<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement
Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. ______)
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 240.14a-11(c) or Rule 240.14a-12
PacificAmerica Money Center, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth in the amount on
which the filing fee is calculated and state how it was
determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 2
PACIFICAMERICA MONEY CENTER, INC.
21031 Ventura Boulevard
Woodland Hills, California 91364
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 10, 1997
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of PacificAmerica Money
Center, Inc. (the "Annual Meeting") will be held at the Los Angeles Airport
Hilton and Towers, Theater Room, Second Floor, located at 5711 West Century
Boulevard, Los Angeles, California 90045 on July 10, 1997 at 2:00 p.m. Pacific
Time, to consider and act upon the following matters, all as more fully
described in the accompanying Proxy Statement which is incorporated herein by
this reference:
(1) To elect two members to the Board of Directors to serve
until the 2000 Annual Meeting of Stockholders or until
their respective successors shall be elected and qualify;
(2) To approve an Amended Employment Agreement of Joel R.
Schultz;
(3) To approve an Amended Employment Agreement of Richard D.
Young;
(4) To approve an amendment to the 1995 Stock Option Plan
increasing the number of options which may be awarded to
the non-employee directors of the Company and its
subsidiaries after each 12 months of continuous service as
a director from 100 per directorship, with a maximum of
200 per year and five annual grants, to a single annual
grant of 1,000 per year during the term of such service.
(5) To ratify the appointment of BDO Seidman, LLP as
independent accountants for the fiscal year ending
December 31, 1997; and
(6) To transact such other business and to consider and take
action upon any and all matters that may properly come
before the Annual Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on May 14,
1997, as the record date for the determination of the stockholders entitled to
notice of and to vote at the Annual Meeting. For ten days prior to the Annual
Meeting, a complete list of stockholders entitled to vote at the Annual Meeting
will be available for examination by any stockholder for any purpose germane to
the Annual Meeting during ordinary business hours at the Company's executive
office, located at the address set forth above.
All stockholders are invited to attend the Annual Meeting in
person.
By Order of the Board of Directors
Joel R. Schultz
Chief Executive Officer
Woodland Hills, California
May 28, 1997
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE MARK, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED ENVELOPE SO
THAT YOUR STOCK MAY BE REPRESENTED AT THE ANNUAL MEETING.
<PAGE> 3
PACIFICAMERICA MONEY CENTER, INC.
21031 Ventura Boulevard
Woodland Hills, California 91364
(818) 992-8999
---------------
PROXY STATEMENT
---------------
Approximate date proxy material first
sent to stockholders: May 28, 1997
INFORMATION CONCERNING SOLICITATION AND VOTING
The enclosed proxy is solicited by and on behalf of the Board of
Directors of PacificAmerica Money Center, Inc. (the "Company") in connection
with the Annual Meeting of Stockholders (the "Annual Meeting") and adjournments
thereof to be held at 2:00 p.m. Pacific Time on July 10, 1997 at the Los Angeles
Airport Hilton and Towers, Theater Room, Second Floor, located at 5711 West
Century Boulevard, Los Angeles, California 90045.
Stockholders are requested to complete, date and sign the
accompanying proxy and return it promptly to the Company. Any proxy given may be
revoked by a stockholder at any time before it is voted at the Annual Meeting
and all adjournments thereof by filing with the Secretary of the Company a
notice in writing revoking it, or by duly executing and submitting a proxy
bearing a later date. Proxies may also be revoked by any stockholder present at
the Annual Meeting who expresses a desire to vote in person. Subject to such
revocation, all proxies duly executed and received prior to, or at the time of,
the Annual Meeting will be voted FOR the election of the two of the
nominee-directors specified herein, FOR the approval of the Amended Employment
Agreements of Joel R. Schultz and Richard D. Young, FOR the amendment of the
Company's 1995 Stock Option Plan increasing the number of non-qualified options
granted to non-employee directors of the Company and its subsidiaries; and FOR
the ratification of the selection of BDO Seidman, LLP, as the Company's
independent public accountants for fiscal year 1997, unless a contrary choice is
specified in the proxy. Where a specification is indicated as provided in the
proxy, the stock represented by the proxy will be voted and cast in accordance
with the specification made. As to other matters, if any, to be voted upon, the
persons designated as proxies will take such actions as they, in their
discretion, may deem advisable. The persons named as proxies were selected by
the Board of Directors of the Company and each of them is a director of the
Company.
In accordance with Delaware law, brokers and nominees may be
precluded from exercising their voting discretion with respect to certain
matters to be acted upon and thus, in the absence of specific instructions from
the beneficial owners of the shares, will not be empowered to vote on such
matters and therefore will not be counted in determining the number of shares
necessary for approval. Shares represented by such broker non-votes will,
however, be counted for purposes of determining whether there is a quorum. Any
shares not voted (whether by abstention, broker non-vote or otherwise) will have
no impact on the election of directors, except to the extent that the failure to
vote for an individual results in another individual receiving a larger
proportion of votes. Any shares represented at the Annual Meeting but not voted
(whether by abstention, broker non-vote or otherwise) with respect to the
proposals to approve the Amended Employment Agreements of Joel R. Schultz and
Richard D. Young and to ratify the selection of BDO Seidman, LLP will have no
effect on the vote for such proposals except to the extent the number of
abstentions causes the number of shares voted in favor of the proposals not to
equal or exceed a majority of the quorum required for the Annual Meeting.
Participants in the Company's Employee Savings Plan (i.e., the
Company's "401(k)" plan) may vote shares of common stock of the Company (the
"Common Stock") equivalent to the value of the interest credited to their
account in the plan by instructing City National Bank,, the trustee of the plan,
pursuant to the instruction card being mailed with this proxy statement to plan
participants. The trustee will vote such shares in accordance with duly executed
instructions received by July 10, 1997. Share equivalents credited to a
participant's account as to which no instructions are received by that date will
be voted by the trustee in the same proportion that it votes share equivalents
for which it did receive timely instructions. Each participant may revoke
previously given voting instructions by July 10, 1997 by filing with the trustee
a written notice to that effect or a duly executed voting instruction card
bearing a date subsequent to the date of his or her previously delivered
instruction card.
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<PAGE> 4
The Company will bear the cost of the solicitation of proxies,
including the charges and expenses of brokerage firms and others forwarding the
solicitation material to beneficial owners of stock. Directors, officers and
regular employees of the Company may solicit proxies personally, by telephone or
by telegraph but will not be separately compensated for such solicitation
services.
Your execution of the enclosed proxy will not affect your right
as a stockholder to attend the Annual Meeting and to vote in person. Any
stockholder giving a proxy has a right to revoke it at any time by either (i) a
later-dated proxy, (ii) a written revocation sent to and received by the
Secretary of the Company prior to the Annual Meeting, or (iii) attendance at the
Annual Meeting and voting in person.
STOCKHOLDERS' VOTING RIGHTS
Only holders of record of the Company's Common Stock at the close
of business on May 14, 1997 (the "Record Date") will be entitled to notice of,
and to vote at, the Annual Meeting. On such date, there were [1,887,991] shares
of Common Stock outstanding, with one vote per share.
With respect to election of directors, assuming a quorum is
present, the two candidates receiving the highest number of votes will be
elected. See "Nomination and Election of Directors." To approve the Amended
Employment Agreements of Messrs. Schultz and Young and the Amendment of the 1995
Stock Option Plan, and to ratify the appointment of BDO Seidman, LLP, assuming a
quorum is present, the affirmative votes of stockholders holding a majority of
the voting power represented and voting at the meeting will be required. A
quorum is the presence in person or by proxy of shares representing a majority
of the voting power of the Common Stock.
STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following tables sets forth the ownership of Common Stock as
of March 31, 1997 by (i) those persons known by the Company to hold at least 5%
of the total outstanding Common Stock of the Company; (ii) the five directors of
the Company, (iii) the Chief Executive Officer and the other four most highly
compensated executive officers of the Company for the fiscal year ended December
31, 1996 (the "Named Executives"), and (iv) all executive officers and directors
of the Company, as a group.
This table includes, in addition to Common Stock outstanding as
of March 31, 1997, Common Stock issuable upon exercise of subscriber warrants
("Subscriber Warrants") and general partner warrants ("General Partner
Warrants") issued in connection with the restructuring (the "Restructuring") of
the Company completed in June 1996. In addition, the table includes that portion
of stock options granted to the Named Executives which are exercisable within
the next 60 days, as described herein under the heading "EXECUTIVE COMPENSATION
AND OTHER MATTERS -- Plans and Arrangements -- Stock Option Plan."
<TABLE>
<CAPTION>
Common
Stock Percent
Name and Address of Beneficially of
Beneficial Owner Owned(1) Class
- ------------------- ------------ -------
<S> <C> <C>
Wellington Management Company, LLP 154,200 8.2%
75 State Street
Boston MA 02109
Kramer Spellman, L.P. 126,200 6.7%
2050 Center Avenue, Suite 300
Fort Lee, New Jersey 0702
Joel R. Schultz (2) 192,472 9.7%
21031 Ventura Boulevard
Woodland Hills, CA 91364
</TABLE>
-2-
<PAGE> 5
<TABLE>
<CAPTION>
Common
Stock Percent
Name and Address of Beneficially of
Beneficial Owner Owned(1) Class
- ------------------- ------------ -------
<S> <C> <C>
Richard D. Young (3)
21031 Ventura Boulevard 47,114 2.4%
Woodland Hills, CA 91364
Charles J. Siegel 9,719 *
21031 Ventura Boulevard
Woodland Hills, CA 91364
Frank Landini 15,218 *
500 Ygnacio Road
Walnut Creek, CA
Kenneth A. Carmona(4) 52,112 2.7%
21031 Ventura Boulevard
Woodland Hills, CA 91364
James C. Neuhauser 6,600 *
21031 Ventura Boulevard
Woodland Hills, CA 91364
Paul D. Weiser (5) 18,140 1.0%
21031 Ventura Boulevard
Woodland Hills, CA 91364
Alan J. Siebler (6) 1,800 *
21031 Ventura Boulevard
Woodland Hills, CA 91364
All Directors and Executive 478,070 23.0%
Officers as a group (10 persons)(7)
</TABLE>
- ----------
* Less than 1%.
(1) Except as otherwise noted and except as required by applicable community
property laws, each person has sole voting and disposition powers with
respect to the shares.
(2) Includes an aggregate of 105,574 shares of Common Stock held by Joel R.
Schultz, Toby Schultz, his spouse and The Schultz Living Trust, of which
Joel R. Schultz and Toby Schultz are the co-trustees, 77,298 Subscriber
and General Partner Warrants and currently exercisable options for 9,600
shares.
(3) Includes 45,514 shares of Common Stock and 1,600 Subscriber Warrants.
(4) Includes 28,394 shares of Common Stock and 23,718 Subscriber and General
Partner Warrants. Mr. Carmona terminated his employment with the Company
effective as of December 31, 1996.
(5) Includes 5,936 shares of Common Stock and 12,204 Subscriber and General
Partner Warrants.
(6) Includes 1,500 shares of Common Stock and 300 Subscriber Warrants.
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<PAGE> 6
(7) Includes 259,067 shares of Common Stock, 205,803 Subscriber and General
Partner Warrants and currently exercisable options for 13,200 shares.
The Company knows of no contractual arrangements which may at a subsequent
date result in a change in control of the Company.
NOMINATION AND ELECTION OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation states
that the Board of Directors shall be divided into three classes of directors,
with the directors in each class to be elected for three-year staggered terms
except for the initial directors. At this Annual Meeting, two directors are to
be elected to serve until the 2000 Annual Meeting of Stockholders and until
their successors are elected and qualify. The nominees for election as directors
at this Annual Meeting set forth in the table below are both recommended by and
currently serve as members of the Board of Directors of the Company.
In the event that either of the nominees for director should become unable
to serve if elected, it is intended that shares represented by proxies which are
executed and returned will be voted for such substitute nominee(s) as may be
recommended by the Company's existing Board of Directors.
The two nominee-directors receiving the highest number of votes cast at
the Annual Meeting will be elected as the Company's directors for the three-year
term from 1997 to 2000. Stockholders of record on the Record Date are not
entitled to cumulate their votes in the election of the Company's directors.
