As filed with the Securities and Exchange Commission on March 1, 2002
Registration No. 333-_____
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM S-8
Registration Statement Under
The Securities Act of 1933
--------------------
IMPAC MORTGAGE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Maryland 33-0675505
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1401 Dove Street, Newport Beach, California 92660
(Address of principal executive offices)
(949) 475-3600
(Registrant's telephone number, including area code)
--------------------
Impac Mortgage Holdings, Inc. 2001 Stock Option, Deferred Stock and Restricted
Stock Plan
(Full Title of the plan)
Ronald M. Morrison
General Counsel
1401 Dove Street
Newport Beach, California 92660
(949) 475-3600
(Name, Address, and Telephone Number, Including Area Code, of Agent for Service)
Copies to:
Thomas J. Poletti, Esq.
Katherine J. Blair, Esq.
David R. Schwartz, Esq.
Kirkpatrick & Lockhart LLP
10100 Santa Monica Boulevard
Seventh Floor
Los Angeles, CA 90067
Telephone: (310) 552-5000
Facsimile: (310) 552-5001
Pursuant to Rule 429 under the Securities Act of 1933, as amended, the
prospectus contained herein also relates to the shares of Common Stock
previously registered under Registration Statements on Form S-8 (Registration
No. 333-68128 and Registration No. 333-12025).
CALCULATION OF REGISTRATION FEE
-----------------------------------------------------------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum
Offering Aggregate Amount of
Amount to be Price per Offering Registration
Title of Securities to be Registered Registered (1)(2) Share (4) Price (4) Fee
-----------------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.01 par value per share (3) 1,120,069 shares $8.28 $9,274,171.32 $853.22
-----------------------------------------------------------------------------------------------------------------------------------
(1) Impac Mortgage Holdings, Inc. has previously registered 1,000,000 shares of
its common stock, $0.01 par value per share ("Common Stock"), under a
Registration Statement on Form S-8 (Registration No. 333-68128) filed
August 22, 2001 in connection with the 2001 Stock Option, Deferred Stock
and Restricted Stock Plan, for which a registration fee was previously paid
and has previously registered 1,2000,000 shares, as adjusted for stock
splits, of its Common Stock under a Registration Statement on Form S-8
(Registration No. 333-12025) filed September 13, 1996 in connection with
the 1995 Stock Option, Deferred Stock and Restricted Stock Plan, for which
a registration fee was previously paid. Pursuant to Rule 429 of the
Securities Act of 1933, as amended, the prospectus contained herein also
relates to the shares of Common Stock previously registered under
Registration Statements on Form S-8 (Registration No. 333-68128 and
Registration No. 333-12025).
(2) This Registration Statement also covers an indeterminate number of shares
of Common Stock which may be issuable by reason of stock splits, stock
dividends or similar transactions pursuant to Rule 416 of the Securities
Act of 1933, as amended.
(3) Includes certain preferred stock purchase rights associated with the shares
of Common Stock pursuant to the Rights Agreement, as amended, dated October
7, 1998.
(4) Estimated in accordance with Rule 457(c) and (h) under the Securities Act
of 1933, as amended, solely for the purpose of calculating the total
registration fee. Computation based upon the average of the high and low
prices of the Common Stock as reported on the American Stock Exchange on
February 27, 2002.
EXPLANATORY NOTE
This Registration Statement on Form S-8 consists of the registration of
additional shares under the Impac Mortgage Holdings, Inc. (the "Company") 2001
Stock Option, Deferred Stock and Restricted Stock Plan (the "2001 Stock Plan").
Pursuant to Rule 429 promulgated under the Securities Act of 1933, in addition
to being a new registration statement for the additional shares under the 2001
Stock Plan, this Form S-8 is also serving as a post-effective amendment to the
Company's Registration Statements on Form S-8 as filed with the Securities and
Exchange Commission on August 22, 2001 (File No. 333-68128) (the "Previous S-8")
and September 13, 1996 (Registration No. 333-12025) for the purposes of adding a
reoffer prospectus.
