SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CWM MORTGAGE HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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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 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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Notes:
[LOGO OF CWM MORTGAGE HOLDINGS, INC.]
April 4, 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
CWM Mortgage Holdings, Inc. (the "Company"). The meeting will be held on
Wednesday, May 29, 1996 at 10:00 a.m. at the Pasadena Hilton, 150 South Los
Robles, Pasadena, California. The formal notice and proxy statement for this
meeting are attached to this letter.
We hope you can attend the Annual Meeting. It is important that you sign,
date and return your proxy as soon as possible, even if you currently plan to
attend the meeting. You may still attend the Annual Meeting and vote in person
if you desire, but returning your proxy card now will assure that your vote is
counted if you are unable to attend. Your vote, regardless of the number of
shares you own, is important. We urge you to indicate your approval by voting
FOR the matters indicated in the notice.
On behalf of the Board of Directors, I thank you for your cooperation.
Sincerely,
/s/ David S. Loeb
David S. Loeb
Chairman of the Board
CWM MORTGAGE HOLDINGS, INC.
35 NORTH LAKE AVENUE
P.O. BOX 7211
PASADENA, CALIFORNIA 91109-7211
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 29, 1996
----------------
To the Stockholders of CWM MORTGAGE HOLDINGS, INC.:
Notice is hereby given that the Annual Meeting of Stockholders of CWM
Mortgage Holdings, Inc. (the "Company") will be held at the Pasadena Hilton,
150 South Los Robles, Pasadena, California on May 29, 1996 at 10 a.m., Los
Angeles time, for the following purposes:
1. To elect the Board of Directors for the ensuing year;
2. To approve the CWM Mortgage Holdings, Inc. 1996 Stock Incentive Plan;
3. To approve the selection by the Board of Directors of Grant Thornton
LLP as independent accountants for the Company for the year ending December
31, 1996; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors of the Company has selected April 1, 1996 as the
record date for the Annual Meeting. Only those stockholders of record at the
close of business on that date will be entitled to notice of and to vote at
the Annual Meeting or any adjournment thereof.
By Order of the Board of Directors
/s/ Richard H. Wohl
Richard H. Wohl
Secretary
APRIL 4, 1996
CWM MORTGAGE HOLDINGS, INC.
35 NORTH LAKE AVENUE
P.O. BOX 7211
PASADENA, CALIFORNIA 91109-7211
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 29, 1996
This Proxy Statement is furnished to stockholders of CWM Mortgage Holdings,
Inc. (the "Company") in connection with the solicitation by the Board of
Directors of the Company of proxies to be voted at the 1996 Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the Pasadena Hilton, 150
South Los Robles, Pasadena, California on May 29, 1996, at 10 a.m. or at any
adjournment thereof. The Company expects to mail the proxy solicitation
materials for the Annual Meeting on or about April 8, 1996.
The principal solicitation of proxies is being made by mail. However,
certain officers, directors and employees of the Company, none of whom will
receive additional compensation therefor, may solicit proxies by telegram,
telephone or other personal contact. The Company has retained Morrow & Co.,
Inc. to assist in the solicitation of proxies for an estimated fee of $6,000
plus reimbursement for certain expenses. The Company will bear the cost of the
solicitation of the proxies, including postage, printing and handling, and
will reimburse brokerage firms and other record holders of shares beneficially
owned by others for their reasonable expenses incurred in forwarding
solicitation material to beneficial owners of shares.
A stockholder may revoke his or her proxy at any time before it is voted by
delivering a later dated signed proxy or other written notice of revocation to
the Company. Any stockholder present at the Annual Meeting may also withdraw
his or her proxy and vote in person on each matter brought before the Annual
Meeting. All shares represented by each properly signed and returned proxy in
the accompanying form, unless revoked, will be voted at the Annual Meeting or
at any adjournment thereof, in accordance with the instructions thereon. If no
instructions are given, the shares will be voted in favor of Proposals One
through Three described herein.
Votes cast in person or by proxy at the meeting will be tabulated by the
inspector of elections appointed for the meeting. In accordance with Delaware
law, abstentions and "broker non-votes" (i.e., proxies from brokers or
nominees indicating that such persons have not received instructions from the
beneficial owner or other persons entitled to vote shares as to a matter with
respect to which the brokers or nominees do not have discretionary power to
vote) will be treated as present for purposes of determining the presence of a
quorum. For purposes of determining approval of a matter presented at the
meeting, abstentions will be deemed present and entitled to vote and will,
therefore, have the same legal effect as a vote "against" a matter presented
at the meeting. Broker non-votes will be deemed not entitled to vote on the
subject matter as to which the non-vote is indicated and will, therefore, have
no legal effect on the vote on that particular matter.
Only holders of the Company's shares of common stock, par value $.01 per
share (the "Common Stock"), are entitled to vote at the Annual Meeting. Each
holder of record of Common Stock at the close of business on April 1, 1996 is
entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof. On that date, there were 43,980,354 shares of Common Stock
outstanding and entitled to one vote per share.
1
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company currently has five directors. The five current directors are
nominees for election as directors to serve until the next annual meeting
after their election and until their successors are elected and have
qualified. In the absence of contrary instructions, it is the intention of the
persons named in the accompanying proxy to vote for the nominees listed below.
In the event any nominee becomes unavailable for any reason, an event the
Board of Directors does not anticipate, the proxies will be voted for the
election of the person, if any, who is designated by the Board of Directors to
replace the nominee.
The Bylaws of the Company provide that the majority of the members of the
Board of Directors and of any committee of the Board of Directors will at all
times be "Unaffiliated Directors," defined as persons who are not "Affiliates"
of Countrywide Asset Management Corporation (the "Manager"), the Company's
manager and a wholly owned subsidiary of Countrywide Credit Industries, Inc.
("Countrywide Credit"). The term "Affiliate" of another person is defined in
the Company's Bylaws to mean any person directly or indirectly owning,
controlling, or holding with power to vote 5% or more of the outstanding
voting securities of such other person or of any person directly or indirectly
controlling, controlled by or under common control with such other person; any
person 5% or more of whose outstanding voting securities are directly or
indirectly owned, controlled or held with power to vote by such other person;
any person directly or indirectly controlling, controlled by or under common
control with such other person, and any officer, director, partner or employee
of such other person. The term "person" includes a natural person, a
corporation, partnership, trust, company or other entity.
The following table sets forth certain information regarding each of the
nominees for election as director and the stock ownership of certain named
executive officers:
YEAR SHARES OF COMMON
FIRST STOCK OWNED PERCENT
BECAME A BENEFICIALLY AS OF
NAME AGE DIRECTOR OF MARCH 1, 1996(1)(2) CLASS
---- --- -------- ---------------------- -------
David S. Loeb................... 72 1985 192,300 *
Angelo R. Mozilo................ 57 1985 85,431(3) *
Lyle E. Gramley(4).............. 69 1993 60,425(5) *
Thomas J. Kearns(4)............. 57 1990 132,000 *
Frederick J. Napolitano(4)...... 66 1985 151,400 *
Michael W. Perry................ -- -- 35,000 *
Richard H. Wohl................. -- -- 2,000 *
Carmella L. Grahn............... -- -- 2,000 *
Kellie A. Johnson............... -- -- -- --
All directors and named execu-
tive officers as a group (9
persons)....................... 660,556 1.5%
Footnotes appear on next page
2
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* Less than one percent of class.
(1) Unless otherwise indicated, sole voting and investment power.
(2) Includes shares which may be purchased through stock options exercisable
within 60 days of March 1, 1996 held by the following persons: Mr. Loeb,
55,000 shares; Mr. Kearns, 70,000 shares; Mr. Perry, 10,698 shares; all
directors and executive officers as a group, 135,698.
(3) Includes 1,000 shares owned by Phyllis Mozilo, the wife of Angelo Mozilo,
as to which shares he disclaims any beneficial interest.