The following table sets forth certain information concerning Richard D.
Young and Alan J. Siebler, the nominees for election as directors. These
nominees were selected by the Nominating Committee of the Board of Directors,
consisting of Joel R. Schultz, James C. Neuhauser and Paul D. Weiser. Mr.
Siebler became a director of the Company by appointment of the Board on April
21, 1997, to fill a vacancy created by the resignation of Russell G. Allison on
April 7, 1997. Mr. Allison, who served as a director of the Company from
November 1995 until his resignation from the Board on April 7, 1997, resigned
due to a policy of his employer against employees acting as directors of public
companies.
<TABLE>
<CAPTION>
NOMINEE PRINCIPAL OCCUPATION AGE
- ------- -------------------- ---
<S> <S> <C>
Richard D. Young Senior Executive Vice President of the Company, 57
President of Pacific Thrift and Loan Company
("Pacific Thrift") and Senior Executive Vice
President of PacificAmerica Money Centers, Inc.
Alan J. Siebler Retired corporate manager and private investor. 66
</TABLE>
Mr. Richard D. Young has served as a director and Senior Executive Vice
President of the Company and PacificAmerica Money Centers, Inc. ("PacificAmerica
Centers"), a wholly-owned subsidiary of the Company, since September 1995. He
has also served as President and Chief Operating Officer of Pacific Thrift, a
wholly-owned subsidiary of the Company, since November 1993. From 1983 to 1993,
Mr. Young served as President and Chief Executive Officer of Topa Thrift and
Loan. From 1984 to 1988 he served as President of Thrift Guaranty Corporation
and as a director from 1983 through 1988 and again from 1989 through 1995 when
the Thrift Guaranty Corporation was liquidated. Mr. Young is a member of the
Mortgage Bankers Association Secondary and Capital Markets Committee and the
California Association of Thrift and Loan Companies ("CATL") and has served as
Vice President of CATL since 1995.
Mr. Alan J. Siebler was appointed as a director of the Company on April
21, 1997 to fill the vacancy created by the resignation of Russell G. Allison.
Mr. Siebler is also a non-employee director of Pacific Thrift and Loan Company,
on which Board he has served since June 1992. He was a Human Resource Manager of
the Van Nuys, California Plant of General Motors Corporation from August 1956
until September 1992. Mr. Siebler also served as a member of the Finance
Committee of Temple Beth Ami, Reseda, California from 1983 to 1988 and of
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<PAGE> 7
Shomrei Torah Synagogue from 1988 to present; Chairman of the California Joint
Apprenticeship State Advisory Committee for Single Plant Industry from 1986 to
1989; and Member of the Committee for Industrial Training Curriculum of Pierce
College. Mr. Siebler received a Bachelor of Arts Degree in Personnel and
Industrial Relations from the University of California at Los Angeles and
completed post-graduate courses at the School of Business of the University of
California at Los Angeles. He has an extensive background in employment, workers
compensation, employee benefits, education and training, labor relations and
labor contract relations.
CONTINUING DIRECTORS
James C. Neuhauser's term as director will expire at the next annual
meeting of stockholders, and the terms of Joel R. Schultz and Paul D. Weiser
will expire at the 1999 annual meeting of stockholders, or when their successors
are elected and qualified. The Board of Directors may fill interim vacancies of
directors. Each officer is elected by and serves at the discretion of, the Board
of Directors, subject to the terms of any employment agreement.
Mr. Joel R. Schultz is Chairman of the Board, President, Chief Executive
Officer and Chief Operating Officer of the Company and was Chief Managing
Officer of Presidential Mortgage Company, a California limited partnership,
which was the Company's predecessor. Since 1989, Mr. Schultz has been the
Chairman of the Board and Chief Executive Officer of Pacific Thrift. He also
served as President of Pacific Thrift from 1988 to November 1993. He also is
President and Chief Executive Officer of PacificAmerica Money Centers, Inc.
("PacificAmerica Centers"). Mr. Schultz is an attorney admitted to practice in
California, a certified public accountant, and a California licensed real estate
broker.
Mr. James C. Neuhauser has been a non-employee director of the Company
since June 1996 and a non-employee director of Pacific Thrift since August 1996.
Since March 1993, he has been employed with Friedman, Billings, Ramsey &
Company, Inc., headquartered in Arlington, Virginia, where he is currently
Managing Director. He was formerly employed with Trident Financial Corporation
from 1986 to 1993, where he last held the position of Senior Vice President. Mr.
Neuhauser is a Chartered Financial Analyst.
Mr. Paul D. Weiser has been a non-employee director of the Company and
PacificAmerica Centers since June 1996 and a non-employee director of Pacific
Thrift since August 1996. Since 1968, he has been employed with Dataproducts
Corporation, a manufacturer and seller of computer printers and related
products, currently as its Senior Vice President, Secretary and General Counsel.
Mr. Weiser is an attorney admitted to practice in California and former chairman
of the Securities and Exchange Commission's Advisory Committee on Shareholder
Communications.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
AND CERTAIN COMMITTEES THEREOF
The business of the Company's Board of Directors is conducted through
meetings of the Board, as well as through meetings of its committees. Set forth
below is a description of the committees of the Board.
The Audit Committee reviews and reports to the Board on various auditing
and accounting matters, including the annual audit report from the Company's
independent public accountants. The Audit Committee consists of James C.
Neuhauser, Paul D. Weiser and Alan J. Siebler. Russell G. Allison was a director
of the Company and member of the Audit Committee until Mr. Allison's resignation
from the Board on April 7, 1997. Mr. Neuhauser is the Chairman of the Audit
Committee. The Audit Committee held one meeting during 1996, which both of the
then members of the committee attended.
The Employee Compensation Committee determines the salary and bonus
structure for all of the Company's executive officers and employees who are not
employed under written contracts, as well as the annual bonuses of Messrs.
Siegel, Markiewicz and Fremed. The Employee Compensation Committee consists of
Joel R. Schultz and Richard D. Young. Mr. Schultz is its Chairman. The Employee
Compensation Committee held no meetings during 1996, because the Committee did
not take any actions until 1997.
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<PAGE> 8
The Executive Compensation and Stock Option Committee ("Executive
Compensation Committee") determines the salary and bonus provisions of all
executive officers under written employment agreements with the Company, reviews
and certifies the performance-based bonuses of Messrs. Schultz and Young under
each of their employment agreements with the Company, determines appropriate
awards under the Company's 1995 Stock Option Plan and administers the Company's
Stock Option Plan, Employee Savings Plan and Employee Stock Purchase Plan. See
"EXECUTIVE COMPENSATION AND OTHER MATTERS -- Plans and Arrangements." The
Executive Compensation Committee consists of Paul D. Weiser, James C. Neuhauser
and Alan J. Siebler. Russell G. Allison was a director of the Company and member
of the Executive Compensation Committee until Mr. Allison's resignation from the
Board on April 7, 1997. Mr. Weiser is its Chairman. The Executive Compensation
Committee held one meeting in 1996. Each of the members of the Executive
Compensation Committee attended the meeting.
The Executive Committee has the authority to act on behalf of the full
Board of Directors in between meetings of the Board, except that the Executive
Committee does not have the authority to amend the Certificate of Incorporation
or the Bylaws of the Company, adopt an agreement of merger or consolidation,
recommend to the stockholders a dissolution of the Company or a revocation of
dissolution or remove or indemnify a director. To the extent authorized by the
Board of Directors, the Executive Committee is also authorized to declare
dividends of the Company and to issue shares of authorized and unissued Common
Stock or any series of Preferred Stock of the Company. The Executive Committee
consists of Joel R. Schultz, Richard D. Young and Paul D. Weiser. Mr. Schultz is
its Chairman. The Executive Committee held no meetings during 1996.
On April 17, 1997, the Board of Directors created a Nominating Committee,
which has the authority to nominate directors of the Company for election. The
Nominating Committee consists of Joel R. Schultz, Paul D. Weiser, James C.
Neuhauser and Alan J. Siebler. The Nominating Committee was not created until
1997, and thus held no meetings in 1996.
COMPENSATION OF BOARD OF DIRECTORS
FEES
The Company pays fees to its directors for serving on the Board of
Directors and for their attendance at Board and committee meetings. The Company
pays each employee director an annual fee of $500, plus $200 per board or
committee meeting attended. The Company pays each non-employee director an
annual fee of $2,500 (increased to $5,000 for 1997), plus $750 (increased to
$1,000 for 1997) for each board meeting attended, plus $300 for each telephonic
meeting of over 30 minutes in length, plus $350 (increased to $500 for 1997) per
committee meeting for committee chairman and $250 (increased to $400 for 1997)
per committee meeting for other committee members. The Corporate Secretary
receives a fee of $200 per meeting attended.
Each of Pacific Thrift and PacificAmerica Centers also pays fees to its
officer and non-officer directors for serving on the Board of Directors and for
their attendance at Board and committee meetings. Pacific Thrift pays the same
fees as the Company pays to its officer and non-officer directors.
PacificAmerica Centers pays each employee director an annual fee of $250 plus
$200 for each meeting attended, and each non-employee director an annual fee of
$1,000, plus $500 for each board meeting attended, plus $200 for each telephonic
meeting of over 30 minutes in length, plus $350 per committee meeting for
committee chairman or $250 per committee meeting for other committee members.
The Corporate Secretary receives a fee of $200 per meeting attended. Only one
meeting fee is paid for meetings of the Boards of Directors of the Company and
one or more of its subsidiaries on the same day and for meetings of two or more
committees of the Board of Directors of the Company or any of its subsidiaries
on the same day. It is the policy of the Board of Directors to have as many
board and committee meetings on the same day as possible.
OPTION PLAN
For options granted to certain of the Company's directors pursuant to the
Company's 1995 Stock Option Plan, see "EXECUTIVE COMPENSATION AND OTHER MATTERS
- -- Stock Option Plan -- Options to Non- Employee Directors" and " -- Grant of
Options."
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<PAGE> 9
LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS
The Company's Certificate of Incorporation provides that a director of the
Company will have no personal liability to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director except (i) for any
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, (iii) as provided under Section 174 of
the Delaware General Corporation Law (the "Delaware GCL") for the payment of
certain unlawful dividends and the making of certain stock purchases or
redemptions or (iv) for any transaction from which the director derived an
improper personal benefit. This provision would absolve directors of personal
liability for negligence in the performance of their duties, including gross
negligence. It would not permit a director to be exculpated, however, for
liability for actions involving conflicts of interest or breaches of the
traditional "duty of loyalty" to the Company and its stockholders, and it would
not affect the availability of injunctive or other equitable relief as a remedy.
The provision does not eliminate or alter the duty of the Company's
directors; it merely limits personal liability for monetary damages to the
maximum extent now permitted by the Delaware GCL. Moreover, it applies only to
claims against a director arising out of his role as a director; it does not
apply to claims arising out of his role as an officer (if he is also an officer)
or arising out of any other capacity in which he serves. While this provision
does not affect the availability of injunctive or other equitable relief as a
remedy for breach of duty by directors, it does limit the remedies available to
a stockholder who has an otherwise valid claim that a director acted in
violation of his duties, if the action is among those as to which liability is
limited. Because of this provision, stockholders will not have a claim for
monetary damages based on breach of the directors' duty, even if the directors'
conduct involved gross negligence (including a grossly negligent business
decision involving a takeover proposal for the Company), unless the conduct is
of a type for which the Delaware GCL does not permit limitation of liability. If
the stockholders do not have a claim for monetary damages, their only remedy may
be a suit to enjoin completion of the Board's action or to rescind completed
action. The stockholders may not be aware of a proposed transaction that might
otherwise give rise to a claim until the transaction is completed or until it is
too late to prevent its completion by injunction. In such a case, the Company
and its stockholders may have no effective remedy for an injury resulting from
the Board's action.
This provision may reduce the likelihood of stockholder derivative
litigation against directors and may discourage or deter stockholders or
management from bringing a lawsuit against directors for breach of their duties,
even though such action, if successful, might otherwise have benefited the
Company and its stockholders. The Securities and Exchange Commission has taken
the position that similar provisions added to other corporations' certificates
of incorporation would not protect those corporations' directors from liability
for violations of the federal securities laws.