This Registration Statement, therefore, consists of two parts. The first part
contains a reoffer prospectus prepared in accordance with Part I of Form S-3.
The second part contains information required in the registration statement
under Part II of Form S-8. Information required by Part I of Form S-8 is
omitted from this Registration Statement in accordance with Rule 428 under the
Securities Act and the Note to Part I of Form S-8.
Pursuant to General Instruction E to Form S-8, for the purposes of the
registration of additional shares under the 2001 Stock Plan, the contents of the
Registrant's Previous S-8 are incorporated herein by this reference. The
Registrant is filing this Registration Statement on Form S-8 to register
additional shares of Common Stock that may be issued pursuant to options granted
under the 2001 Stock Plan. Effective January 1, 2002, the number of shares of
common stock for which options may be granted under the 2001 Stock Plan was
increased pursuant to the "evergreen" provision contained in Section 3(a) of the
2001 Stock Plan, by 1,120,069 shares (which was the lesser of (a) 3.5% of the
total number of shares of stock outstanding on such date and (b) a lesser amount
as determined by the Company's Board of Directors).
IMPAC MORTGAGE HOLDINGS, INC.
1,277,000 SHARES OF COMMON STOCK
-----------------------
REOFFER PROSPECTUS
-----------------------
Selling stockholders of Impac Mortgage Holdings, Inc. may from time to time
offer and sell up to an aggregate of 1,277,000 shares of common stock to the
public under this reoffer prospectus. The selling stockholders are executive
officers and directors of Impac Mortgage Holdings, Inc. who acquired their
shares of common stock under the 2001 Stock Option, Deferred Stock and
Restricted Stock Plan and the 1995 Stock Option, Deferred Stock and Restricted
Stock Plan. Sales may be made at market prices prevailing at the time of sale or
at negotiated or fixed prices. We will not receive any proceeds from the sale of
these shares. The selling stockholders will bear the expense of all sales
commissions and similar expenses. Any other expenses incurred by us in
connection with this registration and offering, and not borne by the selling
stockholders, will be borne by us.
Unless the context otherwise indicates, "common stock" refers to the common
stock, par value $0.01 per share, of Impac Mortgage Holdings, Inc. and the
associated preferred stock purchase rights issued under a Rights Agreement, as
amended, dated October 7, 1998. We sometimes refer to the shares of common
stock offered under this reoffer prospectus as the "securities."
Our common stock is listed on the American Stock Exchange under the symbol
"IMH."
-----------------------
Investing in our common stock involves risks.
See "Risk Factors" beginning on page 1 in this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
-----------------------
The date of this reoffer prospectus is March 1, 2002.
TABLE OF CONTENTS
WHERE TO FIND MORE INFORMATION ABOUT IMPAC MORTGAGE HOLDINGS, INC. i
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS ii
PROSPECTUS SUMMARY......................................................... 1
RISK FACTORS............................................................... 1
USE OF PROCEEDS............................................................ 14
SELLING STOCKHOLDERS....................................................... 15
PLAN OF DISTRIBUTION....................................................... 16
INDEMNIFICATION OF DIRECTORS AND OFFICERS.................................. 18
LEGAL MATTERS.............................................................. 19
EXPERTS.................................................................... 19
You should rely only on the information contained in or incorporated by
reference into this prospectus or any supplement. We have not authorized anyone
to provide you with information different from that contained in this prospectus
or any supplement. This document may only be used where it is legal to sell
these securities. The information contained in this prospectus is accurate only
as of the date of this prospectus, regardless of the time of delivery of this
prospectus of any sale of the securities contemplated herein.
