<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant X
Filed by a party other than Registrant
Check the appropriate box:
Preliminary Proxy Statement
X Definitive-Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
FIRST MORTGAGE CORPORATION
(Name of Registrant as Specified in its Charter)
FIRST MORTGAGE CORPORATION
(Name of Person(s) Filing Proxy Statement
Payment of Filing Fee (Check the appropriate box):
$125 per Exchange Act Rules 0-11(c) (1) (ii), 14a-6(i), or 14a-6(i)(2)
$500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(I)(3)
Fee computed on table below per Exchange Act rules 14a-6(i)(4)and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
4) Proposed maximum aggregate value of transaction
*Set forth the amount on which the filing fee is calculated and state
how it was determined.
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and-identify the filing for which-the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of
its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
August 20, 2000
To Our Shareholders:
You are cordially invited to attend the annual meeting
of shareholders of First Mortgage Corporation on
September 20, 2000, beginning at 10:00 a.m., at the Shilo
Inn Hilltop Suites Hotel, 3101 Temple Street, Pomona,
California 91768.
Details of business to be conducted at the annual
meeting are provided in the enclosed Notice of Annual
Meeting of Shareholders and Proxy Statement. Also
enclosed for your information is a copy of our Annual
Report to Shareholders for fiscal year 2000.
We hope that you will attend the annual meeting. In
any event, please sign, date and return the enclosed form
of proxy in the accompanying envelope as promptly as
possible so that your shares will be voted at the meeting
in accordance with your instructions.
Very truly yours,
Clement Ziroli
Chairman of the Board
and Chief Executive Officer
<PAGE>
3230 Fallow Field Drive
Diamond Bar, CA 91765
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 20, 2000
To the Shareholders of First Mortgage Corporation:
The Annual Meeting of the Shareholders of First
Mortgage Corporation, a California corporation (the
"Company"), will be held on September 20, 2000, beginning
at 10:00 a.m., at the Shilo Inn Hilltop Suites Hotel,
3101 Temple Street, Pomona, California 91768 for the
following purposes:
1. To elect a Board of Directors of five members;
2. To approve the appointment of Ernst & Young LLP as
independent auditors of the Company for the fiscal
year ending March 31, 2001; and
3. To consider and transact such other business as may
properly come before the meeting and at any and all
adjournments thereof.
The Board of Directors has fixed the close of business on
August 10, 2000 as the record date for determining those
shareholders entitled to notice of, and to vote at, the
meeting and at any and all adjournments thereof.
By Order of the Board of Directors
Robyn S. Fredericks
Secretary
August 20, 2000
Diamond Bar, California
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN
PERSON. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE SIGN, DATE AND RETURN THE ENCLOSED FORM OF PROXY
IN THE ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE SO
THAT YOUR SHARES WILL BE VOTED AT THE MEETING IN
ACCORDANCE WITH YOUR INSTRUCTIONS.
<PAGE>
3230 Fallow Field Drive
Diamond Bar, CA 91765
_____________________________
PROXY STATEMENT
Annual Meeting of Shareholders
To Be Held September 20, 2000
This Proxy Statement and the accompanying form of
proxy are being mailed to shareholders on or about August
20, 2000 in connection with the solicitation by the Board
of Directors of First Mortgage Corporation, a California
corporation (the "Company"), of proxies for use at the
annual meeting of shareholders of the Company on
September 20, 2000, and at any and all adjournments
thereof, for the purposes set forth in the accompanying
Notice of Annual Meeting.
Although the principal solicitation of proxies is
being made through this Proxy Statement, proxies may also
be solicited personally, by telephone or by mail by
directors, officers or employees of the Company. Such
persons will not receive any additional compensation for
their solicitation services. The Company will pay the
entire expense of preparing, printing and mailing proxy
solicitation material on behalf of the Board of
Directors, including amounts paid in reimbursement to
banks, brokerage firms and others for their expenses in
forwarding soliciting material to beneficial owners of
shares of the Company's common stock, no par value
("Common Stock").
VOTING SECURITIES
The Board of Directors has fixed the close of business
on August 10, 2000 as the record date for determining
those shareholders entitled to notice of, and to vote at,
the annual meeting and at any and all adjournments
thereof. As of August 10, 2000, there were 5,250,697
shares of Common Stock issued and outstanding and
entitled to vote at the annual meeting. The Company has
no other voting securities outstanding. Each shareholder
of record is entitled to one vote per share owned on all
matters submitted to a vote of shareholders except that,
as described in more detail below, each shareholder is
entitled to cumulate his or her votes in electing
directors.
Shares represented by duly executed and dated proxies
in the accompanying form and received before the annual
meeting will be voted at the annual meeting. Where a
shareholder specifies a choice on the proxy with respect
to any matter to be acted upon, the shares will be voted
accordingly by the proxy holders named in the proxy.
Where no choice is specified, the shares represented by
the proxy will be voted (i) as described below with
respect to the election of directors, (ii) to approve the
appointment of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending March 31, 2001,
and (iii) in accordance with the best judgment of the
proxy holders with respect to any other business that
properly comes before the annual meeting.
<PAGE>
A shareholder has the power to revoke a proxy at any
time before it is exercised by filing with the Secretary
of the Company either an instrument revoking the proxy or
a duly executed proxy bearing a later date. A proxy may
also be revoked by a shareholder who is present at the
annual meeting and who expresses a desire to vote in
person.