(4) Unaffiliated Director.
(5) Includes 9,425 shares owned by Marlys Gramley, the wife of Lyle Gramley.
DAVID S. LOEB has been Chairman of the Board of Directors and Chief
Executive Officer of the Company since its formation in July 1985. He is co-
founder of Countrywide Credit and has been President and Chairman of
Countrywide Credit since its formation in March 1969. Mr. Loeb also serves as
Chief Executive Officer of the Manager, a wholly owned subsidiary of
Countrywide Credit. In addition, Mr. Loeb serves as Chairman of Independent
National Mortgage Corporation ("Indy Mac"), an affiliate of the Company and of
Independent Lending Corporation, a wholly-owned subsidiary of the Company
("ILC").
ANGELO R. MOZILO has been President of the Company since its formation and a
director since October 31, 1985. He has been Vice Chairman of the Board of
Directors since 1993. He is co-founder of Countrywide Credit and has been Vice
Chairman of the Board of Directors and Executive Vice President of Countrywide
Credit since its formation in March 1969. Mr. Mozilo serves as Chairman of the
Board of the Manager. Mr. Mozilo served as President of Countrywide Funding
Corporation, now known as Countrywide Home Loans, Inc. ("CHL"), a subsidiary
of Countrywide Credit which is engaged in certain transactions with the
Company, from 1978 to March 1995. Mr. Mozilo currently serves as Chairman and
Chief Executive Officer of CHL. In addition, Mr. Mozilo serves as Vice
Chairman of Indy Mac and of ILC.
LYLE E. GRAMLEY became a director of the Company in January 1993. He is a
former member of the Board of Governors of the Federal Reserve System. Since
September 1985, he has been employed by the Mortgage Bankers Association of
America as its chief economist and more recently as a consulting economist,
and during that period he has also been self-employed as an economic
consultant. He also serves on the Board of Trustees of the following mutual
funds distributed by Dreyfus Service Corporation: Cash Management, Cash
Management Plus, Inc., Government Cash Management, Treasury Cash Management,
Treasury Prime Cash Management, Tax Exempt Cash Management, Municipal Cash
Management Plus and New York Municipal Cash Management.
THOMAS J. KEARNS has been a director of the Company since June 1990. He is
President of Thomas J. Kearns Inc., a financial consulting firm, and has been
in the securities business for 30 years. Since April 1995, he has been Senior
Vice President and Director of Financial Services for Josephthal Lyon & Ross,
Inc., an investment banking firm. He spent approximately 16 years with Merrill
Lynch Capital Markets as a First Vice President and he was a Managing Director
of Commonwealth Associates from April 1994 to February 1995. Mr. Kearns serves
on the Board of Directors of Jameson Inns, Inc., a hotel real estate
investment trust, and Hamilton Industrial Properties, Inc., an industrial real
estate investment trust.
FREDERICK J. NAPOLITANO has been a director of the Company since its
inception and has been Chairman of the Board of Pembroke Enterprises, Inc., a
real estate development company located in Virginia, since 1973. He
3
was also a director of Home Mortgage Access Corporation and serves on the
board of directors and executive committee of the National Association of Home
Builders and was President of the National Association of Home Builders in
1982. He served on the Federal Home Loan Bank Board Advisory Council from 1983
to 1985, Federal Home Loan Mortgage Corporation Advisory Committee from 1981
to 1983, Federal National Mortgage Association Advisory Board from 1984 to
1985, was chairman of the Hampton Roads Chamber of Commerce in 1989, and is a
member of the Industrial Development Services Advisory Board for the
Commonwealth of Virginia.
Two of the five directors listed above are also officers of the Company and
three are Unaffiliated Directors. A majority of the votes cast at the Annual
Meeting, at which a quorum is present, is sufficient to elect a director.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF THE
NOMINEES. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY OTHERWISE.
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1995, the Board of Directors held
eight meetings, in person or by telephone. Each Board member attended 75% or
more of the Board and applicable committee meetings held during the fiscal
year ended December 31, 1995.
The Audit Committee of the Board of Directors consults with and reviews
reports and recommendations of the Company's independent certified public
accountants and reports thereon to the Board. The Audit Committee held four
meetings during the fiscal year ended December 31, 1995. This committee
consists of Messrs. Gramley, Kearns and Napolitano.
The Compensation Committee of the Board of Directors administers the
Company's Stock Option Plans as well as the Company's Deferred Compensation
Plan and Loan Plans. The Compensation Committee held four meetings during the
fiscal year ended December 31, 1995. This committee consists of Messrs.
Gramley, Kearns and Napolitano.
The Board of Directors does not have a nominating committee.
EXECUTIVE OFFICERS
The executive officers of the Company are:
NAME AGE OFFICE OFFICER SINCE
---- --- ---------------------------- -------------
David S. Loeb............... 72 Chairman of the Board of 1985
Directors and Chief
Executive Officer
Angelo R. Mozilo............ 57 Vice Chairman of the Board 1985
of Directors and President
Michael W. Perry............ 33 Executive Vice President and 1993
Chief Operating Officer
Richard H. Wohl............. 37 Senior Vice President, 1994
Secretary and General
Counsel
Carmella L. Grahn........... 32 Senior Vice President and 1993
Chief Accounting Officer
Kellie A. Johnson........... 34 Senior Vice President of 1993
Production and Operations
4
David S. Loeb has been Chairman of the Board of Directors and Chief
Executive Officer of the Company since its formation in July 1985. He is co-
founder of Countrywide Credit and has been Chairman and President of
Countrywide Credit since its formation in March 1969. Mr. Loeb also serves as
Chief Executive Officer of the Manager. In addition, Mr. Loeb serves as
Chairman of Indy Mac and of ILC.
Angelo R. Mozilo has been President of the Company since its formation and a
Director since October 31, 1985. He has been Vice Chairman of the Board of
Directors since 1993. He is co-founder of Countrywide Credit and has been Vice
Chairman of the Board of Directors and Executive Vice President of Countrywide
Credit since its formation in March 1969. Mr. Mozilo serves as Chairman of the
Board of the Manager. Mr. Mozilo served as President of CHL from 1978 to March
1995 and currently serves as Chairman and Chief Executive Officer of CHL. In
addition, Mr. Mozilo serves as Vice Chairman of Indy Mac and of ILC.
Michael W. Perry is currently Executive Vice President and Chief Operating
Officer of the Company, and President and Chief Executive Officer of Indy Mac.
Mr. Perry has been with the Company since January 1993 and has direct
responsibility for the management of the Company and its subsidiaries. From
May 1987 to December 1992, he served as Senior Executive Vice President in
charge of the Mortgage Banking Division of Commerce Security Bank. He has 12
years of business experience with financial institutions, real estate firms
and mortgage banking companies, including four years as a certified public
accountant with KPMG Peat Marwick LLP.
Richard H. Wohl is currently Senior Vice President, General Counsel and
Secretary for the Company and Executive Vice President, General Counsel and
Secretary for each of the Company's subsidiaries. Prior to joining the Company
in April 1994, Mr. Wohl practiced as an attorney with Morrison & Foerster in
Los Angeles. In that capacity, he worked extensively in the institutional
lending and corporate areas, and represented a number of major warehouse
lenders and other financial institutions in the mortgage banking industry. Mr.
Wohl graduated with distinction from Stanford University and received his J.D.
from the Harvard Law School, where he was an editor of the Harvard Law Review.
Carmella L. Grahn is currently Senior Vice President, Chief Accounting
Officer of the Company and Executive Vice President, Chief Accounting Officer
of each of the Company's subsidiaries. Ms. Grahn is responsible for
accounting, financial reporting, taxes, administration and master servicing.
Prior to joining the Company in October 1993, Ms. Grahn worked for Price
Waterhouse as a certified public accountant and audit manager. She also served
as Senior Vice President and Chief Financial Officer of Olympic National Bank,
a publicly held bank with assets of $150 million.