Unless the context otherwise requires, references to "we," "us," or the
"company" in this prospectus mean Impac Mortgage Holdings, Inc. and its
subsidiaries, IMH Assets Corp. and Impac Warehouse Lending Group, Inc. and its
affiliate, Impac Funding Corporation (together with its wholly-owned
subsidiaries Impac Secured Assets Corp. and Novelle Financial Services, Inc.).
WHERE TO FIND MORE INFORMATION ABOUT IMPAC MORTGAGE HOLDINGS, INC.
We have filed a registration statement on Form S-8 with the SEC for the
stock the selling stockholders are offering by this prospectus. This prospectus
does not include all of the information contained in the registration statement
and its exhibits. We have included all material terms of the registration
statement and the related exhibits that are referred to in this prospectus. You
should refer to the registration statement and its exhibits for additional
information. We are also required to file annual, quarterly and special
reports, proxy statements and other information with the SEC.
We file reports, proxy statements, and other information with the SEC.
Such reports, proxy statements, and other information concerning us can be read
and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the Public Reference Room. The SEC maintains an Internet site at
http://www.sec.gov that contains reports, proxy and information statements and
------------------
other information from issuers, including us, that file such documents
electronically with the SEC. Our common stock is listed and traded on the
American Stock Exchange. These reports, proxy statements and other information
are also available for inspection at the offices of the American Stock Exchange,
86 Trinity Place, New York, New York 10006.
The SEC allows us to "incorporate by reference" the information we file
with the SEC. This permits us to disclose important information to you by
referencing these filed documents. Any information referenced this way is
considered part of this prospectus, and any information filed with the SEC
subsequent to this prospectus will automatically be deemed to update and
supersede this information. We incorporate by reference the following documents
which we have filed with the SEC (File No. 1-14100) under the Securities
Exchange Act of 1934 (the "Exchange Act"), and these documents are incorporated
herein by reference:
. Our Annual Report on Form 10-K for the fiscal year ended December 31, 2000
as filed on March 30, 2001 and as amended by Form 10-K/A (Amendment No. 1)
filed on October 17, 2001 and Form 10-K/A (Amendment No. 2) filed on
January 16, 2002;
. Our Definitive Proxy Statement filed on April 30, 2001 and amended on May
17, 2001;
. Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 as
filed on May 15, 2001;
. Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2001 as
filed on August 14, 2001 and as amended by Form 10-Q/A filed on October 12,
2001;
. Our Quarterly Report on Form 10-Q for the quarter ended September 30, 2001
as filed on November 14, 2001;
. Our Current Reports on Form 8-K filed on February 8, 2002; January 29,
2002, October 26, 2001, October 24, 2001 and September 5, 2001;
. The description of our common stock contained in our registration statement
on Form 8-A, including all amendments and reports filed for the purpose of
updating such description; and
. The description of our preferred stock purchase rights contained in our
registration statement on Form 8-A, as amended, including all amendments
and reports filed for the purpose of updating such description.
We incorporate by reference the documents listed above and any future
filings made with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act from the date of this prospectus until we file a post-effective
amendment which indicates the termination of the offering of the securities made
by this prospectus. Nothing in this prospectus shall be deemed to incorporate
information furnished by us but not filed with the SEC pursuant to Item 9 of
Form 8-K.
Any statement contained in a document incorporated or considered to be
incorporated by reference in this prospectus or any supplement shall be
considered to be modified or superseded for purposes of this prospectus to the
extent that a statement contained in this prospectus or any supplement or in any
subsequently filed document that is or is considered to be incorporated by
reference modifies or supersedes the statement. Each statement about the
contents of any contracts or other document is qualified in all material
respects by reference to such contract or other document. Any statement that is
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this prospectus or any supplement.
i
We will provide without charge upon written or oral request, a copy of any
or all of the documents which are incorporated by reference to this prospectus.
