248,302 5.46%
Angelo R. Mozilo(7)..... Note 1 $ 0.00 $ 87,835 5.56%
Note 2 0.00 730,818 5.56%
Note 3 0.00 97,792 5.56%
Note 4 0.00 697,259 5.56%
Note 5 0.00 2,025,450 5.56%
Note 6 0.00 991,675 5.56%
Note 7 0.00 99,981 5.56%
Note 8 0.00 647,947 5.56%
Note 9 0.00 640,303 5.56%
Note 10 0.00 2,150,959 5.56%
Note 11 0.00 630,665 5.56%
Note 12 3,322,705 3,322,705 5.46%
Frederick J.
Napolitano(8).......... Note 1 $ 0.00 $ 81,548 5.56%
Note 2 0.00 84,871 5.56%
Note 3 0.00 347,105 5.56%
Michael W. Perry(9)..... Note 1 $ 0.00 $ 80,137 5.56%
Note 2 0.00 96,554 5.56%
Note 3 0.00 187,047 5.56%
Note 4 0.00 157,776 5.56%
Note 5 0.00 204,238 5.56%
Richard H. Wohl(10)..... Note 1 $ 0.00 $ 40,012 5.56%
Note 2 0.00 59,090 5.56%
Note 3 0.00 25,639 5.56%
Note 4 0.00 199,758 5.56%
Note 5 0.00 38,758 5.56%
</TABLE>
- --------
(1) All loans are fixed rate loans.
14
<PAGE>
(2) On October 23, 1998, Mr. Abernathy sold at market 5,000 shares of Common
Stock pledged to secure six Original Notes having a combined principal
balance of $224,016 to IndyMac REIT and executed a New Note reflecting the
remaining principal balance on his six Original Notes. The New Note has a
5.46% fixed interest rate and a principal balance of $33,661.
(3) On October 22, 1998, Ms. Grahn sold at market 4,846 shares of Common Stock
pledged to secure two Original Notes having a combined principal balance
of $63,119 to IndyMac REIT and executed a New Note reflecting the
remaining principal balance on her two Original Notes. The New Note had a
5.46% fixed interest rate and a principal balance of $5,876. On October
27, 1998, Ms. Grahn (i) sold at market 3,487 shares of Common Stock
pledged to secure one Original Note having a principal balance of $56,497,
and an additional 1,668 shares of Common Stock held by Ms. Grahn that were
not pledged to secure loans, to IndyMac REIT, and (ii) paid $29 in cash to
IndyMac REIT. Her one Original Note and the New Note, with a combined
principal balance of $62,373, were paid in full.
(4) Mr. Gramley is a non-employee director and retained his Original Notes
without change.
(5) Mr. Kearns is a non-employee director and retained his Original Notes
without change until October 27, 1998 when he paid off Note 2 in full.
(6) On October 22, 1998, Mr. Loeb sold at market 485,660 shares of Common
Stock pledged to secure four Original Notes having a combined principal
balance of $9,985,161 to IndyMac REIT and executed a New Note reflecting
the remaining principal balance on his four Original Notes. The New Note
has a 5.46% fixed interest rate and a principal balance of $4,248,302.
(7) On October 22, 1998, Mr. Mozilo sold at market 450,454 shares of Common
Stock pledged to secure eleven Original Notes having a combined principal
balance of $8,627,697 to IndyMac REIT and executed a New Note reflecting
the remaining principal balance on his eleven Original Notes. The New Note
has a 5.46% fixed interest rate and a principal balance of $3,322,705.
(8) Mr. Napolitano is a non-employee director and retained his Original Notes
without change until November 3, 1998 when he paid off all of his Original
Notes in full.
(9) On October 20, 1998, Mr. Perry sold at market 50,000 shares of Common
Stock pledged to secure five Original Notes, as well as an additional
5,685 shares of Common Stock held by Mr. Perry that were not pledged to
secure loans, to IndyMac REIT. His five Original Notes, with a combined
principal balance of $688,758, were paid in full.
(10) On October 20, 1998, Mr. Wohl sold at market 22,000 shares of Common
Stock pledged to secure five Original Notes, as well as an additional
5,000 shares of Common Stock held by Mr. Wohl that were not pledged to
secure loans, to IndyMac REIT, and paid $14,511 in cash to IndyMac REIT.
His five Original Notes, with a combined principal balance of $348,636,
were paid in full.
Replacement Option Program. On December 9, 1998, the Compensation Committee
of the Board of Directors adopted a stock option replacement program
("Replacement Option Program") for all officers and employees, but not the
non-employee directors, of IndyMac REIT and its affiliates who had outstanding
grants of "out of the money" stock options (i.e., outstanding stock options
with exercise prices that exceeded the then market value of the Common Stock)
(the "outstanding stock options") previously granted by the Compensation
Committee. Pursuant to the Replacement Option Program, at the election of each
officer and employee with outstanding stock options, each officer's and
employee's outstanding stock options (both vested and non-vested) were
cancelled and replaced with newly issued stock options. For a further
discussion of the Compensation Committee's actions relating to the Replacement
Option Program and certain other information regarding the program, see
"Compensation Committee Report on Executive Compensation."
Pursuant to the Replacement Option Program, each officer's and employee's
outstanding stock options were replaced with newly issued stock options with
exercise prices based on the following formula: (i) for the first 50% of the
individual's outstanding stock options (starting with the lowest priced stock
options and then the next lowest priced stock options, etc.), the exercise
price is $9.7781, which was the "fair market value" of the Common Stock, as
defined in the 1998 Plan (which is the average of the average of the high and
low reported
15
<PAGE>
sales prices for the Common Stock, as published in the Western Edition of The
Wall Street Journal, on the ten trading days preceding the award date) (the
"Base Exercise Price"), (ii) for the next 25% of the individual's outstanding
stock options, the exercise price is $12.2226, which is 125% of the Base
Exercise Price, and (iii) for the last 25% of the individual's outstanding
stock options, the exercise price is $14.6672, which is 150% of the Base
Exercise Price. The replacement stock options are non-qualified stock options
and have the same vesting schedule and expiration date as the replaced stock
options.
16
<PAGE>
The following table sets forth information for certain executive officers of
IndyMac REIT with respect to the Replacement Option Program (IndyMac REIT has
had no other stock option or stock appreciation right repricings during the
past ten years):
Stock Option Repricings
<TABLE>
<CAPTION>
Length of
Number of Market Price Original
Securities Of Stock At Option Term
Underlying Time Of Exercise Price New Remaining At
Options Repricing Or At Time Of Exercise Date Of
Repriced Or Amendment Repricing Or Price Repricing Or
Date Amended (#) (1) ($) Amendment ($) ($) Amendment
Name -------- ----------- ------------ -------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
David S. Loeb........... 12/14/98 75,850 $9.7781 $23.4063 $ 9.7781 9.6 years
Chairman 12/14/98 37,925 9.7781 23.4063 12.2226 9.6 years
12/14/98 37,924 9.7781 23.4063 14.6672 9.6 years
Angelo R. Mozilo........ 12/14/98 44,307 $9.7781 $17.5625 $ 9.7781 2.6 years
Vice Chairman 12/14/98 90,899 9.7781 21.0000 9.7781 3.6 years
and Chief Executive 12/14/98 8,247 9.7781 23.4063 9.7781 9.6 years
Officer 12/14/98 71,726 9.7781 23.4063 12.2226 9.6 years
12/14/98 71,726 9.7781 23.4063 14.6672 9.6 years
Michael W. Perry........ 12/14/98 200,000 $9.7781 $19.7500 $ 9.7781 2.6 years
President 12/14/98 121,000 9.7781 23.4063 9.7781 9.6 years
12/14/98 160,500 9.7781 23.4063 12.2226 9.6 years
12/14/98 35,500 9.7781 23.4063 14.6672 9.6 years
12/14/98 125,000 9.7781 23.9375 14.6672 3.6 years
Richard H. Wohl......... 12/14/98 56,250 $9.7781 $23.4063 $ 9.7781 9.6 years
Senior Executive 12/14/98 16,250 9.7781 23.4063 12.2226 9.6 years
Vice President and 12/14/98 11,875 9.7781 23.9375 12.2226 3.6 years
General Counsel 12/14/98 28,125 9.7781 23.9375 14.6672 3.6 years
Kathleen H. Rezzo....... 12/14/98 10,000 $9.7781 $11.6250 $ 9.7781 1.6 years
Senior Executive 12/14/98 20,000 9.7781 17.5625 9.7781 2.6 years
Vice President, CLCA 12/14/98 28,250 9.7781 23.4063 9.7781 9.6 years
12/14/98 29,125 9.7781 23.4063 12.2226 9.6 years
12/14/98 4,125 9.7781 23.4063 14.6672 9.6 years
12/14/98 25,000 9.7781 23.9375 14.6672 3.6 years
S. Blair Abernathy...... 12/14/98 6,008 $9.7781 $17.5625 $ 9.7781 2.6 years
Executive Vice 12/14/98 26,246 9.7781 23.4063 9.7781 9.6 years
President and 12/14/98 14,754 9.7781 23.4063 12.2226 9.6 years
Chief Investment 12/14/98 1,373 9.7781 23.9375 12.2226 3.6 years
Officer 12/14/98 16,127 9.7781 23.9375 14.6672 3.6 years
Carmella L. Grahn....... 12/14/98 3,334 $9.7781 $11.6250 $ 9.7781 1.6 years
Executive Vice 12/14/98 10,000 9.7781 17.5625 9.7781 2.6 years
President and 12/14/98 19,333 9.7781 23.4063 9.7781 9.6 years
Chief Financial 12/14/98 15,167 9.7781 23.4063 12.2226 9.6 years
Officer 12/14/98 1,167 9.7781 23.9375 12.2226 3.6 years
12/14/98 16,333 9.7781 23.9375 14.6672 3.6 years
</TABLE>
- --------
(1) The Market Price was determined by taking the average of the high and low
sales prices of the Common Stock, as published in the Western Edition of
The Wall Street Journal, on the ten trading days preceding December 14,
1998.