Kellie A. Johnson is currently Senior Vice President of Production and
Operations for the Company and Executive Vice President of Production and
Operations for each of the Company's operating subsidiaries. The Production
and Operations Department is comprised of two divisions: the Conduit Division
with one sales manager, six national account managers, two national accounts
associates and four client service representatives and the Correspondent
Lending Division with one sales manager, ten correspondent account managers
and three client service representatives. Each division is responsible for
marketing Indy Mac and warehouse and construction lending products. Prior to
joining the Company in March 1993, Ms. Johnson was Assistant Vice President
and Builder Division Manager for Cypress Financial Corporation in northern
California. Ms. Johnson also held various production positions at North
American Mortgage Company. Ms. Johnson has over 13 years experience in the
mortgage industry and is a licensed mortgage broker in the state of
California.
5
EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION
During 1995, each director was paid an annual retainer of $31,200 plus $300
for each meeting attended in person through May 1995 and was reimbursed for
related expenses. On June 1, 1995, each Unaffiliated Director received a grant
of stock options for 25,800 shares, each at an exercise price of $11.625 per
share. These options will become exercisable one year after the grant date.
Messrs. Loeb and Mozilo, who are both officers of the Company, each received a
grant of stock options for 100,000 shares, each at an exercise price of
$11.625 per share. These options will become exercisable one year after the
grant date.
Effective July 21, 1986, the Board of Directors adopted a deferred
compensation plan allowing payment of directors' fees to be deferred until the
following year. No directors' fees earned in the fiscal year ended December
31, 1995 were deferred until 1996.
GENERAL
The Company has no salaried employees. Beginning in 1993, the Company agreed
to reimburse the Manager for operating expenses, including personnel costs,
incurred by the Manager in operating the Company's business. See "Related
Party Transactions."
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION AWARDS
----------------------- ---------------------
NAME AND SECURITIES UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION(1)
- ------------------ ---- ---------- --------- --------------------- ---------------
David S. Loeb........... 1995 $ 31,200(2) $ -- 100,000 $ --
Chairman of the Board 1994 $ 27,500(2) $ -- 30,000
and CEO 1993 $ 27,500(2) $ -- 25,000
Michael W. Perry(3)..... 1995 $350,000 $550,000 20,000 $20,373
Executive Vice Presi-
dent and Chief 1994 $275,000 $400,000 120,000
Operating Officer 1993 $250,000 $200,000 20,000
Richard H. Wohl(3)...... 1995 $175,000 $ 130,000 10,000 $ 1,750
Senior Vice President,
Secretary and 1994(4) $103,385 $ 87,500 10,000
General Counsel
Carmella L. Grahn(3).... 1995 $ 120,000 $ 100,000 10,000 $ 3,600
Senior Vice President
and Chief Accounting 1994 $ 96,667(5) $ 64,000 10,000
Officer
Kellie A. Johnson(3).... 1995 $ 180,000 $168,190 10,000 $ 2,370
Senior Vice President, 1994 $ 92,647 $ 342,885(6) 10,000
Production and
Operations
Footnotes appear on next page
6
- --------
(1) Amounts shown for 1995 consist of the following: (i) Mr. Perry: Company
contribution to deferred compensation account--$6,875; the portion of
interest accrued on deferred compensation that exceeded 120% of the
applicable federal rate--$1,075; life insurance premiums--$9,017; Company
contribution to 401(k) Plan--$3,406; (ii) Mr. Wohl, Ms. Grahn and Ms.
Johnson: Company contribution to 401(k) Plan. The named individuals
participate in the 401(k) Plan of Countrywide Credit, the parent of the
Manager.
(2) Mr. Loeb is a director and officer of the Company. The amounts in this
column represent fees paid for his services as a director of the Company.
He receives no salary or bonus for his services as an officer of the
Company.
(3) Messrs. Perry and Wohl and Ms. Grahn and Ms. Johnson are officers of the
Company and/or Indy Mac but employees of the Company's Manager who pays
their compensation. The Company reimburses the Manager for its operating
expenses, including the salaries and bonuses paid to these individuals.
See "Compensation Committee Report on Executive Compensation" and "Related
Party Transactions."
(4) Employed by the Company beginning in April 1994, so the 1994 annual
compensation listed reflects compensation for less than a full year.
(5) Does not include $1,000 earned under the employee referral program.
(6) Includes bonus and sales commission earned as a sales person and $51,743
of compensation deferred until January 1995.
STOCK OPTION PLANS
General. Pursuant to the Company's 1985 Stock Option Plan (the "1985 Plan")
and 1994 Stock Incentive Plan (the "1994 Plan") (the 1985 Plan and the 1994
Plan are collectively referred to herein as the "Stock Option Plans"), stock
options may be granted to directors and officers of the Company, among others.
STOCK OPTION GRANTS IN FISCAL YEAR 1995
INDIVIDUAL GRANTS
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NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE
UNDERLYING OPTIONS TO EMPLOYEES PRICE EXPIRATION GRANT DATE
NAME GRANTED(#) IN FISCAL YEAR ($/SHARE)(4) DATE PRESENT VALUE(5)
---- ------------------ --------------- ------------ ---------- ----------------
David S. Loeb........... 100,000(1) 19% $11.625 6/1/00 $95,927
Michael W. Perry........ 20,000(2) 3.8% $11.625 6/1/00 $19,185
Richard H. Wohl......... 10,000(3) 1.9% $11.625 6/1/00 $ 9,225
Carmella L. Grahn....... 10,000(3) 1.9% $11.625 6/1/00 $ 9,225
Kellie A. Johnson....... 10,000(3) 1.9% $11.625 6/1/00 $ 9,225
- --------
(1) Option was granted on June 1, 1995 and becomes exercisable on the first
anniversary of the grant date, except in the event of a "Change of
Control" as defined in the 1994 Plan. Upon a Change in Control, all
options become immediately exercisable.
(2) Option was granted on June 1, 1995 and becomes exercisable on the first
anniversary of the grant date, except in the event of a Change of Control.
Upon a Change in Control, all options become immediately exercisable.
Footnotes continued on next page
7
(3) Options were granted on June 1, 1995 and become exercisable as follow,
except in the event of a Change in Control: one-third on the first
anniversary of the grant date, one-third on the second anniversary of the
grant date, and one-third on the third anniversary of the grant date. Upon
a Change in Control, all options become immediately exercisable.
(4) The exercise price is the market value (defined as the average of the high
and low stock prices on the New York Stock Exchange) on the date of grant.
(5) The present value of the options as of the grant date was calculated using
the Black-Scholes options pricing model which has been modified to
consider estimated cash dividends to be paid. The assumptions used in the
model were: expected volatility of 21%, risk-free rate of return
(approximately equal to the five year Treasury rate at the grant date) of
5.95%, dividend yield of 9% and time to exercise of five years. No
discounting was done to account for non-transferability or vesting. The
actual value, if any, an executive officer may realize will depend on the
excess of the stock price over the exercise price on the date the option
is exercised.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1995
AND FISCAL YEAR END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END(#) AT FY-END($)
SHARES ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------------ -------- ----------- ------------- ----------- -------------
David S. Loeb........... 0 $ 0 55,000 100,000 $547,188 $550,000
Michael W. Perry........ 50,000 $275,388 70,000 40,000 $618,125 $306,250
Richard H. Wohl......... 10,000 $ 46,250 0 10,000 $ 0 $ 55,000
Carmella L. Grahn....... 10,000 $ 78,125 0 10,000 $ 0 $ 55,000
Kellie A. Johnson....... 10,000 $ 83,125 0 10,000 $ 0 $ 55,000
Loan Plans. The Board of Directors has adopted two Loan Plans (the "Loan
Plans") under which loans may be made to officers and directors of the Company
in connection with the exercise of stock options granted under the 1985 Plan
and the 1994 Plan. Under the Loan Plans, the principal of any loan may not
exceed the purchase price required to be paid to the Company upon the exercise
of one or more options, less any margin or other legally required amount, and
any loan proceeds must be paid directly to the Company in connection with the
exercise of such options. Loans may be extended for a period of five years,
which term may be renewed, at an interest rate which is set by the
Compensation Committee and is, at the option of the borrower, either fixed for
the term of the loan or adjustable annually by the Compensation Committee,
with such interest rate to be at all times at least sufficient to avoid
imputed interest under the Internal Revenue Code of 1986, as amended (the
"Code"). The loans under the Loan Plan are recourse loans and are secured by
pledges of the Common Stock purchased upon the exercise of the stock options
to which they relate. In the event of the sale or transfer of any of the
shares of Common Stock pledged as security, except under certain limited
conditions, the unpaid principal balance and accrued interest shall become
immediately due and payable to the extent of the proceeds (net of brokerage
fees) realized from such sale or transfer. The principal and interest on the
loans made under the Loan Plans are payable quarterly, with any dividends paid
on the pledged stock being applied against such installments. To the extent
that a dividend for any quarter is insufficient to pay the accrued interest
for a quarterly
8
installment, the difference is added to the principal of the loan, and to the
extent a quarterly dividend is insufficient to pay a quarterly installment of
principal, the difference is payable at the end of the term of the loan.