You may direct your requests to Investor Relations, Impac Mortgage Holdings,
Inc., 1401 Dove Street, Suite 100, Newport Beach, CA 92660, or by calling (949)
475-3600.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference certain forward-
looking statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Exchange Act. Forward-looking statements, some of
which are based on various assumptions and events that are beyond our control,
may be identified by reference to a future period or periods or by the use of
forward-looking terminology, such as "may," "will," "believe," "expect,"
"anticipate," "continue," or similar terms or variations on those terms or the
negative of those terms. Actual results could differ materially from those set
forth in forward-looking statements due to a variety of factors, including, but
not limited to, adverse economic conditions, changes in interest rates, changes
in yield curves, changes in prepayment rates, the availability of financing and,
if available, the terms of any financing. For a discussion of the risks and
uncertainties that could cause actual results to differ from those contained in
the forward-looking statements, see "Risk Factors" in this prospectus and under
"Business - Risk Factors" in our Annual Report on Form 10-K. We do not
undertake, and specifically disclaim any obligation, to publicly release the
results of any revisions that may be made to any forward-looking statements to
reflect the occurrence of anticipated or unanticipated events or circumstances
after the date of such statements.
We encourage you to read this prospectus as well as the information that is
incorporated by reference in this prospectus in their entireties. You should
carefully consider the factors set forth under "Risk Factors" on page 1 of this
prospectus before making an investment decision to purchase our securities.
ii
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this reoffer
prospectus. This summary is not complete and may not contain all of the
information that you should consider before investing in the securities.
IMPAC MORTGAGE HOLDINGS, INC.
Our company, Impac Mortgage Holdings, Inc., is a mortgage real estate
investment trust, or "REIT." Together with our subsidiaries and affiliate,
Impac Funding Corporation, we are a nationwide acquirer and originator of non-
conforming Alt-A mortgage loans. "Alt-A" mortgage loans consist primarily of
mortgage loans that are first lien mortgage loans made to borrowers whose credit
is generally within typical Fannie Mae or Freddie Mac guidelines, but that have
loan characteristics that make them non-conforming under those guidelines. For
instance, the loans may have higher loan-to-value, or "LTV," ratios than
allowable or may have excluded certain documentation or verifications.
Therefore, in making our credit decisions, we are more reliant upon the
borrower's credit scores and the adequacy of the underlying collateral. We also
provide warehouse and repurchase financing to originators of mortgage loans. Our
goal is to generate consistent reliable income for distribution to our
stockholders, primarily from the earnings of our core businesses.
We operate three core businesses: our long-term investment operations, our
mortgage operations, and our warehouse lending operations.
Our long-term investment operations invests primarily in non-conforming
Alt-A mortgage loans. This business generates income based on the excess of the
interest it earns on its investment portfolio and the expense associated with
its borrowings against its investment portfolio. Our investment in non-
conforming Alt-A mortgage loans and, to a lesser extent, mortgage-backed
securities, is financed with collateralized mortgage obligations, or "CMO,"
borrowings and proceeds from the sale of capital stock. Our mortgage operations
acquires, originates, sells and securitizes primarily non-conforming Alt-A
mortgage loans. Our mortgage operations generates income by securitizing and
selling loans to permanent investors, including our long-term investment
operations. Our mortgage operations primarily uses warehouse lines of credit to
finance the acquisition and origination of mortgage loans. Our warehouse
operations provides short-term financing to mortgage loan originators by funding
mortgage loans from their closing date until they are sold to pre-approved
investors, including our long-term investment operations. Our warehouse lending
operations earns fees, as well as a spread, from the difference between its cost
of borrowings and the interest earned on advances against the loans prior to
their sale. Generally, we seek to acquire the non-conforming Alt-A mortgage
loans funded with facilities provided by our warehouse lending operations, which
provides synergies with our long-term investment operations and mortgage
operations.
Our principal executive offices are located at 1401 Dove Street, Newport
Beach, California 92660. Our telephone number is (949) 475-3600.