17
<PAGE>
Defined Benefit Pension Plan
The following table illustrates annual pension benefits under IndyMac
Operating's Defined Benefit Pension Plan (the "Pension Plan"), under which
officers of IndyMac REIT participate, for participants retiring in 1999 at age
65 payable in the form of a life annuity under various levels of compensation
and years of service. The pension benefits in the table are not subject to
deduction for Social Security or other offset amounts.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Final Average
Compensation(1) Years of Service
--------------- -------------------------------------------------
5 10 15 20 25 30 35
------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 125,000.................... $18,510 18,510 29,670 38,950 46,980 55,020 63,050
150,000.................... 22,640 22,640 36,290 47,700 57,610 67,520 77,420
175,000.................... 23,300 23,300 37,350 49,100 59,310 69,520 79,720
200,000.................... 23,300 23,300 37,350 49,100 59,310 69,520 79,720
225,000.................... 23,300 23,300 37,350 49,100 59,310 69,520 79,720
250,000.................... 23,300 23,300 37,350 49,100 59,310 69,520 79,720
300,000.................... 23,300 23,300 37,350 49,100 59,310 69,520 79,720
400,000.................... 23,300 23,300 37,350 49,100 59,310 69,520 79,720
500,000.................... 23,300 23,300 37,350 49,100 59,310 69,520 79,720
1,000,000.................... 23,300 23,300 37,350 49,100 59,310 69,520 79,720
</TABLE>
- --------
(1) As a result of a limitation, effective January 1, 1997, under the Code,
annual compensation in excess of $160,000 is not taken into account when
calculating benefits under the Pension Plan.
The compensation used for Pension Plan purposes is the amount shown in the
Salary column of the Summary Compensation Table, subject to the $160,000
limitation under the Code. The following table sets forth the number of years
of credited service of each executive officer listed in the Summary
Compensation Table.
<TABLE>
<CAPTION>
Credited
Years of
Name Service
---- --------
<S> <C>
David S. Loeb.................................................. 0
Angelo R. Mozilo............................................... 0
Michael W. Perry............................................... 6
Richard H. Wohl................................................ 5
Kathleen H. Rezzo.............................................. 4
</TABLE>
Benefits are 100% vested after five years of service. A participant shall be
fully vested in his/her accrued normal retirement benefit regardless of
his/her length of service if his employment is terminated by IndyMac REIT
other than for "Cause" within a two-year period following a "Change in
Control" (as both terms are defined in the Pension Plan).
Employment Agreements
In December 1998, David S. Loeb, Chairman of IndyMac REIT, and Angelo R.
Mozilo, Vice Chairman and Chief Executive Officer (now Vice Chairman and
President) of IndyMac REIT, entered into employment agreements with IndyMac
REIT. Upon the execution of their respective employment agreements, Messrs.
Loeb and Mozilo each became entitled to receive a one-time signing bonus of
$1,100,000. In addition, upon execution of the agreements, Messrs. Loeb and
Mozilo were each granted 100,000 shares of restricted Common Stock that will
vest in increments of one-fifth on each of the first five anniversaries of the
date of grant, and upon certain other events, provided that each officer
remains in the service of IndyMac REIT until each such anniversary or
18
<PAGE>
the occurrence of such other events. Each of the employment agreements also
provides for the following: (i) an annual base salary of $550,000, subject to
annual review by the Board of Directors for increase (but not decrease), (ii)
an annual grant of stock options and restricted Common Stock as determined by
the Compensation Committee of the Board of Directors, with stock options for
no fewer than 100,000 shares of Common Stock annually, and (iii) all other
rights and benefits provided to executive officers of IndyMac REIT generally.
Additionally, each of the employment agreements provides that if Mr. Loeb's or
Mr. Mozilo's employment is terminated by IndyMac REIT other than for "Cause"
(as such term is defined in the employment agreements), or by either of them
for "Good Reason" (as such term is defined in the employment agreements),
which includes a voluntary termination within one year of a "Change in
Control" (as such term is defined in the employment agreements), IndyMac REIT
is required to pay to such officer the following: (i) a $1,000,000 termination
bonus, plus (ii) an amount in cash equal to (a) if such termination occurs in
1999, 2.99 times the officer's base amount as determined under the Code ("Base
Amount"), (b) if such termination occurs in 2000, 2.50 times the Base Amount,
(c) if such termination occurs in 2001, 2.00 times the Base Amount, (d) if
such termination occurs in 2002, 1.50 times the Base Amount, and (e) if such
termination occurs in 2003, an amount equal to the Base Amount. Each of the
employment agreements will expire on December 31, 2003, unless earlier
terminated in accordance with the provisions thereof.
During 1996, Michael W. Perry, President (now Chief Operating Officer) of
IndyMac REIT, entered into an employment agreement with Countrywide Asset
Management Corporation ("CAMC"), IndyMac REIT's former manager, which entity
was merged with and into IndyMac REIT following receipt of stockholder
approval at the end of the second quarter of 1997 ("Merger"). In connection
with the Merger, IndyMac REIT assumed the employment agreement between Mr.
Perry and CAMC. During 1997, IndyMac REIT (through CAMC) also entered into
employment agreements with Richard H. Wohl, Senior Executive Vice President
and General Counsel (now Senior Executive Vice President and Chief Operating
Officer) and Kathleen H. Rezzo, Senior Executive Vice President, CLCA (now
Senior Executive Vice President, Commercial Lending). Each of the foregoing
employment agreements provide for certain base compensation, incentive
compensation and stock options, as well as certain other specified benefits,
and, subject to certain limitations, each of the employment agreements will
expire on December 31, 2000.
Pursuant to the terms of their individual employment agreements, Messrs.
Perry and Wohl and Ms. Rezzo were paid base salaries of $695,750, $265,000,
and $225,000, respectively, for fiscal year 1998. Although each of the
employment agreements contemplates that a 15% increase in IndyMac REIT's
earnings per share over the preceding fiscal year normally would result in a
10% increase in the annual rate of base compensation for each of the foregoing
officers, the amount of such increase, if any, is to be determined by the
Compensation Committee. The employment agreements also provide for incentive
compensation in respect of each fiscal year ending during the term thereof in
the form of an annual cash bonus calculated as follows: Mr. Perry, based on an
incentive matrix relating to earnings per share for the applicable fiscal year
and the percentage change in earnings per share from the prior year; Mr. Wohl,
one-half based on an incentive matrix relating to earnings per share for the
applicable fiscal year and the percentage change in earnings per share from
the prior year and one-half based on the achievement of administrative and
operational objectives by Mr. Wohl; and Ms. Rezzo, 80% based on CLCA's
profitability for the applicable fiscal year and 20% based on Ms. Rezzo's
achievement of corporate objectives. Although Messrs. Perry and Wohl were not
eligible for incentive compensation for fiscal year 1998 pursuant to the
above-referenced formulas (see "Compensation Committee Report on Executive
Compensation" below), each of Messrs. Perry and Wohl received a discretionary
bonus for their outstanding performance in fiscal year 1998, in the respective
amounts of $562,500 in cash and $187,500 in restricted Common Stock, and
$210,000 in cash and $70,000 in restricted Common Stock. The foregoing
restricted Common Stock will vest over a period of two years, one-half on
January 1, 2000 and one-half on January 1, 2001. Incentive compensation for
fiscal year 1998 was payable to Ms. Rezzo pursuant to the above-referenced
formula in the amount of $325,000 in cash and $59,985 in restricted Common
Stock. The foregoing restricted Common Stock will vest over a period of five
years, one-fifth each on the first five anniversaries of the grant date.