The Company included this exculpation provision in its Certificate of
Incorporation to provide its directors with the maximum protection from personal
liability made available by the Delaware GCL. It is believed that this provision
will help the Company to attract and retain as directors the persons most
qualified for those positions.
The Company's Bylaws generally require the Company to indemnify and
advance expenses to its directors, officers, employees and other agents to the
fullest extent permitted by Delaware law. The Company also has entered into
indemnification agreements with each of its directors and executive officers
whereby the Company will indemnify each such person against certain claims
arising out of certain past, present or future acts, omissions or breaches of
duty committed by an indemnitee while serving as a director of the Company or
any of its subsidiaries. Such indemnification does not apply to acts or
omissions which are knowingly fraudulent, deliberately dishonest or arise from
willful misconduct. Indemnification will only be provided to the extent that the
indemnitee has not already received payments in respect of a claim from the
Company or from an insurance company. Under certain circumstances, such
indemnification (including reimbursement of expenses incurred) will be allowed
for liability arising under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
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<PAGE> 10
The Company has purchased a directors' and officers' liability policy
insuring directors and officers of the Company from certain liabilities as a
result of their service as directors and officers of the Company.
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation. The Company is a successor
to Presidential Mortgage Company, a California limited partnership (the
"Partnership"). On June 27, 1997, the Company and the Partnership completed a
restructuring (the "Restructuring"), as a result of which all of the assets and
liabilities of the Partnership were transferred to the Company. Prior to the
Restructuring, the executive officers of the Company received compensation from
the Partnership, Presidential Management Company, the general partner of the
Partnership (the "General Partner") and/or Pacific Thrift, under various
arrangements with those entities. (See "CERTAIN TRANSACTIONS.") The following
table sets forth certain summary information concerning compensation paid or
accrued by the Company, the Partnership, the General Partner and Pacific Thrift
to or on behalf of the Chief Executive Officer and each of the Named Executives
for the fiscal years ended December 31, 1996, 1995, and 1994:
<TABLE>
<CAPTION>
Actual Annual Compensation
-----------------------------------------------------------
Securities
Underlying
Name and Principal Position Year Salary($)(1) Bonus($) Options(#)(2)
- --------------------------- ---- ------------ -------- -------------
<S> <C> <C> <C> <C>
Joel R. Schultz,(3) 1996 $450,704 $222,750(4) 48,000
Chief Executive Officer, 1995 $400,466 -0- -0-
the Company and Pacific Thrift 1994 $214,200 -0- -0-
Richard D. Young, President 1996 $247,583 $354,750(5) 50,000
and Chief Operating Officer, 1995 $214,273 -0- -0-
Pacific Thrift 1994 $161,600 -0- -0-
Frank Landini, 1996 $184,600 $207,112(6) 18,000
Executive Vice President - 1995 $159,600 -0- -0-
Wholesale Lending Division, 1994 $109,600 -0- -0-
Pacific Thrift
Kenneth Carmona, (7) 1996 $151,733 $25,000 9,000
President, Consolidated 1995 $150,000 -0- -0-
Reconveyance Company 1994 $150,150 -0- -0-
("CRC", Lenders Posting and
Publishing Company ("LPPC")
and Consolidated Reconveyance
Corporation ("CRCWA")
Charles J. Siegel, 1996 $163,577 $51,667 13,000
Chief Financial Officer, 1995 $144,400 -0- -0-
the Company and Pacific Thrift 1994 $125,967 -0- -0-
</TABLE>
- ----------
(1) The amounts specified above include automobile allowances and directors'
fees, but do not include life insurance or medical insurance premiums for
benefits in excess of group benefits provided to employees, the aggregate amount
of which do not exceed the lesser of either $50,000 or 10% of the total annual
salary and bonus reported for each of the above named executives in each
reported year.
-8-
<PAGE> 11
(2) All options shown in this column were granted after June 27, 1996 and are
exercisable at a price equal to the fair market value of the options on the date
of grant.
(3) Salary amounts include payments prior to the effective date of the
Restructuring for providing legal services in connection with loan accounts
prior to June 27, 1996. See "Certain Transactions -- Payments to Managing
Officers of the Partnership."
(4) Consists of a bonus amount earned under an employment agreement entered into
effective as of the closing date of the Restructuring accrued for in 1996 and
paid in 1997.
(5) Consists of a bonus of $107,000 paid in 1996 for the period prior to the
Restructuring, a special discretionary bonus of $25,000 paid after the
Restructuring and a bonus of $222,750 accrued for in 1996 under an employment
agreement entered into effective as of the closing date of the Restructuring
Date and paid in 1997.
(6) Consists of a bonus of $182,112 accrued for 1996, of which 75% was paid in
January 1997 and 25% will be paid in January 1999 under an employment agreement,
and a special discretionary bonus of $25,000 paid after the Restructuring. See
"-- Employment Agreements."
(7) Includes amounts paid to a wholly owned corporation of Mr. Carmona. Mr.
Carmona terminated his employment with the Company effective as of December 31,
1996, upon the sale of CRC, LPPC and CRCWA to two new entities substantially
owned by Mr. Carmona. See "Certain Transactions -- Sale of CRC, CRCWA and
LPPC."
OPTIONS
OPTION GRANTS DURING 1996. The Named Executives of the Company received
grants of Incentive Stock Options during the year ended December 31, 1996 for
the following amounts of shares of Common Stock. None of such options had been
exercised, and all of such options were held by the Named Executives as of
December 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
Number of % of Total
Securities Options
Underlying Granted to Exercise of
Options Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Joel R. Schultz 48,000 20% 10.00 06/24/06 $301,869 $764,996
Richard D. Young 50,000 21% 10.00-12.50 06/24/06- $317,592 $804,840
06/25/06
Frank P. Landini 18,000 8% 10.00-12.50 06/24/06- $116,346 $294,842
06/25/06
Charles J. Siegel 13,000 5% 10.00-12.50 06/24/06- $85,687 $217,147
06/25/06
Kenneth A. Carmona(1) 9,000 4% 10.00 03/31/97 $ n/a $ n/a
</TABLE>
-9-
<PAGE> 12
(1) Mr. Carmona terminated his employment with the Company on December 31, 1996,
and the expiration of his options was therefore accelerated to March 31, 1997.
Mr. Carmona exercised all of his options on February 25, 1997, when the options
had a potential realizable value of $198,000 based on the $32 per share market
price of the Common Stock on the exercise date.
OPTION EXERCISES IN 1996 AND CURRENT OPTION VALUES. No options were
exercised during the last fiscal year. The following table provides certain
information concerning unexercised options held as of December 31, 1996, by the
executive officers who held options at the end of 1996:
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END VALUES
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996
AND DECEMBER 31, 1996 OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options
Options at 12/31/96 (#) at 12/31/96 ($) (1)
------------------------------ -------------------------------
Shares
Acquired on Value
Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joel R. Schultz 0 0 9,600 38,400 $182,400 $729,600
Richard D. Young 0 0 0 50,000 0 $945,000
Frank P. Landini 0 0 0 18,000 0 $337,000
Charles J. Siegel 0 0 0 13,000 0 $240,750
Kenneth A. Carmona 0 0 9,000 0 $171,000 0
</TABLE>
(1) Value of unexercised "in-the-money" options is the difference between
the market price of the Common Stock at December 31, 1996 ($29.00 per
share) and the exercise price of the option, multiplied by the number
of shares subject to the option.
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with Messrs. Joel R.
Schultz, Richard D. Young, Kenneth A. Carmona, Norman A. Markiewicz and Richard
B. Fremed, effective as of June 27, 1996, the closing date of the Restructuring
(the "Closing Date"). In addition, Pacific Thrift entered into an employment
agreement with Mr. Frank P. Landini which became effective as of January 1,
1996. The employment agreement with Mr. Carmona was terminated effective
December 31, 1996, upon the sale of CRC, LPPC and CRCWA to entities controlled
by Mr. Carmona. On January 1, 1997, the Company entered an employment agreement
with Mr. Charles J. Siegel.
The employment agreement with Mr. Schultz provided for an initial term of
three years, which is automatically extended for additional one year terms
thereafter unless either party gives at least six months written notice of its
or his intention not to renew the agreement. Mr. Schultz is employed as the
President and Chief Executive Officer of the Company, Chief Executive Officer of
Pacific Thrift, and President and Chief Executive Officer of PacificAmerica
Centers. Mr. Schultz' annual salary is $225,000 per year, as adjusted annually
for increases in the cost of living index, plus an annual bonus of 2-1/2% of the
net pre-tax profits of the Company if the Company earns net after tax profits
(after payment of annual bonuses) equal to a minimum return on equity (as
determined on the Closing Date with respect to 1996 and on January 1 of each
succeeding calendar year) of 20% (reduced to 10% for each year after the Company
reaches equity of at least $20 million). The bonus will increase to 5% of the
net pre-tax profits of the Company if the Company earns net after tax profits
equal to a minimum return on equity of 30% or more (reduced to 20% for each year
after the Company reaches equity of at least $20 million). For 1996, the bonus
included only net profits of the Company from the Closing Date through December
31, 1996. The bonus will be reduced to the extent necessary to allow the Company
to retain the applicable minimum return on
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<PAGE> 13
equity. Up to 50% of each year's annual bonus will be payable in quarterly
installments during the applicable year for which the bonus is earned,
determined by annualizing the quarterly return on equity for each of the first
three quarters of the year. Mr. Schultz is not eligible to participate in the
employee cash bonus pool of the Company.
The employment agreement with Mr. Young provided for an initial term of
two years, which is automatically extended for additional one year terms
thereafter unless either party gives at least six months written notice of its
or his intention not to renew the agreement. Mr. Young is employed as the
President of Pacific Thrift and Senior Executive Vice President of the Company
and PacificAmerica Centers. Mr. Young's annual salary is $225,000 per year, as
adjusted annually for increases in the cost of living index, plus an annual
bonus of 2-1/2% of the net pre-tax profits of the Company if the Company earns
net after tax profits (after payment of annual bonuses) equal to a minimum
return on equity (as determined on the Closing Date with respect to 1996 and on
January 1 of each succeeding calendar year) of 20% (reduced to 10% for each year
after the Company reaches equity of at least $20 million). The bonus will
increase to 5% of the net pre-tax profits of the Company if the Company earns
net after tax profits equal to a minimum return on equity of 30% or more
(reduced to 20% for each year after the Company reaches equity of at least $20
million). For 1996, the bonus included only net profits of the Company from the
Closing Date through December 31, 1996. The bonus will be reduced to the extent
necessary to allow the Company to retain the applicable minimum return on
equity. Up to 50% of each year's annual bonus will be payable in quarterly
installments during the applicable year for which the bonus is earned,
determined by annualizing the quarterly return on equity for each of the first
three quarters of the year. Mr. Young is not eligible to participate in the
employee cash bonus pool of the Company.
The employment agreements of Messrs. Schultz and Young were amended as of
January 1, 1997 to provide that (i) the initial term of each of the Agreements
will be extended until December 31, 2000, and each agreement will thereafter be
automatically extended for additional one year terms thereafter unless either
party gives at least six months written notice of its or his intention not to
renew the agreement; (ii) the annual bonus amount will be determined as the
applicable percentage of the annual net pre-tax profits of the Company as
determined before deduction of the bonuses payable to Messrs Schultz and Young;
(iii) up to 80% of each year's annual bonus will be payable in quarterly
installments during the applicable year for which the bonus is earned, with any
amount paid during the year in excess of the annual bonus determined at year end
to be deducted from base salary and any other amounts owed to the officer by the
Company or, in the discretion of the Board of Directors, paid by the executive
beginning in the next quarter following an overpayment; and (iv) upon a
termination of employment due to a "Corporate Change" (the definition of which
is summarized below under this heading), the bonus amount payable to Mr. Schultz
will be one and one-half times, and the bonus amount payable to Mr. Young will
be equal to, the higher of the actual bonus earned in the prior year or an
amount determined by annualizing the pre-tax and after-tax profits of the
Company for the number of months completed in the current year prior to the
Corporate Change. If the amended employment agreements are not approved by a
majority of stockholders present and voting at the Annual Meeting, the Company
will not be able to deduct for income tax purposes the amount of any
performance-based compensation paid to Messrs. Schultz or Young in excess of
$1,000,000. See "Approval of Amendments to Employment Agreements of Executive
Officers."