RISK FACTORS
A prolonged economic downturn or recession would likely result in a reduction of
our mortgage origination activity which would adversely affect our financial
results
Although we have not operated during a period of prolonged general economic
downturn or a recession, these events have historically resulted in a reduction
in mortgage origination activity and an increase in the rate of mortgage
defaults. The United States economy is currently undergoing a period of a
recession. This economic condition has been worsened by the September 11, 2001
terrorist attacks in New York, N.Y. and Washington, D.C., and Somerset County,
Pennsylvania. A continued recession may have a significant adverse impact on
our operations and our financial condition. For example, a reduction in new
mortgages will adversely affect our ability to expand our mortgage portfolio,
our principal means of increasing our earnings. In addition, a decline in new
mortgage activity will likely result in reduced activity for our warehouse
lending operations and our long-term investment operations. In the case of our
mortgage operations, a decline in mortgage activity may result in fewer loans
that meet its criteria for purchase and securitization, thus resulting in a
reduction in interest income and fees
1
and gain on sale of loans. We may also experience larger than previously
reported losses on our investment portfolio due to a higher level of defaults on
our mortgage loans.
If we are unable to generate sufficient liquidity we will be unable to conduct
our operations as planned
If we cannot generate sufficient liquidity, we will be unable to continue
to grow our operations, grow our asset base, maintain our current hedging policy
and pay dividends. We have traditionally derived our liquidity from four
primary sources:
. financing facilities provided to us by others to acquire or originate
mortgage assets;
. whole loan sales and securitizations of acquired or originated mortgage
loans;
. our issuance of equity and debt securities; and
. earnings from operations.
We cannot assure you that any of these alternatives will be available to
us, or if available, that we will be able to negotiate favorable terms. Our
ability to meet our long-term liquidity requirements is subject to the renewal
of our credit and repurchase facilities and/or obtaining other sources of
financing, including additional debt or equity from time to time. Any decision
by our lenders and/or investors to make additional funds available to us in the
future will depend upon a number of factors, such as our compliance with the
terms of our existing credit arrangements, our financial performance, industry
and market trends in our various businesses, the lenders' and/or investors' own
resources and policies concerning loans and investments, and the relative
attractiveness of alternative investment or lending opportunities. If we cannot
raise cash by selling debt or equity securities, we may be forced to sell our
assets at unfavorable prices or discontinue various business activities. Our
inability to access the capital markets could have a negative impact on our
earnings and hence, our ability to pay dividends.
Any significant margin calls under our financing facilities would adversely
affect our liquidity and may adversely affect our financial results
Prior to the fourth quarter of 1998, we generally had no difficulty in
obtaining favorable financing facilities or in selling acquired mortgage loans.
However, during the fourth quarter of 1998, the mortgage industry experienced
substantial turmoil as a result of a lack of liquidity in the secondary markets.
At that time, investors expressed unwillingness to purchase interests in
securitizations due, in part, to:
. the lack of financing to acquire these securitization interests;
. the widening of returns expected by institutional investors on
securitization interests over the prevailing Treasury rate; and
. market uncertainty.
As a result, many mortgage loan originators, including our company, were
unable to access the securitization market on favorable terms. This resulted in
some companies declaring bankruptcy. Originators, like our company, were
required to sell loans on a whole loan basis and liquidate holdings of mortgage-
backed securities to repay short-term borrowings. However, the large amount of
loans available for sale on a whole loan basis affected the pricing offered for
these loans, which in turn reduced the value of the collateral underlying the
financing facilities. Therefore, many providers of financing facilities
initiated margin calls. Margin calls resulted when our lenders evaluated the
market value of the collateral securing our financing facilities and required us
to provide them with additional equity or collateral to secure our borrowings.
Our financing facilities were short-term borrowings and due to the turmoil
in the mortgage industry during the latter part of 1998 many traditional
providers of financing facilities were unwilling to provide facilities on
favorable terms, or at all. Our current financing facilities continue to be
short-term borrowings and we expect this to continue. If we cannot renew or
replace maturing borrowings, we may have to sell, on a whole loan basis, the
loans securing these facilities which, depending upon market conditions, may
result in substantial losses.