In 1997, IndyMac REIT's stockholders approved the annual cash incentive
compensation provisions of Mr. Perry's employment agreement so that such
compensation will qualify for a tax deduction for IndyMac REIT
19
<PAGE>
pursuant to Section 162(m) of the Code. Section 162(m) limits the corporate
deduction for compensation paid to the executive officers named in the Summary
Compensation Table to $1 million unless the amount by which such compensation
exceeds the $1 million threshold is based upon performance goals that are
subject to stockholder approval.
The employment agreements provide for additional incentive compensation in
the form of grants of stock options and restricted Common Stock for such
number of shares of IndyMac REIT Common Stock as the Compensation Committee in
its sole discretion determines, taking into account each officer's and IndyMac
REIT's performance and the competitive practices then prevailing regarding the
granting of stock options. All stock options granted to Messrs. Perry and Wohl
and Ms. Rezzo (i) will be awarded pursuant to IndyMac REIT's then current
stock option plan, (ii) with respect to stock options, will have an exercise
price equal to the fair market value of the IndyMac REIT Common Stock at the
time of the grant and will become exercisable in three equal installments on
each of the first three anniversaries of the date of the grant, (iii) with
respect to restricted Common Stock, will be priced in accordance with the
terms set by the Compensation Committee and will vest in five equal
installments on each of the first five anniversaries of the date of the grant,
and (iv) will become immediately and fully exercisable in the event of a
Change of Control (as such term is defined in the employment agreements) or in
the event that Messrs. Perry's or Wohl's or Ms. Rezzo's employment, as the
case may be, is terminated due to death or disability or by IndyMac REIT (or
any successor thereto) other than for Cause (as such term is defined in the
employment agreements). For fiscal year 1998, the Compensation Committee
awarded Messrs. Perry and Wohl and Ms. Rezzo 317,000, 72,500, and 61,500 stock
options, respectively, and 18,578, 4,246 and 3,605 shares of restricted Common
Stock, respectively. The foregoing stock options will vest over a period of
three years, one third each on the first three anniversaries of the grant
date, and the restricted Common Stock will vest over a period of five years,
one-fifth each on the first five anniversaries of the grant date.
In consideration of an agreement generally not to compete with IndyMac REIT
within North America for a period of one year after termination of employment,
Messrs. Perry and Wohl and Ms. Rezzo will receive certain severance payments
upon termination of employment for reasons other than for Cause (as such term
is defined in the employment agreements), or with respect to Messrs. Perry and
Wohl, upon termination of employment by the officers for Good Reason (as such
term is defined in the employment agreements). Under the terms of the
employment agreements, the amount of the severance payment will equal the sum
of the officer's annual base salary at the time of termination, the incentive
compensation relating to the immediately preceding fiscal year, any unpaid
incentive compensation that relates to the prior fiscal year, and any
proportional payment of incentive compensation due for the current year, based
on the aggregate incentive compensation for the immediately preceding fiscal
year (if such termination occurs on a date prior to the end of a fiscal year).
In addition, with respect to Messrs. Perry and Wohl, if either officer is
terminated within two years after a Change of Control (as such term is defined
in the employment agreements), each officer's severance payment will equal
twice the sum of the foregoing amounts.
Compensation Committee Report on Executive Compensation
General
Compensation for the executive officers of IndyMac REIT is administered
under the direction of the Compensation Committee. The Compensation Committee
is composed of Messrs. Gramley, Kearns and Napolitano, who are non-employee
directors of IndyMac REIT (the "Non-Employee Directors"). IndyMac REIT's
executive compensation program consists of three main components: (1) base
compensation, (2) annual cash incentive compensation, and (3) stock options
and restricted Common Stock to provide long-term incentives for performance
and to align executive officer and stockholder interests.
The philosophy behind IndyMac REIT's executive compensation programs is to
attract, motivate and retain the executives needed in order to maximize the
creation of long-term stockholder value. The factors historically used by the
Compensation Committee to calculate compensation of executive officers
include: (1) the responsibilities of the executive officers with IndyMac REIT,
(2) completion of individual business objectives
20
<PAGE>
established prior to the beginning of each fiscal year, (3) business unit and
overall performance of IndyMac REIT, including earnings per share for the
applicable fiscal year and the percentage change in earnings per share from
the prior fiscal year, (4) amount, form and timing of prior compensation
amounts, and (5) compensation levels of executives with comparable rank in a
peer group of mortgage banking companies.
Compensation of Chairman, Vice Chairman and Chief Executive Officer, and
President and Chief Operating Officer for 1998
During fiscal year 1998, Messrs. Loeb and Mozilo received no base salary for
their services as IndyMac REIT executive officers. However, the Compensation
Committee determined that it was in the best interests of IndyMac REIT and its
stockholders to ensure the continuity and stability of senior management in
light of the economic and financial market disruption during the fourth
quarter of fiscal year 1998 and the unforeseen decline in the value of the
Common Stock. Accordingly, the Compensation Committee determined that it was
necessary and appropriate to enter into a five-year employment agreement with
each of Messrs. Loeb and Mozilo. See "Employment Agreements." Upon the
execution of their respective employment agreements, Messrs. Loeb and Mozilo
each became entitled to receive a one-time execution bonus of $1,100,000. In
addition, upon execution of the agreements, Messrs. Loeb and Mozilo were each
granted 100,000 shares of restricted Common Stock that will vest in increments
of one-fifth on each of the first five anniversaries of the date of grant, and
upon certain other events, provided that each officer remains in the service
of IndyMac REIT until each such anniversary or the occurrence of such other
events. As directors of IndyMac REIT during 1998, Messrs. Loeb and Mozilo also
were paid an annual retainer of $35,917 and were reimbursed for expenses
related to attendance at each IndyMac REIT Board meeting. Beginning in 1999,
Messrs. Loeb and Mozilo will no longer receive the annual director retainer.
Compensation for fiscal year 1998 for Mr. Perry was determined pursuant to
the terms of his employment agreement. See "Employment Agreements." Mr.
Perry's employment agreement contemplates that a 15% increase in IndyMac
REIT's earnings per share over the preceding fiscal year normally would result
in a 10% increase in the annual rate of base compensation, although the exact
amount of such increase, if any, is determined by the Compensation Committee.
The percentage change in earnings per share between fiscal years 1996 and 1997
was 19%. Based on this factor, the Compensation Committee increased Mr.
Perry's 1997 base compensation rate by 15%, to $695,750, for fiscal year 1998.
Mr. Perry's employment agreement also contemplates that he will be paid a non-
discretionary incentive bonus determined by reference to an incentive matrix
contained in the employment agreement. The two variables in the incentive
matrix are the earnings per share of IndyMac REIT for the applicable fiscal
year and the percentage change in earnings per share from the prior year.
As a result of the impact of the economic and financial market disruption
discussed above on IndyMac REIT's earnings, a non-discretionary bonus was not
payable to Mr. Perry under the incentive matrix for fiscal year 1998, even
though IndyMac REIT attained its earnings targets in three of the four
quarters during the fiscal year. After considering Mr. Perry's outstanding
performance in fiscal year 1998 (particularly during and in response to the
financial market disruption), IndyMac REIT's successful earnings performance
during three quarters of the fiscal year, the terms of Mr. Perry's employment
agreement (which permit Mr. Perry to receive other discretionary benefits in
addition to his non-discretionary incentive bonus), and the fact that the
impact of the economic and financial market disruption was outside of the
control of Mr. Perry, the Compensation Committee determined that it was
appropriate and consistent with IndyMac REIT's compensation policies to award
Mr. Perry a discretionary cash incentive bonus of $562,500 and a restricted
Common Stock bonus of $187,500.
Compensation of Other Named Executive Officers
Compensation for fiscal year 1998 for Mr. Wohl and Ms. Rezzo was determined
pursuant to the terms of their respective employment agreements. See
"Employment Agreements." Pursuant to their respective employment agreements,
for fiscal year 1998, the annual base compensation rates for Mr. Wohl and Ms.
Rezzo
21
<PAGE>
were $265,000 and $225,000, respectively. In setting these 1998 annual base
compensation rates for Mr. Wohl and Ms. Rezzo, the Compensation Committee
considered the responsibilities of these executive officers, the completion of
previously established business objectives by each of them, individual
business unit and overall performance of IndyMac REIT, the amount, form and
timing of prior compensation amounts for each of them, and compensation levels
of executives with comparable rank in a peer group of mortgage banking
companies. As was the case with respect to Mr. Perry, no cash incentive bonus
would have been payable to Mr. Wohl using the Compensation Committee's usual
criteria for fiscal year 1998. However, given the superior performance of Mr.
