FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to _________________
Commission file number: 1-11017
NORTH AMERICAN MORTGAGE COMPANY
(Exact name of registrant as specified in its charter)
Delaware 68-0267088
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3883 Airway Drive, Santa Rosa, California, 95403-1699
(Address of principal executive offices, zip code)
(707) 523-5000
(Registrant's telephone number, including area code)
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
The number of shares of Common Stock, par value $.01 per share, (the
"Common Stock") outstanding as of November 12, 1996, was 13,956,035.
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
NORTH AMERICAN MORTGAGE COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
September 30, December 31,
1996 1995
---- ----
ASSETS (Unaudited)
<S> <C> <C>
Cash and cash equivalents ...................... $ 18,123 $ 12,273
Advances and other receivables ................. 77,215 76,628
Real estate loans held for sale to investors
--- net of unearned discounts .............. 479,622 526,913
Purchased loan servicing ....................... 702 1,163
Originated loan servicing ...................... 101,357 56,353
Excess servicing fees .......................... 21,701 20,559
Other intangible assets ........................ 6,199 6,438
Property and equipment ......................... 37,909 36,339
Other assets ................................... 9,239 9,702
----- -----
$ 752,067 $ 746,368
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Warehouse line of credit ....................... $ 96,955 $ 146,833
Notes payable .................................. 100,704 74,801
Commercial paper and other borrowings .......... 294,313 279,221
Subordinated debt .............................. 10,070 10,070
Accounts payable and other liabilities ......... 55,627 42,299
------ ------
557,669 553,224
STOCKHOLDERS' EQUITY
Convertible preferred stock (1,000,000 shares
authorized,748,179 shares issued and
outstanding) ............................... -- --
Common stock (50,000,000 shares authorized,
16,278,951 and 16,257,614 shares issued at
September 30, 1996, and December 31, 1995,
respectively) ............................... 163 163
Additional paid-in capital ...................... 110,550 110,250
Retained earnings ............................... 124,375 101,909
Treasury stock, at cost - (2,322,916 and 1,140,516
shares at September 30, 1996 and December 31,
1995, respectively) ......................... (40,690) (19,178)
------- -------
194,398 193,144
------- -------
$ 752,067 $ 746,368
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
NORTH AMERICAN MORTGAGE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended September 30, 1996 and September 30, 1995
(Amounts in thousands, except per share data)
<CAPTION>
Three Months Ended
September 30,
1996 1995
---- ----
Income:
<S> <C> <C>
Loan administration fees, net of excess
servicing fee amortization ........................ $11,186 $10,000
Loan origination fees ................................. 20,702 19,893
Gain from sales of loans .............................. 22,560 20,629
Interest income, net of warehouse interest expense .... 7,150 8,010
Gain from sales of servicing .......................... 12,888 13,795
Other ................................................. 2,350 2,252
------- -------
76,836 74,579
Expenses:
Personnel ............................................ 36,757 32,880
Other operating expenses ............................. 18,434 16,508
Interest expense ..................................... 2,316 2,536
Depreciation and amortization of property and
equipment ........................................ 1,993 1,790
Amortization of purchased loan servicing ............. 149 177
Amortization of originated loan servicing ............ 2,042 950
Provision for impairment of originated loan servicing 168 79
Amortization of other intangibles .................... 102 109
------- -------
61,961 55,029
------- -------
Income before income taxes ........................... 14,875 19,550
Income tax expense ................................... 5,950 7,427
------- -------
NET INCOME ............................................... $ 8,925 $12,123
======= =======
NET INCOME PER SHARE ..................................... $ 0.64 $ 0.80
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING ...................... 13,962 15,087
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
NORTH AMERICAN MORTGAGE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Nine Months Ended September 30, 1996, and September 30, 1995
(Amounts in thousands, except per share data)
<CAPTION>
Nine Months Ended
September 30,
1996 1995
---- ----
Income:
<S> <C> <C>
Loan administration fees, net of excess
servicing fee amortization..................... $ 33,505 $ 31,251
Loan origination fees.............................. 61,581 47,868
Gain from sales of loans........................... 71,531 51,606
Interest income, net of warehouse interest
expense....................................... 20,770 20,394
Gain from sales of servicing....................... 28,375 38,268
Other.............................................. 6,799 6,195
------- -------
222,561 195,582
Expenses:
Personnel......................................... 110,326 87,754
Other operating expenses.......................... 53,458 46,459
Interest expense.................................. 6,799 7,044
Depreciation and amortization of property and
equipment..................................... 5,739 5,473
Amortization of purchased loan servicing.......... 461 565
Amortization of originated loan servicing......... 5,572 1,702
(Recovery)/provision for impairment of
originated loan servicing (1,884) 2,062
Amortization of other intangibles................. 316 334
------- -------
180,787 151,393
------- -------
Income before income taxes........................ 41,774 44,189
Income tax expense................................ 16,718 16,359
------ ------
NET INCOME............................................ $ 25,056 $ 27,830
====== ======
NET INCOME PER SHARE.................................. $ 1.74 $ 1.85
====== ======
WEIGHTED AVERAGE SHARES OUTSTANDING................... 14,436 15,028
====== ======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
NORTH AMERICAN MORTGAGE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, 1996 and 1995
(Dollars in thousands)
<CAPTION>
Nine Months Ended
September 30,
1996 1995
------- -------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income............................................. $ 25,056 $ 27,830
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................... 12,126 13,301
Excess servicing fee income......................... (25,646) (31,333)
Gain from sales of servicing rights................. (28,375) (38,268)
Cash proceeds from sales of servicing rights........ 97,909 72,036
Net decrease in real estate loans held for sale,
net of unearned discounts........................... 47,291 10,339
Increase in advances and other receivables............. (587) (8,288)
Increase in accounts payable and other liabilities .... 13,328 11,130
Decrease (increase) in other assets.................... 463 (585)
-------- --------
NET CASH PROVIDED BY
OPERATING ACTIVITIES.............................. 141,565 56,162
INVESTING ACTIVITIES:
Acquisition of assets of branches including
purchase accounting adjustments..................... (77) (26)
Purchase of servicing rights........................... -- (80)
Acquisition of originated servicing rights............. (95,644) (65,389)
Purchase of property and equipment..................... (7,309) (1,613)
Retirement of property and equipment................... --- 857
--------- --------
NET CASH USED IN INVESTING ACTIVITIES............ (103,030) (66,251)
FINANCING ACTIVITIES:
Increases in (principal payments on) long-term debt.... 25,903 (10,500)
Decrease in warehouse lines of credit, commercial paper,
repurchase agreements, and other borrowings...... (34,786) (76,286)
Purchases of Treasury Stock............................ (21,512) ---
Dividends.............................................. (2,590) (2,706)
Stock issuance under Incentive Stock Option Plan....... 300 1,883
-------- --------
NET CASH USED IN FINANCING ACTIVITIES............ (32,685) (87,609)
-------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................................ 5,850 (97,698)
Cash and cash equivalents at beginning of year....... 12,273 102,045
------- -------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD.................................. $ 18,123 $ 4,347
======= ========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest........................................ $ 21,616 $ 15,779
======= ========
Income Taxes.................................... $ 6,913 $ 1,029
======= ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
NORTH AMERICAN MORTGAGE COMPANY
Notes to Consolidated Financial Statements (Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited financial statements of North American Mortgage
Company (the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and in accordance with
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management of the Company, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine and three month periods ended September 30, 1996,
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included on Form 10-K for the year
ended December 31, 1995.
Note 2 - Net Income Per Share Information
Net income per common share is computed based on the weighted average
number of shares outstanding during the period. The potential dilutive effect of
common stock equivalents has not been included because that amount is not
considered to be material. The weighted average number of shares outstanding for
net income per share was 13,962,000 and 15,087,000 for the three months ended
September 30, 1996, and 1995, respectively, and 14,436,000 and 15,028,000 for
the nine months ended September 30, 1996, and 1995, respectively.
Note 3 - Capitalized Servicing Rights
Purchased loan servicing, excess servicing fees and originated loan
servicing, net of accumulated amortization and impairment were as follows:
<TABLE>
<CAPTION>
Purchased Loan Excess Servicing Originated Loan
Servicing, Net Fees, Net Servicing, Net
-------------- --------- --------------
(Dollars in thousands)
<S> <C> <C> <C>
Balance at December 31, 1995.. $ 1,163 $ 20,559 $ 56,353
Additions..................... --- 25,646 95,644
Scheduled Amortization........ (461) (1,922) (5,572)
Recovery of Impairment of
Originated Loan Servicing.... --- --- 1,884
Basis on Servicing Sales...... --- (22,582) (46,952)
----- ------- -------
Balance at September 30, 1996. $ 702 $ 21,701 $ 101,357(1)(2)
===== ====== =======
</TABLE>
- ---------------
(1) Includes $6,360 of originated loan servicing rights which are related to
loans held for sale to investors. No revenues have been recognized on this
$6,360 of servicing rights, as the underlying loans have not yet been sold.
(2) At September 30, 1996, the originated loan servicing impairment allowance
was approximately $668.
<PAGE>
Note 4 - FAS No. 125
In June 1996, the Financial Accounting Standards Board issued Statement
Number 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities" (FAS No. 125), which will become effective on
January 1, 1997. This statement will make the accounting for Originated Mortgage
Servicing Rights and Excess Servicing Rights consistent. The Company is
currently studying the effect of this statement, but does not expect the
adoption of the statement to have a material effect on future reported earnings.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Quarter Ended September 30, 1996, Compared with Quarter Ended September 30, 1995
RESULTS OF OPERATIONS
General Market Conditions - Based on current industry estimates, total
United States purchase and refinance origination levels decreased by 2% to $183
billion in the third quarter of 1996 from $187 billion in the same period last
year. While the level of new and existing home purchases increased over last
year, this increase was offset by a lower level of refinancings (see table
below). The level of refinance originations began to decline in February of 1996
when interest rates began to rise; however, by early summer, refinance activity
leveled off and remained steady through September 1996. Recently, interest rates
have begun to decline. From mid-September through early November 1996, the
30-year fixed mortgage rate declined from 8.3% to 7.8%. This interest rate
decline has increased the Company's refinance loan applications over September
levels. To the extent interest rates remain at existing levels or move lower,
demand for refinancings may increase.
<TABLE>
<CAPTION>
1-4 Family U.S. Mortgage
Originations*
Third Quarter
1996 1995
---- ----
(Dollars in billions)
<S> <C> <C>
New and existing home purchases........... $ 151 $ 133
Refinancings.............................. 32 54
--- ---
Total $ 183 $ 187
=== ===
</TABLE>
- ---------------
* Sources: Mortgage Bankers Association (MBA), Federal National Mortgage
Association (FNMA), and Federal Home Loan Mortgage Corporation (FHLMC) (1996
market data based on current estimates).
The Company's $2.1 billion in loan originations during the third quarter of
1996 were 5% lower than during the same quarter last year. This decrease in loan
origination volume is primarily reflective of the 2% decrease in total U. S.
mortgage originations for the same period. Refinancings represented 28% of total
originations in the third quarter of 1996 compared with 33% in the third quarter
of 1995. October 1996 loan applications were $1.4 billion, up 7% from October
1995 applications of $1.3 billion. Loan applications for refinancings in October
1996 were 41% of total applications.
Summary of Results - Net income for the third quarter of 1996 was $8.9
million or $0.64 per share, a $3.2 million decrease from the $12.1 million, or
$0.80 per share, earned during the third quarter of 1995. This decrease in
earnings occurred due to comparatively higher expense levels. Personnel and
operating expenses increased due to start-up costs for new branch offices and
satellites, hiring costs for new loan officers added in connection with the
Company's retail sales initiative, as well as from the higher percentage of
originations for government loans in the third quarter of 1996. While government
loans are traditionally more costly to produce, they also have a higher OMSR
value compared to conventional loans (see discussion of OMSR gains on page 11).
Additionally, amortization of originated loan servicing increased due to the
higher carrying value for servicing rights in the third quarter of 1996 compared
to 1995.
Servicing Rights - The following table sets forth certain information
regarding the servicing portfolio of the Company for the periods indicated:
<TABLE>
<CAPTION>
Quarters Ended September 30,
1996 1995
---- ----
(Dollars in millions, except
Average Loan Size)
Servicing Portfolio:
<S> <C> <C>
Beginning Portfolio..................... $ 13,836 $ 14,561
Add:
Loans Originated.................. 2,112 2,227
Deduct:
Sales of Servicing Rights......... (1,891) (1,881)
Run-off (1)....................... (426) (452)
------ -------
Ending Portfolio...................... $ 13,631 $ 14,455
====== ======
Average Loan Size of
Ending Portfolio.................. $ 97,000 $ 96,000
Weighted Average Interest Rate.. 7.79% 7.71%
</TABLE>
- ---------------
(1) Run-off refers to regular dollar amount of the amortization of loans,
prepayments and foreclosures. The annualized run-off rate in both the third
quarter of 1996 and 1995 was 12%.
Effective January 1, 1995, the Company adopted FAS No. 122, "Accounting for
Mortgage Servicing Rights," an amendment to FAS No. 65. The primary difference
between FAS No. 122 and FAS No. 65, as it relates to the Company, is the
accounting treatment for the normal servicing fee associated with in-house
Originated Mortgage Servicing Rights (OMSRs). Virtually all of the additions to
the servicing portfolio are OMSRs. Generally, under FAS No. 65, OMSRs were not
recorded as an asset, while under FAS No. 122, the full value of OMSRs are
capitalized.
As a result of the difference in accounting treatment, the balance sheet
carrying value for servicing rights is significantly different depending on
whether the servicing was originated before January 1, 1995 (pre-1995) or after
January 1, 1995 (post-1995). Management believes that the total fair market
value of its pre-1995 servicing rights is substantially more than their carrying
value, while the fair market value of post- 1995 servicing rights is
approximately equal to their total carrying value. In the third quarter of 1996,
the Company sold $1.04 billion of pre-1995 servicing rights and recorded a net
pre-tax gain of $12.3 million. The prices received for sales in the third
quarter of 1996 may not necessarily be reflective of the value of the remaining
pre-1995 portfolio, due to differences in portfolio characteristics (i.e.,
servicing fees, age, coupon rates) and changes in market conditions. At
September 30, 1996, the net balance sheet carrying value (the total OMSR,
Purchased Servicing and Excess Servicing Assets) and the principal balance of
the Servicing Portfolio originated pre-1995 and post-1995 were as follows:
<TABLE>
<CAPTION>
Total at
Pre-1995 Post-1995 9/30/96
-------- --------- -------
<S> <C> <C> <C>
Balance sheet carrying value
(In thousands) $ 1,686 $ 122,074 $ 123,760
------ ------- -------
Servicing portfolio principal
balance (In millions) $ 6,694 $ 6,937 $ 13,631
------ ------- -------
Carrying value percentage .03% 1.76% .91%
------ ------- -------
</TABLE>
Management continually evaluates the Company's investment in retained
servicing rights and periodically makes decisions to sell servicing rights after
considering the following criteria: cash requirements, market value for
servicing rights compared to their economic value to the Company, exposure to
prepayment risk, and earnings impact. To the extent the Company elects to sell
pre-1995 servicing rights, virtually all of the net proceeds from such sales are
recognized as a one-time gain from sale of servicing due to their minimal book
value. Of the approximately $6.7 billion of pre-1995 servicing remaining at
September 30, 1996, the Company estimates that it may be economically
advantageous (i.e., where market value equals or exceeds the economic value to
the Company) to sell only approximately $3.8 billion as part of its future
servicing sales. The Company's results of operations have historically been and
will continue to be impacted by the amount and timing of sales of pre-1995
servicing rights.
Historically, when interest rates decline, the incremental value created by
the Company's production organization from higher refinance originations has
more than offset the loss in value to its servicing portfolio resulting from
higher prepayments. Accordingly, the Company has not purchased any financial
prepayment hedges, but it has relied on its ability to produce new servicing as
a macro-hedge. Under FASB No. 122, however, if rates were to decline, the timing
of additional production revenues and any servicing impairment charge, for
financial statement purposes, may not occur in the same period. The Company
could be required to recognize a servicing impairment charge in one reporting
period, while the incremental production revenues could be generated over
several periods.
Revenues - Revenues for the third quarter of 1996 were $76.8 million, a
$2.3 million or 3%, increase from $74.6 million in the third quarter of 1995.
Loan administration fees were $11.2 million in the third quarter of 1996, a
12% increase, as compared with $10.0 million in the third quarter of 1995. This
increase resulted from an increase in the average servicing fees collected and a
$500,000 reduction in excess servicing impairment during the third quarter of
1996. This resulted from lower mortgage prepayment expectations driven by the
general rising rate environment during most of 1996.
Loan origination fees were $20.7 million during the third quarter of 1996,
a 4% increase, as compared with $19.9 million during the third quarter of 1995.
This increase resulted from an increase in average origination fees collected on
each loan, partially offset by a 5% decrease in loan originations. The increase
in average origination fees collected resulted from a higher percentage of
retail production in the third quarter of 1996 as compared to 1995 (42% as
compared with 40%), on which the Company received higher average origination
fees than it received on wholesale and telemarketing production, as well as the
introduction of an equity line of credit product and increased revenues on
brokered out loans.
The gain from sales of loans was $22.6 million during the third quarter of
1996, as compared with $20.6 million during the third quarter of 1995. Gain from
sales of loans is impacted by three factors: hedging activity, price subsidies
and the recognition of gains related to OMSR under FAS 122.
A summary of the marketing results for the third quarter of 1996 and 1995
follows:
<TABLE>
<CAPTION>
Three Months Ended September 30,
1996 1995
---- ----
(Dollars in thousands)
<S> <C> <C>
Hedging Gains (Losses) ............ $ 886 $ (803)
Pricing Subsidies.................. (7,281) (7,441)
OMSR - FAS No. 122................. 28,955 28,873
------ ------
$ 22,560 $ 20,629
====== ======
</TABLE>
Third quarter hedging results improved slightly to a gain of $886,000, or 4
basis points on loans originated during the quarter, as compared to a loss of
$803,000, or 4 basis points on loans originated during the third quarter of
1995. The improved hedging results were partially due to the lower bond market
volatility in the third quarter of 1996 as compared to the third quarter of
1995.
Pricing subsidies were $7.3 million in the third quarter of 1996, or an
average subsidy of 34 basis points on loans produced, compared with $7.4 million
in the third quarter of 1995, or 33 basis points. This level of pricing subsidy
reflects the continuing price competition for mortgage loans, particularly those
loans sourced through wholesale brokers.
OMSR gains increased to $29.0 million during the third quarter of 1996,
compared with $28.9 million during the third quarter of 1995. This increase
occurred despite an 8% decrease in the volume of loans sold, due to changes in
the product mix and market values that resulted in a higher capitalization rate
during the third quarter of 1996. The changes in product mix included an
increase in government loans sold in the third quarter of 1996. Government
originations increased to 33% of total originations during the third quarter of
1996, compared to 28% during the third quarter of 1995.
Interest income, net of warehouse interest expense, decreased to $7.2
million during the third quarter of 1996, as compared with $8.0 million during
the third quarter of 1995, an 11% decrease. This decrease resulted from having
less corporate funds available to reduce inventory related borrowing. Since
September 30, 1995, the Company has used some of its corporate funds to repay
debt and repurchase the Company's Common Stock.
Gain from sales of servicing was $12.9 million during the third quarter of
1996, as compared with $13.8 million during the third quarter of 1995, a 7%
decrease. Gain from sales of servicing is affected by the volume of servicing
rights sold, the proceeds received and the amount of OMSR and excess servicing
basis associated with each sale.