The following table sets forth information relating to loans made by the
Company to certain executive officers and directors of the Company under the
Loan Plans in connection with the exercise of stock options under the 1985
Plan and the 1994 Plan.
NOTES BALANCE AT HIGHEST BALANCE INTEREST
NAME OUTSTANDING MARCH 1, 1996 DURING 1995 RATE
---- ----------- ------------- --------------- --------
David S. Loeb.............. Note 1 $ 54,910 $ 88,080 7.70%*
Note 2 154,025 233,644 6.08%*
Note 3 258,296 373,489 4.17%*
Angelo R. Mozilo........... Note 1 $ 0 $241,912 5.97%**
Note 2 0 122,392 6.19%**
Note 3 190.484 199,712 7.15%*
Note 4 0 155,464 6.83%*
Note 5 0 241,596 6.83%*
Lyle E. Gramley............ Note 1 $185,935 $214,008 6.87%*
Thomas J. Kearns........... Note 1 $ 27,581 $ 38,034 4.17%*
Note 2 82,404 108,021 4.17%*
Note 3 85,268 97,205 6.66%*
Frederick J. Napolitano.... Note 1 $ 0 $132,281 6.20%*
Note 2 121,271 203,085 7.70%*+
Note 3 86,128 311,991 6.08%*
Note 4 164,240 178,480 6.83%*
Note 5 146,470 158,074 6.83%*
Michael W. Perry........... Note 1 $100,574 $ 0 5.61%*
Carmella L. Grahn.......... Note 1 $ 0 $ 85,694 5.79%*
Kellie A. Johnson.......... Note 1 $ 0 $ 85,694 5.79%*
- --------
* Fixed rate note.
** Adjustable rate note. Rate will be adjusted each subsequent year after the
origination date according to the Applicable Federal Rate in effect at that
time.
+ Loan renewed for an additional five-year term on February 15, 1996. New
fixed rate--5.49%.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is composed of Messrs. Gramley, Kearns and
Napolitano, who are Unaffiliated Directors of the Company. The Company does
not directly pay any employee or officer compensation; such compensation is
paid by the Manager and ultimately charged to the Company pursuant to the
expense reimbursement provisions of the management agreement. See "Related
Party Transactions." The Manager's determinations with respect to monetary
compensation are made on the basis of its policies and procedures. Pursuant to
a policy adopted by the Board of Directors, the Compensation Committee reviews
and approves such compensation paid by the Manager to the Company's executive
officers on an annual basis. In reviewing the Manager's determinations, the
9
Compensation Committee considers the following criteria: the degree to which
the executive officers have been able to successfully implement the Company's
operating plan, the Company's earnings per share during the year and the
corresponding level of dividends paid to stockholders, the Company's general
performance relative to the performance of its peers during the year, the
Company's growth during the year as evidenced by the market share and
profitability of its principal businesses, and general product development.
In addition, the Compensation Committee determines the stock options which
may be awarded to officers of the Company. Stock options are awarded to the
Unaffiliated Directors of the Company pursuant to a formula which operates
automatically and has been approved by the stockholders. During 1995, Messrs.
Loeb and Mozilo, who are both officers of the Company, received options for
100,000 shares, which was a greater amount than the Unaffiliated Directors
received.
The options granted to Messrs. Perry and Wohl and Ms. Grahn and Ms. Johnson
during 1995 were intended to provide incentives related to earnings per share
and the corresponding level of dividends paid to stockholders, and achievement
of the Company's goals in implementing the Company's current operating plan.
The Compensation Committee
Lyle E. Gramley
Thomas J. Kearns
Frederick J. Napolitano
10
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURNS AMONG CWM MORTGAGE HOLDINGS,
INC., NYSE MARKET INDEX AND PEER GROUP INDEX(/1/)
PERFORMANCE GRAPH APPEARS HERE
Measurement Period CWM MORTGAGE PEER NYSE
(Fiscal Year Covered) HOLDINGS, INC. GROUP INDEX MARKET INDEX
- --------------------- -------------- ----------- ------------
Measurement Pt- 12/31/1990 $100 $100 $100
FYE 12/31/1991 $154.90 $136.16 $129.41
FYE 12/31/1992 $150.64 $147.17 $135.50
FYE 12/31/1993 $299.80 $172.01 $153.86
FYE 12/31/1994 $279.40 $173.45 $150.86
FYE 12/31/1995 $608.26 $203.72 $195.61
ASSUMES $100 INVESTED ON JAN. 1, 1991
ASSUMES ALL DIVIDENDS REINVESTED
THROUGH FISCAL YEAR ENDING DEC. 31. 1995.
DOLLAR AMOUNTS SHOWN FOR EACH
YEAR ARE AS OF DECEMBER 31.
/(1)/ Peer group is Media General Financial Services industry group of real
estate investment trusts, which includes the Company.
SECTION 16 DISCLOSURE
Section 16 of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and executive officers to report their ownership of and
transactions in the Company's Common Stock to the SEC and the New York Stock
Exchange. Copies of these reports are also required to be supplied to the
Company. Specific dates for filing these reports have been established by the
SEC, and the Company is required to report in this Proxy Statement any failure
of its directors and executive officers to file by the relevant due date any
of these reports during 1994. Based solely on its review of the copies of the
reports prepared or received by it, the Company believes that all such filing
requirements were satisfied.
11
RELATED PARTY TRANSACTIONS
The Company has entered into the transactions described below with the
Manager, Indy Mac and CHL. The following directors and executive officers of
the Company hold the following positions with the Manager, Indy Mac or CHL, as
the case may be. David S. Loeb, who is an executive officer and director of
the Company, is also an executive officer and director of the Manager and
Countrywide Credit, and a director of CHL and Indy Mac. Angelo R. Mozilo, who
is an executive officer and director of the Company, is also an executive
officer and director of CHL and Countrywide Credit, and a director of the
Manager and Indy Mac. Michael W. Perry and Richard H. Wohl, who are executive
officers of the Company, are also executive officers and directors of the
Manager and Indy Mac, and Mr. Perry is also an executive officer and director
of the Company's subsidiaries. Carmella L. Grahn and Kellie A. Johnson,
executive officers of the Company, are also executive officers of the Manager
and Indy Mac, and Mr. Wohl, Ms. Grahn and Ms. Johnson are also executive
officers of certain of the Company's subsidiaries.
GENERAL
Under its operating plan commenced in 1993, the Company conducts mortgage
conduit activities through Indy Mac. The Company also conducts warehouse
lending and construction lending operations. Historically, the Company has
been a long-term investor in single-family, first-lien, residential mortgage
loans and in mortgage securities representing interests in such loans.