Wohl during the fiscal year and the other factors discussed above, the
Compensation Committee determined that it was appropriate and consistent with
IndyMac REIT's compensation policies to award a discretionary cash incentive
bonus to Mr. Wohl in the amount of $210,000 and a restricted Common Stock
bonus of $70,000. For Ms. Rezzo for fiscal year 1998, a cash incentive bonus
of $325,000 and a restricted Common Stock bonus of $59,985 were paid pursuant
to the terms of her employment agreement, based on CLCA's profitability for
fiscal year 1998 and Ms. Rezzo's achievement of corporate objectives.
Stock Options and Restricted Stock Awards
In addition to reviewing the compensation arrangements of executive
officers, the Compensation Committee awarded stock options and shares of
restricted Common Stock pursuant to the 1998 Plan, which was approved by the
stockholders on May 19, 1998. Under the 1998 Plan, executive officers are
eligible to receive stock options, shares of restricted Common Stock, stock
appreciation rights and certain other share related awards. The Compensation
Committee determined such awards by using criteria set forth in the 1998 Plan,
which includes the responsibilities and contributions of the individual and
the other compensation payable to such person.
In considering the stock option and restricted stock awards for Messrs. Loeb
and Mozilo during fiscal year 1998, the Compensation Committee followed the
guidelines adopted by the Committee in May 1998 to aid the Compensation
Committee's annual determination of appropriate stock option awards for
Messrs. Loeb and Mozilo. The guidelines are discretionary and do not
constitute a binding commitment on the part of the Compensation Committee to
grant specific awards to Messrs. Loeb and Mozilo, and may be revised or
revoked by the Compensation Committee at any time.
The guidelines condition the award of stock options and restricted stock to
Messrs. Loeb and Mozilo on IndyMac REIT's aggregate earnings for the prior
year and the improvement in IndyMac REIT's earnings per share during the prior
year. The target award is based on the following formula: 1.25% of the prior
fiscal year's earnings up to $100 million; 0.75% of the prior fiscal year's
earnings greater than $100 million up to $200 million; and .50% of the prior
fiscal year's earnings greater than $200 million. The target award is then
adjusted pursuant to the following formula: to 125% of the target award if
earnings per share for the prior fiscal year improved greater than 20% over
the preceding fiscal year's earnings per share; to 100% of the target award if
earnings per share for the prior fiscal year improved between 15% and 20% over
the preceding fiscal year's earnings per share; to 75% of the target award if
earnings per share for the prior fiscal year improved between 10% and 15% over
the preceding fiscal year's earnings per share; and to 50% of the target award
if earnings per share for the prior fiscal year improved less than 10% over
the preceding fiscal year's earnings per share.
The Compensation Committee adopted the foregoing guidelines with a view
toward creating long-term incentives for performance on the part of Messrs.
Loeb and Mozilo, and to align their interests with those of IndyMac REIT's
stockholders. The Compensation Committee recognized that Messrs. Loeb and
Mozilo contribute substantial time and experience to the business affairs of
IndyMac REIT and that, prior to the execution of their employment agreements,
they received no base, incentive or other compensation besides stock options
and directors' fees.
Based on IndyMac REIT's earnings for fiscal year 1997 of $100 million, and
the improvement in IndyMac REIT's earnings per share for fiscal year 1997
compared to fiscal year 1996 of 19%, the aggregate target award of stock
options and restricted stock to Messrs. Loeb and Mozilo during 1998 was
$1,250,000. Of this aggregate target award, 50% was awarded in the form of
stock options for a total grant of 151,699 stock options, and 50%
22
<PAGE>
was awarded in the form of restricted Common Stock for a total grant of 26,702
shares of restricted Common Stock. The stock options, which were cancelled and
replaced pursuant to IndyMac REIT's Replacement Option Program, see "Stock
Option Plans--Replacement Option Program," will vest one year from the date of
the original grant, and upon certain other events, and the restricted stock
will vest in increments of one-third on each of the first three anniversaries
of the date of grant, and upon certain other events, provided that each of
Messrs. Loeb and Mozilo remain in the service of IndyMac REIT until each such
anniversary or the occurrence of such other events. As discussed above, the
Compensation Committee also awarded shares of restricted Common Stock under
the 1998 Plan to Mr. Loeb and Mr. Mozilo pursuant to the terms of their
employment agreements.
Pursuant to the terms of Messrs. Perry's and Wohl's and Ms. Rezzo's
employment agreements, in considering the stock option and restricted stock
awards for Messrs. Perry and Wohl and Ms. Rezzo during fiscal year 1998, the
Compensation Committee considered the performance of each of Messrs. Perry and
Wohl and Ms. Rezzo and the performance of IndyMac REIT in meeting earnings per
share goals. Additionally, the Compensation Committee established guidelines
for the granting of stock options and restricted Common Stock at various
officer levels. Pursuant to these guidelines, the President (Mr. Perry) is
eligible for a grant of stock options and restricted Common Stock of up to 2.5
times such officer's annual base salary, to be allocated 75% to stock options
and 25% to restricted Common Stock, and officers at the Senior Executive Vice
President level (Mr. Wohl and Ms. Rezzo) are eligible for a grant of stock
options and restricted Common Stock of up to 1.5 times each such officer's
annual base salary, to be allocated 75% to stock options and 25% to restricted
Common Stock. Based on the foregoing, the Compensation Committee awarded
Messrs. Perry and Wohl and Ms. Rezzo 317,000, 72,500 and 61,500 stock options,
respectively, and 18,578, 4,246 and 3,605 shares of restricted Common Stock,
respectively, during 1998. The stock options will vest in increments of one-
third on each of the first three anniversaries of the date of grant, and upon
certain other events, and the restricted stock will vest in increments of one-
fifth on each of the first five anniversaries of the date of grant, and upon
certain other events, provided that each officer remains in the service of
IndyMac REIT until each such anniversary or the occurrence of such other
events.
In October 1998, the Compensation Committee determined to allow those
executive officers and employees, but not the non-employee directors, of
IndyMac REIT and its affiliates who had financed their exercises of stock
options under IndyMac REIT's Stock Option Plans to make a one-time election
to: (1) change the interest rate on their outstanding loans under IndyMac
REIT's Amended and Restated Loan Plan from an adjustable rate to a fixed rate
of interest set at the applicable market rate; (2) extend the maturity date of
their outstanding loans to 20 years and to change from a fixed rate of
interest to an adjustable rate, or to change from an adjustable rate to a
fixed rate of interest; (3) sell back to IndyMac REIT at the then fair market
value the pledged shares of Common Stock securing their outstanding loans and
to finance any remaining balance of their outstanding loans, if any, with a
new loan on an unsecured basis at a fixed rate based on the applicable market
rate; or (4) retain their outstanding loans without change. See "Stock Option
Plans--Loan Plans." The Compensation Committee determined to offer this one-
time election to address the Compensation Committee's concern that the
outstanding loans, which were originally fully secured, had become
undersecured due to the severe impact of fourth quarter 1998 market events on
IndyMac REIT's stock price, and that the loans could become further
undersecured if IndyMac REIT's stock price declined further, leaving IndyMac
potentially exposed with respect to collateral with a market value lower than
the associated outstanding loan obligations.
Thereafter, on December 9, 1998, the Compensation Committee determined to
give officers and employees, but not the non-employee directors, of IndyMac
REIT and its affiliates the opportunity to exchange all of their outstanding
stock options (both vested and non-vested) having an exercise price exceeding
the then current market value of the Common Stock, on a one-for-one basis, for
new, replacement options with an exercise price closer to the then current
market value of IndyMac REIT's Common Stock. See "Stock Option Plans--
Replacement Option Program." The Compensation Committee took this action in
response to the significant decline in the market price of the Common Stock
during the fourth quarter of 1998. Specifically, the Compensation Committee
determined that the decline in the market price was caused primarily by market
events not within the control of IndyMac REIT's management, and substantially
all of the stock options previously granted as financial incentives to the
officers and employees of IndyMac REIT and its affiliates pursuant to IndyMac
REIT's stock incentive plans had exercise prices that exceeded the then
current market value of the Common Stock and thus had ceased to provide their
intended financial incentive. In order to effectuate this exchange, the
Compensation Committee determined that it was necessary and appropriate to
make awards to named executive officers in excess of the annual limitation on
awards to individual grantees under the
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1998 Plan, because all stock options granted during the 1998 calendar year
(i.e., the stock options that were cancelled and replaced and the replacement
stock options) would be aggregated under applicable laws. Thus, the Board of
Directors of IndyMac REIT amended the 1998 Plan to increase the annual
limitation from 500,000 shares to 1,000,000 shares. In accordance with the
rules under Section 162(m) of the Code, IndyMac REIT has requested that its
stockholders approve this amendment so that awards of stock options, stock
appreciation rights and restricted stock made under the 1998 Plan after such
approval will qualify as performance-based compensation, as described below.