The following table summarizes the items for the third quarter of 1996 and
1995:
<TABLE>
<CAPTION>
Three Months Ended September 30,
1996 1995
---- ----
(Dollars in millions)
<S> <C> <C>
Principal Sold ................... $ 1,891 $ 1,881
===== =====
Proceeds*......................... $ 25.1 $ 31.9
OMSR and Excess Basis............. (12.2) (18.1)
------ ------
Net Gain on Servicing Sales....... $ 12.9 $ 13.8
===== =====
</TABLE>
- ---------------
* Represents 132 basis points on the principal balance sold in 1996 vs. 169
basis points in 1995.
The comparatively lower proceeds for the third quarter of 1996 relate to
differences in the type of servicing sold (i.e., government vs. conventional)
and the level of excess servicing fees, which resulted in a lower average
servicing fee in the third quarter of 1996 compared with 1995. The decreased
basis on servicing sold resulted from a lower percentage of post-1995 servicing
sold with OMSR basis (pre-1995 originated servicing has no OMSR basis since it
was produced prior to the implementation of FAS No. 122) during the third
quarter of 1996 as compared with 1995. (See discussion of Servicing Rights.)
Expenses - Expenses for the third quarter of 1996 were $62.0 million, a 13%
increase, as compared with $55.0 million during the third quarter of 1995.
Personnel costs were $36.8 million for the third quarter of 1996, a 12%
increase, as compared with $32.9 million for the third quarter of 1995. This
increase in personnel expenses occurred due to a higher percentage of government
originations during the third quarter of 1996, as well as start up costs for
seven new production offices and ten satellite origination locations opened
during the third quarter. The Company also incurred hiring costs for new loan
officers added in connection with the Company's retail sales initiative. Other
operating costs were $18.4 million for the third quarter of 1996,a 12% increase,
as compared to $16.5 million during the third quarter of 1995. This increase
reflects additional operating expenses that were required to operate an expanded
production network during 1996, as well as start up costs for the new production
offices and satellite locations.
Amortization of originated loan servicing increased to $2.0 million in the
third quarter of 1996, as compared with $950,000 during the third quarter of
1995. This increase related to the increase in the Originated Loan Servicing
asset, which was $101.4 million at September 30, 1996 and $46.1 million at
September 30, 1995.
Nine Months Ended September 30, 1996, Compared with Nine Months Ended
September 30, 1995
RESULTS OF OPERATIONS
General Market Conditions - For the nine month period ended September 30,
1996, origination levels increased by 40% compared to the prior year. This was
in contrast to the third quarter of 1996, in which origination levels declined
by 5% compared to the same period in 1995. The reason for the difference in year
to year comparisons (nine months vs. third quarter) is a function of the trends
of interest rates over these periods of time. In 1995, origination levels
started slowly and increased throughout the nine months as interest rates
declined, while in 1996, origination levels started more vigorously, then
weakened as interest rates rose and refinancings declined (see charts below).
(Graph)
30 Year Mortgage Rates
1995 1996
---- ----
December 9.18% 7.11%
January 9.13% 7.00%
February 8.73% 7.32%
March 8.38% 7.69%
April 8.26% 7.92%
May 7.85% 8.03%
June 7.53% 8.29%
July 7.79% 8.19%
August 7.88% 8.09%
September 7.62% 8.16%
Source: FHLMC
(Graph)
North American Mortgage Company Originations
($ in millions)
1995 1996
---- ----
First Quarter $ 1,128 $ 2,455
Second Quarter $ 1,697 $ 2,487
Third Quarter $ 2,227 $ 2,112
Note: The above graphs show the inverse relationship between interest rates and
loan originations.
The aggregate principal amount of loan originations for the first nine
months of 1996 was $7.1 billion, a 40% increase, as compared with $5.1 billion
for the first nine months of 1995. This increase in production volume is
reflective of the 37% increase* in the total U. S. mortgage originations for the
same period.
- ---------------
* Sources: MBA, FNMA and FHLMC (1996 market data based on current estimates).
Summary of Results - Net income for the first nine months of 1996 was $25.1
million, or $1.74 per share, as compared with $27.8 million, or $1.85 per share,
earned during the first nine months of 1995. The 10% decrease in earnings
relative to the 40% increase in originations is primarily attributable to the
following factors: (i) higher discounts given to borrowers to meet escalating
price competition, (ii) lower hedge gains due to higher bond market volatility
during the nine months, and (iii) lower gains from sales of servicing due to a
higher OMSR basis associated with servicing sales in 1996.
Servicing Rights - The following table summarizes the activity in the
Company's servicing portfolio for the first nine months of 1996:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1996 1995
---- ----
(Dollars in millions,
except Average Loan Size)
<S> <C> <C>
Servicing Portfolio:
Beginning Portfolio................... $ 14,109 $ 14,836
Add:
Loans Originated............... 7,054 5,051
Deduct:
Sales of Servicing Rights...... (6,032) (4,398)
Run-off (1) .................. (1,500) (1,034)
------- -------
Ending Portfolio............... $ 13,631 $ 14,455
</TABLE>
- --------------
(1) Run-off refers to dollar amount of the amortization of loans,
prepayments and foreclosures. For the first nine months of 1996, the
annualized run-off rate was 14% compared with 9% for the first nine
months of 1995.
Revenues - Revenues for the first nine months ended September 30, 1996,
were $222.6 million, a $27.0 million, or 14% increase, as compared with $195.6
million in the first nine months of 1995.
Loan administration fees were $33.5 million during the first nine months of
1996, a 7% increase, as compared with $31.3 million in the first nine months of
1995. This increase was due to a $2.0 million charge for the impairment of
excess servicing rights during the first nine months of 1995, which did not
recur during the first nine months of 1996.
Loan origination fees were $61.6 million during the first nine months of
1996, a 29% increase, as compared with $47.9 million in the first nine months of
1995. This increase resulted primarily from a 40% increase in loan originations,
partially offset by a decrease in the average origination fees collected on each
loan. The decrease in the average origination fees collected resulted from a
higher percentage of wholesale and telemarketing production in the first nine
months of 1996 (63% as compared with 59%), on which the Company receives lower
average origination fees than it receives on retail loans.
The gain from sales of loans was $71.5 million for the first nine months of
1996, as compared with $51.6 million during the first nine months of 1995. Gain
on sales of loans is impacted by three factors: hedging activity, price
subsidies and the recognition of gains related to OMSR under FAS No. 122.
A summary of the marketing results for the first nine months of 1996 and
1995 follows:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1996 1995
---- ----
(Dollars in thousands)
<S> <C> <C>
Hedging Gains.................... $ 541 $ 9,035
Pricing Subsidies................ (24,984) (15,600)
OMSR - FAS No. 122............... 95,974 58,171
------ ------
$ 71,531 $ 51,606
====== ======
</TABLE>
During the first nine months of 1996, hedging results were negatively
impacted by the upward movement in interest rates and increased bond market
volatility. To the extent that interest rates increase or the bond market
remains volatile, the Company's future marketing results may be negatively
affected.
Pricing subsidies increased to $25.0 million during the first nine months
of 1996, or an average subsidy of 35 basis points on loans produced, compared
with $15.6 million, or 31 basis points, in the first nine months of 1995. This
increase reflects the continuing price competition within the industry,
particularly for loans sourced through wholesale brokers.
OMSR gains increased to $96.0 million during the first nine months of 1996,
an increase of $37.8 million, or 65%, compared with the first nine months of
1995. This increase was due to a 40% increase in loans sold during the first
nine months of 1996, and the fact that approximately 11% of loans sold during
the first nine months of 1995 were originated in 1994, prior to the
implementation of FAS No. 122, and accordingly did not reflect the additional
gain for the capitalization of the OMSRs.
Gain from sales of servicing was $28.4 million during the first nine months
of 1996, as compared with $38.3 million during the first nine months of 1995, a
26% decrease. In the first nine months of 1996, the Company sold $6.0 billion of
servicing rights at an average price of 162 basis points for total proceeds of
$97.9 million. This compares with $4.4 billion sold in the first nine months of
1995 at an average price of 164 basis points for total proceeds of $72.0
million. The related gain on sales of servicing decreased, however, due to a
higher level of OMSR and excess servicing basis associated with sales ($69.5
million for the first nine months of 1996, as compared with $33.8 million for
the first nine months of 1995).
Expenses - Expenses for the first nine months of 1996 were $180.8 million,
a 19% increase, as compared with $151.4 million during the first nine months of
1995.
Personnel expenses were $110.3 million for the first nine months of 1996, a
26% increase, as compared with $87.8 million for the first nine months of 1995.
This increase in personnel expenses from 1995 primarily occurred in the
residential loan production area. The increase reflects the additional personnel
expenses that were required to produce a 40% higher loan origination volume,
while at the same time hiring additional loan officers as part of the Company's
retail production initiative.
Other operating expenses increased 15% to $53.5 million for the first nine
months of 1996, as compared with $46.5 million for the first nine months of
1995. This increase reflects additional operating expenses that were required to
originate a 40% higher origination volume, as well as costs to open 13 new
production offices and numerous satellite locations during 1996. The percentage
increase in other operating expenses during the first nine months of 1996 was
less than the percentage increase in loan production volume due to better
absorption of fixed overhead.
Amortization of originated loan servicing increased to $5.6 million during
the first nine months of 1996, as compared with $1.7 million during the first
nine months of 1995. This increase related to the increase in the Originated
Loan Servicing asset to $101.4 million at September 30, 1996 from $56.4 million
at December 31, 1995 (see FAS No. 122 discussion).
The Company recognized a recovery of impairment of originated loan
servicing of $1.9 million in the first nine months of 1996, as compared with a
$2.1 million impairment provision during the first nine months of 1995. This
recovery was caused by increasing interest rates during the first nine months of
1996, which slowed expected mortgage prepayment speeds on loans the Company
services and, as a result, increased the expected life and value of the
servicing asset.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary financing requirements are the financing of its
warehouse loan fundings and the ongoing net cost of the Company's loan
originations. The Company's future cash flow requirements will depend primarily
on the level of its loan originations and the cash flow generated by, or
required by, its operations. The Company expects that loan origination volume
will be financed through warehouse borrowings, borrowings under a commercial
paper program, through the use of "gestation" facilities and with corporate
funds.
The Company finances its warehouse loan funding requirements primarily
through a bank warehouse line of credit and through its commercial paper
program. This financing requirement begins at the time of loan closing and
extends for an average of approximately 30 days until the loan is sold into the
secondary market. On January 23, 1996, the Company entered into a new warehouse
line of credit facility totaling $1.21 billion. This line of credit expires on
January 23, 1999. Effective August 7, 1996, the commitment amount for the
warehouse line of credit facility was reduced, at the Company's request, to $1.0
billion.
The Company also has a commercial paper borrowing program. Borrowings under
this $500 million program replace, at a reduced interest rate, borrowings under
the Company's warehouse line of credit. The warehouse line of credit acts as the
liquidity backup facility for the commercial paper borrowings. In addition to
the warehouse line of credit and commercial paper borrowings, the Company makes
use of gestation facilities provided by an investment bank, FNMA and FHLMC.
During the fourth quarter of 1993, the Company sold a combined $100 million
of two, three, five, and seven year medium term notes. The proceeds from the
sale of these notes are being used for general corporate purposes, which include
the replacement of indebtedness, financing loan origination volume and the
expansion of loan origination capacity. The Company paid off $25 million of two
year medium term notes on maturity in the fourth quarter of 1995. During August
1996, the Company issued $26.0 million of seven year medium term notes. At
September 30, 1996, $101 million of medium term notes were outstanding, of which
$25.0 million will mature in the fourth quarter of 1996. The Company will make
this $25.0 million payment with general corporate funds.
The Company has paid quarterly common stock dividends since the initial
public offering on July 15, 1992. During the third quarter of 1996, the Company
paid dividends of $.06 per share totaling $837,032 for 13,950,535 shares
outstanding on August 1, 1996. This compares with dividends paid in the third
quarter of 1995 of $.06 per share totaling $904,700 for 15,078,336 shares
outstanding on August 1, 1995.
On February 7, 1996, the Board of Directors authorized the repurchase of up
to 1.5 million shares of common stock. During the first, second and third
quarters of 1996, the Company repurchased 329,900, 812,500 and 40,000 shares
with an aggregate cost of $6.8 million, $14.1 million and $643,000,
respectively. As of September 30, 1996, the Company held 2,322,916 shares in
treasury stock which were acquired at an aggregate cost of $40.7 million, of
which 1,140,516 shares were acquired under a prior Board authorization.
The Company's net cost of its owned servicing rights is financed through
cash flow from its operations, including the sale of servicing rights.
During the first nine months of 1996 and 1995, the Company generated $25.6
million and $31.3 million, respectively, of excess servicing fees as a result of
loan sale transactions. In general, the Company creates excess servicing because
the secondary market price offered for servicing assets is lower than the
economic value or the amount the Company could receive by accumulating the
assets and selling them as part of a bulk sale at a later date. During the
Company's holding period of the excess servicing fee asset, the Company is at
risk that the asset will decline in value and a write down will be required,
primarily due to faster prepayment speeds, or expectation of faster prepayment
speeds, resulting from lower interest rates, which could cause borrowers to
refinance their mortgage loans being serviced. The carrying amount of excess
servicing rights was $21.7 million and $20.6 million at September 30, 1996, and
December 31, 1995, respectively.
During the first nine months of 1996 and 1995, the Company purchased
property and equipment totaling $7.3 million and $1.6 million, respectively.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is a defendant in certain litigation arising in the
normal course of its business. Although the ultimate outcome of
all pending litigation cannot be precisely determined at this
time, the Company believes that any liability resulting from the
aggregate amount of damages for outstanding lawsuits and claims
will not have a material adverse effect on its financial
position.
Item 2. Changes in Securities.
On October 17, 1996, the Board of Directors amended the Company's
By-Laws to do the following: (a) clarify the provision setting
the time and place and notice for the meeting of the Board of
Directors following the annual meeting of stockholders; (b)
permit the Chairman of the Board, in addition to the Board of
Directors, to call regular meetings of the Board of Directors;
(c) permit special meetings of the Board to be called on one
day's notice rather than two; (d) provide that the Chairman of
the Board may call special meetings of the Board and determine
the place of the meeting, pursuant to the notice provisions; (e)
provide that the Chairman of the Board, in addition to the
Secretary, may call special meetings of the Board on the written
request of two directors; (f) clarify the notice provisions; (g)
provide for one or more Vice-Chairmen; (h) provide that the
President operates under the direction of the Chief Executive
Officer, in addition to the Board of Directors; (i) provide that
the Chief Executive Officer, the President or the Secretary, in
addition to the Board of Directors, can direct a new certificate
to be issued in place of any lost, stolen or destroyed
certificate, upon such terms and conditions as they deem
expedient; (j) provide that the Chief Executive Officer, the
President or the Treasurer, or any officers or other persons as
the Chief Executive Officer, the President, the Treasurer, or the
Board of Directors may designate, can sign corporate checks; and
(k) make certain other non-substantive changes.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits
3.7 Amended and Restated By-Laws of the Company
10.46 American International Companies Directors,
Officers and Corporate Insurance Policy
10.47 Chubb Group of Insurance Companies Directors and
Officers Liability and Reimbursement Excess Policy
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
b. Reports on Form 8-K
None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTH AMERICAN MORTGAGE COMPANY
Date: November 12, 1996 By: /s/ MARTIN S. HUGHES
---------------------------------
(Martin S. Hughes)
Executive Vice President,
Chief Financial Officer and
Principal Financial Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description Page Number
3.7 Amended and Restated By-Laws of the Company
10.46 American International Companies Directors,
Officers and Corporate Insurance Policy
10.47 Chubb Group of Insurance Companies Directors and
Officers Liability and Reimbursement Excess Policy
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
<PAGE>
EXHIBIT 3.7
AMENDED AND RESTATED BY-LAWS
NORTH AMERICAN MORTGAGE COMPANY
ARTICLE I
OFFICES
SECTION 1. The registered office shall be located in Wilmington, Delaware.
(Adopted 3/31/92).
SECTION 2. The Corporation may also have offices at such other places both
within and without the State of Delaware as the Board of Directors may from time
to time determine or the business of the Corporation may require. (Adopted
3/31/92).
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders of the Corporation,
commencing with the year 1991 shall be held at such place, within or without the
State of Delaware, at such time and on such day as may be determined by the
Board of Directors and as such shall be designated in the notice of said
meeting, for the purpose of electing directors and for the transaction of such
other business as may properly be brought before the meeting. If for any reason
the annual meeting shall not be held during the period designated herein, the
Board of Directors shall cause the annual meeting to be held as soon thereafter
as may be convenient. (Adopted 3/31/92).
SECTION 2. Special meetings of the stockholders for any purpose or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be held at any place, within or without the State of
Delaware, and may be called by resolution of the Board of Directors. (Adopted
3/31/92). Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice of meeting. (Adopted 7/18/96).
SECTION 3. The holders of a majority of the shares of stock issued and
outstanding and entitled to vote, represented in person or by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the Certificate of
Incorporation. If a quorum is present or represented, the affirmative vote of a
majority of the shares of stock present or represented at the meeting shall be
the act of the stockholders unless the vote of a greater number of shares of
stock is required by law or by the Certificate of Incorporation. If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders present in person or represented by proxy shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally notified. (Adopted 3/31/92).
SECTION 4. Any action required to be taken at a meeting of the stockholders
may be taken without a meeting if a consent in writing, setting forth the action
so taken, shall be signed by all of the stockholders entitled to vote with
respect to the subject matter thereof. (Adopted 3/31/92).
SECTION 5. At an annual meeting of stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. To be
properly brought before the meeting business must be (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (b) proposed by or at the direction of the Chairman of the Board
of Directors or (c) proposed by any stockholder of the Corporation who is
entitled to vote at the meeting, who complied with the notice provisions of this
Section 5 and who is a stockholder of record at the time such notice is
delivered to the Secretary of the Corporation. For business to be properly
brought before an annual meeting by a stockholder, the stockholder must have
given timely notice thereof in writing to the Secretary of the Corporation, and,
such business must be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not less than sixty days nor more than
ninety days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than twenty days, or delayed by more than seventy
days, from such anniversary date, notice by the stockholder to be timely must be
so delivered not earlier than the ninetieth day prior to such annual meeting and
not later than the close of business on the later of the seventieth day prior to
such annual meeting or the tenth day following the day on which public
announcement of the date of such meeting is first made. Such stockholder's
notice shall set forth (a) a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (b) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Corporation's books, and of such beneficial
owner and (ii) the class and number of shares of the Corporation which are owned
beneficially and of record by such stockholder and such beneficial owner. (New
section adopted 7/18/96).
ARTICLE III
DIRECTORS
SECTION 1. The number of directors which shall constitute the whole Board
of Directors shall initially be seven. Thereafter, the number of directors which
shall constitute the Board of Directors shall be such as from time to time shall
be fixed by the Board of Directors, but in no case shall such number be greater
than nine or less than two, provided that no decrease in the number of
directorships shall shorten the term of any incumbent director. Any change in
the number of directorships must be authorized by a majority of the whole Board
of Directors, as constituted immediately prior to such change. The directors
shall be elected at the annual meeting of the stockholders, except as provided
in Section 2 of this Article, and each director elected shall hold office until
the next annual meeting of stockholders and until his or her successor is
elected and qualified or until his or her earlier death or resignation.
Directors need not be stockholders. (Revised 7/27/93).