MANAGEMENT AGREEMENT
Since its inception, the Company has each year entered into a management
agreement with the Manager pursuant to which the Manager advises the Company
on various facets of its businesses and manages its day-to-day operations,
subject to the supervision of the Company's Board of Directors. The Manager
conducts the day-to-day mortgage conduit, warehouse lending and construction
lending operations. The management agreement may be terminated by the Company
under certain circumstances upon 30 days' prior notice and by either party
upon 60 days' prior notice. CHL has guaranteed the performance of the duties
and obligations of the Manager under the management agreement. The Manager has
subcontracted with CHL to provide certain management services to the Company.
Such subcontract may be terminated by either party upon 60 days' prior notice.
Under the terms of the management agreement with the Company, the Manager is
entitled to receive a base management fee of 1/8 of 1% per annum of the
average invested assets of the Company's mortgage conduit (which, for purposes
of the management agreement, means the average of the aggregate book value of
the assets of the mortgage conduit invested in loans secured by real estate,
but excluding any mortgage loans or agency securities securitized through the
issuance of mortgage-backed securities in the form of real estate mortgage
investment conduits or collateralized mortgage obligations or pledged to
secure other mortgage collateralized debt). In addition, the Manager is
entitled to receive a warehouse lending management fee equal to 1/5 of 1% of
the average daily balance of the outstanding amounts under the Company's
warehouse lending facilities. Incentive compensation will also be paid to the
Manager if the Company's "annualized return on equity" during any fiscal
quarter is in excess of the then current Ten Year U.S. Treasury Rate plus 2%.
In such event, the Manager will receive 25% of such excess amount. As used in
calculating the Manager's incentive compensation, the term "annualized return
on equity" means the annualized return on stockholders' equity during a
quarter,
12
calculated by dividing the Company's annualized "net income" for the quarter
by its "average net worth" for the quarter, in each case determined in
accordance with generally accepted accounting principles. For such
calculations, the "net income" of the Company means total revenues less
expenses and "average net worth" is defined as the arithmetic average of the
sum (as of the beginning of each quarter and at the end of each calendar month
in the quarter) of the gross proceeds from any offering of equity securities
by the Company, before deducting any underwriting discounts and commissions
and other expenses and costs relating to the offering, plus or minus any
retained earnings or losses of the Company. During 1995, management fees
incurred by the Company under the management agreement totalled $7.3 million,
which includes amounts allocated to Indy Mac. The Company also incurred
$14.1 million for reimbursement of the Manager's expenses during 1995.
TRANSACTIONS WITH INDY MAC
The Company's mortgage conduit operations are primarily conducted through
Indy Mac, a taxable corporation which is not consolidated with the Company for
tax or financial reporting purposes. The Company owns all of Indy Mac's
outstanding non-voting preferred stock and 99% of the economic interest of
Indy Mac, and CHL owns all of Indy Mac's outstanding voting common stock and
1% of the economic interest of Indy Mac. Indy Mac's operations and technology
are dependent upon and closely integrated with the Company, and the Company is
the sole supplier of Indy Mac's mortgage loans. Accordingly, the Company has
the ability to exercise significant influence over the financial and operating
policies of Indy Mac through its ownership of the preferred stock of Indy Mac
and other contracts.
TRANSACTIONS WITH CHL
The Company's mortgage loan conduit operations consist of the purchase of
residential mortgage loans by the Company from originators and the sale of
such mortgage loans to Indy Mac, securitization of the mortgage loans and the
sale of the resulting securities to investors or sales of the mortgage loans
on a whole loan basis. The Company and the sellers of the mortgage loans
negotiate whether the seller will retain or the Company will purchase the
rights to service the mortgage loans purchased by the Company and Indy Mac.
Indy Mac has an arrangement with established servicers, including CHL, to sub-
service loans for which Indy Mac acquires the servicing rights for a fee. CHL
earned sub-servicing fees of approximately $461,000 during 1995 under this
arrangement.
During 1995, the Company purchased mortgage loans with principal balances
aggregating approximately $74.6 million from CHL. In addition, CHL was
servicing the mortgage loans securing three series of CMOs issued by a
subsidiary of the Company or trusts established by a subsidiary pursuant to
servicing agreements entered into in 1987 and 1993. The agreements provide for
servicing fees up to .32% of the aggregate unpaid principal balance of the
mortgage loans being serviced. CHL received servicing fees of approximately
$250,000 under these agreements in 1995.
13
PROPOSAL TWO
APPROVAL OF THE 1996 STOCK INCENTIVE PLAN
At the annual meeting, stockholders will be asked to approve the Company's
1996 Stock Incentive Plan (the "Plan" or the "1996 Plan"), adopted by the
Board of Directors on April 1, 1996, which authorizes 4,000,000 (subject to
adjustments under the Plan) shares of the Company's common stock, $0.01 par
value, for issuance under the Plan. The closing price of the Company's common
stock on March 29, 1996 was $16.125.
This summary of the material terms of the Plan is qualified in its entirety
by the full text of the Plan, a copy of which is available for review at the
principal executive offices of the Company and will be furnished to
stockholders without charge upon written request directed to Investor
Relations, CWM Mortgage Holdings, Inc., 155 North Lake Avenue, P.O. Box 7137,
Pasadena, CA 91109-7137 (telephone: (818) 304-7523).
DESCRIPTION OF PLAN
The purposes of the Plan are to promote the interests of the Company and its
stockholders, to improve the long-term financial performance of the Company,
and to attract and retain outside directors, members of management and key
individuals who provide services to the Company, by providing competitive
financial incentives related to equity interests in the Company. The Plan
consists of two separate components: the Staff Program under which options
(both incentive and nonqualified), stock appreciation rights, restricted
stock, stock bonuses, dividend equivalents and certain other performance and
incentive share related awards (collectively, "Staff Awards") may be granted
to officers (including directors who are officers), employees and certain
consultants and other individuals who perform significant services for the
Company; and the Director Program under which nonqualified options ("Director
Options") will be automatically granted to non-employee directors. Messrs.
David S. Loeb and Angelo R. Mozilo are eligible for Staff Awards. All other
directors are eligible only for the Director Options.
The Staff Program does not prescribe limitations on the price of awards
(except that stock options may not be granted at less than fair market value
on the date of grant) or require minimum holding periods or vesting periods.
To the extent such restrictions are deemed appropriate by the Compensation
Committee of the Board of Directors (the "Committee") to a particular type of
award, to particular individuals, or in particular circumstances, such
restrictions will be included in the respective award agreements.
Administration
The Director Program is a formula plan and, to the maximum extent feasible,
self-effectuating.
The Staff Program will be administered by the Committee. The Board of
Directors has delegated to the Committee complete administrative authority
with respect to the Staff Program, including the authority to grant (and
amend) any award or combination of stock options, stock appreciation rights,
restricted or performance stock, stock bonuses, dividend equivalents,
performance awards and other stock related benefits, payable in stock and/or
cash.
14
Eligibility
Persons eligible to receive awards under the Staff Program include officers
of the Company and its subsidiaries and certain other individuals, including
employees, who perform services for the Company and its subsidiaries of a
nature similar to those performed by employees, such as agents and
consultants. The Staff Program, however, does not require any participant to
remain in the continuous employ of the Company or to serve for any particular
period of time. Although the Company does not currently have any direct
employees (see "Executive Compensation--General"), 31 officers of the Company
are, and approximately 294 employees of the Manager may be, considered
eligible under the Staff Program at the present time, subject to the power of
the Committee to determine all eligible employees and other persons (other
than ineligible directors) to whom awards will be granted.
Persons entitled to Director Options include each director who is not an
officer or employee of the Company or any subsidiary ("Non-Officer Director").