See "Proposal Two--Amendment To The 1998 Stock Incentive Plan."
Deductibility of Compensation
Section 162(m) of the Code limits the corporate deduction for compensation
paid to the executive officers named in the Summary Compensation Table to $1
million unless the amount by which such compensation exceeds the $1 million
threshold is based upon performance goals that are subject to stockholder
approval ("performance-based compensation"). In 1998, IndyMac REIT's
stockholders approved the non-discretionary cash incentive compensation
provisions of Mr. Perry's employment agreement so that such compensation
should qualify for deduction by IndyMac REIT pursuant to Section 162(m). As
discussed above, Mr. Perry's employment agreement also permits the payment of
discretionary bonuses and other benefits to Mr. Perry, which generally will
not constitute performance-based compensation under Section 162(m). Similarly,
awards made under the 1998 Plan after it was amended by the Board of Directors
but before the amendment is approved by IndyMac REIT's stockholders will not
constitute performance-based compensation.
The Compensation Committee's policy on deductibility is generally to develop
compensation plans that provide for the payment of compensation that is tax
deductible to IndyMac REIT, while recognizing that the legitimate interests of
IndyMac REIT and its stockholders may at times be better served by
compensation arrangements that may not be fully deductible. Even if a portion
of the compensation paid to executive officers were not deductible, IndyMac
REIT would not incur a federal income tax liability so long as it distributed
dividends to its shareholders in an amount that at least equaled IndyMac
REIT's taxable income. In other words, any increase in IndyMac REIT's taxable
income attributable to nondeductible compensation expense could be offset with
a deduction for dividends paid to IndyMac REIT shareholders.
The Compensation Committee
Lyle E. Gramley
Thomas J. Kearns
Frederick J. Napolitano
Compensation Committee Interlocks and Insider Participation
During fiscal year 1998, Messrs. Gramley, Kearns and Napolitano served as
members of the Compensation Committee. No member of the Compensation Committee
was, during the fiscal year, an officer or employee of IndyMac REIT, nor was
any member of the Compensation Committee formerly an officer of IndyMac REIT.
No executive officer of IndyMac REIT served (i) as a member of the
compensation committee or board of directors of another entity, one of whose
executive officers served on the Compensation Committee or (ii) as a member of
the compensation committee of another entity, one of whose executive officers
served on the Board of Directors.
Certain Transactions with Management and Business Relationships
IndyMac REIT, through CLCA, has from time to time made loans to builders of
residential construction projects secured by real property purchased by such
builders from a company doing business as Loeb Enterprises, LLC, in which
IndyMac REIT's chairman and former chief executive officer is a major investor
together with his family. The non-family executive managers of Loeb
Enterprises, LLC, who run the day-to-day operations of Loeb Enterprises, LLC,
own approximately 34% of the equity and profits of that company. Each project
is part of a master planned community being developed by Loeb Enterprises,
LLC, which includes various amenities, including an 18-hole golf course.
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In connection with two of the real property sales transactions between Loeb
Enterprises, LLC and the builders to which CLCA has made construction loans,
Loeb Enterprises, LLC has accepted a second mortgage from each builder to
partially finance each builder's purchase of real property. As a part of
CLCA's credit review of each project with a second mortgage, the amount of the
second mortgage was considered a part of the equity of the builder in the
project. In each case, the second mortgage is subordinate to CLCA's financing
facility, although both the CLCA financing facility and the second mortgage
are paid down on a unit-by-unit basis.
In the case of each project financed by CLCA, the builder is not affiliated
with either IndyMac REIT or Loeb Enterprises, LLC, the general risk
characteristics of the construction loan are comparable to those for similar
projects funded by CLCA, and the construction loan facility between CLCA and
the builder has been negotiated at arms' length on terms consistent with those
of similar loans made by CLCA to other unaffiliated builders. Moreover, each
credit facility has been approved by the disinterested members of the Board of
Directors of IndyMac REIT pursuant to Section 144 of the DGCL.
As of December 31, 1998, CLCA had extended nine construction loan facilities
to builders secured by property originally purchased from Loeb Enterprises,
LLC, with total dollar commitments of $27.9 million, and total loan
outstandings of $12.6 million. Loeb Enterprises, LLC, has posted a bond for
the completion of certain infrastructure improvements such as arterial roads,
drainage, and utilities in the portion of the master planned community in
which builders are currently building, and these improvements have been
substantially completed. In addition, the builders are contractually
responsible to the city of Sparks, Nevada for certain other improvements such
as roads, drainage, and utilities, within the specific subdivisions of
property they have purchased.
In addition to the foregoing loans, in May 1998 IndyMac REIT, through CLCA,
made a land and water rights acquisition loan, secured by, among other things,
approximately 42,000 acres of real property, to Coyote Springs Investment LLC,
a Nevada limited liability company, in which Mr. Loeb and his wife hold a 45%
interest and for which Mr. Loeb acts as a managing member. The remaining 55%
interest in the limited liability company is held by members who are not
affiliated with Mr. Loeb or IndyMac REIT. The loan is personally guaranteed by
Mr. Loeb and his wife. The property is intended to be used by the limited
liability company to develop a master planned community, which includes
various amenities, including two 18-hole golf courses. The general risk
characteristics of the loan are comparable to those for similar projects
funded by CLCA, and the loan was negotiated at arms' length on terms
consistent with those of similar loans made by CLCA to other unaffiliated
builders. Under the terms of the loan, interest is paid monthly, with annual
scheduled principal reductions. The original principal loan amount was $11.2
million, which amount remained outstanding as of December 31, 1998. The
primary source of repayment of the loan is derived from the income generated
from the sale of water rights to a local municipality. The terms of the loan
have been approved by the disinterested members of the Board of Directors of
IndyMac REIT pursuant to Section 144 of the DGCL.
From time to time, certain directors and executive officers of IndyMac REIT
and IndyMac Operating and associates of such persons were indebted to IndyMac
REIT and IndyMac Operating, as customers, in connection with mortgage loans
and other extensions of credit by IndyMac REIT and IndyMac Operating. These
transactions were in the ordinary course of business; they were substantially
on the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with unrelated persons,
except that for some loan products interest rates charged were the same as the
lowest interest rates charged other persons or were more favorable for IndyMac
REIT and IndyMac Operating employees and directors than for other persons; and
they did not involve more than the normal risk of collectibility or present
other unfavorable features. In addition, directors, officers and employees of
IndyMac REIT and IndyMac Operating are entitled to receive certain discounts
or waivers of fees or commissions for certain products and services offered by
IndyMac REIT and IndyMac Operating.
In October 1998, IndyMac REIT extended a $100,000 second mortgage loan to
Carmella Grahn, IndyMac REIT's Executive Vice President and Chief Financial
Officer, and Ms. Grahn's spouse, in connection with the purchase of a home.
The loan bears an interest rate of 10% and a term of 15 years. Pursuant to the
terms of the loan, no interest or principal is due unless Ms. Grahn's
employment is terminated voluntarily or involuntarily, at which point the
interest rate will be modified and interest and principal payments will be
calculated to ensure
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payment in full on the maturity date. As long as Ms. Grahn remains an employee
of IndyMac REIT, the loan will be forgiven over a five-year period, 20% on
each of the first five anniversaries of the origination date. If upon a
termination of Ms. Grahn's employment she is entitled to payment of severance
pursuant to her employment agreement with IndyMac REIT, the loan will be
forgiven in its entirety.
In November 1998, IndyMac REIT extended a $100,000 second mortgage loan to
the spouse of Richard H. Wohl, IndyMac REIT's Senior Executive Vice President
and Chief Operating Officer, in connection with the purchase of a home. The
loan bears an interest rate of 10% and a term of 15 years. Pursuant to the
terms of the loan, no interest or principal is due unless Mr. Wohl's
employment is terminated for "Cause" (as defined in Mr. Wohl's employment
agreement), at which point the interest rate will be modified and interest and
principal payments will be calculated to ensure payment in full on the
maturity date. As long as Mr. Wohl remains an employee of IndyMac REIT, the
loan will be forgiven over a four-year period, 25% on each of the first four
anniversaries of the origination date. If Mr. Wohl is terminated other than
for Cause, the loan will be forgiven in its entirety.