SECTION 2. Vacancies and newly created directorships resulting from any
increase in the number of directorships may be filled by a majority of the
directors then in office, though less than a quorum, or elected by a sole
stockholder, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and qualified. A vacancy
created by the removal of a director by the stockholders may be filled by the
stockholders. (Adopted 3/31/92).
SECTION 3. The first meeting of each newly elected Board of Directors shall
be held at such time and place as shall be announced after the annual meeting of
stockholders and no other notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. (Revised 10/17/96).
SECTION 4. Regular meetings of the Board of Directors may be held upon such
notice, or without notice, and at such time and at such place as shall from time
to time be determined by the Board of Directors or the Chairman of the Board of
Directors. (Revised 10/17/96).
SECTION 5. Special meetings of the Board of Directors may be called by the
Chairman of the Board of Directors on one day's notice to each director, and at
such place as shall be determined by the Chairman of the Board of Directors,
pursuant to the notice provisions of Article IV; special meetings shall be
called by the Chairman of the Board of Directors or the Secretary in like manner
and on like notice on the written request of two directors. (Revised 10/17/96).
SECTION 6. Attendance of a director at any meeting shall constitute a
waiver of notice of such meeting, except where a director attends for the
express purpose of objecting to the transaction in any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting. (Adopted 3/31/92).
SECTION 7. At all meetings of the Board of Directors a majority of the
total number of directors then constituting the whole Board of Directors but in
no event less than two directors shall constitute a quorum for the transaction
of business, and the act of a majority of the directors present at any meeting
at which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the Certificate of
Incorporation or by these By-Laws. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present. (Adopted 3/31/92).
SECTION 8. Unless otherwise restricted by the Certificate of Incorporation
or by these By-Laws, any action required or permitted to be taken at any meeting
of the Board of Directors or of any committee thereof may be taken without a
meeting, if prior to such action a written consent thereto is signed by all
members of the Board of Directors or of such committee, as the case may be, and
such written consent is filed with the minutes of proceedings of the Board of
Directors or committee. (Adopted 3/31/92).
SECTION 9. The Board of Directors may, by resolution passed by a majority
of the whole Board of Directors, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation, which,
to the extent provided in the resolution, shall have and may exercise the powers
of the Board of Directors in the management of the business and affairs of the
Corporation and may authorize the seal of the Corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
Board of Directors. (Adopted 3/31/92).
SECTION 10. Subject to any exclusive rights of holders of any class or
series of stock having a preference over the common stock, par value $0.01 per
share, of the Corporation as to dividends or upon liquidation to elect directors
upon the happening of certain events, only persons who are nominated at any
meeting of stockholders of the Corporation in accordance with the following
procedures shall be eligible for election as directors. Nominations of persons
for election to the Board of Directors of the Corporation may be made at a
meeting of stockholders at which directors are to be elected only (i) by or at
the direction of the Board of Directors or (ii) by any stockholder of the
Corporation entitled to vote for the election of directors generally at the
meeting who complies with the notice procedures set forth in this Section 10.
Such nominations by a stockholder shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the Corporation not less than 60 days nor more than 90 days prior to
the date of the meeting; provided, however, that in the event that less than 75
days' notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so received
not later than the close of business on the 10th day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. Such stockholder's notice to the Secretary shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or re-election as
a director, all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including such person's written consent to being named
in the proxy statement as a nominee and to serving as a director if elected);
and (ii) as to the stockholder giving the notice (x) the name and address, as
they appear on the Corporation's books, of such Stockholder and (y) the class
and number of shares of the Corporation's stock that are beneficially owned by
such stockholder. At the request of the Board of Directors, any person nominated
by the Board of Directors for election as a director shall furnish to the
Secretary of the Corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the Corporation unless nominated
in accordance with the provisions of this Section 10. The officer of the
Corporation or other person presiding at the meeting shall, if the facts so
warrant, determine and declare to the meeting that a nomination was not made in
accordance with such provisions and, if he should so determine, he shall so
declare to the meeting and the defective nomination shall be disregarded. In
addition to any other requirements relating to amendments to these By-Laws, no
proposal to amend or repeal this Section 10 shall be brought before any meeting
of the stockholders of the Corporation unless written notice is given of (i)
such proposed repeal or the substance of such proposed amendment, (ii) the name
and address of the stockholder who intends to propose such repeal or amendment,
and (iii) a representation that the stockholder is a holder of record of stock
of the Corporation specified in such notice, is or will be entitled to vote at
such meeting and intends to appear in person or by proxy at the meeting to make
the proposal. Such notice shall be given in the manner and at the time specified
above in this Section 10. (New section adopted 6/14/94).
ARTICLE IV
NOTICES
SECTION 1. Whenever, under the provisions of statute or Certificate of
Incorporation or of these By-Laws, notice is required to be given to any
director or stockholder, it shall not be construed to mean only personal notice,
but such notice may be given in writing, by mail, addressed to such director or
stockholder, at his or her address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may be sent by a private or public overnight delivery
service and such notice shall be deemed given at the time when notice is
delivered to such service. Notice to directors also may be given by telegram,
telex and by facsimile transmission; any such notice is effective when sent.
Notices to be given to stockholders in connection with any annual or special
meeting of stockholders shall be given to all stockholders of record as
determined at least 30 days prior to such meeting. (Revised 10/17/96).
SECTION 2. Whenever notice is required to be given under the provisions of
statute or of the Certificate of Incorporation or of these By-Laws, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice. (Adopted 3/31/92).
ARTICLE V
OFFICERS
SECTION 1. The officers of the Corporation may include a Chairman of the
Board of Directors (who shall also be the Chief Executive Officer), one or more
Vice-Chairmen, a President, one or more Executive Vice Presidents, one or more
Senior Vice Presidents, one or more Vice Presidents, a Secretary, a Treasurer, a
Controller, one or more Assistant Vice Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers and one or more Assistant
Controllers. The Board of Directors shall have the power to choose all or any of
such officers. In addition, each of the Chief Executive Officer and the
President, acting alone, may from time to time appoint one or more Senior Vice
Presidents, Vice Presidents, Assistant Vice Presidents, Assistant Secretaries,
Assistant Controllers and Assistant Treasurers. Two or more offices may be held
by the same person except the offices of President and Secretary or the offices
of President and Vice President. (Revised 10/17/96).
SECTION 2. The Board of Directors shall elect officers of the Corporation
at its first meeting after each annual meeting of stockholders. (Adopted
3/31/92).
SECTION 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board of Directors. (Adopted 3/31/92).
SECTION 4. All salaries and bonuses of officers of the Corporation at the
rank of Executive Vice President or above shall be subject to approval by the
Board of Directors. (Adopted 10/19/92).
SECTION 5. Each officer of the Corporation shall hold office until the
first meeting of the Board of Directors next following the annual meeting of
stockholders next following the election or appointment of such officer. The
Board of Directors may remove any officer at any time. The Chief Executive
Officer or the President may each, acting alone, remove at any time any person
from any office other than the office of President or Chief Executive Officer.
Any vacancy occurring in any office of the Corporation may be filled by the
Board of Directors or by an officer having the power to make an appointment to
such vacant office. (Adopted 10/19/92).
CHAIRMAN OF THE BOARD
SECTION 6. The Chairman of the Board of Directors, if there be a Chairman,
shall be chosen from among the directors and shall be the Chief Executive
Officer of the Corporation, shall preside at all meetings of the stockholders
and the Board of Directors. The Chief Executive Officer shall be vested with
general supervisory power and authority over the business affairs of the
Corporation, and shall see that all orders and resolutions of the Board of
Directors are carried into effect. Any Vice-Chairman or Vice-Chairmen, shall be
chosen from among the directors and shall have such powers and duties as may
from time to time be assigned by the Board of Directors. (Revised 10/25/93).
PRESIDENT
SECTION 7. The President shall be the Chief Operating Officer of the
Corporation, unless there is no Chairman of the Board of Directors, in which
case the President shall be the Chief Executive Officer of the Corporation as
well as the Chief Operating Officer. In the absence of the Chairman of the Board
of Directors, or if there be no Chairman, the President shall preside at all
meetings of the stockholders and the Board of Directors; the President shall
have general and active management of the business of the Corporation, subject
to the direction of the Board of Directors and the Chief Executive Officer, and
shall see that all orders and resolutions of the Board of Directors and the
Chief Executive Officer are carried into effect, and shall perform all duties
incident to the office of a President of a corporation, and such other duties as
from time to time may be assigned by the Board of Directors and the Chief
Executive Officer. (Adopted 3/31/92).
EXECUTIVE VICE PRESIDENTS
SECTION 8. Any Executive Vice-Presidents elected shall have such duties as
the Board of Directors or Chief Executive Officer, or President may from time to
time prescribe, and shall, except as the Board of Directors may otherwise
direct, perform such duties under the general supervision of the President. (New
section adopted 10/19/92).
SENIOR VICE-PRESIDENTS
SECTION 9. Any Senior Vice-Presidents elected shall have such duties as the
Board of Directors or President may from time to time prescribe, and shall,
except as the Board of Directors may otherwise direct, perform such duties under
the general supervision of the President. (Adopted 3/31/92. Section renumbered
10/19/92).
VICE-PRESIDENTS
SECTION 10. Any Vice-Presidents elected shall have such duties as the Board
of Directors or President may from time to time prescribe, and shall, except as
the Board of Directors may otherwise direct, perform such duties under the
general supervision of the President. (Adopted 3/31/92. Section renumbered
10/19/92).
SECRETARY
SECTION 11. The Secretary shall take minutes of the proceedings of the
stockholders and the Board of Directors and record the same in a suitable book
for preservation. The Secretary shall give notice of all regular and duly called
special meetings of the stockholders and the Board of Directors. The Secretary
shall have charge of and keep the seal of the Corporation, and shall affix the
seal, attested by his or her signature, to such instruments as may require the
same. Unless the Board of Directors shall have appointed a transfer agent, the
Secretary shall have charge of the certificate books, transfer books, and stock
ledgers, and shall prepare voting lists prior to all meetings of stockholders.
The Secretary shall have charge of such other books and papers as the Board of
Directors may direct and shall perform such other duties as may be prescribed
from time to time by the Board of Directors or the President. (Adopted 3/31/92.
Section renumbered 10/19/92).
ASSISTANT SECRETARY
SECTION 12. The Assistant Secretary, if there shall be one, or, if there
shall be more than one, the Assistant Secretaries in the order determined by the
Board of Directors, shall, in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Directors or the
officer to whom such Assistant Secretary reports may from time to time
prescribe. (Adopted 3/31/92. Section renumbered 10/19/92).
TREASURER
SECTION 13. The Treasurer shall have custody of the funds, securities and
other assets of the Corporation. The Treasurer shall keep a full and accurate
record of all receipts and disbursements of the Corporation, and shall deposit
or cause to be deposited in the name of the Corporation all monies or other
valuable effects in such banks, trust companies, or other depositories as may
from time to time be selected by the Board of Directors. The Treasurer shall
have power to make and endorse notes and pay out monies on check without
countersignature and shall perform such other duties as may be prescribed from
time to time by the Board of Directors or the President. (Adopted 3/31/92.
Section renumbered 10/19/92).
ASSISTANT TREASURER
SECTION 14. The Assistant Treasurer, if there shall be one, or, if there
shall be more than one, the Assistant Treasurers in the order determined by the
Board of Directors, shall, in the absence or disability of the Treasurer,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties and have such other powers as the Board of Directors or the
officer to whom such Assistant Treasurer reports may from time to time
prescribe. (Adopted 3/31/92. Section renumbered 10/19/92).
ARTICLE VI
CERTIFICATES FOR SHARES
LOST CERTIFICATES
SECTION 1. The Board of Directors, the Chief Executive Officer, the
President, or the Secretary may direct a new certificate to be issued in place
of any certificate theretofore issued by the Corporation alleged to have been
lost, stolen or destroyed. When authorizing each such issue of a new
certificate, the Board of Directors, the Chief Executive Officer, the President,
or the Secretary in its or his or her discretion and as a condition precedent to
the issuance thereof, may prescribe such terms and conditions as it deems
expedient, and may require such indemnities as it deems adequate to protect the
Corporation from any claim that may be made against it with respect to any such
certificate alleged to have been lost, stolen or destroyed. (Revised 10/17/96).
TRANSFER OF SHARES
SECTION 2. Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate representing shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, a new
certificate shall be issued to the person entitled thereto, and the old
certificate canceled and the transaction recorded upon the books of the
Corporation. (Adopted 3/31/92).
REGISTERED STOCKHOLDERS
SECTION 3. The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware. (Adopted 3/31/92).
SIGNING AUTHORITY
SECTION 4. All contracts, agreements, assignments, transfers, deeds, stock
powers or other instruments of the Corporation may be executed and delivered by
(i) the Chief Executive Officer or the President, or (ii) by such other officers
or agent or agents, of the Corporation as shall be thereunto authorized from
time to time by the Chief Executive Officer or the President or the Board of
Directors, or (iii) by power of attorney executed by any person pursuant to
authority granted by the Chief Executive Officer or the President or the Board
of Directors; and the Secretary or any Assistant Secretary or the Treasurer or
any Assistant Treasurer may affix the seal of the Corporation thereto and attest
the same. (Revised 7/27/93).
ARTICLE VII
GENERAL PROVISIONS
CHECKS
SECTION 1. All checks or demands for money and notes of the Corporation
shall be signed by the Chief Executive Officer, the President, the Treasurer, or
any other such officer or officers or such other person or persons as the Chief
Executive Officer, the President, the Treasurer, or the Board of Directors may
from time to time designate. (Revised 10/17/96).
FISCAL YEAR
SECTION 2. The fiscal year of the Corporation shall be fixed by resolution
of the Board of Directors. (Adopted 3/31/92).
SEAL
SECTION 3. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words Corporation Seal,
Delaware. The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced. (Adopted 3/31/92).
INDEMNIFICATION
SECTION 4. The Corporation shall indemnify its officers, directors,
employees and agents to the fullest extent permitted by the General Corporation
Law of Delaware, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment). (Adopted 3/31/92).
ARTICLE VIII
AMENDMENTS
SECTION 1. These By-Laws may be altered, amended or repealed or new By-Laws
may be adopted (a) at any regular or special meeting of stockholders at which a
quorum is present or represented subject to Section 10 of Article III of these
By-Laws, by the affirmative vote of a majority of the stock entitled to vote,
provided notice of the proposed alteration, amendment or repeal be contained in
the notice of such meeting, or (b) by the affirmative vote of a majority of the
Board of Directors at any regular or special meeting of the Board of Directors.
The stockholders shall have authority to change or repeal any By-Laws adopted by
the directors, subject to Section 10 of Article III of these By-Laws. (Revised
6/14/94).
Exhibit 10.46
Policy Number:
483-54-02
Renewal of:
445-40-00
American International Companies
Directors, Officers and Corporate Liability Insurance Policy
___ AIU Insurance Company
___ American International South Insurance Company
___ Birmingham Fire Insurance Company of Penns.
___ Granite State Insurance Company
___ Illinois National Insurance Company
_X_ National Union Fire Insurance Company of Pitts., PA
___ National Union Fire Insurance Company of Louisiana
___ New Hampshire Insurance Company
- --------------------------------------------------------------------------------
(each of the above being a capital stock company)
NOTICE: EXCEPT TO SUCH EXTENT AS MAY OTHERWISE BE PROVIDED HEREIN, THE
COVERAGE OF THIS POLICY IS GENERALLY LIMITED TO LIABILITY FOR ONLY THOSE CLAIMS
THAT ARE FIRST MADE AGAINST THE INSUREDS DURING THE POLICY PERIOD AND REPORTED
IN WRITING TO THE INSURER PURSUANT TO THE TERMS HEREIN. PLEASE READ THE POLICY
CAREFULLY AND DISCUSS THE COVERAGE THEREUNDER WITH YOUR INSURANCE AGENT OR
BROKER. NOTICE: THE LIMIT OF LIABILITY AVAILABLE TO PAY JUDGMENTS OR SETTLEMENTS
SHALL BE REDUCED BY AMOUNTS INCURRED FOR LEGAL DEFENSE. AMOUNTS INCURRED FOR
LEGAL DEFENSE SHALL BE APPLIED AGAINST THE RETENTION AMOUNT.
NOTICE: THE INSURER DOES NOT ASSUME ANY DUTY TO DEFEND; HOWEVER, THE
INSURER MUST ADVANCE DEFENSE COSTS PAYMENTS PURSUANT TO THE TERMS HEREIN PRIOR
TO THE FINAL DISPOSITION OF A CLAIM.
DECLARATIONS
ITEM 1. NAMED CORPORATION: NORTH AMERICAN MORTGAGE COMPANY
MAILING ADDRESS: 3883 AIRWAY DRIVE
SANTA ROSA, CA 95403
STATE OF INCORPORATION OF THE NAMED CORPORATION:
California
ITEM 2. SUBSIDIARY COVERAGE: any past, present or future Subsidiary of the Named
Corporation
ITEM 3. POLICY PERIOD: From: July 08, 1996 To: July 08, 1997 (12:01 A.M.
standard time at the address stated in Item 1.)
ITEM 4. LIMIT OF LIABILITY: $10,000,000 aggregate for Coverages A and B combined
(including Defense Costs)
ITEM 5. RETENTION:
SECURITIES CLAIMS:
Judgments & Settlements (all coverages) None
Defense Costs (non-indemnifiable Loss) None
Defense Costs (Coverage B(i) and $ 250,000
Indemnifiable Loss) for Loss arising from Claims
alleging the same Wrongful
Act or related Wrongful Acts
(waivable) under Clause 6 in
certain circumstances)
OTHER CLAIMS:
Judgments, Settlements and Defense
Costs (non-indemnifiable Loss) None
Judgments, Settlements and Defense
Costs (Indemnifiable Loss) $ 250,000
for Loss arising from Claims
alleging the same Wrongful
Act or related Wrongful Acts
ITEM 6. CONTINUITY DATES:
A. Coverages A and B(ii): July 08,1992
B. Coverage B(i): July 08, 1996
C. Coverages A and B:
Outside Entity Coverage (Per Outside Entity)
See Endorsement #62790
ITEM 7. PREMIUM: $ 385,000
ITEM 8. NAME AND ADDRESS OF INSURER ("Insurer"):
(This policy is issued only by the insurance company indicated below.)
National Union Fire Insurance Company of Pittsburgh, Pa
70 Pine Street
New York, NY 10270
IN WITNESS WHEREOF, the Insurer has caused this policy to be signed on the
Declarations Page by its President, a Secretary and a duly authorized
representative of the Insurer.
/s/ Elizabeth M. Tuck /s/ Kristian Moor
--------------------- -----------------
SECRETARY PRESIDENT
-----------------------------
AUTHORIZED REPRESENTATIVE
------------------------ ------------------------
COUNTERSIGNATURE DATE COUNTERSIGNED AT
Marsh & McLennan of S.F.
Three Embarcadero Center
P.O. Box 193880
San Francisco, CA 94119
American International Companies
DIRECTORS, OFFICERS AND CORPORATE LIABILITY INSURANCE POLICY
In consideration of the payment of the premium, and in reliance upon the
statements made to the Insurer by application forming a part hereof and its
attachments and the material incorporated therein, the insurance company
designated in Item 8 of the Declarations, herein called the "Insurer", agrees as
follows:
1. INSURING AGREEMENTS
COVERAGE A: DIRECTORS AND OFFICERS INSURANCE
This policy shall pay the Loss of each and every Director or Officer of the
Company arising from a Claim first made against the Directors or Officers during
the Policy Period or the Discovery Period (if applicable) and reported to the
Insurer pursuant to the terms of this policy for any actual or alleged Wrongful
Act in their respective capacities as Directors or Officers of the Company,
except when and to the extent that the Company has indemnified the Directors or
Officers. The Insurer shall, in accordance with and subject to Clause 8, advance
Defense Costs of such Claim prior to its final disposition.