The presence in person or by proxy of a majority of
the shares of Common Stock entitled to vote at the annual
meeting will constitute a quorum for the transaction of
business. Abstentions on any particular matter will be
counted for purposes of determining the presence of a
quorum. Abstentions will also be treated as shares that
are present and entitled to vote with respect to the
matter on which the abstentions are indicated but as
unvoted with respect to the matter. If a broker
indicates on the proxy that it does not have
discretionary authority to vote certain shares on a
particular matter, those shares will be counted for
purposes of determining the presence of a quorum.
However, the shares will not be treated as shares that
are present and entitled to vote with respect to the
matter as to which the broker indicates that it lacks
voting authority.
Assuming the presence of a quorum: (a) the five
persons receiving the highest number of affirmative votes
of the shares of Common Stock entitled to be voted on the
matter will be elected as directors of the Company; and
(b) approval of the appointment of Ernst & Young LLP
requires the affirmative vote of a majority of the shares
of Common Stock represented in person or by proxy at the
annual meeting and voting on the matter, provided that
such shares voting affirmatively must also constitute at
least a majority of the required quorum for the meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
Voting Procedures
Five directors will be elected at the annual meeting,
each to hold office until the next annual meeting of
shareholders and the election and qualification of a
successor or the director's earlier death, resignation or
removal.
Under California law, each shareholder who is entitled
to vote at the annual meeting has cumulative voting
rights in connection with the election of directors.
Under cumulative voting, a shareholder may cast a number
of votes equal to the number of shares of Common Stock
standing in such shareholder's name as of August 10,
2000, multiplied by the number of directors to be
elected. A shareholder exercising cumulative voting
rights is entitled to cast all such votes for a single
nominee for director or for any two or more nominees in
such proportion as the shareholder may decide. However,
under California law, a shareholder may not cumulate
votes for a candidate unless the candidate's name has
been placed in nomination prior to the voting and unless
the shareholder has given notice at the annual meeting
prior to the voting of the shareholder's intention to
cumulate votes. If any one shareholder has given such
notice, all shareholders are entitled to cumulate their
votes.
The Board of Directors recommends that shareholders
grant proxies to vote for all five of the nominees for
directors listed below. In order to permit the election
of all or as many as possible of the following nominees,
the Board of Directors also recommends that shareholders
do not cast their votes on a cumulative basis. Unless
marked otherwise, proxies will be voted by the proxy
holders in such a manner as to elect all or as many of
the following nominees as possible. Unless marked
otherwise,
<PAGE>
proxies will give the proxy holders discretionary
authority to cumulate votes if they so choose and to
allocate votes among the nominees in such manner as they
determine is necessary in order to elect all or as many
of such nominees as possible.
If any of the nominees listed below refuses or is
unable to serve as a director, the proxy holders will
vote for a substitute nominee or nominees recommended by
the Board of Directors. Each of the following nominees
has agreed to serve if elected, and the Board of
Directors has no reason to believe that any of such
nominees will be unwilling or unable to serve if elected
as a director.
Nominees to the Board of Directors
The following persons have been nominated for election
as directors:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Clement Ziroli 58 Chairman of the Board
and Chief Executive Officer
Bruce G. Norman 59 President, Chief Operating Officer
and Director
Pac W. Dong 50 Executive Vice President, Chief
Financial Officer, Controller
and Director
Harold Harrigian(1)(2) 65 Director
Robert E. Weiss(1)(2) 71 Director
<FN>
<F1>
(1) Member of the Audit Committee.
<F2>
(2) Member of the Compensation Committee.
</FN>
</TABLE>
Clement Ziroli has served as Chairman of the Board of
Directors of the Company and Chief Executive Officer
since 1975. He also served as its President from 1975 to
1995. Mr. Ziroli devotes approximately 90% of his
business time to the management of the Company. Since
1970, Mr. Ziroli has also served as the Chairman of the
Board of Directors, President and Chief Executive Officer
of Fin-West Group ("Fin-West"), which owns 91.5% of the
outstanding shares of the Company's Common Stock.
Bruce G. Norman has served as a director and Chief
Operating Officer of the Company since 1975. He also
held the position of Executive Vice President until
December 1995 when he was promoted to President of the
Company. Mr. Norman served as the President of the
California Mortgage Bankers Association (the "CMBA")
during 1998-1999, and previously served as the First and
Second Vice President of the CMBA during 1996-1997. He
served as its Secretary during 1990-91, and was a member
of its Board of Directors from 1990 to 2000. He is also
on the Residential Loan Production and Membership
Committees of the Mortgage Bankers Association of
America. Mr. Norman is a member of the Board of
Directors of Fin-West.
<PAGE>
Pac W. Dong has served as the Company's Chief
Financial Officer and Controller since 1976. He has
served as a director of the Company since June 1992. He
held the position of Senior Vice President until December
1995 when he was promoted to an Executive Vice President
of the Company. He also served on the Warehouse/Treasury
Committee of CMBA during 1994-1995.