At present there are three Non-Officer Directors of the Company. Non-Officer
Directors are not eligible under the Staff Program. Directors who are officers
or employees of the Company or a subsidiary are eligible to receive awards
only under the Staff Program.
The maximum number of shares subject to stock options and stock appreciation
rights (individually "SAR", collectively "SARs") which may be granted under
the Staff Program to any eligible individual under the Staff Program in any
year may not exceed 250,000, subject to adjustment. The Staff Program limit of
4,000,000 on the maximum amount of shares that may be issued under the Plan
includes shares underlying certain derivative securities payable in cash (such
as where the cash amount is determined by share value). The Plan is not
exclusive. A person who holds an award may be granted additional awards under
the Plan or under other plans or by appropriate authorization of the Board or
the Committee without reference to a specific plan.
The Committee may grant to a holder of an award under the Staff Program, if
he or she is otherwise eligible and (where consent is required) consents, a
new or modified award in lieu of an award previously granted with respect to a
number of shares, at an exercise price and for a length of time, which is
greater or lesser than that under the earlier award, or may do so by
cancellation and regrant, amendment, substitution or otherwise, subject only
to the general limitations of the Plan or under applicable law.
In determining the persons to whom awards will be granted and the amount of
the awards, the Committee typically will consider the responsibilities and
contributions of such persons, their other compensation, other factors deemed
relevant in light of the type of award under consideration and the purposes of
the Plan, as well as applicable legal requirements.
Options and similar rights, as well as restricted shares or other awards
(prior to vesting), will be non-transferrable, with limited exceptions. In
general, stock options will be exercisable for a period of three months
following termination of service to the Company except that special provisions
apply in the event of death, permanent disability or termination for cause.
Staff Program
The Staff Program provides that the Committee may grant any combination of
stock options, restricted or performance stock, cash and stock bonuses, SARs,
dividend equivalents, performance awards and other stock
15
related benefits. Each grant will be set forth in a separate agreement with
the person receiving the award and will indicate the type, terms and
conditions of the award.
Stock options provide for the right to purchase Common Stock at a price
which may not be less than fair market value on the effective date of the
grant. Options may be granted, typically without any specific consideration
but subject to vesting limitations, for a term which may not exceed five
years. Incentive stock options, if used, will be designed to comply with the
provisions of the Code and will be subject to restrictions contained in the
Code, but may be subsequently modified to disqualify them from such treatment.
SARs may be granted in connection with stock options and other awards, or
separately. SARs granted by the Committee in connection with stock options or
other awards typically will provide for payments to the holder based upon
increases in the price of the Company's common stock over the exercise price
of the related option or other awards but may also or alternatively be based
upon criteria such as book value or earnings. The SARs may provide that the
holder of the SARs may exercise the SAR and/or the option or other awards in
whole or in part. The Committee may elect to pay SARs in cash or in common
stock or in a combination of cash and common stock. SARs limited to change in
control situations or other extraordinary events are also authorized.
Restricted and unrestricted stock may be awarded or sold to eligible
participants under the Plan for such lawful consideration with a value not
less than the par value per share and subject to such restrictions as may be
determined by the Committee. Restricted stock typically will be subject to
return to the Company if the applicable restrictions (which may include the
lapse of time, performance criteria or other factors) do not lapse within a
period not to exceed five years and generally will be nontransferable until
such restrictions lapse. Recipients of restricted stock, unlike recipients of
options, may have voting rights and receive dividends on the shares prior to
the time when the restrictions lapse.
Performance awards may be granted by the Committee. Generally, these awards,
if granted in the future, will be based upon specific agreements and may be
paid in cash or in common stock or in a combination of cash and common stock.
Performance awards may include "phantom" stock awards that provide for
payments based upon increases in the price or value of the Company's common
stock over a predetermined period. These awards do not involve the issuance of
Company stock but are hypothetical stock "units" which are granted to a
participant and upon which the value of any incentive award will be
calculated. Performance awards may also include cash and stock bonuses which
may be granted by the Committee on an individual or group basis and which may
be payable in cash or in common stock or in a combination of cash and common
stock.
If expressly provided by the Committee, Awards of restricted stock may be
made to the holder of any Option, based upon dividends or distributions that
would have been received had the Common Stock covered by the Option been
issued and outstanding on the applicable dividend record date. The terms and
conditions of any such Awards of restricted stock will be specified by the
applicable Award Agreement.
The Committee may approve any combination of payment in cash or common stock
to any participant in respect of any performance or incentive award under the
Plan and may approve a payment in common stock, or an option or other right to
purchase common stock, as part of a deferred compensation arrangement, made in
lieu of all or any portion of the compensation otherwise payable to an
eligible employee.
16
Director Program
Each Non-Officer Director will be granted automatically on June 1, 1996,
subject to shareholder approval of the Plan, and on the first business day in
June in each calendar year during the term of the Plan, a Director Option to
purchase the number of Common Shares equal to 30,000 multiplied by a fraction,
the numerator of which is the earnings per share ("EPS") of the Common Stock
(on a fully diluted basis) of the Company for the fiscal year of the Company
ended immediately before the date of grant of the Director Option (as reported
in the audited Financial Statements included in the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission, but in no event
less than zero) (the "EPS Numerator Amount") and the denominator of which is
the greater of (x) $1.15 in 1996 which amount shall be compounded at a rate of
15% per year for subsequent years; and (y) the EPS Numerator Amount for the
fiscal year of the Company ended immediately before the fiscal year whose
results are included in the EPS Numerator Amount in the applicable year. No
Non-Officer Director will receive Director Options to purchase less than
20,000 or more than 50,000 shares in any calendar year. The purchase price per
share of common stock covered by each such option, payable in cash and/or
shares (at then fair market value), is the fair market value of the Common
Stock on the date the option is granted. The options are fully exercisable the
first anniversary of the date of grant, and, unless earlier terminated,
terminate five years after they are granted, or upon any earlier liquidation
of the Company.
If a director's services as a Board member are terminated as a result of
death, disability, or retirement after five years of service, options will
become immediately exercisable in full for a period of one year or until the
expiration of the stated term of the Director Option, whichever period is
shorter. If a Non-Officer Director's services are terminated for any other
reason (other than cause as defined in the Plan), the Director Option will be
exercisable for a period of three months or the balance of the Director
Option's term, whichever period is shorter.
The Plan provides for full vesting and acceleration of exercise dates of the
Director Options in the event of and in certain circumstances prior to a
change of control of the Company. A change of control occurs under the Plan
when 25% or more of the Common Stock of the Company is acquired without Board
approval by any entity or group, or the shareholders approve a dissolution or
liquidation of the Company, or a reorganization, merger or consolidation as a
result of which the stockholders of the Company immediately prior to such
event own securities with less than 25% of the voting power of the surviving
corporation, or sale of substantially all or all of the assets of the Company
as an entirety to another entity, or there is a change in the majority of the
Board during any 24-month period without approval of a majority of the
directors then still in office who were directors at the beginning of such
period (including for these purposes, new directors whose election or
nomination was so approved).
Miscellaneous Provisions
The Plan contains provisions relating to adjustments for certain changes in
the Company's capitalization or Common Stock or upon certain specified events.
The number and type of shares or other securities, cash or other property that
may be acquired under the Plan, share limits (individual and otherwise), the
EPS and fixed dollar amounts, the maximum number and type of shares or other
securities that may be delivered pursuant to awards, and such other terms as
are necessarily affected by such specified events are subject to adjustment in
the event of a reorganization, merger, recapitalization, stock split, stock
dividend, consolidation, restructuring or similar
17
events. Adjustments relating to Director Options may only be based on
objective criteria and must be approved by stockholders or otherwise
consistent with the treatment of stockholders generally in respect of their
shares.
In addition, the Plan generally provides for full vesting and acceleration
of exercise dates of awards under the Staff Program in the event of a change
of control of the Company (as defined above), although the Committee may limit
the duration of such acceleration of Staff Awards.