2
We incurred losses for fiscal years 1997, 1998 and 2000 and may incur losses in
the future
During the year ended December 31, 2000, we experienced a net loss of $54.2
million. The net loss incurred during 2000 included non-recurring, non-cash
accounting charges of $68.9 million. The non-recurring, non-cash accounting
charges were the result of write-downs of non-performing investment securities
secured by mortgages and additional increases in allowance for loan losses to
provide for the deteriorating performance of collateral supporting specific
investment securities. During the year ended December 31, 1998, we experienced
a net loss of $5.9 million. During the year ended December 31, 1997, we
experienced a net loss of $16.0 million. The net loss incurred during 1997
included a non-recurring, non-cash accounting charge of $44.4 million that was
the result of expenses related to the termination and buyout of our management
agreement with Imperial Credit Advisors, Inc. We cannot be certain that
revenues will remain at current levels or improve or that we will be profitable
in the future, which could prevent us from effectuating our business strategy.
If we are unable to complete securitizations, we would face a liquidity shortage
which would adversely affect our operating results
We rely significantly upon securitizations to generate cash proceeds to
repay borrowings and to create credit availability. Any reduction in our
ability to complete securitizations may require us to utilize other sources of
financing, which, if available at all, may be on unfavorable terms. In
addition, delays in closing securitizations of our mortgage loans increase our
risk by exposing our company to credit and interest rate risks for this extended
period of time. Furthermore, gains on sales from our securitizations represent
a significant portion of our earnings.
Several factors could affect our ability to complete securitizations of our
mortgages, including:
. conditions in the securities and secondary markets;
. credit quality of the mortgage loans acquired or originated through our
mortgage operations;
. volume of our mortgage loan acquisitions and originations;
. our ability to obtain credit enhancements; and
. lack of investors purchasing higher risk components of the securities.
If we are unable to profitably securitize a significant number of our
mortgage loans in a particular financial reporting period, then we could
experience lower income or a loss for that period. As a result of turmoil in
the securitization market during the latter part of 1998, many mortgage lenders,
including our company, were required to sell mortgage loans on a whole loan
basis under adverse market conditions in order to generate liquidity. Many of
these sales were made at prices lower than our carrying value of the mortgage
loans and we experienced substantial losses. We cannot assure you that we will
be able to continue to profitably securitize or sell our loans on a whole loan
basis, or at all.
The market for first loss risk securities, which are securities that take
the first loss when mortgages are not paid by the borrowers, is generally
limited. In connection with our REMIC securitizations, we endeavor to sell all
securities subjecting us to a first loss risk. If we cannot sell these
securities, we may be required to hold them for an extended period, subjecting
us to a first loss risk.
Our borrowings and use of substantial leverage may cause losses
Our use of collateralized mortgage obligations may expose our operations to
credit losses
To grow our investment portfolio, we borrow a substantial portion of the
market value of substantially all of our investments in mortgage loans in the
form of collateralized mortgage obligations. Historically, we have borrowed
approximately 98% of the market value of such investments. There are no
limitations on the amount we may borrow, other than the aggregate value of the
underlying mortgage loans. We currently use collateralized mortgage obligations
as financing vehicles to increase our leverage, since mortgage loans held for
collateralized mortgage obligation collateral are retained for investment rather
than sold in a secondary market transaction. Retaining mortgage loans as
collateral for collateralized mortgage obligations exposes our operations to
greater credit losses than does the use of other securitization techniques that
are treated as sales because as the equity holder
3
in the security, we are allocated losses from the liquidation of defaulted loans
first prior to any other security holder. Although our liability under a
collateralized mortgage obligation is limited to the collateral used to create
the collateralized mortgage obligation, we generally are required to make a cash
equity investment to fund collateral in excess of the amount of the securities
issued in order to obtain the appropriate credit ratings for the securities
being sold, and therefore obtain the lowest interest rate available, on the
collateralized mortgage obligations. If we experience greater credit losses than
expected on the pool of loans subject to the collateralized mortgage obligation,
the value of our equity investment will decrease and we would have to increase
the allowance for loan losses on our financial statements.