The employment agreement with Mr. Siegel provides for a term of two years,
which will be automatically extended for additional one year terms thereafter
unless either party gives at least six months written notice of its or his
intention not to renew the agreement. Mr. Siegel is employed as Chief Financial
Officer of the Company, PacificAmerica Centers and Pacific Thrift. Mr. Siegel's
annual salary is $160,000 per year, as adjusted annually for increases in the
cost of living index, and Mr. Siegel is also eligible to participate in the
employee cash bonus pool of the Company.
The employment agreement with Mr. Markiewicz provides for a term of one
year, which will be automatically extended for additional one year terms
thereafter unless either party gives at least six months written notice of its
or his intention not to renew the agreement. Mr. Markiewicz is employed as
Executive Vice President of the Company, PacificAmerica Centers and Pacific
Thrift. Mr. Markiewicz' annual salary is $135,000 per year, as adjusted annually
for increases in the cost of living index, and Mr. Markiewicz is also eligible
to participate in the employee cash bonus pool of the Company.
The employment agreement with Mr. Fremed provides for a term of one year,
which will be automatically extended for additional one year terms thereafter
unless either party gives at least six months written notice of its or his
intention not to renew the agreement. Mr. Fremed is employed as Executive Vice
President and Secretary of the
-11-
<PAGE> 14
Company, and PacificAmerica Centers, and Secretary and Treasurer of Pacific
Thrift. Mr. Fremed's annual salary is $125,000 per year, as adjusted annually
for increases in the cost of living index, and Mr. Fremed is eligible to
participate in the employee cash bonus pool of the Company.
The employment agreements of Messrs. Schultz, Young, Siegel, Markiewicz
and Fremed provide that an executive may voluntarily terminate his employment
with the Company upon the occurrence of a corporate change, as defined in the
employment agreement (a "Corporate Change"). In that event, the employee will be
entitled to continuation of certain benefits, and severance pay equal to a
percentage of his salary and bonus as provided in his agreement. Corporate
Changes under the employment agreements include any one (or more) of the
following events: (i) any person, including a group as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended, becomes the
beneficial owner of shares of the Company with respect to which twenty percent
(20%) or more of the total number of votes for the election of the Board may be
cast; (ii) as a result of, or in connection with, any cash tender offer,
exchange offer, merger or other business combination, sale of assets, or
contested election for the Board, or combination of the foregoing, persons who
were directors of the Company just prior to such event(s) shall cease to
constitute a majority of the Board; (iii) a transaction in which the Company
will cease to be an independent publicly owned corporation that is required to
file quarterly and annual reports under the Securities Exchange Act of 1934, or
a sale or other disposition of all or substantially all the assets of the
Company (including but not limited to the assets or stock of Company's
subsidiaries that results in all or substantially all of the assets or stock of
Company on a consolidated basis being sold); (iv) a tender offer or exchange
offer is made for shares of the Company's Common Stock (other than one made by
the Company) and shares of Common Stock are acquired thereunder; (v) the
stockholders of the Company cause a change in the majority of the members of the
Board within a twelve (12) month period; provided, however, that the election of
one or more new directors shall not be deemed to be a change in the membership
of the Board if the nomination of the newly elected directors was approved by
the vote of three-fourths of the directors then still in office who were
directors at the beginning of such twelve (12) month period; (vi) with respect
to Joel Schultz only, a change in his duties or a reduction in compensation and
(vii) with respect to Charles Siegel only, a change in the Chief Executive
Officer and Senior Executive President of the Company.
The Company retains the right to terminate any of the employment
agreements in the event of an employee's physical or mental disability which
renders him unable to perform under the agreement for any period of one hundred
and twenty consecutive days or for an aggregate period of one hundred and twenty
or more days during any twelve-month period. In the event of termination due to
disability, an employee would be entitled to receive as disability compensation
a lump sum payment equal to the annual bonus earned by employee during the
fiscal year preceding the year of termination, one year's annual salary, payable
not less frequently than monthly and continuation of certain benefits for the
greater of one year or the remainder of the term under the agreement. In the
event of death, an employee's personal representative is entitled to receive as
a death benefit, in addition to any other payments which he may be entitled to
receive under any of the Company's benefit plans, payment of one year's salary,
payable not less frequently than monthly. In addition, the personal
representative of Mr. Schultz or Mr. Young would be entitled to receive a lump
sum payment equal to the higher of the bonus earned in the prior year or the
bonus that would have been earned in the current year had the employee continued
his employment for the full year.
The Company will have the right to terminate the employee for cause, which
is defined in the agreement as conviction of a felony or any crime involving
moral turpitude, commission of an act of fraud, theft or embezzlement against
the Company, or conduct materially injurious to the Company's business or
reputation. In the event of termination of the agreement without cause, the
employee would be entitled to the continuation of certain benefits and severance
pay for either six months or one year, as provided in his agreement.
Mr. Landini is employed as Executive Vice President of Pacific Thrift for
a term of two years by Pacific Thrift, which will be automatically extended for
additional one year terms thereafter unless either party gives at least six
months written notice of its or his intention not to renew the agreement. Mr.
Landini receives an annual base salary of $150,000, as adjusted annually for
increases in the cost of living index. Mr. Landini also receives an annual bonus
based upon net profits earned by Pacific Thrift's Wholesale Division, over which
Mr. Landini has primary responsibility. Net profits from the Wholesale Division
consists of revenues earned from premiums on loan sales, net interest earned on
loans prior to sale, and net fees charged to borrowers (less fees paid to
brokers and other referral sources), less employee related and overhead expenses
of the Wholesale Division.
Mr. Landini's original agreement provided for him to receive up to
$100,000 of his bonus earned in 1996 plus one-half of any bonus earned in 1996
in excess of $200,000 in January 1997, with any remaining bonus amount
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<PAGE> 15
earned in 1996 to be paid 36 months later. For years after 1996, one-half of Mr.
Landini's bonus was to be paid the following January, and the remaining half
paid 36 months later. In every case, the deferred bonus amount is subject to
forfeiture if Mr. Landini voluntarily terminated his employment or Pacific
Thrift terminated his employment "for cause." Events which are deemed
termination "for cause" include conviction of a felony or any crime involving
moral turpitude, commission of an act of fraud, theft or embezzlement against
Pacific Thrift or conduct materially injurious to Pacific Thrift's business or
reputation. If Mr. Landini's employment agreement continues for a total of ten
years or more, the provision delaying a portion of his bonus for three years
will terminate. Mr. Landini is not eligible for the employee bonus pool.
Pursuant to an amendment to his agreement dated as of January 1, 1997, 75%
of the bonus earned in 1996 was paid in January 1997, and 75% of the bonus
payable for future years will be payable in the following January, with the
remainder of each year's bonus payable three years thereafter.
PLANS AND ARRANGEMENTS
Employees of the Company, including executive officers, are entitled to
participate in various benefit plans established by the Company and approved by
the Board of Directors and the Partnership, as the sole stockholder of the
Company, prior to the Restructuring.
1995 STOCK OPTION PLAN
The 1995 PacificAmerica Money Center, Inc. Stock Option Plan (the "1995
Plan") is designed to promote and advance the interests of the Company and its
stockholders by (1) enabling the Company to attract, retain, and reward
managerial and other key employees and non-employee directors, and (2)
strengthening the mutuality of interests between participants and the
stockholders of the Company in its long term growth, profitability and financial
success by offering stock options.
SUMMARY OF THE 1995 PLAN. The 1995 Plan empowers the Company to award or
grant from time to time until December 31, 2003, when the 1995 Plan expires
except with respect to options then outstanding, to officers, directors and key
employees of the Company and its subsidiaries, Incentive and Non-Qualified Stock
Options ("Options") authorized by the Committee which will administer the 1995
Plan.
ADMINISTRATION. The 1995 Plan is administered by the Executive
Compensation and Stock Option Committee of the Board of Directors (the
"Executive Compensation Committee"). The 1995 Plan provides that the Executive
Compensation Committee must consist of at least two non-employee directors of
the Company within the meaning of Rule 16b-3 under the Securities and Exchange
Act of 1934, as amended (the "Exchange Act") and "outside directors" within the
meaning of proposed Treasury Regulations ss. 1.162-27(c)(3). The Executive
Compensation Committee has the sole authority to construe and interpret the 1995
Plan, to make rules and procedures relating to the implementation of the 1995
Plan, to select participants, to establish the terms and conditions of Options
and to grant Options, with broad authority to delegate its responsibilities to
others, except with respect to the selection for participation of, and the
granting of Options to, persons subject to Sections 16(a) and 16(b) of the
Exchange Act. Members of the Executive Compensation Committee are not be
eligible to receive discretionary Options under the 1995 Plan.
ELIGIBILITY CONDITIONS. Managerial employees, including all officers of
the Company, and other key employees of the Company and its subsidiaries who
hold positions of significant responsibility and non-employee directors will be
eligible to receive Options under the 1995 Plan. Non-employee directors are only
eligible to receive Non-Qualified Stock Options under the 1995 Plan. Except for
Non-Qualified Stock Options granted to non-employee directors, the selection of
recipients of, and the nature and size of, Options granted under the 1995 Plan
will be wholly within the discretion of Executive Compensation Committee. The
1995 Plan is subject to specific formula provisions relating to the grant of
options to non-employee directors, the exercisability of Incentive Stock Options
and
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<PAGE> 16
the total shares available for option grants. In addition, there is a 50,000
share limit on the number of shares of Common Stock in respect of which any type
of Options may be granted to any person in each calendar year.
SHARES SUBJECT TO 1995 PLAN. The maximum number of shares of Common Stock
in respect of which Options may be granted under the Plan (the "Plan Maximum")
is 250,000 with an increase of two percent (2%) of the total issued and
outstanding shares of the Common Stock on the first day of each subsequent
calendar year, up to a maximum 330,000 shares, commencing January 1, 1997.
For the purpose of computing the total number of shares of Common Stock
available for Options under the 1995 Plan, the above limitations shall be
reduced by the number of shares of Common Stock subject to issuance upon
exercise or settlement of Options, determined at the date of the grant of such
Options. However, if any Options are forfeited, terminated, settled in cash or
exchanged for other Options or expire unexercised, the shares of Common Stock
previously subject to such Options shall again be available for further Option
grants. The shares of Common Stock which may be issued to participants in the
1995 Plan may be either authorized and unissued Common Stock or issued Common
Stock reacquired by the Company. No fractional shares may be issued under the
1995 Plan.
The maximum numbers of shares of Common Stock in payment of Options
granted or which may be subject to Options, as applied to the 1995 Plan and its
several components, are subject to appropriate equitable adjustment in the event
of a reorganization, stock split, stock dividend, combination of shares, merger,
consolidation or other recapitalization of the Company.
TRANSFERABILITY. No Option granted under the 1995 Plan, and no right or
interest therein, is assignable or transferable by a participant except by will
or the laws of descent and distribution.
TERM, AMENDMENT AND TERMINATION. The 1995 Plan will terminate on December
31, 2003, except with respect to Options then outstanding. The Board or
Directors may amend or terminate the 1995 Plan at any time, except that, (i) to
the extent restricted by Rule 16b-3 promulgated under the Exchange Act, as
amended and in effect from time to time (or any successor rule), the Board of
Directors may not, without approval of the stockholders of the Company, make any
amendment that would (1) increase the total number of shares available for
issuance (except as permitted by the 1995 Plan to reflect changes in capital
structure), (2) materially change the eligibility requirements, or (3)
materially increase the benefits accruing to participants under the 1995 Plan,
and (ii) the provisions of the 1995 Plan governing the award of options to
non-employee directors may not be amended more than once every six months other
than to comport with changes to the Code, the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or the regulations promulgated
thereunder.