Harold Harrigian has served as a director of the
Company and as a member of its Compensation and Audit
Committees since June 1992. Mr. Harrigian was a partner
and served as Director of the Corporate Finance
Department of the investment banking and securities firm
of Crowell, Weedon & Co. from 1984 to 1998, when he
retired from the firm. He served as a director of The
MacNeal-Schwendler Corporation from 1986 to June 1998.
He has served as a director of Cohu, Inc. since October
1998. Currently, he is a financial consultant.
Robert E. Weiss has served as a director of the
Company and as a member of its Compensation and Audit
Committees since June 1992. Mr. Weiss is an attorney and
has practiced with the firm of Robert E. Weiss
Incorporated since 1959.
Committees and Meetings of the Board of Directors
The business of the Company is managed by and under
the direction of the Board of Directors as provided by
the laws of California, the Company's state of
incorporation. During the fiscal year ended March 31,
2000, the Board of Directors met four times, and each
director attended all of the meetings of the Board of
Directors and those committees of the Board of Directors
on which he served.
The Audit Committee of the Board of Directors reviews
and comments upon the scope of the independent auditors'
assignments and related fees, the accounting principles
applied by the Company in financial reporting, the scope
of internal auditing procedures and the adequacy of
internal controls. The Audit Committee was appointed in
July 1992. Its members are Harold Harrigian and Robert
E. Weiss. The Audit Committee met one time during fiscal
2000.
The primary function of the Compensation Committee,
which was appointed in July 1992, is to review and
approve the Company's executive compensation policies and
to administer the Company's 1992 Stock Incentive Plan.
Messrs. Harrigian and Weiss are the members of the
Compensation Committee. The Compensation Committee held
two meetings during fiscal 2000.
The Board of Directors has not appointed a Nominating
Committee. The Board of Directors will consider director
nominations recommended by shareholders but has not
established formal procedures for the submission of such
recommendations.
<PAGE>
Executive Officers
Set forth below is certain information about the
Company's executive officers. Each executive officer
holds office until his or her successor is elected or
until his or her earlier death, resignation or removal by
the Company's Board of Directors.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Clement Ziroli 58 Chairman of the Board and Chief
Executive Officer
Bruce G. Norman 59 President, Chief Operating
Officer and Director
Pac W. Dong 50 Executive Vice
President, Chief Financial
Officer, Controller and
Director
Ronald T. Vargas 55 Senior Vice President
Scott Lehrer 48 Senior Vice President
Robyn S. Fredericks 47 Vice President and Secretary
</TABLE>
Additional information regarding Messrs. Ziroli,
Norman and Dong is set forth above under "Nominees to the
Board of Directors."
Ronald T. Vargas has served as a Senior Vice President
since 1975. Mr. Vargas served as Chairman of the
California Housing Agency Committee of the CMBA during
1991-1992.
Scott Lehrer has served as a Senior Vice President of
the Company since May 1994. Before joining the Company,
he served as a Vice President at Sanwa Bank in charge of
the residential real estate department since November
1987. Mr. Lehrer served as Chairman of the Loan
Servicing Committee of the CMBA during 1998-1999.
Robyn S. Fredericks has served as the Company's
Secretary and as its Vice President since 1975.
Security Ownership of Certain Beneficial Owners and Management
With respect to each person known by the Company to be
the beneficial owner of more than five percent of its
Common Stock, each director and nominee for director of
the Company, each executive officer of the Company named
in the Summary Compensation Table, and all current
directors and executive officers of the Company as a
group, the following table sets forth (i) the number of
shares of Common Stock beneficially owned as of July 10,
2000 by each such person or group, and (ii) the
percentage of the outstanding shares of the Company's
Common Stock beneficially owned as of July 10, 2000 by
each such person or group. Unless otherwise indicated,
each of the following shareholders has, to the Company's
knowledge, sole voting and investment power with respect
to the shares beneficially owned, except to the extent
that such authority is shared by spouses under applicable
law.
<PAGE>
<TABLE>
<CAPTION>
Percentage
of Common
Shares Stock
Beneficially Beneficially
Name of Beneficial Owned as of Owned as of
Owner July 10, July 10,
2000 2000
<S> <C> <C>
Fin-West Group (1) 4,804,075 91.5%
Clement Ziroli (1)(2) 4,885,075 91.6%
Bruce G. Norman (2) 38,000 *
Pac W. Dong (2) 33,375 *
Harold Harrigian (2) 30,625 *
Robert E. Weiss (2) 33,750 *
All directors and
executive officers as a 5,064,200 92.2%
group (8 persons) (2)
<FN>
<F1>
* Owns less than 1% of the Company's outstanding shares of Common Stock.
<F2>
(1) The business address of Fin-West and Mr. Ziroli is
3230 Fallow Field Drive, Diamond Bar, California
91765. Fin-West is the record holder of 4,804,075
shares of the Company's Common Stock. By reason of
his ownership of approximately 69.6% of the
outstanding shares of the capital stock of Fin-West,
Mr. Ziroli shares voting and investment power, and the
beneficial ownership, of the 4,804,075 shares of the
Common Stock as to which Fin-West is the record
holder. Mr. Ziroli is not the record holder of any
shares of Common Stock, although he does hold options
to acquire 81,000 shares. The foregoing information
is based in part upon a Schedule 13D dated April 22,
1992 that Fin-West and Mr. Ziroli filed with the
Securities and Exchange Commission.