STOCK PERFORMANCE GRAPH
The following chart compares the total stockholder return (stock price
increase plus dividends) on the IndyMac REIT Common Stock from January 1, 1994
through December 31, 1998 with the total stockholder returns for the NYSE
Market Index and the Peer Group Index. The graph assumes that the value of the
investment in the IndyMac REIT Common Stock and each index was $100 on January
1, 1994 and that all dividends were reinvested.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN(/1/)
COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE
AMONG INDYMAC COMPANIES, PEER GROUPS, INDUSTRY INDEXES AND/OR BOARD MARKETS
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period INDYMAC REIT NYSE
(Fiscal Year Covered) MORTGAGE RESIDENTIAL MARKET INDEX
- ------------------- ---------- ----------- -------------
<S> <C> <C> <C>
Measurement Pt- 12/31/1993 $100 $100 $100
FYE 12/30/1994 $ 93.19 $ 93.48 $ 98.06
FYE 12/29/1995 $202.89 $109.15 $127.15
FYE 12/31/1996 $278.95 $143.84 $153.16
FYE 12/31/1997 $328.30 $161.47 $201.50
FYE 12/31/1998 $162.43 $140.14 $239.77
</TABLE>
ASSUMES $100 INVESTED ON JAN. 1, 1994
ASSUMES DIVIDENDS REINVESTED THROUGH
FISCAL YEAR ENDING DEC. 31, 1998
(1) Peer group is Media General Financial Services industry group of
residential real estate investment trusts, which includes IndyMac REIT.
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Section 16 Disclosure
Section 16 of the Securities Exchange Act of 1934 requires IndyMac REIT's
directors and executive officers to report their ownership of and transactions
in IndyMac REIT's Common Stock to the Securities and Exchange Commission and
the New York Stock Exchange. Copies of these reports are also required to be
supplied to IndyMac REIT. Specific dates for filing these reports have been
established by the Securities and Exchange Commission, and IndyMac REIT is
required to report in this Proxy Statement any failure of its directors and
executive officers to file by the relevant due date any of these reports
during 1998. Based solely on its review of the copies of the reports prepared
or received by it, IndyMac REIT believes that all such filing requirements
were satisfied.
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PROPOSAL TWO
AMENDMENT TO THE 1998 STOCK INCENTIVE PLAN
General
The 1998 Plan consists of two components: the Officer/Employee Program and
the Non-Employee Director Program. The proposed amendment to the 1998 Plan
will increase the aggregate number of shares of Common Stock subject to
options, stock appreciation rights, and awards of restricted stock
(collectively, "Stock Awards") granted during any calendar year to any
individual from 500,000 to 1,000,000. This change to Section 3(b)(ii) of the
1998 Plan will affect only the Officer/Employee Program. If the amendment is
approved, IndyMac REIT will be able to grant Stock Awards to eligible persons
for amounts up to 1,000,000 shares of Common Stock during any calendar year.
The amendment will make no other changes to the 1998 Plan. The text of the
Proposed amendment is included as Appendix A to this Proxy Statement.
Persons eligible to receive awards under the Officer/Employee Program
include officers and employees of IndyMac REIT or IndyMac Operating and their
respective subsidiaries or affiliates and certain other individuals who
perform services for IndyMac REIT, IndyMac Operating 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 non-employee
directors of IndyMac Operating who are not also non-employee directors of
IndyMac REIT. As of February 28, 1999, approximately 1,015 officers and
employees of IndyMac REIT or IndyMac Operating and two non-employee directors
of IndyMac Operating are considered eligible under the Officer/Employee
Program, subject to the power of the Compensation Committee to determine all
eligible officers, employees and other persons (other than ineligible non-
employee directors of IndyMac REIT) to whom awards will be granted.
The amendment of the 1998 Plan was previously approved by the Board of
Directors of IndyMac REIT following a review of the amendment by IndyMac
REIT's outside compensation consultants, Compensation Resource Group. IndyMac
REIT's compensation consultants confirmed that, based on industry compensation
standards, the amendment would provide IndyMac REIT with the flexibility it
required to attract and retain highly qualified executive officers.
Under the rules applicable to the Replacement Option Program discussed in
more detail above in "Executive Compensation--Stock Option Plans--Replacement
Option Program," the replacement stock options are considered to be newly
granted stock options during 1998. Accordingly, the stock options granted
during 1998 that were cancelled in connection with the Replacement Option
Program, as well as the stock options granted to replace the cancelled stock
options, count toward the maximum aggregate annual per person limit set forth
in Section 3(b)(ii) of the 1998 Plan. As a result of the stock options granted
to Michael W. Perry pursuant to the Replacement Option Program and the other
Stock Awards granted to Mr. Perry during 1998, Mr. Perry received Stock Awards
in excess of the current maximum aggregate annual per person limit under the
1998 Plan. Pursuant to Section 162(m) of the Code, the Stock Awards granted to
Mr. Perry in excess of the maximum aggregate per person limit under the 1998
Plan will not qualify as "performance-based compensation" for 1998, and
therefore, the value of such excess Stock Awards will not be deductible by
IndyMac REIT. IndyMac REIT is requesting that its stockholders approve the
proposed amendment to the 1998 Plan so that all future Stock Awards up to
1,000,000 shares of Common Stock made under the 1998 Plan during any calendar
year to any individual will be deemed to be performance-based compensation for
purposes of Section 162(m) of the Code.
Vote Required; Board Recommendation
A majority of the votes cast at the Annual Meeting, at which a quorum is
present, is sufficient to approve the amendment.
The Board of Directors recommends that stockholders vote FOR the amendment
to the 1998 Plan. Proxies solicited by the Board of Directors will be so voted
unless the stockholder specifies otherwise.
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PROPOSAL THREE
RATIFYING THE SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected the accounting firm of Grant Thornton
LLP ("Grant Thornton") to audit IndyMac REIT's financial statements for the
year ending December 31, 1999. Grant Thornton has acted as the independent
accounting firm for IndyMac REIT since 1985. In accordance with a resolution
of the Board of Directors, this selection is being presented to stockholders
for ratification at this meeting. The affirmative vote of a majority of the
votes cast at the Annual Meeting is necessary for ratification. A
representative of Grant Thornton will be present at the Annual Meeting, will
have an opportunity to make a statement if he or she wishes to do so and will
be available to respond to appropriate questions.
The Board of Directors recommends a vote FOR ratification of Grant Thornton
as IndyMac REIT's independent accountants. Proxies solicited by the Board of
Directors will be so voted unless the stockholder specifies otherwise.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
The following paragraphs contain a description of certain transactions and
relationships between IndyMac REIT or any of its affiliates and CCI or any of
its affiliates. For a description of CCI's ownership of IndyMac REIT Common
Stock, see "Principal Stockholders."
IndyMac Operating
IndyMac REIT's third party lending operations are primarily conducted
through IndyMac Operating, a taxable corporation that is not consolidated with
IndyMac REIT for tax or financial reporting purposes. Although IndyMac REIT
owns all of IndyMac Operating's outstanding non-voting preferred stock and 99%
of the economic interest in IndyMac Operating, CHL, a wholly-owned subsidiary
of CCI, owns all of IndyMac Operating's outstanding voting Common Stock and 1%
of the economic interest in IndyMac Operating. Accordingly, CCI, through its
stock ownership of CHL, has the power to elect directors and officers of CHL
and IndyMac Operating, and consequently CCI has the power to direct CHL's and
IndyMac Operating's day-to-day operations. Currently, seven executive
officers, two of whom are also directors, of IndyMac REIT are officers and/or
directors of IndyMac Operating, and two directors of IndyMac Operating are
senior officers of CCI and CHL.
In connection with the Merger, CCI agreed with IndyMac REIT to amend the
certificate of incorporation of IndyMac Operating to provide that if a CCI
Change of Control (as defined in IndyMac Operating's certificate of
incorporation) occurs, or if CCI ceases to beneficially own more than 5.0% of
the issued and outstanding shares of IndyMac REIT Common Stock, or if neither
Mr. Loeb nor Mr. Mozilo is a director of IndyMac REIT, IndyMac REIT will be
entitled, in its sole discretion, to compel the dissolution of IndyMac
Operating and to receive all assets of IndyMac Operating, other than a certain
amount of cash, which will be payable to CCI in an amount equal to 3% of the
book value of IndyMac Operating, unless CCI requests an independent appraisal.
If such appraisal is requested, CCI shall receive such higher or lower value
that corresponds to 1% of the fair market value of IndyMac Operating's assets.
In connection with the Merger, IndyMac Operating's certificate of
incorporation was also amended to prohibit a holder of IndyMac Operating
securities (such as CCI) from causing any assets of IndyMac Operating to be
used for any purpose other than in furtherance of IndyMac Operating's
business.
In connection with the Merger, IndyMac REIT agreed that in the event that
IndyMac REIT (i) establishes or acquires a majority ownership interest in an
entity, the business activities of which are substantially the same as all of
the business activities then being conducted by IndyMac Operating or (ii)
transfers to such other entity substantially all of the assets of IndyMac
Operating, then IndyMac REIT shall, at CCI's option, purchase CCI's interest
in IndyMac Operating at a purchase price equal to the amount required to be
paid to CCI in the event of a dissolution of IndyMac Operating as described
above.