CHANGE OF CONTROL. The 1995 Plan provides that the exercisability of
outstanding Options shall be accelerated upon any of the following events: (i)
any person, including a group as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended, becomes the beneficial owner of shares of the
Company with respect to which twenty percent (20%) or more of the total number
of votes for the election of the Board may be cast; (ii) as a result of, or in
connection with, any cash tender offer, exchange offer, merger or other business
combination, sale of assets, or contested election for the Board, or combination
of the foregoing, persons who were directors of the Company just prior to such
event(s) shall cease to constitute a majority of the Board; (iii) a transaction
in which the Company will cease to be an independent publicly owned corporation
that is required to file quarterly and annual reports under the Securities
Exchange Act of 1934, or a sale or other disposition of all or substantially all
the assets of the Company (including but not limited to the assets or stock of
the Company's subsidiaries that results in all or substantially all of the
assets or stock of the Company on a consolidated basis being sold); (iv) a
tender offer or exchange offer is made for shares of the Company's Common Stock
(other than one made by the Company ) and shares of Common Stock are acquired
thereunder; or (v) the stockholders of the Company cause a change in the
majority of the members of the Board within a twelve (12) month period;
provided, however, that the election of one or more new directors shall not be
deemed to be a change in the membership of the Board if the nomination of the
newly elected directors was approved by the vote of three-fourths of the
directors then still in office who were directors at the beginning of such
twelve (12) month period.
INCENTIVE STOCK OPTIONS. Options designated as Incentive Stock Options,
within the meaning of Section 422 of the Code, in respect of up to the Plan
Maximum may be granted under the 1995 Plan. The number of shares of Common Stock
in respect of which Incentive Stock Options are first exercisable by any
optionee during any calendar year shall not have a fair market value (determined
at the date of grant) in excess of $100,000 (or such other limit as
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<PAGE> 17
may be imposed by the Code). To the extent the fair market value of the shares
for which options are designated as Incentive Stock Options that are first
exercisable by any optionee during any calendar year exceed $100,000, the excess
amount shall be treated as Non-Qualified Stock Options. Incentive Stock Options
shall be exercisable for such period or periods, not in excess of ten years
after the date of grant, as shall be determined by Executive Compensation
Committee.
GRANT OF INCENTIVE STOCK OPTIONS. As of December 31, 1996, a total of
227,400 Incentive Stock Options were held by key employees, including executive
officers of the Company, at exercise prices ranging from $10 to $30 per share.
For employees who were employed by the Partnership for five years or more,
options become exercisable 20% after the first six months following the grant,
and an additional 20% on the first, second, third and fourth anniversary dates
of the grant thereafter. For employees who were employed by the Partnership for
less than five years, options become exercisable 25% on each of the first,
second, third and fourth anniversary dates of the grant. See "-- Option Grants
During 1996."
NON-QUALIFIED STOCK OPTIONS. Non-Qualified Stock Options may be granted
for such number of shares of Common Stock and will be exercisable for such
period or periods as Executive Compensation Committee shall determine, up to a
maximum term of ten years.
OPTIONS TO NON-EMPLOYEE DIRECTORS. The 1995 Plan also provides for the
grant of options to non-employee directors of the Company or any of its
subsidiaries, without any action on the part of the Board or Executive
Compensation Committee, only upon the terms and conditions set forth in the 1995
Plan. Each eligible non-employee director of the Company or any of its
subsidiaries automatically receives, for each directorship held by such person,
Non-Qualified Options to acquire (i) 1,000 shares of Common Stock and (ii) 100
shares of Common Stock after each 12 month period of continuous service as a
director of the Company thereafter for up to a maximum of five such periods. In
no event, however, shall any person receive options upon becoming a director for
more than 1,000 shares or options for any subsequent year in excess of 200
shares per year. Each person who thereafter becomes a non-employee director
shall automatically receive Non-Qualified Options to acquire (i) 1,000 shares of
Common Stock for each directorship held by such person on the date such person
becomes a non-employee director and (ii) 100 shares of Common Stock after each
12 month period of continuous service as a director of the Company thereafter
for up to a maximum of five such periods. In no event, however, shall any person
receive options upon becoming a director for more than 1,000 shares or options
for any subsequent year in excess of 200 shares per year. Each option shall
become exercisable as to 50% of the shares of Common Stock subject to the option
on each of the first anniversary date of the grant and 50% on the second
anniversary date of the grant, and will expire ten years from the date the
option was granted. The exercise price of such options shall be equal to 100% of
the fair market value of the Common Stock subject to the option on the date on
which such options are granted. Each option shall be subject to the other
provisions of the 1995 Plan.
As of December 31, 1996, the non-employee directors of the Company and its
subsidiaries and one consultant have been granted pursuant to the formula
provisions of the 1995 Plan Non-Qualified Options to acquire a maximum of 6,000
shares of Common Stock, at exercise prices ranging from $10 to $14.75 per share.
The Board of Directors has adopted an amendment to the 1995 Plan, subject
to the approval of the stockholders, to increase the number of Non-Qualified
Options which would automatically be granted to non-employee directors after
each 12 month period of continuous services as a director from 100 shares for
each directorship held, to 1,000 shares, regardless of the number of
directorships held . See "APPROVAL OF AMENDMENT TO 1995 STOCK OPTION PLAN."
OPTION EXERCISE PRICES. The exercise price of an Incentive Stock Option
shall be at least 100% of the fair market value of the Common Stock on the date
of grant. Except for Options to Non-Employee Directors, Non- Qualified Stock
Options may be issued at such option exercise price as Executive Compensation
Committee shall determine, but not less than par value per share. The fair
market value of all Options is determined as the closing price of the Common
Stock on the date the Option is granted.
EXERCISE OF OPTIONS. No Stock Option may be exercised, except as provided
below, unless the holder thereof remains in the continuous employ or service of
the Company or one of its subsidiaries.
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Stock Options are exercisable only upon the payment in full of the
applicable option exercise price in cash or, if approved by Executive
Compensation Committee, in shares of the Common Stock (at the fair market value
thereof at exercise date) or, if approved by Executive Compensation Committee,
by surrendering outstanding Options denominated as to which the participant is
vested. No Incentive or Non-Qualified Stock Option may be exercised within six
months following the date of grant.
RETIREMENT PLAN
The Company has adopted the 401(k) Plan previously established by the
General Partner on behalf of the Partnership and its subsidiaries (the
"Retirement Plan"). The terms of the Retirement Plan allow employees to invest
contributions in Common Stock of the Company.
All employees (including officers) of the Company and its subsidiaries are
eligible to participate in the Retirement Plan and future employees will be
eligible following the completion of 1,000 hours of service and their first year
of employment. Subject to certain limitations, participants in the Retirement
Plan may make contributions from 2% to 15% of their pretax compensation, up to a
maximum of $9,500 per year (in 1996), subject to certain limitations and annual
adjustments for inflation. The Company may, in its discretion, make a matching
contribution equal to a percentage of compensation contributed by each
participant, not to exceed 6% of compensation. The Retirement Plan is designed
to qualify under Section 401(k) of the Code and therefore contributions by the
Company and the participants are deductible by the Company and not includable in
the income of the participants for federal income tax purposes. Participants
will always be fully vested in all of their individual contributions to the
Retirement Plan (and in earnings on such contributions). Participants will be
fully vested in employer contributions (and earnings on such contributions) to
the Retirement Plan, regardless of years of service, upon the attainment of
normal retirement age (age 65), such participant's death or permanent and total
disability while employed by the Company or the termination or complete
discontinuance of the Retirement Plan. If a participant terminates employment
with the Company for any other reason other than retirement, then such
participant's interest in employer contributions to the Retirement Plan shall
vest 20% after one year of service, and 20% for each year of service thereafter,
so they will be vested 100% after five or more years of service. An employee's
service with the Partnership, the General Partner, and former affiliates is
counted for purposes of vesting under the Retirement Plan.
STOCK PURCHASE PLAN
The 1995 Employee Stock Purchase Plan (the "Stock Purchase Plan") provides
for eligible employees of the Company and its subsidiaries to participate in the
ownership of the Company by acquiring the right to purchase shares of the
Company's Common Stock. The Stock Purchase Plan covers a total of 50,000 shares
of Common Stock, which may be purchased by the Plan in the open market or issued
by the Company from authorized and unissued treasury stock. The purpose of the
Stock Purchase Plan is to promote the interests of the Company by providing a
method whereby employees of the Company may participate in the ownership of the
Company by acquiring an interest in the Company's growth and productivity.
THE OPTIONS. The Stock Purchase Plan provides that, during each specified
period ("Option Period"), the Company may grant options to participants to
purchase, at the termination of that Option Period, shares of Common Stock under
the Stock Purchase Plan. The Option Periods coincide with the Company's calendar
year.
The price at which each share covered by an option under the Stock
Purchase Plan may be purchased is in all instances 100% of the fair market value
of a share of Common Stock on the first day of the applicable Option Period.
Unless terminated, options granted at the commencement of an Option Period
are exercised automatically on the last day of that Option Period. An option
terminates upon a voluntary withdrawal from participation in the Stock Purchase
Plan by a participant, which may be effected any time prior to the last day of
the Option Period by completing a notice of termination form. An option also
terminates automatically if the participant holding the option ceases to be
employed by the Company or a subsidiary of the Company for any reason (including
death, disability or retirement) prior to the last day of the Option Period.
An option may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent or
distribution, and may be exercised, during the lifetime of the optionee, only
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by such optionee. Optionees do not have rights as Stockholders with respect to
option shares until they exercise their options.
ELIGIBILITY AND PARTICIPATION. All full-time employees of the Company and
its subsidiaries who have been employed continuously for at least 30 days and
who work more than 20 hours per week are eligible to participate in the Stock
Purchase Plan at their election. However, no employee may be granted an option
if such employee would immediately thereafter own, directly or indirectly, 5% or
more of the combined voting power of all classes of stock, of the Company, as
determined pursuant to Section 424(d) of the Code.
Eligible employees may enroll as participants in the Stock Purchase Plan
by executing a form provided by the Company prior to the commencement of each
Option Period on which they may designate the stated maximum set forth on the
form, to (1) the portion of their compensation, in any amount up to the stated
maximum set forth on the form, to be deducted semi-monthly, and accumulated for
the purchase of shares of Common Stock, and/or (2) the amount of funds, if any,
which they will deposit at the beginning of the Option Period for the purchase
of shares of Common Stock. Once chosen, the semi-monthly contribution for that
Option Period cannot be decreased or increased without terminating the option.
The aggregate maximum dollar amount which may be designated by a participant to
be applied to the purchase of shares under the Stock Purchase Plan may not
exceed the lesser of 15% of base compensation or $25,000 per year.
ADMINISTRATION AND AMENDMENT. The Stock Purchase Plan is administered by
the Executive Compensation and Stock Option Committee of the Board of Directors.
That Committee is empowered to interpret and construe any provision of the Stock
Purchase Plan and to adopt such rules and regulations for administering the
Stock Purchase Plan as it deems necessary.
The Board of Directors of the Company may at any time, insofar as is
permitted by law, alter, amend, suspend or discontinue the Stock Purchase Plan
with respect to any shares not already subject to options; provided, however,
that without the approval of the Stockholders no modification or amendment may
increase the number of shares subject to the Stock Purchase Plan, extend the
term of the Stock Purchase Plan, alter the option price formula, otherwise
materially increase the benefits accruing to participants, materially modify the
requirements as to eligibility for participation, or amend the Stock Purchase
Plan in any manner that will cause it to fail to meet the requirements of an
"Employee Stock Purchase Plan" as defined in Section 423 of the Code.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The PacificAmerica Money Center, Inc. Supplemental Executive Retirement
Plan (the "Supplemental Plan"), an unfunded retirement plan, is designed to
provide benefits to certain long-term executive officers of the Company and its
predecessors. Participants' years of service with the Partnership, the General
Partner (and its former affiliate, Pacific Thrift and Loan Association) CRC,
LPPC and Pacific Thrift prior to the completion of the Restructuring will carry
forward for vesting and benefit accrual purposes. The Supplemental Plan covers
the following six employees: Joel R. Schultz, Richard B. Fremed, Norman A.
Markiewicz, Richard D. Young, Charles J. Siegel and Frank P. Landini. Future
participants, if any, will be determined by the Board of Directors.