<F3>
(2) Information presented includes shares which the
specified person or group has the right to acquire
within sixty days after July 10, 2000 through the
exercise of stock options, as follows: Mr. Ziroli,
81,000 shares; Mr. Norman, 38,000 shares; Mr. Dong,
33,375 shares; Mr. Harrigian, 28,750 shares; Mr.
Weiss, 28,750 shares; and all directors and executive
officers as a group, 252,875 shares.
<F4>
(3) Information regarding the number of shares of the
Company's Common Stock beneficially owned by all
directors and executive officers includes the
4,804,075 shares that are owned by Fin-West and in
which Mr. Ziroli has a beneficial ownership interest,
as described above.
</FN>
</TABLE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934,
as amended, requires the Company's directors and
executive officers, and persons who own more than ten
percent of a registered class of the Company's equity
securities, to file with the Securities and Exchange
Commission (the "Commission") initial reports of
ownership and reports of changes in ownership of Common
Stock and other equity securities of the Company.
Officers, directors and greater than ten percent
stockholders are required by Commission regulations to
furnish the Company with copies of all Section 16(a)
forms they file.
<PAGE>
To the Company's knowledge, based solely on its review
of the copies of such reports furnished to the Company
and written representations that no other reports were
required, during the fiscal year ended March 31, 2000,
all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent
beneficial owners were satisfied.
Executive Compensation
Summary Compensation Table
The following table sets forth certain information
concerning the compensation of the Chief Executive
Officer and the other named executive officers of the
Company for the 2000, 1999 and 1998 fiscal years.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation(1) Awards
Name and Securities
Principal Underlying All Other
Position Year Salary$(2) Bonus$(2) Options/SARS(#) Compensation$(3)
<S> <C> <C> <C> <C> <C>
Clement Ziroli 2000 $286,250 $ - 25,500 $ -
Chairman of 1999 300,000 599,655 25,500 7,485
the Board and 1998 334,998 181,443 11,000 2,693
Chief Executive
Officer
Bruce G. Norman 2000 252,856 - 5,500 -
President and 1999 265,000 469,158 5,500 7,485
Chief Operating 1998 235,000 139,716 10,000 2,693
Officer
Pac W. Dong 2000 124,044 - 4,500 -
Executive Vice 1999 130,000 342,660 4,500 6,081
President, Chief 1998 130,000 83,075 9,000 2,188
Financial
Officer and
Controller
<FN>
<F1>
(1) In accordance with Securities and Exchange
Commission regulations, this table does not include
perquisites and other personal benefits valued at the
lesser of $50,000 or 10% of the total salary and bonus
reported for the named executive officer. In addition
to Mr. Ziroli, the Company had only two other officers
who served as executive officers and whose total
salary and bonus for the 2000 fiscal year exceeded
$100,000.
<F2>
(2) Includes amounts deferred by the named executive
officer under the Company's 401(k) Profit Sharing
Plan.
<F3>
(3) Amounts included under All Other Compensation were
contributed by the Company to its 401(k) Profit
Sharing Plan for the named executive officer.
</FN>
</TABLE>
<PAGE>
Options/SAR Grants in Last Fiscal Year
The following table sets forth certain information
concerning stock options granted during the fiscal year
ended March 31, 2000 to the individuals named in the
Summary Compensation Table. No stock appreciation rights
were granted to any person.
<TABLE>
<CAPTION>
Individual Grants
Potential Realizable
Number of Value at Assumed
Securities % of Total Annual Rates of Stock
Underlying Options Granted Exercise Price Appreciation for
Options to Employees in Price Expiration Option Term (2)
Name Granted(#)(1) Fiscal Year ($/Share) Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Clement Ziroli 25,500 29.6% $4.13 7/30/2004 $29,097 $64,296
Bruce G. Norman 5,500 6.4% $4.13 7/30/2004 $6,276 $13,868
Pac W. Dong 4,500 5.2% $4.13 7/30/2004 $5,135 $11,346
<FN>
<F1>
(1) All of the stock options awarded to the named
executive officers were granted on July 30, 1999 and
became exercisable in full on January 31, 2000. All
of the options were incentive stock options and were
granted at an exercise price equal to the closing
price of a share of the Company's Common Stock on the
grant date, except for Mr. Ziroli who received
nonqualified stock options at the exercise price of
$4.13 per share.
<F2>
(2) The potential realizable value shown in this table
represents the hypothetical gain that might be realized
based on assumed 5% and 10% annual compound rates of
stock price appreciation over the full option term.
These prescribed rates are not intended to forecast
possible future appreciation of the Common Stock. Actual
gains, if any, on stock option exercises are dependent
upon the future performance of the Company's Common Stock
and overall market conditions.
</FN>
</TABLE>
The following table sets forth certain information
concerning the number and value of stock options as of
March 31, 2000. None of the named executive officers
exercised any options during the fiscal year ended March
31, 2000. No stock appreciation rights have been granted
by the Company.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
<TABLE>
<CAPTION>
Number of Securities Underlying Unexercised In-The-
Unexercised Options at Value of Unexercised In-The-Money
Name March 31, 2000 Options at March 31, 2000 (1)
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Clement Ziroli 81,000 0 $0 0
Bruce G. Norman 38,000 0 $0 0
Pac W. Dong 33,000 0 $0 0
<PAGE>
<FN>
<F1>
(1) The value of unexercised in-the-money options at
March 31, 2000 represented the spread between the
exercise price set at the date of grant and the $3.10
closing price of the Company's Common Stock on March
31, 2000, the last business day of the fiscal year
2000. Because the exercise price of the options
exceeded the $3.10 closing price, no value is shown in
the table for the options.