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During 1998, IndyMac Operating purchased all of the mortgage loans that it
subsequently securitized from IndyMac REIT, consistent with its past practice.
In January 1996, IndyMac REIT and IndyMac Operating entered into a Master
Forward Commitment and Services Agreement (which replaced an earlier agreement
entered into in 1993) pursuant to which IndyMac REIT agreed to sell and
IndyMac Operating agreed to purchase certain mortgage loans, and IndyMac
Operating agreed to act as the master servicer or sub-servicer with respect to
certain assets originated or acquired by IndyMac REIT for an annual fee, which
equals the product of .025% and the aggregate unpaid principal balance of
assets under its management.
IndyMac Operating has a revolving credit facility and term borrowings up to
one year with IndyMac REIT whereby funds are advanced to IndyMac Operating
primarily to finance assets in which IndyMac Operating invests. As of December
31, 1998 and 1997, advances due to IndyMac REIT from IndyMac Operating totaled
$196 million and $118 million, respectively. Such advances bear interest at
rates indexed to LIBOR. Interest charged on advances by IndyMac REIT to
IndyMac Operating was at a rate of 9.3% at December 31, 1998 and 10.5% at
December 31, 1997.
IndyMac Operating received $75 million in capital contribution from IndyMac
REIT in the fourth quarter of 1998 in the form of a reduction in amounts due
IndyMac REIT.
IndyMac Operating has granted IndyMac REIT a license to use the "IndyMac"
name as a part of its corporate name.
Following consummation of the Merger, substantially all the operating
personnel then employed by CAMC were hired by IndyMac REIT or IndyMac
Operating on the basis of the respective business activities of each entity,
the current and expected duties of each employee and any cost-sharing
arrangements negotiated between IndyMac REIT and IndyMac Operating with
respect to any employees whose services support the business activities of
both entities.
CHL
IndyMac REIT's consumer lending and third party lending operations consist
of the origination and the purchase of residential mortgage loans by IndyMac
REIT and the sale of such mortgage loans to IndyMac Operating, and
securitization of the mortgage loans and the sale of the resulting securities
to investors or sales of the mortgage loans on a whole loan basis by IndyMac
Operating. IndyMac REIT and the sellers of the mortgage loans negotiate
whether the seller will retain, or IndyMac REIT will purchase, the rights to
service the mortgage loans purchased by IndyMac REIT and IndyMac Operating.
Prior to September, 1998 IndyMac REIT and IndyMac Operating did not generally
perform primary servicing on their respective portfolios of mortgage loans
held for sale or investment, and prior to such date IndyMac REIT and IndyMac
Operating negotiated contractual arrangements with established servicers,
including CHL, a wholly-owned subsidiary of CCI, to sub-service loans for
which IndyMac REIT or IndyMac Operating acquired the servicing rights. The
sub-servicing arrangement among IndyMac REIT, IndyMac Operating and CHL was
governed by the 1987 Amended and Restated Servicing Agreement, as amended (the
"Sub-Servicing Agreement"). Under the Sub-Servicing Agreement, CHL retained a
monthly fee of $6.25 per loan for "A" paper loans and $15.00 per loan for
subprime loans. In addition, CHL retained setup fees in the normal course.
Under the Sub-Servicing Agreement, CHL earned sub-servicing fees of
approximately $1.7 million and $1.9 million for the years ended December 31,
1998 and 1997, respectively. In the opinion of management, the overall terms
of the sub-servicing arrangements with CHL are as favorable to IndyMac REIT as
could have been negotiated with unaffiliated parties.
During 1998, IndyMac REIT and IndyMac Operating continued to purchase a
relatively small portion of the mortgage loans they securitize from CHL.
Pursuant to a Purchase and Servicing Agreement, CHL retains the servicing
rights on all conforming loans it sells to IndyMac REIT and IndyMac Operating.
During the years ended December 31, 1998 and 1997, IndyMac REIT and IndyMac
Operating purchased approximately $418.4 million and $2.7 million,
respectively, of mortgage loans from CHL.
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In addition, CHL services the mortgage loans that secure three series of
CMOs issued by a subsidiary of IndyMac REIT or trusts established by a
subsidiary of IndyMac REIT pursuant to servicing agreements entered into
between IndyMac REIT and CHL. These agreements provide for servicing fees up
to .32% of the aggregate unpaid principal balance of the mortgage loans being
serviced. CHL received servicing fees of approximately $132,000 and $186,000
under these agreements for the years ended December 31, 1998 and 1997,
respectively.
During 1998, IndyMac REIT issued ARM securities backed by mortgage loans
previously sold to the Federal Home Loan Mortgage Corporation ("Freddie Mac")
and assumed certain recourse obligations with respect to the underlying
mortgage loans. During the fourth quarter of 1998, IndyMac REIT entered into a
transaction with CHL whereby CHL assumed IndyMac REIT's recourse obligations
to Freddie Mac. In consideration of CHL's assumption of these recourse
obligations, IndyMac REIT paid CHL a total of $6.0 million. Of this amount a
portion is reimbursable to IndyMac REIT based upon actual loss experience on
the loans. As of December 31, 1998, the net estimated present value of this
deposit was $2.8 million.
In August 1998, IndyMac Operating acquired, but did not take delivery, from
Flagstar Bank, FSB, a federally chartered savings and loan, the servicing
rights of a loan portfolio with an aggregate unpaid principal balance of $2.9
billion for $46.4 million. IndyMac Operating sold the servicing rights to CHL
on October 31, 1998 at a price of $36.7 million.
Currently, two executive officers, who are also directors, of IndyMac REIT
are executive officers and directors of CHL.
CCI
In connection with the Merger, CCI acquired 3,440,860 shares of IndyMac REIT
Common Stock. As a condition to the Merger, IndyMac REIT entered into an
agreement with CCI (the "Registration Rights Agreement") pursuant to which CCI
may require, under certain circumstances and subject to certain limitations,
that IndyMac REIT register any or all of the IndyMac REIT Common Stock issued
to CCI in connection with the Merger. Under the Registration Rights Agreement,
CCI, on two occasions commencing two years after the date of the Registration
Rights Agreement, which is June 30, 1997, may request that IndyMac REIT file a
registration statement covering the IndyMac REIT Common Stock issued pursuant
to the Merger ("Demand Registration"). Only one request for a Demand
Registration may be made during any nine-month period. Each Demand
Registration request must be for a minimum of (i) 1,250,000 shares of IndyMac
REIT Common Stock or (ii) the number of shares of IndyMac REIT Common Stock
having a market value of $20 million, whichever is less. A Demand Registration
will not be deemed to have been effected until the registration statement
filed in connection therewith is declared effective by the Securities and
Exchange Commission. All costs of the registration, including, among other
things, registration and filing fees, printing expenses, attorneys' fees,
accountants' fees and other reasonable expenses, will be borne by IndyMac
REIT.
If IndyMac REIT determines that, in light of the pendency of a material
transaction, it would be materially detrimental to IndyMac REIT and its
stockholders to file a registration statement pursuant to a request for a
Demand Registration, IndyMac REIT may defer such Demand Registration for not
more than 90 days after receipt of such request. IndyMac REIT also is
permitted to defer the filing of a registration statement pursuant to a
request for a Demand Registration for an additional period of 60 days after
the expiration of the initial 90-day period in order to satisfy its disclosure
obligations under the Securities Act with respect to certain material
transactions.
If IndyMac REIT proposes to file a registration statement covering the
IndyMac REIT Common Stock under the Securities Act of 1933 (except for
registration (a) on Form S-8, or a successor or substantially similar form, of
an employee stock option, stock purchase or compensation plan or of IndyMac
REIT Common Stock issued or issuable pursuant to any such plan, (b) of a
dividend reinvestment plan or (c) on Form S-4, or a successor or substantially
similar form, of shares issuable in connection with any acquisition, merger,
exchange or similar transaction), IndyMac REIT will, subject to certain
limitations, use its best efforts to arrange to include in such
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registration statement all of the IndyMac REIT Common Stock owned by CCI as to
which it has received a request for inclusion. Such IndyMac REIT Common Stock
will not be included, however, to the extent that the underwriters indicate
that such inclusion will interfere with the successful marketing of IndyMac
REIT Common Stock being issued by IndyMac REIT.
In connection with the Merger, IndyMac REIT has granted CCI the right (the
"Right of First Offer") to purchase from IndyMac REIT in an offering (an
"Offering") of voting capital stock (or a security convertible or exchangeable
into or exercisable for voting capital stock) such number of shares of the
capital stock as may be required for CCI to maintain its then proportionate
voting interest in IndyMac REIT. Any purchase by CCI pursuant to the Right of
First Offer shall be made on the terms and be subject to the conditions
applicable to other purchasers in the Offering.