COVERAGE B: CORPORATE LIABILITY INSURANCE
This policy shall pay the Loss of the Company arising from a:
(i) Securities Claim first made against the Company, or
(ii) Claim first made against the Directors or Officers,
during the Policy Period or the Discovery Period (if applicable) and
reported to the Insurer pursuant to the terms of this policy for any actual
or alleged Wrongful Act, but, in the case of (ii) above, only when and to
the extent that the Company has indemnified the Directors or Officers for
such Loss pursuant to law, common or statutory, or contract, or the Charter
or By-laws of the Company duly effective under such law which determines
and defines such rights of indemnity. The Insurer shall, in accordance with
and subject to Clause 8, advance Defense Costs of such Claim prior to its
final disposition.
2. DEFINITIONS
(a) "Claim" means:
(1) a written demand for monetary or non-monetary relief; or
(2) a civil, criminal, or administrative proceeding for monetary or
non-monetary relief which is commenced by:
(i) service of a complaint or similar pleading; or
(ii) return of an indictment (in the case of a criminal
proceeding); or
(iii) receipt or filing of a notice of charges.
The term "Claim" shall include a Securities Claim; provided, however, that
with respect to Coverage B(i) only, Claim or Securities Claim shall not mean a
criminal or administrative proceeding against the Company.
(b) "Company" means the Named Corporation designated in Item 1 of the
Declarations and any Subsidiary thereof.
(c) "Continuity Date" means the date set forth in:
(1) Item 6A of the Declarations with respect to Coverages A and B
(ii); or
(2) Item 6B of the Declarations with respect to Coverage B(i); or
(3) Item 6C of the Declarations with respect to Coverages A and B for
a Claim against an Insured arising out of such Insured serving as a director,
officer, trustee or governor of an Outside Entity.
(d) "Defense Costs" means reasonable and necessary fees, costs and expenses
consented to by the Insurer (including premiums for any appeal bond, attachment
bond or similar bond, but without any obligation to apply for or furnish any
such bond) resulting solely from the investigation, adjustment, defense and
appeal of a Claim against the Insureds, but excluding salaries of Officers or
employees of the Company.
(e) "Director(s) or Officer(s)" or "Insured(s)" means:
(1) with respect to Coverages A and B (ii), any past, present or future
duly elected or appointed directors or officers of the Company. In the event the
Named Corporation or a Subsidiary thereof operates outside the United States,
then the terms "Director(s) or Officer(s)" or "Insured(s)" also mean those
titles, positions or capacities in such foreign Named Corporation or Subsidiary
which is equivalent to the position of Director(s) or Officer(s) in a
corporation incorporated within the United States. Coverage will automatically
apply to all new Directors and Officers after the inception date of this policy;
(2) with respect to Coverage B(i) only, the Company.
(f) "Listed Event" means any of the following events:
(1) any event for which the Company has reported or is required to
report on Form 8-K filed with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934; or
(2) any restatement or correction of a Company financial statement
contained in any document filed with the Securities and Exchange Commission; or
(3) any statement or disclosure made by or on the behalf of the Company
relating to a prior forecast, estimate or projection of the Company's earnings
or sales made by or on behalf of the Company, which statement or disclosure
represents a greater than 15% change from such prior forecast, estimate or
projection.
(g) "Loss" means damages, judgments, settlements and Defense Costs;
however, Loss shall not include civil or criminal fines or penalties imposed by
law, punitive or exemplary damages, the multiplied portion of multiplied
damages, taxes, any amount for which the Insureds are not financially liable or
which are without legal recourse to the Insureds, or matters which may be deemed
uninsurable under the law pursuant to which this policy shall be construed.
Further, with respect to Coverage B only, Loss shall not include damages,
judgments or settlements arising out of a Claim alleging that the Company paid
an inadequate or unfair price or consideration for the purchase of its own
securities or the securities of a Subsidiary.
Notwithstanding the foregoing, with respect to Coverage B(i) only and
subject to the other terms, conditions and exclusions of the policy, Loss shall
include punitive damages (if insurable by law) imposed upon the Company.
(h) "No Liability" means with respect to a Securities Claim made against
the Insured(s): (1) a final judgment of no liability obtained prior to trial, in
favor of all Insureds, by reason of a motion to dismiss or a motion for summary
judgment, after the exhaustion of all appeals; or (2) a final judgment of no
liability obtained after trial, in favor of all Insureds, after exhaustion of
all appeals. In no event shall the term "No Liability" apply to a Securities
Claim made against an Insured for which a settlement has occurred.
(i) "Outside Entity" means:
(1) a not-for-profit organization under section 501(c)(3) of the
Internal Revenue Code of 1986 (as amended); or
(2) any other corporation, partnership, joint venture or other
organization listed by endorsement to this policy.
(j) "Policy Period" means the period of time from the inception date shown
in Item 3 of the Declarations to the earlier of the expiration date shown in
Item 3 of the Declarations or the effective date of cancellation of this policy;
however, to the extent that coverage under this policy replaces coverage in
other policies terminating at noon standard time on the inception date of such
coverage hereunder, then such coverage as is provided by this policy shall not
become effective until such other coverage has terminated.
(k) "Securities Claim" means a Claim made against an Insured which alleges
a violation of the Securities Act of 1933 or the Securities Exchange Act of
1934, rules or regulations promulgated thereunder, the securities laws of any
state, or any foreign jurisdiction, and which alleges a Wrongful Act in
connection with the claimant's purchase or sale of, or the offer to purchase or
sell to the claimant, any securities of the Company, whether on the open market
or arising from a public or private offering of securities by the Company.
(l) "Subsidiary" means:
(1) any corporation of which the Named Corporation owns on or before
the inception of the Policy Period more than 50% of the issued and outstanding
voting stock either directly, or indirectly through one or more of its
Subsidiaries;
(2) automatically any corporation whose assets total less than 10% of
the total consolidated assets of the Company as of the inception date of this
policy, which corporation becomes a Subsidiary during the Policy Period. The
Named Corporation shall provide the Insurer with full particulars of the new
Subsidiary before the end of the Policy Period;
(3) any corporation which becomes a Subsidiary during the Policy Period
(other than a corporation described in paragraph (2) above) but only upon the
condition that within 90 days of its becoming a Subsidiary the Named Corporation
shall have provided the Insurer with full particulars of the new Subsidiary and
agreed to any additional premium and/or amendment of the provisions of this
policy required by the Insurer relating to such new Subsidiary. Further,
coverage as shall be afforded to the new Subsidiary is conditioned upon the
Named Corporation paying when due any additional premium required by the Insurer
relating to such new Subsidiary.
A corporation becomes a Subsidiary when the Named Corporation owns more
than 50% of the issued and outstanding voting stock, either directly, or
indirectly through one or more of its Subsidiaries. A corporation ceases to be a
Subsidiary when the Named Corporation ceases to own more than 50% of the issued
and outstanding voting stock either directly, or indirectly through one or more
of its Subsidiaries.
In all events, coverage as is afforded under this policy with respect
to any Claim made against a Subsidiary or any Director or Officer thereof shall
only apply for Wrongful Acts committed or allegedly committed after the
effective time that such Subsidiary became a Subsidiary and prior to the time
that such Subsidiary ceased to be a Subsidiary.
(m) "Wrongful Act" means:
(1) with respect to individual Directors or Officers, any breach of
duty, neglect, error, misstatement, misleading statement, omission or act by the
Directors or Officers of the Company in their respective capacities as such, or
any matter claimed against them solely by reason of their status as Directors or
Officers of the Company, or any matter claimed against them arising out of their
serving as a director, officer, trustee or governor of an Outside Entity in such
capacities, but only if such service is at the specific written request or
direction of the Company,
(2) with respect to the Company, any breach of duty, neglect, error,
misstatement, misleading statement, omission or act by the Company, but solely
as respects a Securities Claim.
3. EXTENSIONS
Subject otherwise to the terms hereof, this policy shall cover Loss arising
from any Claims made against the estates, heirs, or legal representatives of
deceased Directors or Officers, and the legal representatives of Directors or
Officers in the event of incompetency, insolvency or bankruptcy, who were
Directors or Officers at the time the Wrongful Acts upon which such Claims are
based were committed.
Subject otherwise to the terms hereof, this policy shall cover Loss arising
from all Claims made against the lawful spouse (whether such status is derived
by reason of statutory law, common law or otherwise of any applicable
jurisdiction in the world) of an individual Director or Officer for all Claims
arising solely out of his or her status as the spouse of an individual Director
or Officer, including a Claim that seeks damages recoverable from marital
community property, property jointly held by the individual Director or Officer
and the spouse, or property transferred from the individual Director or Officer
to the spouse; provided, however, that this extension shall not afford coverage
for any Claim for any actual or alleged Wrongful Act of the spouse, but shall
apply only to Claims arising out of any actual or alleged Wrongful Acts of an
individual Director or Officer, subject to the policy's terms, conditions and
exclusions.
4. EXCLUSIONS
The Insurer shall not be liable to make any payment for Loss in connection
with a Claim made against an Insured:
(a) arising out of, based upon or attributable to the gaining in fact
of any profit or advantage to which an Insured was not legally entitled;
(b) arising out of, based upon or attributable to: (1) profits in fact
made from the purchase or sale by an Insured of securities of the Company within
the meaning of Section 16(b) of the Securities Exchange Act of 1934 and
amendments thereto or similar provisions of any state statutory law; or (2)
payments to an Insured of any remuneration without the previous approval of the
stockholders of the Company, which payment without such previous approval shall
be held to have been illegal;
(c) arising out of, based upon or attributable to the committing in
fact of any criminal or deliberate fraudulent act;
[The Wrongful Act of a Director or Officer shall not be imputed to any
other Director or Officer for the purpose of determining the applicability of
the foregoing exclusions 4(a) through 4(c)]
(d) alleging, arising out of, based upon or attributable to the facts
alleged, or to the same or related Wrongful Acts alleged or contained, in any
claim which has been reported, or in any circumstances of which notice has been
given, under any policy of which this policy is a renewal or replacement or
which it may succeed in time;
(e) alleging, arising out of, based upon or attributable to any pending
or prior litigation as of the Continuity Date, or alleging or derived from the
same or essentially the same facts as alleged in such pending or prior
litigation;
(f) alleging, arising out of, based upon or attributable to a Listed
Event that occurs no later than 90 days subsequent to the Continuity Date;
provided, however, that this exclusion shall only apply with respect to coverage
which would have otherwise been afforded under Coverage B(i) of the policy;
(g) with respect to serving as a director, officer, trustee or governor
of an Outside Entity, for any Wrongful Act occurring prior to the Continuity
Date if the Insured knew or could have reasonably foreseen that such Wrongful
Act could lead to a Claim under this policy;
(h) alleging, arising out of, based upon or attributable to any actual
or alleged act or omission of the Directors or Officers serving in their
capacities as directors, officers, trustees or governors of any other entity
other than the Company or an Outside Entity, or by reason of their status as
directors, officers, trustees or governors of such other entity;
(i) which is brought by any Insured or by the Company; or which is
brought by any security holder of the Company, whether directly or derivatively,
unless such security holder's Claim is instigated and continued totally
independent of, and totally without the solicitation of, or assistance of, or
active participation of, or intervention of, any Insured or the Company;
provided, however, this exclusion shall not apply to a wrongful termination of
employment Claim brought by a former employee other than a former employee who
is or was a Director of the Company.
(j) for any Wrongful Act arising out of the Insured serving as a
director, officer, trustee or governor of an Outside Entity if such Claim is
brought by the Outside Entity or by any director, officer, trustee or governor
thereof; or which is brought by any security holder of the Outside Entity,
whether directly or derivatively, unless such security holder's Claim is
instigated and continued totally independent of, and totally without the
solicitation of, or assistance of, or active participation of, or intervention
of, the Outside Entity, any director, officer, trustee, or governor thereof, any
Insured or the Company.
(k) for bodily injury, sickness, disease, death or emotional distress
of any person, or damage to or destruction of any tangible property, including
the loss of use thereof, or for injury from libel or slander or defamation or
disparagement, or for injury from a violation of a person's right of privacy;
(1) alleging, arising out of, based upon, attributable to, or in any
way involving, directly or indirectly:
(1) the actual, alleged or threatened discharge, dispersal, release
or escape of pollutants; or
(2) any direction or request to test for, monitor, clean up,
remove, contain, treat, detoxify or neutralize pollutants,
including, but not limited to, a Claim alleging damage to the
Company or its securities holders. Pollutants include (but are not limited to)
any solid, liquid, gaseous or thermal irritant or contaminant, including smoke,
vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes (but is
not limited to) materials to be recycled, reconditioned or reclaimed;
(m) for violation(s) of any of the responsibilities, obligations or
duties imposed upon fiduciaries by the Employee Retirement Income Security Act
of 1974, or amendments thereto or any similar provisions of state statutory law
or common law.
5. LIMIT OF LIABILITY - (FOR ALL LOSS - INCLUDING DEFENSE COSTS)
The Limit of Liability stated in Item 4 of the Declarations is the limit of
the Insurer's liability for all Loss, under Coverage A and Coverage B combined,
arising out of all Claims first made against the Insureds during the Policy
Period and the Discovery Period (if applicable); however, the Limit of Liability
for the Discovery Period shall be part of, and not in addition to, the Limit of
Liability for the Policy Period. Further, any Claim which is made subsequent to
the Policy Period or Discovery Period (if applicable) which pursuant to Clause
7(b) or 7(c) is considered made during the Policy Period or Discovery Period
shall also be subject to the one aggregate Limit of Liability stated in Item 4
of the Declarations.
Defense Costs are not payable by the Insurer in addition to the Limit of
Liability. Defense Costs are part of Loss and as such are subject to the Limit
of Liability for Loss.
6. RETENTION CLAUSE
The Insurer shall only be liable for the amount of Loss arising from a
Claim which is in excess of the Retention amount stated in Item 5 of the
Declarations, such Retention amount to be borne by the Company and/or the
Insureds and shall remain uninsured, with regard to all Loss under: (i) Coverage
A or B(ii) for which the Company has indemnified or is permitted or required to
indemnify the Director(s) or Officer(s) ("Indemnifiable Loss"); or (ii) Coverage
B(i). A single Retention amount shall apply to Loss arising from all Claims
alleging the same Wrongful Act or related Wrongful Acts.
Notwithstanding the foregoing, solely with respect to a Securities Claim
under this policy, the Retention shall only apply to Defense Costs; provided,
however, no Retention shall apply for a Securities Claim even as respects
Defense Costs in the event of a determination of No Liability of all Insureds,
and the Insurer shall thereupon reimburse such Defense Costs paid by the
Insured.
7. NOTICE/CLAIM REPORTING PROVISIONS
Notice hereunder shall be given in writing to the Insurer named in Item 8
of the Declarations at the address indicated in Item 8 of the Declarations. If
mailed, the date of mailing shall constitute the date that such notice was given
and proof of mailing shall be sufficient proof of notice.
(a) The Company or the Insureds shall, as a condition precedent to the
obligations of the Insurer under this policy, give written notice to the Insurer
of any Claim made against an Insured as soon as practicable and either:
(1) any time during the Policy Period or during the Discovery
Period (if applicable); or
(2) within 30 days after the end of the Policy Period or the
Discovery Period (if applicable), as long as such Claim is reported no later
than 30 days after the date such Claim was first made against an Insured.
(b) If written notice of a Claim has been given to the Insurer pursuant
to Clause 7(a) above, then any Claim which is subsequently made against the
Insureds and reported to the Insurer alleging, arising out of, based upon or
attributable to the facts alleged in the Claim for which such notice has been
given, or alleging any Wrongful Act which is the same as or related to any
Wrongful Act alleged in the Claim of which such notice has been given, shall be
considered made at the time such notice was given.
(c) If during the Policy Period or during the Discovery Period (if
applicable) the Company or the Insureds shall become aware of any circumstances
which may reasonably be expected to give rise to a Claim being made against the
Insureds and shall give written notice to the Insurer of the circumstances and
the reasons for anticipating such a Claim, with full particulars as to dates,
persons, and entities involved, then any Claim which is subsequently made
against the Insureds and reported to the Insurer alleging, arising out of, based
upon or attributable to such circumstances or alleging any Wrongful Act which is
the same as or related to any Wrongful Act alleged or contained in such
circumstances, shall be considered made at the time such notice of such
circumstances was given.
8. DEFENSE COSTS, SETTLEMENTS, JUDGMENTS (INCLUDING THE
ADVANCEMENT OF DEFENSE COSTS)
Under both Coverage A and Coverage B of this policy, except as hereinafter
stated, the Insurer shall advance, at the written request of the Insured,
Defense Costs prior to the final disposition of a Claim. Such advanced payments
by the Insurer shall be repaid to the Insurer by the Insureds or the Company
severally according to their respective interests, in the event and to the
extent that the Insureds or the Company shall not be entitled under the terms
and conditions of this policy to payment of such Loss.
The Insurer does not, however, under this policy, assume any duty to
defend. The Insureds shall defend and contest any Claim made against them. The
Insureds shall not admit or assume any liability, enter into any settlement
agreement, stipulate to any judgment, or incur any Defense Costs without the
prior written consent of the Insurer. Only those settlements, stipulated
judgments and Defense Costs which have been consented to by the Insurer shall be
recoverable as Loss under the terms of this policy. The Insurer's consent shall
not be unreasonably withheld, provided that the Insurer shall be entitled to
effectively associate in the defense and the negotiation of any settlement of
any Claim.
The Insurer shall have the right to effectively associate with the Company
and the Insureds in the defense of any Claim that appears reasonably likely to
involve the Insurer, including but not limited to negotiating a settlement. The
Company and the Insureds shall give the Insurer full cooperation and such
information as it may reasonably require.
The Insurer may make any settlement of any Claim it deems expedient with
respect to any Insured subject to such Insured's written consent. If any Insured
withholds consent to such settlement, the Insurer's liability for all Loss on
account of such Claim shall not exceed the amount for which the Insurer could
have settled such Claim plus Defense Costs incurred as of the date such
settlement was proposed in writing by the Insurer.
The Company is not covered in any respect under Coverage A; the Company is
covered, subject to the policy's terms and conditions, only with respect to its
indemnification of its Directors or Officers under Coverage B(ii) as respects a
Claim against such Directors and Officers, and subject to the policy's terms and
conditions, under Coverage B(i) for a Securities Claim made against the Company.
Accordingly, the Insurer has no obligation under this policy for Defense Costs
incurred by, judgments against or settlements by the Company arising out of a
Claim made against the Company other than a covered Securities Claim, or any
obligation to pay Loss arising out of any legal liability that the Company has
to the claimant except as respects a covered Securities Claim against the
Company.
With respect to (i) Defense Costs jointly incurred by, (11) any joint
settlement made by, and/or (iii) any adjudicated judgment of joint and several
liability against the Company and any Director or Officer, in connection with
any Claim other than a Securities Claim, the Company and the Director(s) or
Officer(s) and the Insurer agree to use their best efforts to determine a fair
and proper allocation of the amounts as between the Company and the Director(s)
or Officers(s) and the Insurer, taking into account the relative legal and
financial exposures of and the relative benefits obtained by the Directors and
Officers and the Company. In the event that a determination as to the amount of
Defense Costs to be advanced under the policy cannot be agreed to, then the
Insurer shall advance such Defense Costs which the Insurer states to be fair and
proper until a different amount shall be agreed upon or determined pursuant to
the provisions of this policy and applicable law.