</FN>
</TABLE>
Compensation of Directors
The Company pays each of its directors who is not an
officer or employee of the Company an annual retainer fee
of $8,000 plus a $750 fee for each Board meeting attended
by the director. Directors who are officers or employees
of the Company do not receive any additional compensation
for serving as directors. Each non-employee director who
is a member of the Compensation or Audit Committee also
receives a fee of $500 for each committee meeting
attended.
Under the Company's 1993 Stock Option Plan for Non-
Employee Directors, which was amended and extended to the
last business day in July 1999, each non-employee
director also receives a nonqualified stock option each
year on the last business day of July to purchase 5,750
shares of the Company's Common Stock at an exercise price
equal to the closing price of a share of Common Stock on
that date. Each stock option becomes exercisable in full
on the 185th day after its grant date and terminates five
years after its grant date but is subject to earlier
termination if the director terminates his or her service
as a director. In accordance with this plan, on July 30,
1999, Messrs. Harrigian and Weiss each received an option
to purchase 5,750 shares of Common Stock at a purchase
price of $4.13 per share.
Employment Contracts, Termination of Employment and
Change-In-Control Arrangements
On October 1, 1997, the Company entered into new
employment agreements with each of Clement Ziroli, Bruce
G. Norman and Pac W. Dong. Each employment agreement was
extended on March 31, 2000 for one year, commencing April
1, 2000 and ending March 31, 2001. These agreements are
identical except for their provisions regarding
employment titles, base salaries and bonuses. Pursuant
to his agreement, Mr. Ziroli serves as the Company's
Chairman of the Board of Directors and Chief Executive
Officer; pursuant to his agreement, Mr. Norman serves as
the Company's President and Chief Operating Officer; and
pursuant to his agreement, Mr. Dong serves as an
Executive Vice President and as the Company's Chief
Financial Officer and Controller.
Under the extended employment agreements, Mr. Ziroli
receives an annual base salary of $300,000; Mr. Norman
receives an annual base salary of $265,000; and Mr. Dong
receives an annual base salary of $140,000. Each
executive officer is also entitled to receive an annual
cash bonus, which is determined by, and calculated in
accordance with, the Company's satisfaction of certain
objective performance goals established by the
Compensation Committee and described in the agreement.
Each executive officer also receives all standard Company
employee benefits and the right to participate in the
Company's Stock Incentive Plan.
Each employment agreement provides that the executive
officer may terminate his employment voluntarily, and
that the Company may terminate his employment for cause,
which is defined as the officer's conviction of a felony,
his willful and continued failure to perform his duties
or his willful and gross misconduct. The executive
officer's right to receive further compensation under the
agreement ceases as of the date of such employment
termination, subject to his right to receive any <PAGE>
previously earned but unpaid salary and bonus and subject
to his right to receive a bonus on a pro rata basis for
the portion of the term of employment in which he was
employed by the Company, the amount of such pro rata
bonus to be calculated in accordance with the objective
performance goals described in the employment agreement.
The Company has not entered into employment agreements
or termination of employment arrangements with any of its
other executive officers, and the Company has not entered
into change-in-control agreements or arrangements with
any of its executive officers.
Compensation Committee Interlocks and Insider
Participation
The current members of the Company's Compensation
Committee are Harold Harrigian and Robert E. Weiss. No
other persons served as members of the Compensation
Committee during the fiscal year ended March 31, 2000.
Mr. Harrigian has served as a director of the Company
since June 1992. Mr. Harrigian was a partner and also a
Director with the investment banking and securities firm
of Crowell, Weedon & Co., which served as the managing
underwriter of the Company's initial public offering of
1,293,750 shares of Common Stock in April 1992. He
retired from the firm in 1998.
Mr. Weiss has served as a director of the Company
since June 1992. Mr. Weiss is an attorney with the firm
of Robert E. Weiss Incorporated, which rendered legal
services to the Company during the fiscal year ended
March 31, 2000. The amount of the Company's payments to
Robert E. Weiss Incorporated for such services did not
exceed five percent of that firm's gross revenues for its
last full fiscal year.
Fin-West owns 91.5% of the Company's outstanding
shares of Common Stock. Clement Ziroli, the Chairman of
the Board and Chief Executive Officer of the Company,
owns 69.6% of the outstanding shares of the capital stock
of Fin-West and is the Chairman of the Board, President
and Chief Executive Officer of Fin-West. Bruce G. Norman
is an executive officer and a director of the Company and
Fin-West. Pac W. Dong is an executive officer and a
director of the Company and an executive officer of Fin-
West. Ronald T. Vargas is an executive officer of the
Company and an executive officer and a director of Fin-
West. Robyn S. Fredericks is an executive officer of
both the Company and Fin-West. Messrs. Norman, Dong,
Vargas and Ms. Fredericks are also shareholders of Fin-
West and, in the aggregate, own 15.3% of the outstanding
shares of the capital stock of Fin-West.