The cost of our borrowings may exceed the return on our assets
The cost of borrowings under our financing facilities corresponds to a
referenced interest rate plus or minus a margin. The margin varies depending on
factors such as the nature and liquidity of the underlying collateral and the
availability of financing in the market. We will experience net interest losses
if the returns on our assets financed with borrowed funds fail to cover the cost
of our borrowings, and we did not implement any applicable financial hedges.
If we default under our financing facilities, we may be forced to liquidate
the collateral at prices less than the amount borrowed
If we default under our financing facilities, our lenders could force us to
liquidate the collateral. If the value of the collateral is less than the
amount borrowed, we could be required to pay the difference in cash. If we were
to declare bankruptcy, some of our reverse repurchase agreements may obtain
special treatment and our creditors would then be allowed to liquidate the
collateral without any delay. On the other hand, if a lender with whom we have
a reverse repurchase agreement declares bankruptcy, we might experience
difficulty repurchasing our collateral, or enforcing our claim for damages, and
it is possible that our claim could be repudiated and we could be treated as an
unsecured creditor. If this occurs, our claims would be subject to significant
delay and we may receive substantially less than our actual damages or nothing
at all.
If we are forced to liquidate we may have few unpledged assets for
distribution to unsecured creditors
We have pledged a substantial portion of our assets to secure the repayment
of collateralized mortgage obligations issued in securitizations, our financing
facilities and our other borrowings. We will also pledge substantially all of
our current and future mortgage loans to secure borrowings pending their
securitization or sale. The cash flows we receive from our investments that
have not yet been distributed, pledged or used to acquire mortgage loans or
other investments may be the only unpledged assets available to our unsecured
creditors and you if our company was liquidated.
Interest rate fluctuations may adversely affect our operating results
Our operations, as a portfolio manager, a mortgage loan acquirer and
originator or a warehouse lender, may be adversely affected by rising and
falling interest rates. Higher interest rates may discourage potential
borrowers from refinancing mortgages, borrowing to purchase homes or seeking
second mortgages. This may decrease the amount of mortgages available to be
acquired or originated by our mortgage operations and decrease the demand for
warehouse financing provided by our warehouse lending operations. If short-term
interest rates exceed long-term interest rates, there is a higher risk of
increased loan prepayments, as borrowers may seek to refinance their fixed and
adjustable rate mortgage loans at lower long-term fixed interest rates.
Increased loan prepayments could lead to a reduction in the number of loans in
our investment portfolio and reduce our net interest income.
We are subject to the risk of rising mortgage interest rates between the
time we commit to purchase mortgages at a fixed price through the issuance of
individual, bulk or other rate-locks and the time we sell or securitize those
mortgages. An increase in interest rates will generally result in a decrease in
the market value of mortgages that we have committed to purchase at a fixed
price, but have not been sold or securitized or have not been properly hedged.
As a result, we may record a smaller gain, or even a loss, upon the sale or
securitization of those mortgage loans.
4
We may experience losses if our liabilities reprice at different rates than our
assets
Our principal source of revenue is net interest income or net interest
spread from our investment portfolio, which is the difference between the
interest we earn on our interest earning assets and the interest we pay on our
interest bearing liabilities. The rates we pay on our borrowings are
independent of the rates we earn on our assets and may be subject to more
frequent periodic rate adjustments. Therefore, we could experience a decrease
in net interest income or a net interest loss because the interest rates on our
borrowings could increase faster than the interest rates on our assets. If our
net interest spread becomes negative, we will be paying more interest on our
borrowings than we will be earning on our assets and we will be exposed to a
risk of loss.