9. PRE-AUTHORIZED SECURITIES DEFENSE ATTORNEYS
Only with respect to a Securities Claim:
Affixed as Appendix A hereto and made a part of this policy is a list of
Panel Counsel law firms ("Panel Counsel Firms"). The list provides the Insured a
choice of law firms from which a selection of legal counsel shall be made to
conduct the defense of any Securities Claim made against them.
The Insureds shall select a Panel Counsel Firm to defend a Securities Claim
made against the Insureds in the jurisdiction in which the Securities Claim is
brought. In the event a Securities Claim is brought in a jurisdiction not
included on the list, the Insureds shall select a Panel Counsel Firm in the
listed jurisdiction which is the nearest geographical jurisdiction to either
where the Securities Claim is brought or where the corporate headquarters of the
Named Corporation is located. In such instance the Insureds also may, with the
consent of the Insurer, which consent shall not be unreasonably withheld, select
a non-Panel Counsel Firm in the jurisdiction in which the Securities Claim is
brought to function as "local counsel" on the Securities Claim to assist the
Panel Counsel Firm which will function as "lead counsel" in conducting the
defense of the Securities Claim.
With the express prior written consent of the Insurer, an Insured may
select a Panel Counsel Firm different from that selected by other Insured
defendants if such selection is required due to an actual conflict of interest
or is otherwise reasonably justifiable.
The list of Panel Counsel Firms may be amended from time to time by the
Insurer. However, no change shall be made to the specific list attached to this
policy during the Policy Period without the consent of the Named Corporation. At
the request of the Insured, the Insurer may in its discretion add to the
attached list of Panel Counsel Firms for the purposes of defending a Securities
Claim made against the Insured in any specified jurisdiction (including a
jurisdiction not originally included in the Panel Counsel list) a Panel Counsel
Firm not originally listed for such jurisdiction. The Insurer may in its
discretion waive, in part or in whole, the provisions of this clause as respects
a particular Securities Claim.
10. DISCOVERY CLAUSE
Except as indicated below, if the Insurer or the Named Corporation shall
cancel or refuse to renew this policy, the Named Corporation shall have the
right, upon payment of an additional premium of 75% of the "full annual
premium", to a period of one year following the effective date of such
cancellation or non-renewal (herein referred to as the "Discovery Period") in
which to give to the Insurer written notice of Claims first made against the
Insureds during said one year period for any Wrongful Act occurring prior to the
end of the Policy Period and otherwise covered by this policy. As used herein,
"full annual premium" means the premium level in effect immediately prior to the
end of the Policy Period. The rights contained in this paragraph shall
terminate, however, unless written notice of such election together with the
additional premium due is received by the Insurer within 30 days of the
effective date of cancellation or non-renewal.
In the event of a Transaction, as defined in Clause 12, the Named
Corporation shall have the right, within 30 days before the end of the Policy
Period, to request an offer from the Insurer of a Discovery Period (with respect
to Wrongful Acts occurring prior to the effective time of the Transaction) for a
period of no less than three years or for such longer or shorter period as the
Named Corporation may request. The Insurer shall offer such Discovery Period
pursuant to such terms, conditions and premium as the Insurer may reasonably
decide. In the event of a Transaction, the right to a Discovery Period shall not
otherwise exist except as indicated in this paragraph.
The additional premium for the Discovery Period shall be fully earned at
the inception of the Discovery Period. The Discovery Period is not cancelable.
This clause and the rights contained herein shall not apply to any cancellation
resulting from nonpayment of premium.
11. CANCELLATION CLAUSE
This policy may be canceled by the Named Corporation at any time only by
mailing written prior notice to the Insurer or by surrender of this policy to
the Insurer or its authorized agent. This policy may also be canceled by or on
behalf of the Insurer by delivering to the Named Corporation or by mailing to
the Named Corporation, by registered, certified, or other first class mail, at
the Named Corporation's address as shown in Item 1 of the Declarations, written
notice stating when, not less than 60 days thereafter, the cancellation shall be
effective. The mailing of such notice as aforesaid shall be sufficient proof of
notice. The Policy Period terminates at the date and hour specified in such
notice, or at the date and time of surrender.
If this policy shall be canceled by the Named Corporation, the Insurer
shall retain the customary short rate proportion of the premium herein.
If this policy shall be canceled by the Insurer, the Insurer shall retain
the pro rata proportion of the premium herein.
Payment or tender of any unearned premium by the Insurer shall not be a
condition precedent to the effectiveness of cancellation, but such payment shall
be made as soon as practicable.
If the period of limitation relating to the giving of notice is prohibited
or made void by any law controlling the construction thereof, such period shall
be deemed to be amended so as to be equal to the minimum period of limitation
permitted by such law.
12. CHANGE IN CONTROL OF NAMED CORPORATION
If during the Policy Period:
a. the Named Corporation shall consolidate with or merge into, or sell all
or substantially all of its assets to any other person or entity or group of
persons and/or entities acting in concert; or
b. any person or entity or group of persons and/or entities acting in
concert shall acquire an amount of the outstanding securities representing more
than 50% of the voting power for the election of Directors of the Named
Corporation, or acquires the voting rights of such an amount of such securities;
(either of the above events herein referred to as the "Transaction")
then this policy shall continue in full force and effect as to Wrongful
Acts occurring prior to the effective time of the Transaction, but there shall
be no coverage afforded by any provision of this policy for any actual or
alleged Wrongful Act occurring after the effective time of the Transaction. This
policy may not be canceled after the effective time of the Transaction and the
entire premium for this policy shall be deemed earned as of such time. The Named
Corporation shall also have the right to an offer by the Insurer of a Discovery
Period described in Clause 10 of the policy.
The Named Corporation shall give the Insurer written notice of the
Transaction as soon as practicable, but not later than 30 days after the
effective date of the Transaction.
13. SUBROGATION
In the event of any pavement under this policy, the Insurer shall be
subrogated to the extent of such pavement to all the Company's and the Insureds'
rights of recovery thereof, and the Company and the Insureds shall execute all
papers required and shall do everything that may be necessary to secure such
rights including the execution of such documents necessary to enable the Insurer
to effectively bring suit in the name of the Company and/or the Insureds. In no
event, however, shall the Insurer exercise its rights of subrogation against an
Insured under this policy unless such Insured has been convicted of a criminal
act, or been judicially determined to have committed a deliberate fraudulent
act, or obtained any profit or advantage to which such Insured was not legally
entitled.
14. OTHER INSURANCE AND INDEMNIFICATION
Such insurance as is provided by this policy shall apply only as excess
over any other valid and collectible insurance.
In the event of a Claim against a Director or Officer arising out of his or
her serving as director, officer, trustee or governor of an Outside Entity,
coverage as is afforded by this policy shall be specifically excess of
indemnification provided by such Outside Entity and any insurance provided to
such Outside Entity with respect to its directors, officers, trustees or
governors. Further, in the event such other Outside Entity insurance is provided
by the Insurer or any member company of American International Group, Inc.
("AIG") (or would be provided but for the application of the retention amount,
exhaustion of the limit of liability or failure to submit a notice of a Claim)
then the maximum aggregate Limit of Liability for all Losses combined covered by
virtue of this policy as respects any such Claim shall be reduced by the limit
of liability (as set forth on the declarations page) of the other AIG insurance
provided to such Outside Entity.
15. NOTICE AND AUTHORITY
It is agreed that the Named Corporation shall act on behalf of its
Subsidiaries and all Insureds with respect to the giving notice of Claim or
giving and receiving notice of cancellation, the payment of premiums and the
receiving of any return premiums that may become due under this policy, the
receipt and acceptance of any endorsements issued to form a part of this policy
and the exercising or declining to exercise any right to a Discovery Period.
16. ASSIGNMENT
This policy and any and all rights hereunder are not assignable without the
written consent of the Insurer.
17. ARBITRATION
It is hereby understood and agreed that all disputes or differences which
may arise under or in connection with this policy, whether arising before or
after termination of this policy, including any determination of the amount of
Loss, shall be submitted to the American Arbitration Association under and in
accordance with its then prevailing commercial arbitration rules. The
arbitrators shall be chosen in the manner and within the time frames provided by
such rules. If permitted under such rules the arbitrators shall be three
disinterested individuals having knowledge of the legal, corporate management or
insurance issues relevant to the matters in dispute.
Any party may commence such arbitration proceeding in either New York, New
York; Atlanta, Georgia; Chicago, Illinois; or Denver, Colorado. The arbitrators
shall give due consideration to the general principles of Delaware law in the
construction and interpretation of the provisions of this policy; provided,
however, that the terms, conditions, provisions and exclusions of this policy
are to be construed in an evenhanded fashion as between the parties, including
without limitation, where the language of this policy is alleged to be ambiguous
or otherwise unclear, the issue shall be resolved in the manner most consistent
with the relevant terms, conditions, provisions or exclusions of the policy
(without regard to the authorship of the language, the doctrine of reasonable
expectation of the parties and without any presumption or arbitrary
interpretation or construction in favor of either party or parties, and in
accordance with the intent of the parties.)
The written decision of the arbitrators shall be provided to both parties
and shall be binding on them. The arbitrators' award shall not include attorney
fees or other costs.
Each party shall bear equally the expenses of the arbitration.
18. ACTION AGAINST INSURER
Except as provided in Clause 17 of the policy, no action shall lie against
the Insurer unless, as a condition precedent thereto, there shall have been full
compliance with all of the terms of this policy, nor until the amount of the
Insureds' obligation to pay shall have been finally determined either by
judgment against the Insureds after actual trial or by written agreement of the
Insureds, the claimant and the Insurer.
Any person or organization or the legal representative thereof who has
secured such judgment or written agreement shall thereafter be entitled to
recover under this policy to the extent of the insurance afforded by this
policy. No person or organization shall have any right under this policy to join
the Insurer as a party to any action against the Insureds or the Company to
determine the Insureds' liability, nor shall the Insurer be impleaded by the
Insureds or the Company or their legal representatives. Bankruptcy or insolvency
of the Company or the Insureds or of their estates shall not relieve the Insurer
of any of its obligations hereunder.
19. HEADINGS
The descriptions in the headings of this policy are solely for convenience,
and form no part of the terms and conditions of coverage.
<PAGE>
APPENDIX A
PANEL COUNSEL
CALIFORNIA
Los Angeles
- -----------
Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, CA 90071-3197
Contact Persons:
Robert S. Warren (213) 229-7326
Wayne W. Smith (213) 229-7464
John H. Sharer (213) 229-7476
Heller, Ehrman, White & McAuliffe
601 South Fiqueroa Street - 40th Floor
Los Angeles, CA 90017-5758
Contact Person:
Miles N. Ruthberg (213) 689-0200
Irell & Manelia
1800 Avenue of the Stars - Suite 900
Los Angeles, CA 90067
Contact Person:
Richard Borow (310) 277-1010
Kirkland & Ellis
300 South Grand Avenue
Los Angeles, CA 90071
Contact Persons:
Jeffrey S. Davidson or
Stephen C. Neal (213) 680-8400
Latham & Watkins 633 West Fifth Avenue Los Angeles, CA 90071-2007 Contact
Person:
Hugh Steven Wilson (213) 485-1234
Morrison & Foerster
555 West 5th Street - Suite 3500
Los Angeles, CA 90013-1024
Contact Person:
Robert Stern (213) 892-5484
Munger, Tolles & Olson
355 South Grand Avenue - 35th Floor
Los Angeles, CA 90071-1560
Contact Persons:
Dennis Kinnaird (213) 683-9264 or
John W. Spiegel (213) 683-9152
O'Melveny & Myers
400 South Hope Street
Los Angeles, CA 90071-2899
Contact Persons:
Seth Aronson or
Robert Vanderet (213) 669-6000
Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue - Suite 3400
Los Angeles, CA 90071
Contact Persons:
James E. Lyons or
Frank Rothman (213) 687-5000
Palo Alto
- ---------
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Contact Persons:
Bruce Vanyo or
Steven M. Schatz (415) 493-9300
Heller, Ellman, White & McAuliffe
525 University Avenue
Palo Alto, CA 94301
Contact Person:
Norman J. Blears (415) 324-7000
San Francisco
- -------------
Brobeck, Phleger & Harrison
Spear Street Tower
One Market
San Francisco, CA 94105
Contact Person:
Tower C. Snow Jr. (415) 442-0900
Heller, Ellman, White & McAuliffe
333 Bush Street
San Francisco, CA 94104
Contact Persons:
Douglas Schwab or
M. Laurence Popofsky (415) 772-6000
McCutchen, Doyle, Brown & Enersen
3 Embarcadero Center - 18th Floor
San Francisco, CA 94111
Contact Persons:
David Balabanian or
Philip R. Rotner (415) 393-2000
Morrison & Foerster
345 California Street
San Francisco, CA 94104-2675
Contact Persons:
Melvin R. Goldman (415) 677-7311
Paul T. Friedman (415) 677-7444
Orrick Herrington & Sutcliffe
Old Federal Reserve Bank Bldg.
400 Sansome Street
San Francisco, CA 94111
Contact Persons:
James A. Hughes,
W. Reece Bader or
Richard J. Lucas (415) 392-1122
Pillsbury, Madison & Sutro
P.O. Box 7880
235 Montgomery Street
San Francisco, CA 94104
Contact Person:
Gary H. Anderson (415) 983-1341
Shearman & Sterling 555 California Street San Francisco, CA 94104 Contact
Person:
Susan Samuels Mark (415) 616-1198
DISTRICT OF COLUMBIA
Washington
- ----------
Arnold & Porter
555 Twelfth Street N.W.
Washington, DC 20004-1202
Contact Person:
Scott Schreiber (202) 942-5672
Davis, Polk & Wardwell
1300 I Street, N.W. - Suite 1100
Washington, DC 20005
Contact Persons:
Scott W. Muller or
Michael P. Carroll (202) 962-7000
Gibson, Dunn & Crutcher
1050 Connecticut Avenue, N.W. - Suite 900
Washington, DC 20036-5306
Contact Person:
F. Joseph Warin (202) 887-3609
Mudge, Rose, Guthrie, Alexander & Ferdon
212 K Street, N.W.
Washington, DC 20037
Contact Persons:
Leonard Garment or
I. Lewis Libby (202) 429-9355
Patton Boggs, L.L.P.
2550 M Street N.W. - Suite 900
Washington, DC 20037
Contact Persons:
C. Allen Foster (202) 457-6320 or
Charles H. Camp (202) 457-5265
Shearman & Sterling
801 Pennsylvania Avenue N.W.
Washington, DC 20004-2604
Contact Persons:
Thomas S. Martin or
Jonathan L. Greenblatt (202) 508-8000
Willkie Farr & Gallagher
Three Lafayette Centre
1155 21st Street N.W.
Washington, DC 20036-3384
Contact Person:
Kevin B. Clark (202) 328-8000
GEORGIA
Atlanta
- -------
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, GA 30309
Contact Persons:
Peter Q. Basset (404) 881-7343
Mary C. Gill (404) 881-7276
King & Spalding
191 Peachtree Street N.W.
Atlanta, GA 30303-1763
Contact Persons:
Michael R. Smith or
Griffin Bell (404) 572-4600
Long, Aldridge & Norman
One Peachtree Center
303 Peachtree Street - Suite 5300
Atlanta, GA 30308
Contact Persons:
J. Allen Maines (404) 527-8340
Sharon Glenn (404) 527-8391
Smith, Gambrell & Russel
3343 Peachtree Road N.E. - Suite 1800
Atlanta, GA 30326-1010
Contact Persons:
David Handley (404) 264-2671
Robert C. Schwartz (404) 264-2658
ILLINOIS
Chicago
- -------
Jenner & Block One IBM Plaza Chicago, IL 60611 Contact Person:
Jerold Solovy (312) 222-9350
Freeborn & Peters
311 South Wacker Drive - Suite 3000
Chicago, IL 60606-6677
Contact Person:
David H. Kistenbroker (312) 360-6567
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Contact Persons:
Garrett B. Johnson or
Robert J. Kopecky (312) 861-2000
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Contact Persons:
Robert Downing (312) 853-7434
Eugene Schoon (312) 853-7279
Walter C. Carlson (312) 853-7734
Skadden, Arps, Slate, Meagher & Flom
333 West Wacker Drive - Suite 2100
Chicago, IL 60606
Contact Persons:
Timothy Nelsen or
Susan Getzendanner (312) 407-0700
Sonnenschein, Nath & Rosenthal
8000 Sears Tower
Chicago, IL 60606-6404
Contact Person:
Harold D. Shapiro (312) 876-8035
MASSACHUSETTS
Boston
- ------
Goodwin, Proctor & Hoar
Exchange Place
Boston, MA 02109
Contact Person:
Don M. Kennedy (617) 570-1000
Hale & Dorr
60 State Street
Boston, MA 02109
Contact Person:
Jeffery Rudman or
John Batter (617) 742-9100
Ropes & Gray
One International Plaza
Boston, MA 02110-2624
Contact Person:
John Donovan, Jr. (617) 951-7566
Skadden, Arps, Slate, Meagher & Flom
1 Beacon Street
Boston, MA 02108
Contact Persons:
Thomas A. Dougherty or
George J. Skelley (617) 573-4800
Palmer & Dodge
1 Beacon Street
Boston, MA 02108
Contact Persons:
Peter Terris or
Peter Saparoff (617) 573-0100
Testa, Hurwitz & Thibeault
High Street Tower
125 High Street
Boston, MA 02110
Contact Person:
Brian E. Pastuszenski (617) 248-7253
NEW YORK
New York
- --------
Arnold & Porter
399 Park Avenue
New York, NY 10022-4690
Contact Persons:
Kenneth V. Handal (212) 715-1020 or
Scott Schreiber (212) 701-1000
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Contact Persons:
Charles A. Gilman,
Thomas J. Kavaler or
Immanuel Kohn (212) 701-3000
Davis, Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Contact Persons:
Henry King or
Dan Kolb (212) 450-4000
Fried, Frank, Harris, Shriver & Jacobson
1 New York Plaza - 27th Floor
New York, NY 10004
Contact Person:
Sheldon Raab (212) 859-8090
Kaye, Scholer, Fiernan, Hays & Handler
425 Park Avenue
New York, NY 10022
Contact Person:
Frederic W. Yerman (212) 836-8663
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, NY 10022-4675
Contact Persons:
Yosef J. Riemer or
Frank M. Holozubiec (212) 446-4800
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, NY 10005
Contact Person:
Russell E. Brooks (212) 530-5554
Mudge, Rose, Guthrie, Alexander & Ferdon
180 Maiden Lane
New York, NY 10038
Contact Persons:
Kenneth Conboy, John J. Kirby, Jr., or
Laurence V. Senn, Jr. (212) 510-7000
Shearman & Sterling
Citicorp Center
153 E. 53rd Street
New York, NY 10022-4676
Contact Person:
Dennis Orr (212) 848-8000
Simpson, Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Contact Persons:
Roy L. Reardon, James Hagan or
Michael J. Chepiga (212) 455-2000
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Contact Persons:
Barry H. Garfinkel or
Jonathan Lerner (212) 735-3000
Stroock, Stroock & Lavan
Seven Hanover Square
New York, NY 10004-2696
Contact Persons:
Melvin A. Brosterman,
Laurence Greenwald or
Alvin K. Hellerstein (212) 806-5400
Sullivan & Cromwell
125 Broad Street
New York, NY 10004-2498
Contact Persons:
John L. Warden or
Philip L. Grahman, Jr. (212) 558-4000
Teitelbaum, Hiller, Rodman, Paden &
Hibsher, P.C.