From time to time, the Company has engaged in various
transactions with (i) Mr. Ziroli, (ii) Fin-West, and
(iii) several entities that are wholly-owned or majority-
owned by Fin-West.
The Company leases the building which serves as its
principal executive office from Fin-West under the terms
of a lease agreement that expired on December 31, 1997.
The Company negotiated a lease extension to renew the
lease 3 times, each time for one additional year,
starting January 1, 1998. The monthly rental will be
$22,000 effective April 1, 1998. The monthly rental
payment for any lease extension is subject to increase
(but not decrease), provided that such payments may not
exceed the fair market rent for comparable facilities at
the time of the extension. The Company's annual lease
payments were $264,000 for the fiscal year ended March
31, 2000. The Company believes that the lease payments
are more favorable than the prevailing rates for
comparable office space within substantially the same
geographic area.
/P
In 1985, the Company made a $500,000 loan to Fin-West
that was used to construct, and is secured by, the
building in which the Company's executive offices are
located. The loan was non-interest bearing until the
1991 fiscal year, when interest began to accrue at the
rate of 6% per annum. The unpaid principal amount of the
loan was fully repaid in prior fiscal year 1999.
Fin-West owns 56.5% of the outstanding capital stock
of Nations Holding Group ("NHG") (formerly UTC Financial
Corporation). United Title Company ("UTC"), a subsidiary
of NHG, provides title insurance services to the general
public and it charges a uniform rate to all of its
customers, including services rendered to the Company.
Less than 5% of the business of UTC was derived from the
Company in the last fiscal year.
Hacienda Service Corporation ("Hacienda Service") is a
wholly-owned subsidiary of Fin-West that provides
homeowners' insurance policies to purchasers of
residential property. Substantially all of Hacienda
Service's revenues are derived from customers referred to
it by the Company. Hacienda Service charges a uniform
rate for its services, including services rendered as a
result of the Company's referrals.
The Company anticipates that it will continue to
engage in the foregoing transactions or in other
transactions with Fin-West and its affiliated companies.
To ensure that such transactions are fair and reasonable
to the Company and are on terms that are no less
favorable to the Company than those that could be
obtained from an unaffiliated third party, the Company
has adopted a policy that prohibits engaging in any such
transaction without the authorization or approval of a
majority of the Company's directors who do not have a
material financial or other interest in the transaction.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION
The Compensation Committee is composed of the
Company's two independent outside directors, neither of
whom are officers or employees of the Company. It was
formed shortly after the Company became a publicly held
company in 1992. The Compensation Committee is
responsible for making decisions concerning, and the
administration of programs regarding, the compensation of
the Company's executive officers. Decisions of the
Compensation Committee relating to the compensation of
the Company's executive officers are submitted to the
full Board of Directors for review and approval, except
that decisions concerning awards to executive officers
under the Company's Stock Incentive Plan are made solely
by the Compensation Committee. The Board of Directors
approved all of the Compensation Committee's decisions
that were submitted to it regarding the executive
officers' compensation for the 2000 fiscal year.
Compensation Philosophy
The policy of the Company and the Compensation
Committee toward executive compensation is to attract and
retain motivated and effective executive officers in a
very competitive and highly volatile industry. It
continues to be based upon the belief that the
compensation received by executive officers should be
properly integrated with the Company's annual and long-
term objectives. The Company's executive compensation
program is also based upon the belief that the
compensation-related interests of its executive officers
should be directly aligned with the interests of its
shareholders, and that a significant portion of each
executive officer's compensation should be tied to the
profitability of the Company. To a large degree,
however, the Company also recognizes that stock <PAGE>
price performance as it pertains to the mortgage banking
industry is substantially influenced by many factors,
especially the rapidly changing mortgage industry
conditions and it may not necessarily be the best measure
of executive performance.
Compensation Components
The components of the Company's compensation program
for its executive officers in fiscal year 2000 are base
salaries, bonuses and option awards under the Stock
Incentive Plan. The factors that the Compensation
Committee considered in connection with determining the
amounts of various components of the compensation
received by the Company's executive officers are
described below. Except as specifically described below,
the Compensation Committee did not assign any specific
weights to these factors and the actual compensation in
any particular year may be above or below that of the
Company's competitors.
Base Salaries
In establishing the base salaries for Messrs. Ziroli,
Norman and Dong as set forth in their employment
agreements, and in determining the base salary received
by other executive officers during the 2000 fiscal year,
the Compensation Committee continued its policy of
establishing a strong relationship between the
compensation of its executive officers; the
responsibilities of the executive officers and the
performance of the Company. The weight assigned to each
factor, however, may vary from individual to individual
and may involve subjective judgment of each individual
performance.
The Company's performance was adversely impacted by
the high interest rate and low loan production in fiscal
year 2000. The three executive officers, Ziroli, Norman
and Dong, volunteered to reduce their salary by ten
percent effective October, 1999.
Bonuses
Consistent with the Company's compensation philosophy,
the Compensation Committee believes that a direct and
objective connection should be established between the
financial performance of the Company and the compensation
of its most highly compensated executive officers. The
employment agreements between Messrs. Ziroli, Norman and
Dong provide that the bonus, if any, to be received by
each executive officer is calculated solely in accordance
with the Company's earnings under a predetermined formula
that is based upon the Company's annual net income before
taxes.