Administration of the Supplemental Plan is the responsibility of the Executive
Compensation and Stock Option Committee. Participants in the Supplemental Plan
will not be permitted to make contributions to the Supplemental Plan.
Under the Supplemental Plan, a participant's 65th birthday is deemed his
or her normal retirement date ("Normal Retirement Date"). The yearly benefit
that a participant will receive at his or her Normal Retirement Date will be
1-2/3% of his or her average compensation (whether paid by the General Partner,
the Partnership or the Company) for his or her highest 3 consecutive years,
multiplied by the actual number of his or her years of service. However, in no
event will any years of service in excess of 30 be taken into account. The
participant's benefits are reduced by his estimated Social Security Benefit and
by his estimated Section 401(k) Plan Benefit. The estimated 401(k) Plan Benefit
is determined as a straight life annuity that is the actuarial equivalent of the
sum of the elective deferral and company matching contributions made to the
Retirement Plan, based on the assumption that the maximum elective deferrals and
company match are contributed to the Retirement Plan on behalf of the
participant each year and the participant's account yields an assumed earnings
rate. Benefits are payable monthly upon the participant's retirement.
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<PAGE> 20
A participant is entitled to elect early retirement before his or her
Normal Retirement Date, and still receive retirement benefits, at any time after
(a) he or she has completed 15 years of service and (b) the sum of his or her
age and years of service equals or exceeds 70 ("Early Retirement Date"). The
dollar amount of a participant's early retirement benefit equals the normal
retirement benefit reduced 1/4% for each month prior to his or her 65th
birthday.
If a participant dies while employed by the Company at any time when he or
she is eligible for early or normal retirement, his or her surviving spouse will
receive the survivor portion of a benefit determined as if the participant had
retired on the day before his or her death, and had elected to receive his or
her benefit in the form of a 50% joint and survivor annuity.
Participants' benefits will become fully vested upon the attainment of
their Early Retirement Date or Normal Retirement Date; however, participants
will forfeit all of their benefits in the event they are terminated for cause,
or they engage in competition with the Company without express written consent
of the Company, either before or after retirement.
Special rules apply following a Change of Control of the Company. If a
participant's employment is terminated within 5 years following a Change of
Control:
(a) the participant will be entitled to receive a benefit even if he or
she voluntarily terminates employment prior to eligibility for retirement,
provided it is for "Good Reason," which includes, among other circumstances,
reduction in the participant's annual base salary, the failure to pay within 7
days of the due date any portion of the participant's compensation, and the
Company's failure to continue in effect any material compensation plan in which
the participant participated immediately before the Change of Control;
(b) the participant will be credited with an additional 5 years of service
and entitled to receive a lump sum distribution of the present value of his or
her accrued benefit; and
(c) the participant's benefit can be forfeited because he or she is
terminated for cause only if (i) the termination is because of the willful and
continued failure by the participant to substantially perform his or her duties
with the Company after a written demand for substantial performance is delivered
to the participant by the Board of Directors, or (ii) the participant's theft or
embezzlement from the Company, fraud or other acts of dishonesty in the conduct
of the Company's business, conviction or plea of nolo contendere to any felony
or any crime involving moral turpitude, or willful and knowing action which is
materially injurious to the business or reputation of the Company.
A participant shall have the right to appeal a dismissal for cause to the
Board of Directors. Such participant shall not be deemed to have been terminated
for cause within 5 years following a Change of Control unless and until he or
she receives a copy of a resolution stating that the participant had committed
an act described in clause (i) or (ii) of paragraph (c) above, duly adopted by
the affirmative vote of not less than 75% of the entire membership of the Board
of Directors.
A participant also will have the right to receive a lump sum benefit under
the Plan in the event of a voluntary termination of employment within one year
following a Change of Control, based on his actual Years of Service.
The Board of Directors of the Company may amend or terminate the
Supplemental Plan at any time, provided that neither the accrual or vesting
rights of any participant at the time of amendment or termination may be
adversely affected without the consent of that participant. Plan termination
will not result in immediate vesting of accrued benefits.
The following table shows the estimated annual retirement benefits, before
any applicable offset for estimated Social Security benefits or estimated 401(k)
benefits under the Retirement Plan. Such benefits would be payable to
participants in the Supplemental Plan on their Normal Retirement Date on a
straight life annuity basis. Offsets for social security and 401(k)
contributions made under the Retirement Plan may be substantial for certain
participants.
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<PAGE> 21
<TABLE>
<CAPTION>
Average Annual Annual Compensation
Eligible Years of Service at Retirement
Compensation -------------------------------
15 20 25 30
----------- -------- --------- --------
<S> <C> <C> <C> <C>
$100,000 $25,005 $33,340 $41,675 $50,010
$200,000 $50,010 $66,680 $83,350 $100,020
$300,000 $75,015 $100,020 $125,025 $150,030
$400,000 $100,020 $133,360 $166,700 $200,040
$500,000 $125,025 $166,700 $208,375 $250,050
</TABLE>
1997 CASH BONUS PERFORMANCE PLAN
Effective April 18, 1997, the Board of Directors of the Company adopted a
1997 Cash Bonus Performance Plan (the "Bonus Plan") for all executive officers
and employees of the Company and its subsidiaries except Messrs. Joel R. Schultz
and Richard D. Young. The Bonus Plan is intended to provide a strong incentive
for all of the Company's executive officers and employees to significantly
enhance stockholder value.
The Bonus Plan has established $80 per share performance targets for the
market price of the Company's stock by December 31, 1999 or the consideration to
be received by all Common Stockholders in a sale, merger, cash tender offer,
exchange offer or other business combination. The performance targets will be
achieved if either (a) the average market price for the Company's Common Stock
(the "Market Price") for the sixty days prior to December 31, 1999 is in excess
of $80 per share; or (b) the total consideration (including cash and the value
of any other consideration received by the stockholders, as determined in good
faith by the Board of Directors of the Company) in a sale, merger, cash tender
offer, exchange offer or other business combination (the "Acquisition Price") is
in excess of $80 per share. If either of these performance targets is met, an
employee bonus pool, payable in cash and/or Common Stock in the discretion of
the Board of Directors, will be established by the Board of Directors equal to
no more than five percent (5%) of the excess of the Market Price or the
Acquisition Price over $80 per share, to be allocated among and paid at such
time to such of the employees and executive officers (other than Messrs. Schultz
and Young) as the Board of Directors shall determine, based upon its assessment
of the performance of such employees and executive officers.
The Board of Directors believes that this Bonus Plan will, in addition to
providing a strong incentive to maximize stockholder value, provide a
significant incentive for the all of the Company's valued employees, including
regional managers and top performing loan representatives, to remain in the
Company's employ. The Bonus Plan will be administered by the Company's Executive
Compensation Committee and may from time to time be amended, suspended or
terminated, in whole in part, by the Board of Directors. No amendment will be
effective without Board and/or stockholder approval if such approval is required
to comply with the applicable regulations under Internal Revenue Code Section
162(m), which relates to limits on deductibility of compensation to any
executive officer in excess of $1 million in any taxable year.
Since the Bonus Plan is not available to any executive officer whom
management currently believes would earn compensation in excess of $1 million,
there is no requirement for stockholder approval of the Bonus Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INTRODUCTION
Prior to the completion of the Restructuring on June 27, 1996, the
Partnership had various arrangements with its General Partner and affiliates,
pursuant to which the Partnership received services and acquired certain assets.
Upon the effective date of the Restructuring, all of the prior arrangements,
including management fees and reimbursements, between the Partnership and these
affiliates were terminated. The description of fees and other
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<PAGE> 22
payments appearing below are provided for historical purposes, and are not
representative of any current arrangements between the Company and any of its
officers or directors or any related entities, except as otherwise specifically
noted below with respect to a consulting agreement with a former director of the
Company.
MANAGEMENT AND OTHER FEES AND REIMBURSEMENTS PAID TO THE GENERAL PARTNER
Prior to the Restructuring, the General Partner received various fees and
reimbursements from the Partnership pursuant to the Partnership Agreement, all
of which were terminated effective upon the Closing Date. The following
paragraphs describe the various fees and reimbursements paid to the General
Partner for the three years ended December 31, 1996, 1995, 1994.
In 1993, the General Partner received management fees of $441,000 in the
first and second calendar quarters, which was required to be repaid as a result
of the Partnership's net loss for 1993. As a result, the General Partner
delivered a promissory note to the Partnership for the balance owed, payable in
four equal quarterly principal installments commencing December 20, 1994. As of
December 31, 1995, the General Partner owed $220,000 on this note. No interest
was paid or accrued for 1993. However, interest at prime plus 1% has been
accrued from January 1, 1994 until the date the note was paid. The General
Partner repaid the note and all accrued interest in June 1996.
The General Partner received no management fees in 1994 or 1995. A
management fee of $174,000 was paid to the General Partner in 1996. For the
years ended December 31, 1996, 1995 and 1994, the General Partner received
supervision fees of$959,000, $1,012,000, and $805,000 respectively from the
Partnership. For the years ended December 31, 1996, 1995 and 1994, the
Partnership and two of its subsidiaries reimbursed the General Partner $100,000,
$82,000 and $90,000 respectively for employee salaries and related expenses
provided by the General Partner.
PAYMENTS TO GENERAL PARTNER RELATED TO PURCHASE OF CRC AND LPPC
Effective July 1, 1990, the Partnership purchased CRC and LPPC from the
General Partner, for a total purchase price of $908,000. In addition, the
Partnership agreed to pay to the General Partner an additional amount annually
for five years, to be calculated as 50% of the total annual net profits earned
by CRC in excess of $465,000 (the "Base Profit Amount"). In 1995 and 1994 the
Partnership paid or accrued to the General Partner $172,000 and $224,000
pursuant to this provision. The amount accrued for 1995 was paid in 1996 and no
further amounts were payable to the General Partner under this agreement for any
period after December 31, 1995.
SALE OF CRC, CRCWA AND LPPC
Effective as of December 31, 1996, the Company sold substantially all of
the assets of CRC, and LPPC and all of the stock of CRCWA to two newly created
entities, Consolidated Reconveyance Company, LLC ("New CRC") and Lenders Posting
and Publishing Company, LLC ("New LPPC"), in which Kenneth A. Carmona is a
substantial owner and managing member. Prior to the sale, Mr. Carmona had been
President of CRC, LPPC and CRCWA since the respective dates of their formation,
and an Executive Vice President of the Company. As part of the sale transaction,
the employment agreement between the Company and Mr. Carmona was terminated.
The total purchase price for the assets and stock and goodwill of CRC,
LPPC and CRCWA was $1,822,000, subject to increase or decrease in an amount
equal to the increase or decrease in the total combined partners' and
shareholders' equity of CRC, LPPC and CRCWA, as shown on the audited
consolidating balance sheets of the Company at December 31, 1996, from November
30, 1996. The purchase price was reduced by $74,000 pursuant to the foregoing
adjustment provision. The Company recorded a fourth quarter 1996 pre-tax and
after-tax charge of $1,038,000 for disposition of the business of CRC, LPPC and
CRCWA, which comprised a $926,000 loss of goodwill and a loss from discontinued
operations in November and December 1996.
The purchase price was paid $450,000 in cash and $1,372,000, subject to
adjustment as described above, under the terms of a secured promissory note of
New CRC, New LPPC and CRCWA. The note is payable in installments of principal
and interest equal to $25,000 per month for two years beginning April 1, 1997,
and thereafter in installments of approximately $9,300 per month until March 1,
2012. Mandatory prepayments are also due quarterly on the note equal to
specified percentages of the quarterly gross revenues in excess of minimum
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<PAGE> 23
quarterly amounts of each of New CRC, New LPPC and CRCWA. The note is secured by
all of the accounts receivable of New CRC, New LPPC and CRCWA. The purchase
price and terms of the sale were established by arms' length negotiation between
the Company and the purchasers.