260 Madison Avenue
New York, NY 10016
Contact Person:
Herbert Teitelbaum (212) 213-1010
Wachtell, Lipton, Rosen & Katz
51 West 57th Street
New York, NY 10019
Contact Person:
Norman Redlich (212) 371-9200
Willkie, Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022-4677
Contact Persons:
Michael R. Young, David L. Foster or
Richard L. Posen (212) 821-8000
Weil, Gotshal & Manges
767 Fifth Avenue
New York, NY 10153
Contact Person:
Dennis J. Block (212) 310-8000
PENNSYLVANIA
Philadelphia
- ------------
Blank, Rome, Comisky & McCauley
1200 Four Penn Center
Philadelphia, PA 19103
Contact Persons: Alexander D. Bono,
Richard P. McElroy or
Jerome R. Richter (215) 569-5500
Cozen & O'Connor
The Atrium
1900 Market Street
Philadelphia, PA 19103
Contact Persons:
Patrick J. O'Connor, Thomas C. Zielinski or
H. Robert Fiebach (215) 665-2000
Dechert, Prince & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103-2793
Contact Persons:
Seymour Kurland or
Jeffrey G. Weil (215) 994-4000
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, PA 19103-6993
Contact Persons:
Gregory M. Harvey, Marc J. Sonnenfeld or
Elizabeth Hoop Fay (215) 963-5000
Pepper, Hamilton & Scheetz
3000 Two Logan Square
Eighteenth & Arch Streets
Philadelphia, PA 19103-2799
Contact Persons:
Jon A. Baughman or
Laurence Z. Shiekman (215) 981-4000
Wolf, Block, Schorr & Solis-Cohen
12th Floor - Packard Building
S.E. Corner 15th & Chestnut Streets
Philadelphia, PA 19102-2678
Contact Person:
Jay A. Dubow (215) 977-2058
TEXAS
Dallas
- ------
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue - Suite 4100
Dallas, TX 75201-4618
Contact Persons:
Michael Lowenberg P.C. or
Louis P. Bickel (214) 969-2800
Fulbright & Jaworski
2200 Ross Avenue - Suite 2800
Dallas, TX 75201
Contact Person:
Karl G. Dial (214) 855-8000
Locke, Purnell, Rain & Harrell
2200 Ross Avenue - Suite 2200
Dallas, TX 75201-6776
Contact Persons:
John McElhaney (214) 740-8458
Peter Flynn (214) 740-8654
Morris Harrell (214) 740-8404
Thompson & Knight, P.C.
1700 Pacific Avenue - Suite 3300
Dallas, TX 75201
Contact Person:
Schuyler B. Marshall (214) 969-1246
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, TX 75201-2916
Contact Person:
Ronald L. Palmer (214) 953-6500
Haynes & Boone, L.L.P.
3100 Nations Bank Plaza
901 Main Street
Dallas, TX 75202-3789
Contact Persons:
Michael Boone, George Bramblett or
Noel Hensley (214) 651-5000
Houston
- -------
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Pennzoil Place - South Tower
711 Louisiana Street - Suite 1900
Houston, TX 77002
Contact Persons:
Charles Moore or
Paula Hinton (713) 220-5800
Fulbright & Jaworski, L.L.P.
1301 McKinney - Suite 5100
Houston, TX 77010
Contact Persons:
Richard Carrell or
Frank Jones (713) 651-5151
Vinson & Elkins 2500 First City Tower 1001 Fannin Houston, TX 77002-6760 Contact
Person:
David T. Hedges, Jr. (713) 758-2676
Baker & Botts, L.L.P.
910 Louisiana Street
Houston, TX 77002-4995
Contact Persons:
William C. Slusser or
Harold Metts (713) 229-1234
<PAGE>
ENDORSEMENT# 1
This endorsement, effective 12:01 AM July 08, 1996 forms a part of policy
number 483-54-02 issued to NORTH AMERICAN MORTGAGE COMPANY
by National Union Fire Insurance Company of Pittsburgh, Pa.
PROFESSIONAL ERRORS AND OMISSIONS WITH MANAGEMENT LIABILITY
In consideration of the premium charged, it is hereby understood and agreed
that the Insurer shall not be liable to make any payment for Loss in connection
with any claim or claims made against the Directors or Officers, alleging,
arising out of, based upon or attributable to the Company's, or an Insured's
performance of professional services for others for a fee, or any alleged act,
error or omission relating thereto, including but not limited to, services
rendered in the following areas: mortgage banker, mortgage broker, real estate
syndicate; or services rendered in the Company's Trust Department or as a
trustee or other fiduciary or agent for individuals, partnerships, corporations
or other governmental bodies; or any function similar to those mentioned above;
or any other professional services.
Provided, however, that the foregoing exclusion shall not be applicable to
any derivative or shareholder class action claims against Directors or Officers
alleging a failure to supervise those who performed or failed to perform such
professional services.
<PAGE>
ENDORSEMENT # 2
This endorsement, effective 12:01 AM July 08, 1996 forms a part of policy
number 483-54-02 issued to NORTH AMERICAN MORTGAGE COMPANY
by National Union Fire Insurance Company of Pittsburgh, Pa.
CALIFORNIA CANCELLATION/NONRENEWAL
ENDORSEMENT
Wherever used in this endorsement: 1) "we", "us", "our", and "Insurer" mean
the insurance company which issued this policy; and 2) "you", "your", "named
Insured", "First Named Insured", and "Insured" mean the Named Corporation, Named
Organization, Named Sponsor, Named Insured, or Insured stated in the
declarations page; and 3) "Other Insured(s)" means all other persons or entities
afforded coverage under the policy.
In consideration of the premium charged, it is hereby understood and agreed
that the cancellation clause is replaced with the following:
CANCELLATION
- ------------
The First Named Insured shown in the declarations may cancel the policy by
mailing or delivering to the Insurer advance written notice of cancellation.
If the policy has been in effect for more than sixty (60) days or if it is
a renewal, effective immediately, the Insurer may not cancel the policy unless
such cancellation is based on one or more of the following reasons:
1. Nonpayment of premium, including payment due on a prior policy issued by
the Insurer and due during the current policy term covering the same risks.
2. A judgment by a court or an administrative tribunal that the named
Insured has violated any law of this state of or of the United States having as
one of its necessary elements an act which materially increases any of the risks
insured against.
3. Discovery of fraud or material misrepresentation by either of the
following:
a. The Insured or Other Insured(s) or his or her representative in
obtaining the insurance; or
b. The named Insured or his or her representative in pursuing a claim
under the Policy.
4. Discovery of willful or grossly negligent acts or omissions, or of any
violations of state laws or regulations establishing safety standards, by the
named Insured or Other Insured(s) or a representative of same, which materially
increase any of the risks insured against.
5. Failure by the named Insured or Other Insured(s) or a representative of
same to implement reasonable loss control requirements which were agreed to by
the Insured as a condition of policy issuance or which were conditions precedent
to the use by the Insurer of a particular rate or rating plan if the failure
materially increases any of the risks insured against.
6. A determination by the commissioner that the loss of, or changes in, an
insurer's reinsurance covering all or part of the risk would threaten the
financial integrity or solvency of the Insurer.
7. A determination by the commissioner that a continuation of the policy
coverage could place the Insurer in violation of the laws of this state or the
state of its domicile or that the continuation of coverage would threaten the
solvency of the Insurer.
8. A change by the Named Insured or Other Insured(s) or a representative of
same in the activities or property of the commercial or industrial enterprise
which results in a material added risk, a materially increased risk or a
materially changed risk, unless the added, increased, or changed risk is
included in the policy.
Notice of cancellation shall be delivered or mailed to the producer of
record and the named Insured at least thirty (30) days prior to the effective
date of cancellation. Where cancellation is for nonpayment of premium or fraud,
notice shall be given no less than ten (10) days prior to the effective date of
cancellation.
NONRENEWAL
- ----------
If the Insurer decides not to renew the policy, the Insurer shall mail or
deliver to the producer of record and the named Insured notice of nonrenewal at
least sixty (60) days but no more than 120 days prior to the end of the policy
period. The notice shall contain the reason for nonrenewal of the policy.
RENEWAL
If a policy has been in effect for more than sixty (60) days or if the
policy is a renewal, effective immediately no increase in premium, reduction in
limits, or change in the conditions of coverage shall be effective during the
policy period unless based upon one of the following reasons:
1. Discovery of willful or grossly negligent acts or omissions, or of any
violations of state laws or regulations establishing safety standards by the
named Insured or Other Insured(s) which materially increase any of the risks or
hazards insured against.
2. Failure by the named Insured or Other Insured(s) to implement reasonable
loss control requirements which were agreed to by the Insured as a condition of
policy issuance or which were conditions precedent to the use by the Insurer of
a particular rate or rating plan, if the failure materially increases any of the
risks insured against.
3. A determination by the commissioner that loss of or changes in an
Insurer's reinsurance covering all or part of the risk covered by the policy
would threaten the financial integrity or solvency of the Insurer unless the
change in the terms or conditions or rate upon which the premium is based is
permitted.
4. A change by the named Insured or Other Insured(s) in the activities or
property of the commercial or industrial enterprise which results in a
materially added risk, a materially increased risk, or materially changed risk,
unless the added, increased, or changed risk is included in the policy.
Written notice shall be mailed or delivered to the named Insured and the
producer of record at least thirty (30) days prior to the effective date of any
increase, reduction or change.
All other terms, conditions and exclusions of the policy remain the same.
<PAGE>
ENDORSEMENT # 3
This endorsement, effective 12:01 AM July 08, 1996 forms a part of policy
number 483-54-02 issued to NORTH AMERICAN MORTGAGE COMPANY
by National Union Fire Insurance Company of Pittsburgh, Pa.
OUTSIDE ENTITY ENDORSEMENT
(2x)
In consideration of the premium charged, it is hereby understood and agreed
that the following entities shall be deemed an "Outside Entity", but only as
respects the Outside Entity's respective Continuity Date below:
OUTSIDE ENTITY CONTINUITY DATE
1) A not-for-profit organization under section
501(c) (3) of the Internal Revenue Code of 1986 July 08, 1996
(as amended).
ALL OTHER TERMS, CONDITIONS AND EXCLUSIONS REMAIN UNCHANGED
<PAGE>
ENDORSEMENT# 4
This endorsement, effective 12:01 AM July 08, 1996 forms a part of policy
number 483-54-02 issued to NORTH AMERICAN MORTGAGE COMPANY
by National Union Fire Insurance Company of Pittsburgh, Pa.
NUCLEAR ENERGY LIABILITY EXCLUSIONS ENDORSEMENT
(BROAD FORM)
In consideration of the premium charged, it is hereby understood and agreed
that the Insurer shall not be liable to make any payment for Loss in connection
with any Claim made against any Insured(s):
A. alleging, arising out of, based upon, attributable to, or in any way
involving, directly or indirectly the hazardous properties of nuclear material,
including but not limited to:
(1) nuclear material located at any nuclear facility owned by, or
operated by or on behalf of, the Company, or discharged or dispersed therefrom;
or
(2) nuclear material contained in spent fuel or waste which was or is
at any time possessed, handled, used, processed, stored, transported or disposed
of by or on behalf of the Company; or
(3) the furnishing by an Insured or the Company of services, materials,
parts or equipment in connection with the planning, construction, maintenance,
operation or use of any nuclear facility; or
(4) claims for damages to the Company or its shareholders which
alleges, arises from, is based upon, is attributed to or in any way involves,
directly or indirectly, the hazardous properties of nuclear material.
B. (1) which is insured under a nuclear energy liability policy issued by
Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability
Underwriters, or Nuclear Insurance Association of Canada, or would be insured
under any such policy but for its termination or exhaustion of its Limit of
Liability; or,
(2) with respect to which (a) any person or organization is required to
maintain financial protection pursuant to the Atomic Energy Act of 1954, or any
law amendatory thereof, or (b) the Insured is, or had this policy not been
issued would be entitled to indemnity from the United States of America, or any
agency thereof, under any agreement entered into the United States of America,
or any agency thereof, with any person or organization.
As used in this endorsement:
"hazardous properties" include radioactive, toxic or explosive properties;
"nuclear material" means source material, special nuclear material or byproduct
material;
"source material", "special nuclear material", and "byproduct material" have the
meanings given them in the Atomic Energy Act of 1954 or in any law amendatory
thereof;
"spent fuel" means any fuel element or fuel component, solid or liquid, which
has been used or exposed to radiation in a nuclear reactor;
" waste" means any waste material (1) containing byproduct material and (2)
resulting from the operation by any person or organization of any nuclear
facility included within the definition of nuclear facility under paragraph (a)
or (b) thereof;
"nuclear facility" means --
(a) any nuclear reactor;
(b) any equipment or device designed or used for (1) separating the isotopes of
uranium or plutonium, (2) processing or utilizing spent fuel, or (3) handling,
processing or packaging waste;
(c) any equipment or device used for the processing, fabricating or alloying of
special nuclear material if at any time the total amount of such material in the
custody of the insured at the premises where such equipment or device is located
consists of or contains more than 25 grams of plutonium or uranium 233 or any
combination thereof, or more than 250 grams of uranium 235;
(d) any structure, basin, excavation, premises or place prepared or used for the
storage or disposal of waste, and includes the site on which any of the
foregoing is located, all operations conducted on such site and all premises
used for such operations;
"nuclear reactor" means any apparatus designed or used to sustain nuclear
fission in a self-supporting chain reaction or to contain a critical mass of
fissionable material.
All other terms, conditions and exclusions remain unchanged.
<PAGE>
ENDORSEMENT # 5
This endorsement, effective 12:01 AM July 08, 1996 forms a part of policy
number 483-54-02 issued to NORTH AMERICAN MORTGAGE COMPANY
by National Union Fire Insurance Company of Pittsburgh, Pa.
PRIOR ACTS EXCLUSION
In consideration of the premium charged, it is hereby understood and agreed
that the Insurer shall not be liable to make any payment for Loss arising from a
Claim alleging a Wrongful Act which occurred prior to December 22, 1991. This
policy only provides coverage for Loss arising from a Claim alleging a Wrongful
Act occurring on or after December 22, 1991 and prior to the end of the Policy
Period and otherwise covered by this policy. Loss(es) arising out of the same or
related Wrongful Act(s) shall be deemed to arise from the first such same or
related Wrongful Act.
ALL OTHER TERMS, CONDITIONS AND EXCLUSIONS REMAIN UNCHANGED.
<PAGE>
ENDORSEMENT# 6
This endorsement, effective 12:01 AM July 08, 1996 forms a part of policy
number 483-54-02 issued to NORTH AMERICAN MORTGAGE COMPANY
by National Union Fire Insurance Company of Pittsburgh, Pa.
SUBSIDIARY
In consideration of the premium charged, it is hereby understood and agreed
that definition (f), "Subsidiary", is deleted in its entirety and replaced by
the following:
(f) "Subsidiary" means a corporation of which the Named Corporation owns on
or before the inception date of the Policy Period more than fifty percent (50%)
of the issued and outstanding voting stock either directly or indirectly through
one or more of its Subsidiaries.
"Subsidiary" also automatically means any corporation with assets less than
$150,000,000 which becomes a Subsidiary during the Policy Period and for which
the Named Corporation provides the Insurer with full particulars of the new
Subsidiary before the end of the Policy Period.
"Subsidiary" also means any corporation with assets of $150,000,000 or more
which becomes a Subsidiary, during the Policy Period, but only upon the
condition that within ninety (90) days of its becoming a Subsidiary the Named
Corporation shall have provided the Insurer with full particulars of the new
Subsidiary and agreed to any additional premium and/or amendment of the
provisions of this policy required by the Insurer relating to such new
Subsidiary. Further, coverage as shall be afforded to the new Subsidiary is
conditioned upon the Named Corporation paying when due any additional premium
required by the Insurer relating to such new Subsidiary.
A corporation becomes a Subsidiary when the Named Corporation owns more
than fifty percent (50%) of the issued and outstanding voting stock either
directly or indirectly through one or more of its Subsidiaries.
All other terms and conditions remain unchanged.
<PAGE>
ENDORSEMENT # 7
This rider, effective 12:01 AM, July 8, 1996 forms a part of policy number
483-54-02 issued to NORTH AMERICAN MORTGAGE COMPANY
by National Union Fire Insurance Company of Pittsburgh, Pa.
SECURITIES PLUS
In consideration of the premium charged, it is hereby understood and agreed
that the policy is amended as follows:
1. Definition (a), "Claim", is deleted in its entirety and replaced by the
following:
(a) "Claim" means:
(1) a written demand for monetary or non-monetary relief; or
(2) a civil, criminal, administrative or arbitration proceeding for
monetary or non-monetary relief which is commenced by:
(i) service of a complaint or similar pleading; or
(ii) return of an indictment (in the case of a criminal
proceeding); or
iii) receipt or filing of a notice of charges.
The term "Claim" shall include a Securities Claim; provided,
however, that with respect to Coverage B(i) only, Claim or Securities Claim
shall not mean an administrative proceeding against the Company.
2. Definition (f), "Listed Event", is deleted in its entirety.
3. Definition (k), "Securities Claim", is deleted in its entirety and
replaced by the following:
(k) "Securities Claim" means a Claim (including a civil lawsuit or
criminal proceeding brought by the Securities & Exchange Commission) made
against an Insured and brought anywhere in the world alleging a violation of any
law, regulation or rule, whether statutory or common law, which is:
<PAGE>
ENDORSEMENT #7 (continued)
This rider, effective 12:01 AM, July 8, 1996 forms a part of policy number
483-54-02 issued to NORTH AMERICAN MORTGAGE COMPANY
by National Union Fire Insurance Company of Pittsburgh, Pa.
(1) brought by any person or entity alleging, arising out of, based upon or
attributable to, in part or in whole, the purchase or sale, or offer or
solicitation of an offer to purchase or sell, any securities of the Company, or
(2) brought by a securities holder of the Company, whether directly, by
class action, or derivatively on the behalf of the Company, or otherwise,
alleging any Wrongful Act of an Insured.
4. With respects to Securities Claims only, Definition (e), "Director(s) or
Officer(s)" or "Insured(s)" is amended to add a new subparagraph (3) as follows:
(3) any past, present or future employee of the Company (other than one who
is already an Insured by virtue of subparagraph (1) of this definition (e))
whether such employee is full- time, part-time, seasonal, permanent or temporary
and shall include employees in a supervisory, managerial, co-worker or
subordinate position or otherwise.
5. Definition (g), "Loss", is amended by deleting the last two paragraphs
thereof and inserting the following in place thereof:
Further, with respect to Coverage B only, Loss shall not include damages,
judgments or settlements arising out of a Claim alleging that the Company paid
an inadequate price or consideration for the purchase of its own securities or
the securities of a Subsidiary.
Notwithstanding the foregoing, with respect to Coverage B(i) only and
subject to the other terms, conditions and exclusions of the policy, Loss shall
include punitive or exemplary damages (if insurable by law) imposed upon the
Company.
6. Exclusion (f) is deleted in its entirety.
<PAGE>
Endorsement #7 (continued)
This rider, effective 12:01 AM, July 8, 1996 forms a part of policy number
483-54-02 issued to NORTH AMERICAN MORTGAGE COMPANY
by National Union Fire Insurance Company of Pittsburgh, Pa.