In connection with the Merger, IndyMac REIT and IndyMac Operating entered
into a Cooperation Agreement with CCI whereby certain services previously
provided to IndyMac REIT and IndyMac Operating by CCI and its affiliates would
be provided during a transition period. The Cooperation Agreement specifies
certain costs for IndyMac REIT and IndyMac Operating to pay CCI for certain
services during the transition period. Between July 1, 1997 and December 31,
1997, the Company incurred $2.2 million of charges from CCI and its affiliates
associated with such services. In 1998, total expenses incurred under the
Cooperation Agreement were $421,000. IndyMac REIT incurred certain other
expenses in 1998 related to telephone usage and equipment, and delivery
services of $1.1 million which it paid during the year to CCI.
During 1997, IndyMac REIT and IndyMac Operating entered into a sublease
agreement for their corporate headquarters with CCI, while at the same time,
CCI subleased space from IndyMac REIT and IndyMac Operating in their former
headquarters. As a result, IndyMac REIT and IndyMac Operating paid CCI
$2.6 million and $1.1 million in 1998 and 1997, respectively, and received
$189,000 in 1997 for lease and sublease payments from CCI.
Currently, two executive officers, who are also directors, of IndyMac REIT
are executive officers and directors of CCI.
Contrywide Servicing Exchange, Inc.
Countrywide Securities Corporation
In connection with IndyMac REIT's mortgage conduit operations, IndyMac REIT
and IndyMac Operating periodically enter into loan and/or servicing purchase
and/or sales transactions. In connection with the transactions conducted
during 1998, IndyMac REIT and IndyMac Operating utilized the services of
Countrywide Servicing Exchange, Inc. ("CSE"), a subsidiary of CCI that brokers
bulk sales of mortgage loans and servicing rights for third parties, and
Countrywide Securities Corporation ("CSC"), a subsidiary of CCI that trades
collateralized mortgage obligations, mortgage backed securities, government
securities and mortgage loans. The total fees paid by IndyMac REIT to both CSE
and CSC during 1998 were $421,000 and the total fees paid by IndyMac Operating
to both CSE and CSC during 1998 were $108,000.
OTHER MATTERS
The Board of Directors knows of no matters other than those listed in the
attached Notice of Annual Meeting that are likely to be brought before the
Annual Meeting. However, if any other matters should properly come before the
Annual Meeting, the persons named in the enclosed proxy will vote all proxies
given to them in accordance with their best judgment on such matters.
32
<PAGE>
ANNUAL REPORT AND FORM 10-K
The 1998 Annual Report to Stockholders containing the consolidated financial
statements of IndyMac REIT for the year ended December 31, 1998 accompanies
this proxy statement.
Stockholders may obtain without charge a copy of IndyMac REIT's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998 as filed with
the Securities and Exchange Commission, without the accompanying exhibits, by
writing to Investor Relations, IndyMac Mortgage Holdings, Inc., 155 North Lake
Avenue, P.O. Box 7137, Pasadena, California 91109-7137. A list of exhibits is
included in the Form 10-K, and exhibits are available from IndyMac REIT upon
the payment to IndyMac REIT of the cost of furnishing them.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2000 Annual
Meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended, must be received by the Secretary of IndyMac REIT, 155 North Lake
Avenue, Pasadena, California 91101, not later than December 10, 1999 to be
considered for inclusion in IndyMac REIT's proxy materials for that meeting.
A stockholder that intends to present business at the 2000 Annual Meeting
other than pursuant to Rule 14a-8 must comply with the requirements set forth
in IndyMac REIT's Bylaws. To bring business before an annual meeting, IndyMac
REIT's Bylaws require, among other things, that the stockholder submit written
notice thereof complying with the Bylaws, to the Secretary of IndyMac REIT not
less than 90 days nor more than 120 days prior to the anniversary of the
preceding year's annual meeting. Therefore, IndyMac REIT must receive notice
of a stockholder proposal submitted other than pursuant to Rule 14a-8 no
sooner than February 4, 2000 and no later than March 5, 2000. If the notice is
received before February 4, 2000 or after March 5, 2000, it will be considered
untimely and IndyMac REIT will not be required to present such proposal at the
2000 Annual Meeting.
By Order of the Board of Directors
/s/ Melissa K. Gerard
Melissa K. Gerard
Secretary
Dated: April 8, 1999
33
<PAGE>
APPENDIX A
AMENDMENT TO
INDYMAC MORTGAGE HOLDING, INC.
1998 STOCK INCENTIVE PLAN
(Adopted by the Board of Directors on January 20, 1999)
Section 3(b)(ii) of the IndyMac Mortgage Holdings, Inc. 1998 Stock Incentive
Plan is replace in its entirety with the following:
"(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 1,000,000."
A-1
<PAGE>
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INDYMAC MORTGAGE HOLDINGS, INC.
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS JUNE 3, 1999.
The undersigned appoints David S. Loeb and Angelo R. Mozilo, or either of
them, with full power of substitution, the attorney and proxy of the undersigned
to appear and to vote all of the shares of stock of IndyMac Mortgage Holdings,
Inc. which the undersigned would be entitled to vote if personally present at
the Annual Meeting of Stockholders of IndyMac Mortgage Holdings, Inc. to be held
at the Pasadena Hilton Hotel, 150 South Los Robles Avenue, Pasadena, California
on June 3, 1999 at 10:00 a.m. and any adjournment thereof,
Receipt of copies of the Annual Report to Stockholders, the Notice of the
Annual Meeting of Stockholders and the Proxy Statement dated April 8, 1999 is
hereby acknowledged.
(Continued and to be signed on reverse side.)
INDYMAC MORTGAGE HOLDINGS, INC.
P.O. BOX 11262
NEW YORK, N.Y. 10203-0262
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<PAGE>
VOTE BY TELEPHONE OR INTERNET
24 HOURS A DAY, 7 DAYS A WEEK
<TABLE>
<CAPTION>
TELEPHONE INTERNET MAIL
800-650-0913 http://proxy.shareholder.com/nde
<S> <C> <C>
Use any touch-tone telephone to vote Use the Internet to vote your proxy. Mark, sign and date your proxy card
your proxy. Have your proxy card in Have your proxy card in hand when and return it in the postage-paid
hand when you call. You will be you access the website. You will be envelope we have provided.
prompted to enter your control prompted to enter your control
number, located in the box below, and number, located in the box below, to
then follow the simple directions. create an electronic ballot.
</TABLE>
<TABLE>
<S> <C>
Your telephone or Internet vote authorizes the named [If you have submitted your proxy by telephone or the
proxies to vote your shares in the same manner as if you Internet there is no need for you to mail back your proxy]
marked, signed and returned the proxy card.
</TABLE>
<TABLE>
<S> <C>
CALL TOLL-FREE TO VOTE . IT'S FAST AND CONVENIENT
[800-650-0913] [CONTROL NUMBER FOR
TELEPHONE OR INTERNET VOTING]
</TABLE>
<TABLE>
<CAPTION>
DETACH PROXY CARD HERE IF YOU ARE NOT
VOTING BY TELEPHONE OR INTERNET
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[ ]
UNMARKED PROXIES SHALL BE VOTED IN FAVOR OF EACH OF THE FOLLOWING MATTERS unless
specified to the contrary.
<S> <C> <C> <C>
1. Election of Directors FOR all nominees [_] WITHHOLD AUTHORITY to vote [_] *EXCEPTIONS [_]
listed below for all nominees listed below
</TABLE>
Nominees: 01 - David S. Loeb, 02 - Angelo R. Mozilo, 03 - Michael W. Perry, 04 -
Lyle E. Gramley, 05 - Thomas J. Kearns, 06 - Frederick J. Napolitano
[INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
*Exceptions
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<TABLE>
<S> <C>
2. To amend the IndyMac Mortgage Holdings, Inc. 1998 Stock 3. To ratify the selection of Grant Thornton LLP as
Incentive Plan to increase the annual per person limit independent accountants for IndyMac Mortgage
for benefits under such plan. Holdings, Inc. for the year ending December 31,
1999.
FOR [_] AGAINST [_] ABSTAIN [_]
FOR [_] AGAINST [_] ABSTAIN [_]
I PLAN TO [_] Address Change and/or [_]
ATTEND THE MEETING Comments Mark Here
Please date and sign exactly as name
appears on this card. Joint owners
should each sign. If the signer is
a corporation, please sign full
corporate name by duly authorized
officer. Executors, trustees, etc.
should give full title as such.
Dated:------------------------------, 1999
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Signature(s)
------------------------------------------
Signature(s)
Votes MUST be indicated [ ]
(x) in black or blue ink.
</TABLE>
Please sign, date and return this proxy card in the enclosed envelope.
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Please Detach Here
- You Must Detach This Portion of the Proxy Card -
Before Returning it in the Enclosed Envelope
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