AMOUNTS OWED FROM AND TO THE GENERAL PARTNER AND THE PARTNERSHIP
At June 27, 1996, a total of $1,691,000 was owed by the Partnership to the
General Partner, including a $600,000 unsecured loan made on May 15, 1992 plus
interest thereon of $81,542, plus accrued and unpaid management, supervision and
other fees of $583,799. Offsetting these obligations were debts owed by the
General Partner to the Partnership for salaries, rent and overhead paid by the
Partnership and overpaid management fees in 1994 and 1995, which totaled
$337,000 at June 27, 1996. Of the net $1,354,000 which the Partnership owed to
the General Partner as of June 27, 1996, $800,000 was paid to the General
Partner and used by the General Partner to purchase Common Stock in the Rights
Offering and $385,000 was paid to the General Partner and used to purchase the
General Partner Warrants. The remaining $169,000 owed to the General Partner was
paid in November 1996. The General Partner distributed all Common Stock,
Subscriber Warrants and General Partner Warrants received by it to its partners.
PAYMENTS TO MANAGING OFFICERS OF THE PARTNERSHIP
Prior to the Restructuring, two of the Managing Officers, Joel R. Schultz
and Norman A. Markiewicz, had employment agreements with Pacific Thrift
providing incentive payments based upon net operating profits of the
Partnership. For the two years ended December 31, 1995 and 1994, no compensation
was paid under these agreements. Upon the completion of the Restructuring, Mr.
Schultz and Mr. Markiewicz received $20,000 and $10,000, respectively, on
amounts earned under these employment contracts based on net operating profits
of the Partnership from January 1, 1996 through June 27, 1996. These employment
agreements were terminated as of June 27, 1996.
Joel R. Schultz also received payments for providing legal services in
connection with the Partnership's loan accounts (excluding home improvement
loans), for which he received $100 from the fees paid by each borrower. Total
fees of $212,000, $175,000, $62,000 and $56,000 were paid to Mr. Schultz for the
years ended December 31, 1996, 1995, 1994 and 1993. Upon completion of the
Restructuring, these amounts were no longer paid.
CONSULTING AGREEMENTS WITH DIRECTOR OF PACIFIC THRIFT
Effective August 31, 1992, Pacific Thrift and Presidential entered into an
advisory agreement with Ermyas Amelga, a director of the Company and Pacific
Thrift. Mr. Amelga was retained to provide financial advisory services in
connection with: (i) the establishment of a $75 million securitization program
with Aames Capital Corporation; and (ii) an offering of debt or equity
securities. The agreement terminated on June 30, 1994. Mr. Amelga received
compensation of $125 per hour, provided that monthly billings relating to any
transaction other than the Aames securitization were limited to no more than
$7,500 per month. In addition, Mr. Amelga received incentive fees equal to the
following amounts: for the Aames securitization, .50% of the first $5 million of
loans sold, .25% of the next $10 million loans sold; .30% of the next $35
million loans sold; and .35% of the next $25 million loans sold. In addition,
Mr. Amelga was entitled to reimbursement for all reasonable out-of-pocket
expenses incurred in connection with the performance of his services under the
agreement. Mr. Amelga received $165,000 and $111,000 in compensation under the
Advisory Agreement in 1995 and 1994 respectively. No further amounts were paid
to Mr. Amelga under the agreement.
Following the Restructuring, the Company entered into a new consulting
agreement with Mr. Amelga, pursuant to which Mr. Amelga has agreed to provide
financial and strategic consulting services to the Company for one year. Mr.
Amelga is entitled to receive consulting fees of $2,000 per month during the
term of the Consulting Agreement and stock options for 1,000 shares of Common
Stock under the Company's 1995 Stock Option Plan.
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<PAGE> 24
JOINT REPORT OF THE EXECUTIVE COMPENSATION
AND STOCK OPTION COMMITTEE
AND THE EMPLOYEE COMPENSATION COMMITTEE
The Company's Executive Compensation and Stock Option Committee
("Executive Compensation Committee") and Employee Compensation Committee
("Employee Compensation Committee") make this joint report on executive
compensation pursuant to Item 402 of Regulation S-K. Notwithstanding anything to
the contrary set forth in any of the Company's previous filings under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, that might incorporate future filings, including this Proxy Statement,
in whole or in part, this report and the performance graph which follows this
report shall not be incorporated by reference into any such filings, and such
information shall be entitled to the benefits provided in Item 402(a)(9).
During the fiscal year ended December 31, 1996, the Executive Compensation
and Stock Option Committee (the "Executive Compensation Committee") of the
Company, consisting of Paul D. Weiser and Russell G. Allison (who resigned from
the Board on April 7, 1997 and has since been replaced on the Committee by James
C. Neuhauser and Alan J. Siebler) determined the salary and the
performance-based bonuses of the Company's executive officers under written
employment contracts and appropriate awards under the 1995 Stock Option Plan for
all officers and employees of the Company and administered the Company's
Retirement Plan. The Company's Employee Compensation Committee (the "Employee
Compensation Committee"), consisting of Joel R. Schultz and Richard D. Young,
determined the salary and bonus structure for all employees who are not employed
under written contracts and the annual bonuses of Messrs. Markiewicz, Fremed
and Siegel.
EXECUTIVE OFFICER COMPENSATION POLICY AND PHILOSOPHY
The Company's compensation program for executive officers consists of
three key elements: a base salary, a performance-based annual cash bonus and
periodic grants of stock options. The Company believes that its compensation
policies are designed to attract, retain and reward executive officers who
contribute to the Company's success, to provide economic incentives for
executive officers to achieve the Company's business objectives by linking the
executive officers' compensation to the performance of the Company, to
strengthen the relationship between executive pay and stockholder value and to
reward individual performance. Thus, compensation for such executive officers
involves a high proportion of pay which is at risk: the variable annual cash
bonus (which permits individual performance to be recognized on an annual basis,
and which is based, in significant part, on an evaluation of the contribution
made by the officer to the Company's overall performance) and stock options
(which directly relate a significant portion of the executive officer's
long-term remuneration to stock price appreciation realized by the Company's
stockholders).
COMPONENTS OF COMPENSATION
BASE SALARY. Executive officer salaries are established in relation to a
range of salaries for comparable positions in the subprime residential lending
industry. For the purpose of establishing base salary levels prior to the
Restructuring, the Company compared itself to a self-selected group of subprime
lenders of small to medium market capitalization, which included approximately
five companies in the comparison group. The Company seeks to pay salaries to
executive officers that are commensurate with the qualifications, duties and
responsibilities of each officer and that are competitive in the marketplace. In
making its annual salary recommendations, the Executive Compensation Committee
and the Employee Compensation Committee review the Company's financial position
and performance, the contribution of the individual executive officers during
the prior fiscal year in helping to meet the Company's financial and business
objectives as well as the executive officers' performance of their individual
responsibilities.
ANNUAL CASH BONUS. Executive officer cash bonuses are used to provide
executive officers with financial incentives to meet annual performance targets
of the Company. The performance goals of Messrs. Schultz and Young are
established in their employment agreements as specified returns on stockholder
equity. The performance goals of Mr. Landini are established as a percentage of
the profits of the Wholesale Division of Pacific Thrift. The performance targets
and bonus recommendations for executives other than Messrs. Schultz, Young and
Landini are established by the Employee Compensation Committee. The Employee
Compensation Committee develops a Company-wide bonus pool following the end of
each fiscal year. The size of the bonus pool is based upon a subjective
assessment of overall Company and individual business unit performance as
compared to both budgeted and prior
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<PAGE> 25
fiscal year performance and the extent to which the Company achieved its overall
financial goals of growth in earnings and return on stockholders' equity. Once
the overall size of the bonus pool has been approved, the Employee Compensation
Committee makes discretionary, individual bonus recommendations for eligible
employees based upon an evaluation of their individual performance and
contribution to the Company's overall performance
STOCK OPTIONS. The Board believes that equity ownership by executive
officers provides incentive to build stockholder value and align the interests
of executive officers with the interests of stockholders. Upon hiring executive
officers, the Executive Compensation Committee of the Board will typically
recommend stock option grants to the officers under the 1995 Plan, subject to
applicable vesting periods. Thereafter, the Executive Compensation Committee
will consider awarding additional grants, usually on an annual basis, under the
1995 Plan. The Executive Compensation Committee believes that these additional
annual grants will provide incentives for executive officers to remain with the
Company. Options will be granted at the current market price of the Company's
Common Stock and, consequently, will have value only if the price of the
Company's Common Stock increases over the exercise price. The size of the
initial grant will usually be determined based upon prior grants to executive
officers. In determining the size of the periodic grants the Executive
Compensation Committee will consider prior option grants to the executive
officer, the executive's performance during the current fiscal year and his or
her expected contributions during the succeeding fiscal year.
OTHER EMPLOYEE BENEFIT PLANS. The Company has certain broad-based employee
benefit plans in which all employees, including executive officers, are
permitted to participate on the same terms and conditions relating to
eligibility and subject to the same limitations on amounts that may be
contributed. In 1995, the Company also made a matching contribution for
participants in the Company's Employee Savings Plan (401(k) Plan.)
COMPENSATION OF THE PRINCIPAL EXECUTIVE OFFICERS
Mr. Schultz's 1996 Compensation. In connection with the closing of the
Restructuring on June 27, 1996, the Company entered into an employment agreement
with Mr. Schultz. Accordingly, Mr. Schultz's 1996 compensation was largely
determined by the terms of that employment agreement. The terms of Mr. Schultz'
employment agreement provide for a base salary of $225,000 per annum and a bonus
determined as a specified percentage of the net pre-tax profits of the Company
if the after-tax net income of the Company results in a specified return on
equity. See "Management -- Employment Agreements." The Executive Compensation
Committee also elected to grant 48,000 stock options to Mr. Schultz in
connection with the closing of the Restructuring.
Compensation of other Executive Officers and Employees. In connection with
the closing of the Restructuring, the Company also entered into employment
agreements with all of its executive officers other than Messrs. Landini and
Siegel. Pacific Thrift entered into an employment agreement with Mr. Landini as
of January 1, 1996, and the Company entered into an employment agreement with
Mr. Siegel as of January 1, 1997. The terms of the 1996 compensation of the
executive officers were determined largely based on these employment agreements.
See "Executive Compensation and Other Matters -- Executive Compensation --
Employment Agreements." The annual bonuses of Messrs. Young and Landini were
determined under specific performance-based formulas provided in their
employment agreements. See "Management -- Employment Agreements." The annual
bonuses of Messrs. Siegel, Markiewicz and Fremed were determined as an allocated
share of the employee bonus pool, the amount of which and allocated shares of
which were determined in good faith by the Employee Compensation Committee with
reference to the performance and results of operations of the Company and the
individual performance of each executive officer and employee.
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<PAGE> 26
In evaluating the performance of its executive officers at the end of
1996, the Executive Compensation Committee and the Employee Compensation
Committee considered the following factors: (i) the successful completion of the
Restructuring and a related rights offering and initial public offering of the
Company conducted concurrently with the Restructuring, (ii) the substantial
increase in loan origination volume in 1996 over 1995; (iii) the return to
profitability of the Company from several prior years of losses; and (iv) the
Company's results of operations for 1996, including a net income of $4.2 million
for 1996 compared with a net loss of $1.7 million for 1995 and a 228% increase
in gain on sale of loans. The Committees also took into consideration the
significant stock price appreciation in the Company's Common Stock during 1996
as the price increased from $12.00 on the initial trading date of June 25, 1996
to $29.00 per share on December 31, 1996.
Respectfully submitted,
Executive Compensation and
Stock Option Committee
James C. Neuhauser
Paul D. Weiser
Employee Compensation Committee
Joel R. Schultz
Richard D. Young
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<PAGE> 27
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The graph below compares the cumulative total stockholder return on the
Company's Common Stock with the cumulative total return on the Nasdaq Stock
Market US Index for the period commencing on June 25, 1996 (the date trading of
the Company's Common Stock commenced on the Nasdaq National Market) and ending
on December 31, 1996. The data set forth below assumes the value of an
investment in the Company's Common Stock and the Index was $100 on June 25,
1996.
COMPARISON OF TOTAL RETURN*
SINCE THE INITIAL PUBLIC OFFERING OF PACIFICAMERICA MONEY CENTER, INC.