According to the employment agreements, no bonus was
awarded to Messrs. Ziroli, Norman and Dong in fiscal year
2000.
Bonuses during the 2000 fiscal year to other executive
officers were also calculated solely in accordance with
the Company's performance under predetermined formulas
that were approved by the Compensation Committee and that
were based upon objective criteria such as mortgage loan
production, net income before taxes and the size of the
mortgage servicing portfolio administrated by the
Company. Each such executive officer's bonus formula was
developed after a review of his or her duties and
responsibilities.
<PAGE>
Stock Incentive Plan Awards
The Compensation Committee administers the Company's
Stock Incentive Plan, under which options to purchase
shares of the Company's Common Stock are awarded to
executive officers and other eligible employees. The
grant of the stock options is intended to motivate and
retain these officers and employees needed to execute the
long-term strategic plan for the growth of the Company.
The Compensation Committee believes that granting the
stock options to executive officers and other employees
aligns their interests with those of the Company's
shareholders since the value of the options will increase
only if the market value of the Company's stock
increases.
During the 2000 fiscal year, the Compensation
Committee awarded options covering a total of 43,100
shares of Common Stock to the Company's executive
officers of which nonqualified options covering 25,500
shares of Common Stock were awarded to Mr. Ziroli. Non-
executive officers and employees received options
covering a total of 43,075 shares of common stock. All
incentive stock options were granted at an exercise price
of $4.13 per share, which was the market value of the
underlying Common Stock on the grant date, and options
became exercisable in full on January 31, 2000.
In determining the size of the option awards to
executive officers (other than Mr. Ziroli) and to other
employees, the Compensation Committee considered the
recommendations of the Chief Executive Officer and other
members of management. These recommendations were based
upon the same objective and subjective factors described
above which were used in determining the bonuses for the
2000 fiscal year and also took into account prior awards
of options to the officers and employees and the option
awards made by comparable companies. The same factors
were considered in determining the size of Mr. Ziroli's
option award.
Compliance with Internal Revenue Code Section 162(m)
Internal Revenue Code Section 162(m), enacted in 1993,
generally precludes a publicly held corporation from
taking a tax deduction for compensation in excess of
$1,000,000 that is paid in any year to its chief
executive officer or any of its four other highest paid
executive officers. Certain performance-based
compensation is not subject to the deduction limit if
shareholder approval is obtained and if other specified
requirements are satisfied.
The Compensation Committee believes that, under
ordinary circumstances, the Company's compensation
programs should be structured in a manner that is
designed to comply with the requirements of Section
162(m) and any regulations promulgated thereunder in
order to ensure the full deductibility of all
compensation paid to the Company's executive officers.
The Compensation Committee does not anticipate that the
compensation which is payable to any of the Company's
executive officers during the current taxable year will
exceed $1,000,000.
COMPENSATION COMMITTEE
Robert E. Weiss, Chairman
Harold Harrigian
<PAGE>
COMPANY STOCK PERFORMANCE GRAPH
The following graph compares the percentage change in
the cumulative total shareholder returns, assuming $100
was invested on March 31, 1995, on the Company's Common
Stock, the NASDAQ - Total US and the SNL Traditional
Mortgage Bank Index for the period commencing March 31,
1995 and ending March 31, 2000. The stock price
performance shown below is not necessarily indicative of
future price performance. The graph assumes the
reinvestment of dividends on a daily basis.
PERFORMANCE GRAPH FOR FIRST MORTGAGE CORPORATION
INDEXED COMPARISON OF CUMULATIVE TOTAL RETURN
FIRST MORTGAGE CORPORATION, THE NASDAQ -- TOTAL US AND
SNL TRADITIONAL MORTGAGE BANK INDEX
<TABLE>
<CAPTION>
Period Ending
Index 3/31/95 3/31/96 3/31/97 3/31/98 3/31/99 3/31/00
<S> <C> <C> <C> <C> <C> <C>
First Mortgage Corporation 100.00 156.25 103.13 95.30 100.00 77.35
NASDAQ - Total US 100.00 135.80 150.95 228.88 309.19 574.04
SNL Traditional Mortgage Bank Index 100.00 122.79 137.96 275.60 232.13 140.47
</TABLE>
<PAGE>
Certain Relationships and Related Transactions
The Company is a participant in a profit sharing plan
maintained by Fin-West (the "Profit Sharing Plan")
designed to qualify under Section 401(k) of the Internal
Revenue Code of 1986, as amended, in which all of the
employees of Fin-West and its affiliated companies who
have completed at least one year of service are eligible
to participate other than the employees of Hacienda
Escrow Corporation. The Profit Sharing Plan purchases
mortgage loans from the Company for investment purposes,
although the Profit Sharing Plan generally purchases no
more than five loans per year. The Company guarantees
all loans that it sells to the Profit Sharing Plan. The
Company has adopted a policy that it will not sell a
mortgage loan to the Profit Sharing Plan for a price that
is less than the fair market price for such loan in the
secondary mortgage market.
A description of certain transactions between the
Company and its directors, executive officers and
entities in which such directors and executive officers
have an interest is presented above under "Compensation
Committee Interlocks and Insider Participation."
<PAGE>
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company has selected Ernst & Young LLP as its
independent auditors for the current fiscal year.