7. Exclusion (i) is amended by adding the following at the end thereof:
Provided, further, that this exclusion shall not apply to any Claim brought
by or against an Insured as defined in Definition (e)(3).
8. Clause 6, Retention, is amended by deleting the last paragraph thereof
and inserting the following in place thereof:
Notwithstanding the foregoing, solely with respect to a Securities Claim
under this policy, the Retention shall only apply to Defense Costs; provided,
however, no Retention shall apply for a Securities Claim even as respects
Defense Costs, and therefore the Insurer shall reimburse such Defense Costs paid
by the Insured, in the event of:
(1) a determination of No Liability of all Insureds, or
(2) a dismissal or a stipulation to dismiss the Claim without prejudice
and without the payment of any consideration by any Insured;
provided, however, that in the case of (2) above, such reimbursement
shall occur 90 days after the date of dismissal or stipulation as long as the
Claim (or any other Claim which is subject to the same single retention by
virtue of Clause 6 is not brought) is not re-brought within that time, and
further subject to an undertaking by the Company in a form acceptable to the
Insurer that such reimbursement shall be paid back by the Company to the Insurer
in the event the Claim (or any other Claim which is subject to the same single
retention by virtue of Clause 6) is brought after such 90 day period and before
the expiration of the statute of limitations for such Claim.
9. Clause 8, Defense Costs, Settlements, Judgments (including the
advancement of Defense Costs) is amended by deleting the fourth paragraph
thereof.
<PAGE>
ENDORSEMENT # 7 (continued)
This rider, effective 12:01 AM, July 8, 1996 forms a part of policy number
483-54-02 issued to NORTH AMERICAN MORTGAGE COMPANY
by National Union Fire Insurance Company of Pittsburgh, Pa.
10. Clause 17, Arbitration, is deleted in its entirety and replaced by the
following:
17. ALTERNATIVE DISPUTE RESOLUTION PROCESS
It is hereby understood and agreed that all disputes or differences which
may arise under or in connection with this policy, whether arising before or
after termination of this policy, including any determination of the amount of
Loss, shall be subject to the alternative dispute resolution process ("ADR") set
forth in this clause.
Either the Insurer or the Insureds may elect the type of ADR discussed
below; provided, however, that the Insureds shall have the right to reject the
Insurer's choice of ADR at any time prior to its commencement, in which case the
Insureds' choice of ADR shall control.
The Insurer and Insureds agree that there shall be two choices of ADR:
(1) non-binding mediation administered by the American Arbitration
Association, in which the Insurer and Insureds shall try in good faith to settle
the dispute by mediation under or in accordance with its then prevailing
Commercial Mediation Rules; or
(2) arbitration submitted to the American Arbitration Association under or
in accordance with its then-prevailing Commercial Arbitration Rules, in which
the arbitration panel shall be composed of three disinterested individuals.
In either mediation or arbitration, the mediator(s) or arbitrators shall
have knowledge of the legal, corporate management, or insurance issues relevant
to the matters in dispute. The mediator(s) or arbitrators shall also give due
consideration to the general principles of the law of the state where the Named
Corporation is incorporated in the construction or interpretation of the
provisions of this policy; provided, however, that the terms, conditions,
provisions and exclusions of this policy are to be construed in an even-handed
fashion in the manner most consistent with the relevant terms, conditions,
provisions and exclusions of the policy.
<PAGE>
Endorsement #7 (continued)
This rider, effective 12:01 AM, July 8, 1996 forms a part of policy number
483-54-02 issued to NORTH AMERICAN MORTGAGE COMPANY
by National Union Fire Insurance Company of Pittsburgh, Pa.
In the event of arbitration, the decision of the arbitrators shall be final
and binding and provided to both parties, and the arbitrators' award shall not
include attorneys fees or other costs.
In the event of mediation, either party shall have the right to commence a
judicial proceeding; provided, however, that no such judicial proceeding shall
be commenced until the mediation shall have been terminated and at least 120
days shall have elapsed from the date of the demand for mediation.
In all events, each party shall share equally the expenses of the ADR.
The mediation or arbitration may be commenced in either New York, New York;
Atlanta, Georgia; Chicago, Illinois; Denver, Colorado; or in the state indicated
in Item 1 of the Declaration's page as the mailing address for the Named
Corporation. The Named Corporation shall act on behalf of all Insureds in
deciding to proceed with ADR under this clause.
ALL OTHER TERMS, CONDITIONS AND EXCLUSIONS REMAIN UNCHANGED.
<PAGE>
National Union
Fire Insurance Company
of Pittsburgh, PA.
70 Pine Street
New York, N.Y. 10270-0150
(Herein Called the Insurer)
DIRECTORS AND OFFICERS INSURANCE AND COMPANY REIMBURSEMENT RENEWAL
APPLICATION
IF A POLICY IS ISSUED, IT WILL BE ON A CLAIMS-MADE BASIS
NOTICE: THE POLICY PROVIDES THAT THE LIMIT OF LIABILITY AVAILABLE TO PAY
JUDGMENTS OR SETTLEMENTS SHALL BE REDUCED BY AMOUNTS INCURRED FOR LEGAL DEFENSE.
FURTHER NOTE THAT AMOUNTS INCURRED FOR LEGAL DEFENSE SHALL BE APPLIED AGAINST
THE RETENTION AMOUNT.
1. (a) Corporation Name: NORTH AMERICAN MORTGAGE COMPANY
(b) State of Incorporation: Delaware
2. Address: 3883 Airway Drive Santa Rosa, California 95403
3. (a) Amount of Insurance Presently Carried $ 10,000,000.00
Retention Presently Carried $ 250,000.00
(b) Amount of Insurance desired on renewal $_______________
Self-Insured Retention desired on renewal $______________
4. (a) Nature of Business Mortgage Banking
(b) Annual Sales $274,144,000*
(c) Net Worth $193,144,000*
(d) Total Assets $746,368,000*
5. Corporation has continually been operating since 1992**
*As of December 31, 1995
**See Attachment 5
<PAGE>
6. Attach copies of the following.
(a) Latest annual report See Attachment 6(a)
(b) Latest 10K report filed with SEC (if Company is publicly traded)
See Attachment 6(b)
(c) Latest Dun & Bradstreet report See Attachment 6(c)
(d) Latest interim financial statement available See Attachment 6(d)
(e) If there has been a change, copy (certified by Corporate Secretary) of
the indemnification provisions of the charter and the by-laws. Also
attach a copy of any corporate standard indemnification agreement.
None.
7. Stock ownership
(a) Total number of common shares outstanding 15,021,600 (approximately)*
(b) Total number of common stock shareholders 933*
(c) Total number of common shares owned by its Directors (direct and
beneficial) 434,822*
(d) Total number of common shares owned by its Officers (direct and
beneficial) who are not Directors 240,089*
See Attachment 7(d)
(e) In the event any shareholder owns 5 percent or more of the common shares
directly or beneficially, designate name and percentage of holdings.
See Attachment 7(e)
(f) Please designate if there are any other securities convertible to common
stock. If so, describe fully.
See Attachment 7(f)
8. Complete list of all Directors of parent company by name and affiliations
with other Corporations.
See Attachment 8
9. Complete list of all Officers of parent company by name and affiliations with
other Corporations.
See Attachment 9
10. (a) List of Subsidiaries
Business or Percentage Date Domestic
Name Type of Operation of Ownership Acquired or Foreign
---- ----------------- ------------ -------- ----------
See Attachment 10(a)
*As of March 15, 1996
<PAGE>
(b) Coverage to include all Subsidiaries? Yes X No If "Yes," Include
complete list of Directors and Officers of each Subsidiary. If "No",
Include complete list of Directors and Officers of each Subsidiary for
which coverage is requested.
See Attachment 10(b)
(a) Are any plans for merger, acquisition or consolidation being
considered? Yes No X
See Attachment 11(a)
(b) If so, have they been approved by the Board of Directors? Yes No
(c) If so, have they been submitted to the shareholders for approval?
Yes No
12. It is agreed that this renewal application is a supplement to the
application(s) which are part of the expiring policy, and that those
application(s) together with this renewal application, constitute the
complete application that shall be the basis of the contract and shall form
part of the policy should a policy be issued.
13. It is agreed that the Corporation will file with the Insurer, as soon as
they become available, a copy of each registration statement and annual or
Interim report which the Corporation may from time to time file with the
Securities and Exchange Commission.
THE UNDERSIGNED AUTHORIZED OFFICER OF THE APPLICANT DECLARES THAT THE STATEMENTS
SET FORTH HEREIN ARE TRUE. THE UNDERSIGNED AUTHORIZED OFFICER AGREES THAT IF THE
INFORMATION SUPPLIED ON THIS APPLICATION CHANGES BETWEEN THE DATE OF THIS
APPLICATION AND THE EFFECTIVE DATE OF THE INSURANCE, HE/SHE (UNDERSIGNED) WILL
IMMEDIATELY NOTIFY THE INSURER OF SUCH CHANGES, AND THE INSURER MAY WITHDRAW OR
MODIFY ANY OUTSTANDING QUOTATIONS AND/OR AUTHORIZATION OR AGREEMENT TO BIND THE
INSURANCE.
SIGNING OF THIS APPLICATION DOES NOT BIND THE APPLICANT NOR THE INSURER TO
COMPLETE THE INSURANCE, BUT IT IS AGREED THAT THIS FORM SHALL BE THE BASIS OF
THE CONTRACT SHOULD A POLICY BE ISSUED, AND IT WILL BE ATTACHED TO AND BECOME
PART OF THE POLICY.
ALL WRITTEN STATEMENTS AND MATERIALS FURNISHED TO THE INSURER IN CONJUNCTION
WITH THIS APPLICATION ARE HEREBY INCORPORATED BY REFERENCE INTO THIS APPLICATION
AND MADE A PART HEREOF.
NOTICE TO NEW YORK APPLICANTS: ANY PERSON WHO KNOWINGLY AND WITH INTENT TO
DEFRAUD ANY INSURANCE COMPANY OR OTHER PERSON FILES AN APPLICATION FOR INSURANCE
CONTAINING ANY FALSE INFORMATION, OR CONCEALS FOR THE PURPOSE OF MISLEADING
INFORMATION CONCERNING ANY FACT MATERIAL THERETO, COMMITS A FRAUDULENT INSURANCE
ACT, WHICH IS A CRIME.
Signed: /s/Terrance G. Hodel
---------------------
Date: July 16, 1996
-------------
Title: President
---------
Must be Signed by Chairman of
the Board or President Corporation _______________________
(Corporate Seal)
Attest:
Broker:
Address:
IF AN ORDER IS RECEIVED, THE APPLICATION IS ATTACHED TO AND BECOMES PART OF THE
POLICY SO IT IS NECESSARY THAT ALL QUESTIONS BE ANSWERED IN DETAIL.
IMPORTANT - SEE FURTHER
PLEASE READ. THE FOLLOWING STATEMENT CAREFULLY AND SIGN BELOW WHERE INDICATED.
IF A POLICY IS ISSUED, THIS SIGNED STATEMENT WILL BE ATTACHED TO THE POLICY.
The insured hereby acknowledges that he/she/it is aware that the limit of
liability contained in this policy shall be reduced, and may be completely
exhausted, by the costs of legal defense and, in such event, the Insurer shall
be liable for the costs of legal defense or for the amount of any judgment or
settlement to the extent that such exceeds the limit of liability of this
policy.
The insured hereby further acknowledges that he/she/it is aware that legal
defense costs that are incurred shall be applied against the retention amount.
Signed: /s/Terrance G. Hodel
---------------------
Date: July 16, 1996
-------------
Title: President
---------
Must be Signed by Chairman of
the Board or President
- --------------------------------------------------------------------------------
Exhibit 10.47
Chubb Group of Insurance Companies DECLARATIONS
DIRECTORS AND OFFICERS LIABILITY
AND REIMBURSEMENT EXCESS POLICY
15 Mountain View Road, Warren, New Jersey 07059
- --------------------------------------------------------------------------------
Item 1. Parent Corporation: Policy Number 7022-61-40(C)
North American Mortgage Company
Item 2. Principal Address: FEDERAL INSURANCE COMPANY
Insurance Risk Management
P.O. Box 808005 Incorporated under the laws of Indiana,
Petaluma, CA 94975-8005 a stock insurance company, herein
called the Company
- --------------------------------------------------------------------------------
Item 3. Limit of Liability:
Each Policy Year $ See Endorsement No. 1
Item 4. Underlying Policy(ies): National Union Fire Insurance Company of
(A) Primary Policy: Pittsburgh, PA
Policy No. 483-54-02
Limit of Liability: $10,000,000 excess
deductible
(B) Other Policy(ies): None
Item 5. Policy Period: From July 8, 1996
To July 8, 1997
Item 6. Endorsement(s) Effective At Inception: 1 - 5
Item 7. Termination of Prior Policy(ies): None
IN WITNESS WHEREOF, the Company issuing this policy has caused this policy to be
signed by its Authorized Officers, but it shall not be valid unless also signed
by a duly authorized representative of the Company.
FEDERAL INSURANCE COMPANY
/s/Henry Gulich /s/Dean O'Hare
- --------------- --------------
Secretary President
/s/Marc Beaulieu
-------------------------
Authorized Representative
October 8, 1996
---------------
Date
<PAGE>
DIRECTORS AND OFFICERS LIABILITY AND REIMBURSEMENT EXCESS POLICY
In consideration of payment of required premiums and subject to the
Declarations made a part hereof and the limitations, conditions, provisions and
other terms of this policy, the Company agrees with the Insureds as follows:
INSURING CLAUSE
The Company shall provide the Insureds with insurance during the Policy
Period excess of the Underlying Insurance. Coverage hereunder shall attach only
after all such Underlying Insurance has been exhausted and shall then apply in
conformance with the terms, conditions and endorsements of the Primary Policy
except as specifically set forth in the terms, and conditions and endorsements
of this policy.
MAINTENANCE OF UNDERLYING INSURANCE
All of the underlying Policy(ies) scheduled in Item 4 of the Declarations
shall be maintained during the Policy Period in full effect and affording
coverage at least as broad as the Primary Policy, except for any reduction of
the aggregate limit(s) of liability available under the Underlying Insurance
solely by reason of payment of losses thereunder. Failure to comply with the
foregoing shall not invalidate this policy but the Company shall not be liable
to a greater extent than if this condition had been complied with.
In the event of any actual or alleged (a) failure by the Insureds to give
notice or to exercise any extensions under any Underlying Insurance or (b)
misrepresentation or breach of warranties by any of the Insureds with respect to
any Underlying Insurance, the Company shall not be liable hereunder to a greater
extent than it would have been in the absence of such actual or alleged failure,
misrepresentation or breach.
DEPLETION OF UNDERLYING LIMIT(S)
In the event of the depletion of the limit(s) of liability of the
Underlying Insurance solely as the result of payment of losses thereunder, this
policy shall, subject to the Company's limit of liability and to the other terms
of the policy, continue to apply for subsequent losses as excess insurance over
the amount of insurance remaining under such Underlying Insurance. In the event
of the exhaustion of all of the limit(s) of liability of such Underlying
Insurance solely as a result of payment of losses thereunder, the remaining
limits available under this policy shall, subject to the Company's limit of
liability and to the other terms of this policy, continue for subsequent losses
as primary insurance and any retention specified in the Primary Policy shall be
imposed under this policy; otherwise no retention shall be imposed under this
policy.
LIMIT OF LIABILITY
The amount set forth in Item 3 of the Declarations is the limit of
liability of the Company and shall be the maximum liability of the Company in
each Policy Year.
CLAIM PARTICIPATION
The Company may, at its sole discretion, elect to participate in the
investigation, settlement or defense of any claim against any of the Insureds
for matters covered by this policy even if the Underlying Insurance has not been
exhausted.
SUBROGATION - RECOVERIES
In the event of any payment under this policy, the Company shall be
subrogated to all the Insureds' rights of recovery against any person or
organization, as stated in the Primary Policy, and the Insureds shall execute
and deliver instruments and papers and do whatever else is necessary to secure
such rights.
Any amounts recovered after payment of loss hereunder shall be apportioned
in the inverse order of payment to the extent of actual payment. The expenses of
all such recovery proceedings shall be apportioned in the ratio of respective
recoveries.
NOTICE
The Company shall be given notice in writing as soon as is practicable (a)
in the event of the cancellation of any Underlying Insurance and (b) of any
notice given or additional or return premiums charged or paid in connection with
any Underlying Insurance.
Notice of any claim shall be given in writing to the Company at 15 Mountain
View Road, Warren, New Jersey 07060.
COMPANY AUTHORIZATION CLAUSE
By acceptance of this policy, the Parent Corporation named in Item 1 of the
Declarations agrees to act on behalf of all Insureds with respect to the giving
and receiving of notice of claim or cancellations, the payment of premiums and
the receiving of any return premiums that may become due under this policy; and
the Insureds agree that the Parent Corporation shall act on their behalf.
ALTERATION
No change in or modification of this policy shall be effective except when
made by written endorsement signed by an authorized employee of Chubb & Son,
Inc.
POLICY TERMINATION
This policy may be canceled by the Parent Corporation at any time by
written notice or by surrender of this policy to the Company. This policy may
also be canceled by or on behalf of the Company by delivery to the Parent
Corporation or by mailing to the Parent Corporation, by registered, certified or
other first class mail, at the address shown in Item 2 of the Declarations,
written notice stating when, not less than thirty days thereafter, the
cancellation shall become effective. The mailing of such notice as aforesaid
shall be sufficient proof of notice and this policy shall terminate at the date
and hour specified in such notice.
If the period of limitation relating to the giving of notice is prohibited
or made void by any law controlling the construction thereof, such period shall
be deemed to be amended so as to be equal to the minimum period of limitation
permitted by such law.
The Company shall refund the unearned premium computed at customary short
rates if the policy is terminated in its entirety by the Parent Corporation.
Under any other circumstances the refund shall be computed pro rata.
TERMINATION OF PRIMARY POLICY
This policy shall terminate immediately upon the termination of the Primary
Policy, whether by the Insureds or the primary insurer. Notice of cancellation
or non-renewal of the Primary Policy duly given by the primary insurer shall
serve as notice of the cancellation or non-renewal of this policy by the
Company.
TERMINATION OF PRIOR POLICY(IES)
The taking effect of this policy shall terminate, if not already
terminated, the policy(ies) specified in Item 7 of the Declarations.
POLICY DEFINITIONS
Insureds means those persons or organizations insured under the Primary
Policy.
Primary Policy means the policy scheduled in Item 4 (A) of the Declarations or
any policy of the same insurer replacing or renewing such policy.
Policy Year means the one year period between the anniversaries of the Primary
Policy, provided that: (1) the first Policy Year of this policy shall be the
period between the inception of this policy and the next subsequent anniversary
of the Primary Policy, and (2) the last Policy Year of this policy shall be the
period between the termination of this policy and the anniversary of the Primary
Policy immediately preceding such termination. If any discovery period extension
is exercised such extension shall be treated as set forth in the Primary Policy.
Underlying Insurance means all those policies scheduled in Item 4 of the
Declarations and any policies replacing them.
<PAGE>
Chubb Group of Insurance Companies
RENEWAL APPLICATION FORM FOR
EXECUTIVE LIABILITY INSURANCE
NON BANK FINANCIAL INSTITUTIONS
15 Mountain View Road, P.O. Box 1615 AND SUBSIDIARIES
Warren, New Jersey 07059
- --------------------------------------------------------------------------------
UNDERWRITTEN IN FEDERAL INSURANCE COMPANY, TEXAS PACIFIC INDEMNITY COMPANY, OR
NORTHWESTERN PACIFIC INDEMNITY COMPANY
(If coverage is desired for more than one Company, a separate Application must
be completed for each.)