Among PacificAmerica Money Center, Inc., The Nasdaq Stock Market -- U.S. Index
and the Nasdaq Financial Stocks Index
Company Stock Index Industry Group Index
------- ----------- --------------------
1989 N/A
1990 N/A
1991 N/A
1992 N/A
6/25/1996 100 100 100
12/31/1996 232 110 121
*In calculating cumulative total stockholder return, reinvestment of dividends,
if any, was assumed.
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<PAGE> 28
APPROVAL OF AMENDMENTS TO EMPLOYMENT AGREEMENTS OF
JOEL R. SCHULTZ AND RICHARD D. YOUNG
The current terms of the employment agreements of Messrs. Schultz and
Young are set forth herein under the heading "EXECUTIVE COMPENSATION AND OTHER
MATTERS -- Employment Agreements." These agreements were amended as of January
1, 1997 to provide that (i) the initial term of each of the Agreements will be
extended until December 31, 2000, and each agreement will thereafter be
automatically extended for additional one year terms thereafter unless either
party gives at least six months written notice of its or his intention not to
renew the agreement; (ii) the annual bonus amount will be determined as the
applicable percentage of the annual net pre-tax profits of the Company as
determined before deduction of the bonuses payable to Messrs Schultz and Young;
(iii) up to 80% of each year's annual bonus will be payable in quarterly
installments during the applicable year for which the bonus is earned, with any
amount paid during the year in excess of the annual bonus determined at year end
to be deducted from base salary and any other amounts owed to the officer by the
Company or, in the discretion of the Board of Directors, repaid by the executive
beginning in the quarter following the overpayment; and (iv) upon a termination
of employment due to a "Corporate Change" (the definition of which is summarized
under the heading "EXECUTIVE COMPENSATION AND OTHER MATTERS -- Employment
Agreements"), the bonus amount payable to Mr. Schultz will be one and one-half
times, and the bonus amount payable to Mr. Young will be equal to, the higher of
the actual bonus earned in the prior year or an amount determined by annualizing
the pre-tax and after-tax profits of the Company for the number of months
completed in the current year prior to the Corporate Change. Due to the
requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), the adoption of the proposed amendments requires stockholder
approval of each of the amended employment agreements of Messrs. Schultz and
Young.
The revision of the annual bonus formula to exclude from the calculation
of pre-tax profits the bonuses paid to Messrs. Schultz and Young is intended to
correct a drafting oversight in connection with the original employment
agreements. The effect of this amendment will be to increase any bonus payable
to Messrs Schultz and Young, provided that the amount of the bonus cannot exceed
an amount which would cause the net after tax profits of the Company to be
reduced below 20%, as currently provided in the agreements. Had this amendment
been in effect for the year ended December 31, 1996, the annual bonuses of
Messrs Schultz and Young would have increased to $245,025 from $222,750 under
the existing agreements. The Board of Directors believes that this amendment
reflects the original intent of the Company and Messrs. Schultz and Young, and
that this amendment is an appropriate incentive to Messrs. Schultz and Young to
promote the continuing growth in the Company's earnings.
The revision of the bonus payment on a Corporate Change is intended to
provide incentives to Messrs. Schultz and Young to continue their efforts to
increase the profitability of the Company at a time when the Company may become
subject to takeover proposals. The proposed amendment to the bonus payment
formula would provide additional compensation to Messrs. Schultz and Young to
the extent that the Company has increased profitability during any year in which
a Corporate Change occurs. If there is no increase, then the amount of the bonus
payment upon a Corporate Change will be either one and one-half times (in the
case of Mr. Schultz) or equal to (in the case of Mr. Young) the bonus amount for
the prior year, as determined under the terms of the current agreements.
The revision of the payment terms of the bonus would increase the portion
of the bonus paid during the year in which it is earned to 80% from 50%, as
currently provided. In the event that the amount of payments exceeded the bonus
earned based upon total annual net profits of the Company, as determined by the
annual audited financial statements of the Company, or in the event the Company
had a loss in any quarter, the excess bonus amount paid during any quarter would
be deducted by the Company from the base salary or any other amounts owed to
Messrs. Schultz or Young or, in the discretion of the Board of Directors, would
be repaid by the executive beginning in the quarter following the determination
of the overpayment. The Board of Directors believes that this amendment is an
appropriate incentive to Messrs. Schultz and Young to promote the continuing
growth in the Company's earnings.
The amended employment agreements of Messrs. Schultz and Young are subject
to approval of a majority of the stockholders present and voting at the Annual
Meeting. If the amended agreements are not approved, the Company will not be
able to deduct for income tax purposes the amount of any performance-based
compensation paid to Messrs. Schultz or Young under their employment
agreements in any taxable year in excess of $1,000,000.
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<PAGE> 29
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" APPROVAL OF THE AMENDED EMPLOYMENT AGREEMENTS OF MESSRS.
SCHULTZ AND YOUNG.
APPROVAL OF AMENDMENT TO 1995 STOCK OPTION PLAN
The Board of Directors has approved an amendment to the Company's 1995
Stock Option Plan, subject to approval of the stockholders, which would increase
the number of options automatically granted to any non-employee director of the
Company or one of its subsidiaries upon becoming a director and thereafter on
each 12 month anniversary date that such person remains in continuous service as
a director of the Company and/or one of its subsidiaries. The Stock Option Plan
currently provides for each non-employee director to receive a non-qualified
option for 1,000 shares of Common Stock, plus an additional non-qualified stock
option for 100 shares after each 12 months of continuous service for each
directorship held by such person, not to exceed 200 shares per year and a
maximum of five annual grants.
The proposed amendment to the Stock Option Plan would increase the
automatic non-qualified option granted to each non-employee director after each
12 months of continuous service as a director to 1,000 shares, regardless of the
number of directorships held by each non-employee director. The proposed
amendment would further eliminate the maximum of five annual grants, so that
non-employee directors could receive an annual grant for each year they continue
to serve as a director, regardless of the number of years. The Board of
Directors believes that an increase in the number of options granted to
continuing directors is necessary in order to attract and maintain qualified
independent directors, and that the increased amount of options recommended is
consistent with the policies of other companies of similar size and business as
the Company. If the amendment to the Stock Option Plan is not approved by a
majority of stockholders present and voting at the Annual Meeting, the amendment
will not be adopted. THE BOARD OF DIRECTORS THEREFORE RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" APPROVAL OF THE AMENDMENT TO THE 1995 STOCK OPTION PLAN.
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
Action is to be taken by the stockholders at the Annual Meeting with
respect to the ratification of BDO Seidman, LLP ("BDO"), independent certified
public accountants, as independent accountants for the Company for the fiscal
year ending December 31, 1997. BDO does not have and has not had at any time any
direct or indirect financial interest in the Company or any of its subsidiaries
and does not have and has not had at any time any connection with the Company or
any of its subsidiaries in the capacity of promoter, underwriter, voting
trustee, director, officer, or employee. Neither the Company nor any officer or
director of the Company has or has had any interest in BDO.
The Board of Directors of the Company and its Audit Committee have
approved BDO as its independent accountants. Prior thereto, they have questioned
partners of that firm about its methods of operation and have received
assurances that any litigation or other matters involving it do not affect its
ability to perform as the Company's independent accountants.
Representatives of BDO will be present at the Annual Meeting, will have an
opportunity to make statements if they so desire, and will be available to
respond to appropriate questions.
Notwithstanding the ratification by stockholders of the appointment of
BDO, the Board of Directors or the Audit Committee may, if the circumstances
dictate, appoint other independent accountants.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF BDO SEIDMAN, LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR FISCAL 1997.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16 of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who own more than 10%
of a registered class of the Company's equity securities to
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<PAGE> 30
file various reports with the Securities and Exchange Commission concerning
their holdings of, and transactions in, securities of the Company. Copies of
these filings must be furnished to the Company.
Based on a review of the copies of such forms furnished to the Company and
written representations from the Company's executive officers and directors, the
Company believes all filings were made on a timely basis.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
In order for a stockholder proposal to be included in the Board of
Directors' Proxy Statement for the next annual meeting of stockholders, such
proposal must be received at 21031 Ventura Boulevard, Suite 102, Woodland Hills,
California 91364, Attention: Corporate Secretary, no later than the close of
business on December 27, 1997.
ANNUAL REPORT
The Company's Annual Report on Form 10-K containing its financial
statements for the fiscal year ended December 31, 1996, has been mailed
concurrently herewith. The Annual Report is not incorporated in this Proxy
Statement and is not deemed to be a part of the proxy solicitation material. Any
stockholder who does not receive a copy of such Annual Report may obtain one by
writing to the Company.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
know of any other matter which will be brought before the Annual Meeting.
However, if any other matter properly comes before the Annual Meeting, or any
adjournment thereof, the person or persons voting the proxies will vote on such
matters in accordance with their best judgment and discretion.
ADDITIONAL INFORMATION
The cost of soliciting proxies in the enclosed form will be borne by the
Company. The Company may, if it determines it necessary, retain Georgeson & Co.,
100 Wall Street, New York, New York 10005, to aid in the solicitation of
proxies. Officers and regular employees of the Company may, but without
compensation other than their regular compensation, solicit proxies by further
mailing or personal conversations, or by telephone, telex or facsimile. The
Company will, upon request, reimburse brokerage firms and others for their
reasonable expenses in forwarding solicitation material to the beneficial owners
of Common Stock.
By Order of the Board of Directors
JOEL R. SCHULTZ
Chief Executive Officer and
Chairman of the Board
Woodland Hills, California
April 27, 1997
STOCKHOLDERS ARE URGED TO SPECIFY THEIR CHOICES AND TO DATE, SIGN, AND RETURN
THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND
YOUR COOPERATION WILL BE APPRECIATED.
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<PAGE> 31
PACIFICAMERICA MONEY CENTER, INC.
21031 Ventura Boulevard - Woodland Hills, California 91364
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
STOCKHOLDERS ON JULY 10, 1997
The undersigned hereby appoints Joel R. Schultz or Richard B. Fremed as
proxies, each with the power to appoint his substitute, and hereby authorizes
them or either of them to represent at the Annual Meeting of Stockholders of
PacificAmerica Money Center, Inc. (the "Company") to be held at 2:00 p.m.
Pacific Time, on July 10, 1997, at the Los Angeles Airport Hilton and Towers,
Theater Room, Second Floor, located at 5711 West Century Boulevard, Los Angeles,
California 90045 and at any adjournment thereof and to vote all shares of common
stock which the undersigned may be entitled to vote at such meeting as follows:
(1) [ ] FOR all nominees listed below (except as marked to contrary below).
[ ] WITHHOLDING AUTHORITY to vote for all nominees listed below.
Richard D. Young and Alan J. Siebler
(Instructions: To withhold authority for any individual nominee, strike the
nominee's name listed above.)
(2) TO APPROVE the Amended Employment Agreement of Joel R. Schultz, Chief
Executive Officer and President of the Company.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(3) TO APPROVE the Amended Employment Agreement of Richard D. Young, Senior
Executive Vice President of the Company and President of Pacific Thrift and
Loan Company. FOR [ ] AGAINST [ ] ABSTAIN [ ]
(4) TO APPROVE an Amendment to the 1995 Stock Option Plan increasing the number
of non-qualified options granted to continuing Directors of the
Company. FOR [ ] AGAINST [ ] ABSTAIN [ ]
(5) TO RATIFY the appointment of BDO Seidman, LLP, as Independent
Accountants. FOR [ ] AGAINST [ ] ABSTAIN [ ]
(6) IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON ANY OTHER
BUSINESS WHICH MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY
ADJOURNMENT THEREOF. (Continued and to be Signed on the Other Side)
<PAGE> 32
(Continued from Reverse Side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO SPECIFICATION IS MADE, IT WILL BE VOTED FOR PROPOSALS 1, 2, 3, 4
AND 5.
Dated _____________, 1997
-------------------------
-------------------------
Signature of Stockholder
-------------------------
Signature(s) If Held
Jointly
This Proxy should be
signed exactly as your
name appears hereon.
Joint owners should both
sign. If signed by
executors,
administrators, trustees
and other persons signing
in representative
capacity, they should
give full titles.
PLEASE READ, COMPLETE, DATE, AND SIGN THIS PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE.