The Plan permits the payment of the option or award price at the Committee's
discretion in cash or with shares of the Company's common stock valued at
their fair market value or a combination of shares and cash. Other lawful
consideration, which may include (for example) a note (under any award
financing plan that may be available or as otherwise approved by the
Committee), services, or cash compensation offset, may also be applied to the
purchase or exercise price of an award under the Staff Program, to the extent
so authorized by the Committee.
Shares held by a participant other than a Non-Officer Director may also be
used to discharge tax withholding obligations related to exercise of options
or receipt of other awards, to the extent authorized by the Committee. In
addition, the Committee may grant under the Staff Program a cash bonus in the
amount of any tax related to awards.
The authority to grant new options or awards under the Plan will terminate
on March 31, 2006, unless it is extended or terminated prior to that time by
the Board of Directors. The termination of the Plan will not affect rights of
participants which accrued prior to such termination. The Board may, without
stockholder approval, suspend or amend the Plan at any time, and the Committee
may, with the consent of a holder, substitute awards or modify the terms and
conditions of an outstanding award, to, among other changes, extend the term
(subject to the maximum 5-year term limit), reduce the price (but not, in the
case of options, below the then market price), accelerate exercisability or
vesting or otherwise preserve benefits of the award. The Plan provides that
amendments require stockholder approval to materially increase the maximum
number of shares which may be delivered pursuant to awards granted under the
Plan, materially increase the benefits accruing to participants under the
Plan, materially change the requirements as to the eligibility to participate
in the Plan, provide for the grant of options or stock appreciation rights
having an exercise price or appreciation base of less than the fair market
value of the Common Stock on the date of such grant or extend the term of the
Plan. Amendments to the Plan that are permitted without stockholder approval
could increase the costs to the Company of the Staff Program.
Shares subject to awards that expire or terminate or otherwise do not vest
for any reason are available for subsequent awards under the Plan.
TAX CONSEQUENCES OF THE PLAN
The federal income tax consequences of the Plan under current federal law,
which is subject to change, are summarized in the following discussion which
deals with the general tax principles applicable to the Plan. State and local
tax consequences are beyond the scope of this summary.
18
Nonqualified Stock Options
No taxable income will be realized by an optionee upon the grant of a
nonqualified stock option. Upon exercise of a nonqualified stock option, the
optionee will realize ordinary income in an amount measured by the excess of
the fair market value of the shares on the date of exercise over the option
price, and the Company will be entitled to a corresponding deduction. Upon a
subsequent disposition of the shares, the participant will realize short-term
or long-term capital gain or loss. The Company will not be entitled to any
further deduction at that time.
Incentive Stock Options
An optionee who receives an incentive stock option will not be treated as
receiving taxable income upon the grant of the option or upon the exercise of
the option, provided the exercise occurs, in general, during employment or
within three months after termination of employment. However, any appreciation
in share value after the date of grant will be an item of tax preference at
the time of exercise in determining liability for the alternative minimum tax.
If stock acquired pursuant to an incentive stock option is not sold or
otherwise disposed of within two years from the date of grant of the option
nor within one year after the date of exercise, any gain or loss resulting
from disposition of the stock will be treated as long-term capital gain or
loss. If stock acquired upon exercise of an incentive stock option is disposed
of prior to the expiration of such holding periods (a "disqualifying
disposition"), the optionee will realize ordinary income in the year of such
disposition in an amount equal to the excess of the fair market value of the
stock on the date of exercise over the exercise price or, if less, the excess
of the amount realized on the disqualifying disposition over the exercise
price. Any remaining gain will be taxed at capital gains rates.
The Company will not be entitled to any deduction as a result of the grant
or exercise of an incentive stock option, or on a later disposition of the
stock received, except that in the event of a disqualifying disposition the
Company will be entitled to a deduction equal to the amount of ordinary income
realized by the optionee.
Restricted Stock
The recipient of restricted stock will recognize ordinary income equal to
the excess of the fair market value of the restricted stock at the time the
restrictions lapse over the amount, if any, which the recipient paid for the
restricted stock. However, the recipient may elect, within 30 days after the
date of receipt, to report the fair market value of the stock as ordinary
income at the time of receipt. The Company may deduct an amount equal to the
income recognized by the recipient at the time the recipient recognizes the
income.
The tax treatment of restricted stock which is disposed of will depend upon
whether the recipient made an election to include the value of the stock in
income when awarded. If the recipient made such an election, any disposition
after the restrictions lapse will result in a long-term or short-term capital
gain or loss depending upon the period the restricted stock is held. If,
however, such election is made and for any reason the restrictions imposed on
the restricted stock fail to lapse, the individual will not be entitled to a
deduction. If an election is not made, disposition after the lapse of
restrictions will result in short-term or long-term capital gain or loss equal
to the difference between the amount received on disposition and the greater
of the amount paid for the stock by the recipient or its fair market value at
the date the restrictions lapsed.
19
Stock Appreciation Rights
At the time of receiving a SAR, the participant will not recognize any
taxable income. Likewise, the Company will not be entitled to a deduction for
the SAR. Upon the exercise of a SAR, the participant will generally recognize
ordinary income in an amount equal to the cash and/or fair market value of the
shares received. If a participant receives stock, then the amount recognized
as ordinary income becomes the participant's tax basis for determining gains
or losses (taxable either as short-term or long-term capital gain or loss,
depending on whether or not the shares are held for more than one year) on the
subsequent sale of such stock. The holding period for such shares commences as
of the date ordinary income is recognized. The Company will be entitled to a
deduction in the amount and at the time that the participant first recognizes
ordinary income.
Performance Awards
A participant who has been granted a performance award will not realize
taxable income at the time of grant, and the Company will not be entitled to a
deduction at that time. When an award is paid, whether in cash or shares, the
participant will have ordinary income, and the Company will have a
corresponding deduction. The measure of such income and deduction will be the
amount of cash and the fair market value of the shares at the time the award
is paid.
Dividend Equivalents
A recipient of a dividend equivalent award will not realize taxable income
at the time of grant and the Company will not be entitled to a deduction at
that time. When a dividend equivalent is paid, the participant will recognize
ordinary income, and the Company will be entitled to a deduction. The measure
of the income and deduction will be the amount of cash and the fair market
value of the shares at the time the dividend equivalent award is paid.
Stock Payments and Bonuses
A participant who receives a stock bonus, or a stock payment in lieu of a
cash payment, will be taxed at the value of the stock on the date of award,
and the Company will have a deduction in the same amount.
Special Rules Governing Persons Subject to Section 16(b)
Under the federal tax law, special rules may apply to participants in the
Plan who are subject to the restrictions on resale of the Company's common
stock under Section 16(b) of the Securities Exchange Act of 1934. These rules,
which effectively take into account the Section 16(b) restrictions, apply in
limited circumstances and may affect the timing and/or amount of income
recognized by these persons with respect to certain stock-based awards under
the Plan.
Accelerated Payments
If, as a result of certain changes in control of the Company, a
participant's options or SARs become immediately exercisable, or if
restrictions immediately lapse on restricted stock, or if shares covered by a
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performance award are immediately issued, the additional economic value, if
any, attributable to the acceleration may be deemed a "parachute payment." The
additional value will be deemed a parachute payment if such value, when
combined with the value of other payments which are deemed to result from the
change in control, equals or exceeds a threshold amount equal to 300% of the
participant's average annual taxable compensation over the five calendar years
preceding the year in which the change in control occurs. In such case, the
excess of the total parachute payments over such participant's average annual
taxable compensation will be subject to a 20% non-deductible excise tax in
addition to any income tax payable. The Company will not be entitled to a
deduction for that portion of any parachute payment which is subject to the
excise tax.