Because appointment of the Company's independent auditors
is an important decision, the Board of Directors has
elected to seek ratification by the shareholders of the
appointment of Ernst & Young LLP. If the appointment is
not ratified, the Board of Directors will reconsider the
appointment.
Ernst & Young LLP has examined the financial
statements of the Company since 1992 and management is
satisfied with their quality of professional services.
It is anticipated that representatives of Ernst & Young
LLP will be present at the annual meeting. They will be
afforded an opportunity to make a statement if they
desire to do so and will be available to respond to
appropriate questions from shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR THE PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST &
YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING MARCH 31, 2001. UNLESS MARKED TO THE
CONTRARY, PROXIES RECEIVED WILL BE VOTED FOR THIS
PROPOSAL.
OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
The Board of Directors knows of no other business to
be presented at the annual meeting. If any other
business properly comes before the annual meeting, it is
the intention of the persons named in the accompanying
form of proxy or their substitute(s) to vote on that
business in accordance with their best judgment.
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Shareholders of the Company who intend to submit
proposals to the Company's shareholders for inclusion in
the Company's proxy statement and form of proxy relating
to the next annual meeting of shareholders must submit
such proposals to the Company no later than April 23,
2001 in order to be included in the Company's proxy
statement and form of proxy. Such proposals must also
comply with the requirements of Rule 14a-8 under the
Securities Exchange Act of 1934, as amended (the
"Exchange Act") relating to proposals of shareholders.
If notice of a shareholder proposal submitted outside the
processes of Rule 14a-8 under the Exchange Act is not
received by the Company by July 6, 2001, the persons
named in the Company's form of proxy for the next annual
meeting of shareholders will have discretionary authority
to vote on the proposal in accordance with their best
judgment. Shareholder proposals should be submitted in
writing to the Company's principal executive office at
3230 Fallow Field Drive, Diamond Bar, California 91765,
Attention: Robyn S. Fredericks, Secretary.
By Order of the Board of Directors
Robyn S. Fredericks
Secretary
August 20, 2000
Diamond Bar, California
<PAGE>
SHAREHOLDERS ENTITLED TO VOTE AT THE ANNUAL MEETING MAY
OBTAIN, WITHOUT CHARGE, A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED MARCH 31,
2000, INCLUDING THE FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULES THERETO, UPON WRITTEN REQUEST TO THE
COMPANY AT 3230 FALLOW FIELD DRIVE, DIAMOND BAR,
CALIFORNIA 91765, ATTENTION: ROBYN S. FREDERICKS,
SECRETARY. UPON WRITTEN REQUEST DIRECTED TO MS.
FREDERICKS, THE COMPA
NY WILL ALSO FURNISH TO SUCH SHAREHOLDERS A COPY OF ANY
EXHIBITS TO ITS ANNUAL REPORT ON FORM 10-K FOR A FEE OF
$.20 PER PAGE, PAYABLE IN ADVANCE. THIS FEE COVERS ONLY
THE COMPANY'S REASONABLE EXPENSES IN FURNISHING SUCH
EXHIBITS.
<PAGE>
Exhibit A
Please mark
your votes as
indicated in
this example
FOR all nominees listed below (except as marked to the contrary below).
Discretionary authority to accumulate votes is granted.
WITHHOLD AUTHORITY to vote for all nominees listed below
ITEM 1-ELECTION OF DIRECTORS
Pac W. Dong, Harold Harrigian, Bruce G. Norman, Robert E. Weiss and
Clement Ziroli
(INSTRUCTIONS: To withhold authority to vote for any individual nominee(s),
write the name(s) of the nominee(s) on the space provided below.
ITEM 2--PROPOSAL to approve the appointment of Ernst & Young as independent
auditors of the Company for the fiscal year ending March 31, 2001.
FOR
AGAINST
ABSTAIN
IN THEIR DISCRETION, the proxies are authorized to vote upon such other
business as may properly come before the meeting and at any adjournments
thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED
IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER. IF NO DISCRETION IS
MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL 2
DESCSRIBED ON THE REVERSE SIDE OF THIS PROXY
AND FOR THE ELECTION OF THE PERSONS NOMINATED
AS DIRECTORS BY THE BOARD OF DIRECTORS.
Receipt of the Notice of
Annual Meeting of
Shareholders, the Proxy
Statement accompanying
said Notice and the Annual
Report to Shareholders for
the fiscal year ended
March 31, 2000 hereby is
acknowledged. The
undersigned shareholder
hereby revokes any proxy
heretofore given to vote
at said meeting.
Signature Signature Date
NOTE: Please sign as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
FOLD AND DETACH HERE
<PAGE>
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
FIRST MORTGAGE CORPORATION
The undersigned hereby appoints Clement
Ziroli and Bruce G. Norman, and each of them, as
proxies, with power to act without the other and
with power of substitution, and hereby authorizes
them to represent and vote, as designated on the
other side, all the shares of the common stock of
First Mortgage Corporation standing in the name of
the undersigned with all powers which the
undersigned would possess if present at the Annual
Meeting of Stockholders of the Company to be held
September 20, 2000 and at any and all adjournments
thereof.
(Continued, and to be marked, dated and signed, on the other side)
FOLD AND DETACH HERE