NORTH AMERICAN MORTGAGE COMPANY
- -------------------------------
Company Name
3883 Airway Drive
- -----------------
Street Address
Santa Rosa California 95403 (707) 546-3310
- ---------- ---------- ----- --------------
City State Zip Code Telephone
1. Officer designated, as agent of the Company and of all insured Directors
and Officers, to receive any and all notices from the Insurer or their
authorized representative(s) concerning this insurance:
Martin S. Hughes Executive Vice President
---------------- ------------------------
Name of Officer Title of Officer
2. Type of ownership: X Stock _ Mutual. If stock, complete the following
information regarding common stock:
a. 933* Total number of shareholders
b. 15,021,600 (approx.)* Total number of shares outstanding
c. 674,266* Total number of shares owned directly or
beneficially by Directors and Officers
See attachment 2.c.
*As of March 15, 1996
d. Give names and percent owned of any shareholders holding directly or
beneficially 10% or more of the common stock (if none, so indicate).
See attachment 2.d.
e. During the policy period has there been a change in controlling
ownership (10% or more)? __ Yes __ No. If yes, provide details.
See attachment 2.e.
f. Are there any negotiations now pending for the sale of stock in this
Company in excess of 10% of the total stock outstanding __ Yes X No. If
yes, provide details.
g. Are there any other securities which are convertible to common stock?
X Yes __ No. If yes, provide details.
See attachment 2.g.
3. a. Have any plans for merger, acquisition, consolidation or divestiture
been currently approved by the Board of Directors? __ Yes X No.
b. If yes, have such plans been submitted to the shareholders for
approval? __ Yes __ No. Kindly provide details and current status of
such plans (attach separate sheet if necessary).
c. Does the Company or any Subsidiary anticipate any new public offering
of securities or registration of securities under the Securities Act of
1933 or any other similar Federal, State or Municipal Statute or
qualification of securities under Regulation A or any other similar
Federal, State or Municipal Regulation within the next year __ Yes X
No. If yes, provide details and submit prospectus.
4. Has any regulatory agency denied or indicated that they would deny any
contemplated merger, acquisition or divestment in the last 5 years.
__ Yes X No. If yes, provide details.
5. Provide the following information on Page 6 for all Subsidiaries
(including Subsidiaries of Subsidiaries). If none, please indicate.
a. Name h. Total revenues most
b. Date created or acquired i. Total assets recent
c. State of Incorporation j. Net income year end
d. Percent of ownership figures
e. Nature of business
f. Domestic or foreign
g. Name of parent institution
It is agreed that coverage is not provided for Subsidiaries unless listed
above or by an attachment herein providing similar information.
k. Is coverage to include all listed Subsidiaries? X Yes __ No. If no,
specify which Subsidiaries are not to be included.
6. Provide the following information for the Company and Subsidiaries:
a. _________ Number of Directors
b. _________ Number of Officers See attachment 6.
7. Is the Company or any of its Subsidiaries currently offering or planning
to offer any of the following services?
a. Actuarial Services __ Yes X No
b. Appraisal Services X Yes __ No
c. Data Processing Services __ Yes __ No
d. Discount Brokerage Services __ Yes X No
e. Insurance Agent/Agency X Yes __ No
f. Investment Advisor/Counselor __ Yes X No
g. Real Estate Agent/Agency __ Yes X No See attachment
h. Real Estate Investment Trust
Advisory Services __ Yes X No
i. Security Broker/Dealer __ Yes X No
j. Travel Agent/Agency __ Yes X No
k. Underwriting of Securities __ Yes X No
8. Attach a list of names and principal business affiliations, including
directorships of financial institutions, for all Directors and Senior
Officers proposed for this insurance.
See Attachment 8.
It is agreed that coverage is not provided under this policy for outside
positions listed in conjunction with the above question.
9. a. Have there been any changes in senior management during the policy
period? X Yes __ No. If yes, provide details.
See Attachment 9.a.
b. In the last 5 years has the Company changed the Certified Public
Accounting firm that prepares its independent audited financial
statements? Yes X No. If yes, provide the time of the change and the
reasons for making the change.
10. Have there been during the policy period, or are there now pending, any
suits, claims or proceedings against this Company or Subsidiaries?
X Yes __ No. If yes, provide details.
See Attachment 10.
11. a. Are there any outstanding loans to any Director or Officer of the
Company or of any Subsidiary? X Yes __ No.
See attachment 11.a.
b. Are there any outstanding loans to any corporations or partnerships in
which a Director or Officer of the Company or its Subsidiaries owns or
controls more than 10% interest? __ Yes X No.
If Questions 11(a) or 11(b) is answered yes, please provide separate
schedule of such loans with the following information:
i. name of borrower
ii. type of loan
iii. whether secured or unsecured
iv. outstanding balance
v. final due date
vi. amount past due
12. Provide the following information: See Attachment 12.
a. Blanket Bond Limit: Deductible:
Expiration Date: Insurer:
b. Trust Department E&O Limit: Retention:
(Surcharge Liability) Expiration Date: Insurer:
c. General Liability Insurance Limit: Deductible:
Expiration Date: Insurer:
It is represented and agreed that above coverages in current amounts will
be maintained by the Company and its Subsidiaries during the policy period
of the proposed insurance and that the Insurer is relying upon such
representation when issuing a policy.
13. During the policy period has this Company or any Subsidiary made any claim
in excess of $25,000 under its Blanket Bond? __ Yes X No.
If yes, provide details.
14. How often are Board of Directors meetings held?
Generally, once each quarter
15. List the Board of Directors committees which are in existence and indicate
the frequency of meetings.
a. Compensation Comm., c. Nominating Comm., has not yet met,
meets as needed will meet as needed
b. Audit Comm., meets as needed d.
16. Indicate the areas in which formal written policies and/or procedures have
been implemented by the Board of Directors to address the following:
___ Asset-Liability Management Policy
___ Audit Policy
___ Conflicts of Interest Policy
___ Duties of Directors and Officers
___ Investment Policy
___ Loan Policy
___ Merger and Tender Offers
___ Operation Procedures
___ Personnel Policy
___ Risk Management Policy
___ Selection Process for New Directors
Except as disclosed on Attachment 16, the Board of Directors has not
implemented formal written policies and/or procedures to address any of
the above.
17. How often does the Board of Directors review the following:
Financial Statements of the
Institution Generally, once each quarter
Investment Activities Generally, once each quarter
(Purchase, Sales, Gains & Losses)
Insurance Coverages Annually
Changes in Lending Policy Generally, once each quarter
Loan Delinquencies Each meeting, to extent significant
Charged Off Loans Each meeting, to extent significant
Significant Overdrafts Not applicable
Threatened or Actual Litigation Generally, once each quarter
18. One copy of each of the following documents is to be attached and made a
part of this Application:
a. latest Annual Audited Financial Statement;
b. latest C.P.A. Management Letters and Response;
c. latest Annual Report to Stockholders;
d. all subsequent Quarterly Reports to Stockholders;
e. notice to Stockholders and Proxy Statement for both the last and next
scheduled meetings;
f. most recent S.E.C. Form 10-K filing;
g. all subsequent 10-Q and 8-K filings; and
h. all Registration Statements of securities made in the last year.
See Attachment 18.
The undersigned persons declare that to the best of their knowledge the
statements set forth herein are true and correct and that reasonable efforts
have been made to obtain sufficient information from each and every Director or
Officer proposed for this insurance to facilitate the proper and accurate
completion of this Application. The undersigned further agree that, if between
the date of this Application and the effective date of this Policy, (1) any
material change in the condition of the applicant is discovered or (2) there is
any material changes in the answers to the questions contained herein, either of
which would render this Application inaccurate or incomplete, notice of such
change will be reported in writing to the Insurer immediately and if necessary
any outstanding quotation may be modified or withdrawn.
The signing of this Application does not bind the undersigned to purchase
the insurance, but it is agreed by the Company and all persons proposed for this
insurance that the particulars and statements contained in this Renewal
Application Form and materials submitted with this Renewal Application Form
(which shall be retained on file by the Insurer and shall be deemed attached to
the Policy, if insurance is provided, as if physically attached thereto) are 1)
supplemental to Application Form(s) for all Policies of which this Insurance
would be a renewal and 2) true and correct and will be the basis of the Policy,
and 3) considered as incorporated in and constituting a part of the Policy. It
is further agreed by the Company and all persons proposed for this insurance
that such particulars and statements are material to the decision to provide
this insurance and that any Policy will be issued in reliance upon the truth of
such particulars and statements. All such particulars and statements shall be
deemed to be made by each and every one of the persons proposed for this
insurance, provided that, except for any misstatements omissions of which the
signers of this Renewal Application Form are aware, any misstatement or omission
in this Renewal Application Form, or the attachments and materials submitted
with it, concerning any matter which any person proposed for this insurance has
reason to suppose might afford grounds for a future claim against him shall not
be imputed, for purposes of any rescission of the Policy, to any other persons
proposed for this insurance who are not aware of the omission or the falsity of
the statement.
False Information
Any person who, knowingly and with intent to defraud any insurance company
or other person, files an Application for insurance containing any false
information, or conceals for the purpose of misleading, information concerning
any fact material thereto, commits a fraudulent insurance act, which is a crime.
NORTH AMERICAN MORTGAGE COMPANY
-------------------------------
Company
/s/Terrance G. Hodel /s/John F. Farrell, Jr.
- ------------------------------------ -----------------------------------------
Signature of Chief Executive Officer Signature of Chairman, Board of Directors
or other Senior Officer if the Chief John F. Farrell, Jr.
Executive Officer is also the Chairman of the Board and
Chairman, Board of Directors Chief Executive Officer
Terrance G. Hodel
President and Chief Operating Officer Date: July 10, 1996
A Policy cannot be issued unless the Application is properly signed and
dated by the Chief Executive Officer (or other Senior Officer if the Chief
Executive Officer is also the Chairman, Board of Directors) and the Chairman,
Board of Directors.
NOTE: This Application and all exhibits shall be treated in strictest
confidence.
<PAGE>
<TABLE>
SUBSIDIARY INFORMATION FORM
<CAPTION>
Financial Information for
Most Recent Year End
Date State Percent Domestic
Created or of of Nature of or Name of Parent Total Total Net
Name of SubsidiaryAcquired Incorp, Ownership Business Foreign Institution Revenues Assets Income
(in Millions)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fairfield Financial Not presently North American
Holdings, Inc. 7/15/92 Del 100% active D Mortgage Company See attachment 5
IC Capital Co., Inc7/15/96 Del 100% Not presently D North American 0 0 0
active Mortgage Company
IMCO Capital North American
Co., Inc. 7/15/92 Del 100% * D Mortgage Company 0 0 0
Sonoma Acts as trustee
Conveyancing under deeds North American
Company 7/15/96 Cal 100% of trust D Mortgage Company 0 0 0
North American
Mortgage Insurance Insurance Sonoma Conveyancing
Services 7/15/92 Cal 100% Agency D Company $3.38 $7.65 $1.11
Vintage Reinsurance Reinsurance of North American
Company 3/14/96 Vt 100% mortgage D Mortgage Company 0 $0.60 0**
insurance
This information is attached to and forms a part of the Application Form for
Executive Liability.
*Not presently active except for payments under Promissory Notes.
**Not in operation during 1995; Financial Information stated is for quarter
ended 3/31/96.
</TABLE>
<PAGE>
ENDORSEMENT
Insurer: FEDERAL INSURANCE COMPANY
Effective date of
this Endorsement: July 8, 1996
Endorsement No. 1
To be attached to and form part of
Policy No. 7022-61-40(C)
Issued to: North American Mortgage Company
- --------------------------------------------------------------------------------
AMENDED LIMIT OF LIABILITY
It is understood and agreed that Item 3. of the Declarations, Limit of Liability
shall read as follows:
"Item 3. Limit of Liability:
$10,000,000 Annual Aggregate each Policy Year excess of
$10,000,000 Annual Aggregate each Policy Year which in turn is
excess of the following retention:
RETENTION:
Company Reimbursement and Indemnifiable Loss: $250,000 for Loss
arising from claims alleging the same Wrongful Act or related
Wrongful Acts."
Nothing herein contained shall be held to vary, alter, waive, or extend the
provisions of the above mentioned Policy other than as above stated.
/s/Marc Beaulieu
-------------------------
By: AUTHORIZED REPRESENTATIVE
Date: October 8, 1996
<PAGE>
ENDORSEMENT
Insurer: FEDERAL INSURANCE COMPANY
Effective date of
this Endorsement: July 8, 1996
Endorsement No. 2
To be attached to and form part of
Policy No. 7022-61-40(C)
Issued to: North American Mortgage Company
- --------------------------------------------------------------------------------
RESTATEMENT OF INSURING CLAUSE
It is hereby understood and agreed that the Insuring Clause as set forth on Page
2 of 4 shall be deleted in its entirety and replaced with the following:
"INSURING CLAUSE
The company shall provide the Insureds with insurance during the Policy Period
excess of the Underlying Insurance. Coverage for any loss shall attach 1) only
after all Underlying Insurance carriers have duly admitted liability and shall
have paid the full amount of their respective liability, and 2) all Underlying
Insurance has been exhausted, and 3) shall then apply in conformance with the
terms, conditions, exclusions and endorsements of the Primary Policy, together
with all limitations, restrictions or exclusions contained in or added by
endorsement to any other Underlying Insurance, except as specifically set forth
in the terms and conditions and endorsements of this Policy. In no event shall
this Policy grant broader coverage than would be provided by any of the
exhausted Underlying Insurance."
Nothing herein contained shall be held to vary, alter, waive, or extend the
provisions of the above mentioned Policy other than as above stated.
/s/Marc Beaulieu
-------------------------
By: AUTHORIZED REPRESENTATIVE
Date: October 8, 1996
<PAGE>
ENDORSEMENT
Insurer: FEDERAL INSURANCE COMPANY
Effective date of
this Endorsement: July 8, 1996
Endorsement No. 3
To be attached to and form part of
Policy No. 7022-61-40(C)
Issued to: North American Mortgage Company
- --------------------------------------------------------------------------------
PRIOR & PENDING LITIGATION - EXCESS
It is understood and agreed that the Company shall not be liable to make any
payment for Loss in connection with any Claim based upon, arising out of,
relating to, in consequence of, or in any way involving:
(1) based upon, arising from, or in consequence of any demand, suit or other
proceeding pending, or order, decree or judgment entered against any
Insureds on or prior to July 8, 1993 or the same or any substantially
similar fact, circumstance or situation underlying or alleged therein;
(2) any subsequent litigation arising from, or based on substantially the same
matters as alleged in the prior or pending litigation included in (1)
above; or
(3) any Wrongful Act of the Insureds which gave rise to the prior or pending
litigation included in (1) above.
Nothing herein contained shall be held to vary, alter, waive, or extend the
provisions of the above mentioned Policy other than as above stated.
/s/Marc Beaulieu
-------------------------
By: AUTHORIZED REPRESENTATIVE
Date: October 8, 1996
<PAGE>
ENDORSEMENT
Insurer: FEDERAL INSURANCE COMPANY
Effective date of
this Endorsement: July 8, 1996
Endorsement No. 4
To be attached to and form part of
Policy No. 7022-61-40(C)
Issued to: North American Mortgage Company
- --------------------------------------------------------------------------------
It is understood and agreed that the Policy is amended by adding the following
SECTION:
DISCOVERY CLAUSE
If the Company shall cancel or refuse to renew this Policy the Parent
Corporation shall have the right, upon payment of an additional premium of 75%.
of the full annual premium, to a period of one year following the effective date
of such cancellation or non-renewal (herein referred to as the Discovery Period)
in which to give written notice to the Company of claims first made against the
Insureds during said one year period for any wrongful act occurring prior to the
end of the Policy Year and otherwise covered by this Policy. As used herein,
"full annual premium" means the premium level in effect immediately prior to the
end of the Policy Year.
The rights contained in this clause shall terminate, however, unless written
notice of such election together with the additional premium due is received by
the Company within ten (10) days of the effective date of cancellation or
non-renewal. The additional premium for the Discovery Period shall be fully
earned at the inception of the Discovery Period. The Discovery Period is not
cancelable. This clause and the rights contained herein shall not apply to any
cancellation resulting from non-payment of premium.
The offer by the Company of renewal terms, conditions, limits of liability
and/or premiums different from those of the expiring policy shall not constitute
refusal to renew.
Nothing herein contained shall be held to vary, alter, waive, or extend the
provisions of the above mentioned Policy other than as above stated.
/s/Marc Beaulieu
-------------------------
By: AUTHORIZED REPRESENTATIVE
Date: October 8, 1996
<PAGE>
ENDORSEMENT
Insurer: FEDERAL INSURANCE COMPANY
Effective date of
this Endorsement: July 8, 1996
Endorsement No. 5
To be attached to and form part of
Policy No. 7022-61-40(C)
Issued to: North American Mortgage Company
- --------------------------------------------------------------------------------
It is understood and agreed that:
1. The premium for the Policy Period July 8, 1996 to July 8, 1997 is:
Premium: $214,000
2. It is further understood and agreed that this premium is subject to
change during this period if amendments are made to this Policy at the
request of the Parent Corporation.
Nothing herein contained shall be held to vary, alter, waive, or extend the
provisions of the above mentioned Policy other than as above stated.
/s/Marc Beaulieu
-------------------------
By: AUTHORIZED REPRESENTATIVE
Date: October 8, 1996
<TABLE>
Exhibit 11
Computation of Earnings Per Share
Quarter Ended September 30, 1996
Primary Earnings Per Share
<CAPTION>
Quarterly Year-to-Date
Shares EPS Shares EPS
------ --- ------ ---
<S> <C> <C> <C> <C>
Average Shares Outstanding 13,962,394 $ 0.64 14,436,091 $ 1.74
CSE Incremental Shares 123,926 189,265
Total Average Shares
Outstanding 14,086,320 $ 0.63 14,625,356 $ 1.71
---------- ------ ---------- ------
Dilution 0.88% 1.29%
Net Income $ 8,925,000 $ 25,056,000
=========== ============
Fully Diluted Earnings Per Share
Quarterly Year-to-Date
Shares EPS Shares EPS
------ --- ------ ---
<S> <C> <C> <C> <C>
Average Shares Outstanding 13,962,394 $ 0.64 14,436,091 $ 1.74
CSE Incremental Shares 172,436 187,248
Total Average Shares
Outstanding 14,134,830 $ 0.63 14,623,339 $ 1.71
---------- ------ ---------- ------
Dilution 1.22% 1.28%
Net Income $ 8,925,000 $ 25,056,000
=========== ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets and Consolidated Statements of Operations found on
pages 2 through 5 of the Company's Form 10-Q for the year-to-date, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000882261
<NAME> Financial Data Schedule
<MULTIPLIER> 1,000
<CURRENCY> 0
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 18,123
<SECURITIES> 0
<RECEIVABLES> 77,215
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 37,909
<DEPRECIATION> 1,993
<TOTAL-ASSETS> 752,067
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 163
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 752,067
<SALES> 0
<TOTAL-REVENUES> 76,836
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,316
<INCOME-PRETAX> 14,875
<INCOME-TAX> 5,950
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,056
<EPS-PRIMARY> 1.74
<EPS-DILUTED> 0
</TABLE>