Section 162(m) Limits
Notwithstanding the foregoing discussion of the deductibility of
compensation under the Plan by the Company, Section 162(m) to the Code would
render non-deductible to the Company certain compensation to certain persons
required to be named in the Summary Compensation Table ("Named Executive
Officers") to the extent such person's total compensation exceeds $1,000,000
in any year unless such excess compensation is "qualified performance-based
compensation" (as defined) or is otherwise exempt from these limits on
deductibility. The applicable conditions of an exemption for qualified
performance-based compensation plans include, among others, a requirement that
the stockholders approve the material terms of the plans. The Plan has been
adopted by the Committee subject to stockholder approval. Although the Company
believes that certain performance awards under the Plan may be exempt from
such limits as performance based compensation in any event, other awards under
the Plan would not be. No assurances can be given that compensation payable
under the Plan to such persons will be deductible to the Company if such
$1,000,000 limitation is exceeded.
SPECIFIC BENEFITS
No Awards have been made under the Plan. However, the formula used to
determine Director Options is the same under the 1996 Plan as under the
existing 1994 Plan except that the 1996 Plan provides that the Non-Officer
Directors will receive options for no less than 20,000 shares in any given
year. Accordingly, the same options would have been granted in 1995 under the
1996 Plan as were granted under the 1994 Plan. Specific benefits after 1996
are based on the formula and are not presently determinable; but Director
Options may not in any year exceed 50,000 shares per eligible director or be
less than 20,000 shares. A minimum of 600,000 shares and a maximum of
1,500,000 shares (subject to adjustments under the Plan) may be delivered to
existing Non-Officer Directors on exercise of Director Options to be granted
under the Plan.
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The following table sets forth the number of shares subject to options that
would have been granted during fiscal 1995 to Non-Officer Directors and to
officers, assuming that the 1996 Plan had been in effect during fiscal 1995
and that all stock options granted under the Company's existing 1994 Plan to
officers during fiscal 1995 had been granted instead under the 1996 Plan. The
amounts shown below are not necessarily indicative of the amounts which may be
granted in any future period under the 1996 Plan.
FIRST YEAR PLAN BENEFITS
NUMBER OF SHARES
NAME AND POSITION SUBJECT TO OPTIONS
- ----------------- ------------------
David S. Loeb, Chairman and CEO.............................. 100,000
Michael W. Perry, Senior Vice President and COO.............. 20,000
Richard H. Wohl.............................................. 10,000
Carmella L. Grahn............................................ 10,000
Kellie A. Johnson............................................ 10,000
Executive Officers as a Group (6 persons).................... 250,000
Non-Officer Directors as a Group (3 persons)................. 77,400
All Officers Excluding Executive Officers.................... 130,850
RELATIONSHIP TO 1994 PLAN
If the 1996 Plan is approved by stockholders, the 1994 Plan will be
cancelled and thereafter no additional options can be granted under the 1994
Plan. However, the cancellation will have no effect on outstanding options
under the 1994 Plan.
VOTE REQUIRED
Approval of the Plan requires the affirmative vote of holders of a majority
of the shares present or represented and entitled to vote on the matter at the
meeting. The total votes cast on the proposal must represent over 50% of the
shares entitled to vote on the proposal. The Plan was adopted by the Board,
subject to stockholder approval.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE 1996 STOCK
INCENTIVE PLAN. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED
UNLESS STOCKHOLDERS SPECIFY OTHERWISE.
PROPOSAL THREE
APPROVING THE SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected the accounting firm of Grant Thornton
LLP ("Grant Thornton") to audit the Company's financial statements for the
year ending December 31, 1996. Grant Thornton has acted as the independent
accounting firm for the Company since 1985. In accordance with a resolution of
the Board of Directors, this selection is being presented to stockholders for
ratification at this meeting. The affirmative vote of a majority of the votes
cast at the Annual Meeting is necessary for ratification. A representative of
Grant Thornton will be present at the Annual Meeting, will have an opportunity
to make a statement if he or she wishes to do so and will be available to
respond to appropriate questions.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF GRANT THORNTON
AS THE COMPANY'S INDEPENDENT ACCOUNTANTS. PROXIES SOLICITED BY THE BOARD OF
DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE.
OTHER MATTERS
The Board of Directors knows of no matters other than those listed in the
attached Notice of Annual Meeting which are likely to be brought before the
Annual Meeting. However, if any other matters should properly come before the
Annual Meeting, the persons named in the enclosed proxy will vote all proxies
given to them in accordance with their best judgment on such matters.
ANNUAL REPORT AND FORM 10-K
The 1995 Annual Report to Stockholders containing the consolidated financial
statements of the Company for the year ended December 31, 1995 accompanies
this proxy statement.
STOCKHOLDERS MAY OBTAIN WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL REPORT
ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, WITHOUT THE ACCOMPANYING EXHIBITS, BY
WRITING TO INVESTOR RELATIONS, CWM MORTGAGE HOLDINGS, INC., 155 NORTH LAKE
AVENUE, P.O. BOX 7137, PASADENA, CALIFORNIA 91109-7137. A LIST OF EXHIBITS IS
INCLUDED IN THE FORM 10-K, AND EXHIBITS ARE AVAILABLE FROM THE COMPANY UPON
THE PAYMENT TO THE COMPANY OF THE COSTS OF FURNISHING THEM.
STOCKHOLDER PROPOSALS
Any proposal that a stockholder wishes to present for consideration at the
1997 annual meeting must be received by the Company no later than December 6,
1996, in order to be included in the proxy statement and form of proxy for
that annual meeting. Proposals should be directed to the Secretary of the
Company.
By Order of the Board of Directors
/s/ Richard H. Wohl
Richard H. Wohl
Secretary
Dated: April 4, 1996
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[_]
UNMARKED PROXIES SHALL BE VOTED IN FAVOR OF EACH OF THE FOLLOWING MATTERS unless
specified to the contrary.
1. Election of Directors
FOR all nominees
listed below [X]
WITHHOLD AUTHORITY to vote
for all nominees listed below [X]
*EXCEPTIONS [X]
Nominees: David S. Loeb, Angelo R. Mozilo, Lyle E. Gramley, Thomas J. Kearns,
Frederick J. Napolitano
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
*Exceptions ____________________________________________________________________
2. To approve the CWM Mortgage Holdings, Inc. 1996 Stock Incentive Plan.
FOR [X] AGAINST [X] ABSTAIN [X]
Receipt of copies of the Annual Report to Shareholders, the Notice of the Annual
Meeting of Stockholders and the Proxy Statement dated April 4, 1996 is hereby
acknowledged.
3. To approve the selection of Grant Thornton LLP as the Independent Accountants
to audit the Company's financial statements for the year ending December 31,
1996.
FOR [X] AGAINST [X] ABSTAIN [X]
I PLAN TO Change of Address or
ATTEND THE MEETING [X] Comments Mark Here [X]
Please date and sign exactly as name
appears on this proxy. Joint owners
should each sign. If the signer is a
corporation, please sign full
corporate name by duly authorized
officer. Executors, trustees, etc.
should give full title as such.
Dated:________________________, 1996
____________________________________
Signature(s)
____________________________________
Signature(s)
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK [X]
PLEASE RETURN PROMPTLY IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE U.S.A.
- --------------------------------------------------------------------------------
CWM MORTGAGE HOLDINGS, INC.
P R O X Y
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS, MAY 29, 1996
The undersigned hereby appoints David S. Loeb and Angelo Mozilo, or either
of them, with full power of substitution, the attorney and proxy of the
undersigned, to appear and to vote all of the shares of stock of CWM Mortgage
Holdings, Inc. (the "Company") which the undersigned would be entitled to vote
if personally present at the Annual Meeting of Stockholders of the Company to be
held at the Pasadena Hilton, 150 South Los Robles, Pasadena, California on May
29, 1996 at 10:00 a.m. and any adjournment thereof.
(Continued and to be signed on reverse side)
CWM MORTGAGE HOLDINGS, INC.
P.O. BOX 11294
NEW YORK, N.Y. 10203 0294