Additionally, the rates paid on our borrowings and the rates received on
our assets may be based upon different indices (e.g., LIBOR, U.S. Treasuries,
etc.). If the index used to determine the rate on our borrowings increases
faster than the index used to determine the rate on our assets, we will
experience a declining net interest spread, which will have a negative impact on
our profitability, and may result in losses.
An increase in our adjustable interest rate borrowings may decrease the net
interest margin on our adjustable rate mortgages
As of September 30, 2001, approximately 74% of the mortgages held by our
long-term investment operations were hybrid mortgage loans. These are mortgages
with fixed interest rates for a period of time, which then become mortgages with
variable or adjustable interest rates or begin bearing interest based upon
short-term interest rate indices. We generally fund mortgages with variable
interest rate borrowings that are indexed to short-term interest rates and can
adjust daily. To the extent that there is an increase in the interest rate index
used to determine our adjustable interest rate borrowings and that increase is
not offset by various interest rate hedges that we have in place at any given
time, our net interest margin will decrease or become negative. As of September
30, 2001, our fixed rate mortgages that become adjustable over time had a
weighted average months to interest rate adjustment of 17 months.
We may suffer a net interest loss on our adjustable rate mortgages that
have interest rate caps if the interest rates on our related borrowings
increase
Adjustable rate mortgages typically have interest rate caps, which limit
interest rates charged to the borrower during any given period. Our borrowings
are not subject to similar restrictions. As a result, in a period of rapidly
increasing interest rates, the interest rates we pay on our borrowings could
increase without limitation, while the interest rates we earn on our adjustable
rate mortgage assets would be capped. If this occurs, our net earnings could be
significantly reduced or we could suffer a net interest loss.
Increased levels of prepayments of our adjustable rate mortgage loans may
accelerate our expenses and decrease our net income
Mortgage prepayments generally increase on our adjustable rate mortgages
when fixed mortgage interest rates fall below the then-current interest rates on
outstanding adjustable rate mortgage loans. Prepayments on mortgage loans are
also affected by the terms and credit grades of the loans, conditions in the
housing and financial markets and general economic conditions. Most of the
adjustable rate mortgages that we acquire are originated within three months of
the time we purchased the mortgages and generally bear initial interest rates
that are lower than their fully-indexed amount (the applicable index plus the
margin). If we acquire these mortgages at a premium and they are prepaid prior
to or soon after the time of adjustment to a fully-indexed rate without payment
of any prepay penalty, we would not have received interest at the fully-indexed
rate during such period and we must expense the unamortized premium that was
paid for the loan at the time of the prepayment. This means we would lose the
opportunity to earn interest at that rate over the expected life of the
mortgage. Also, if prepayments on our adjustable rate mortgage loans increase
when interest rates are declining, our net interest income may decrease if we
cannot reinvest the prepayments in mortgage assets bearing comparable rates.
Prepayments on fixed rate mortgages will also decrease our net interest income
when interest rates are declining. As of September 30, 2001, approximately 44%
of our mortgage loan investment portfolio had active prepayment penalty
features.
5
We generally acquire mortgages on a "servicing released" basis, meaning we
acquire both the mortgages and the rights to service them. This strategy
requires us to pay a higher purchase price or premium for the mortgages. If the
mortgage loans that we acquire at a premium prepay faster than originally
projected, generally accepted accounting principles require us to write down the
remaining capitalized premium amounts at a faster speed than was originally
projected, which would decrease our current net interest income.
The value of our portfolio of mortgage-backed securities may be adversely
affected by unforeseen events
Our prior investments in residual interest and subordinated debt
investments exposed us to greater risks as compared to senior mortgage-
backed securities
Prior to 1998, we invested in mortgage-backed securities known as interest-
only, principal-only, residual interest or other subordinated securities.
Investments in residual interest and subordinated securities are much riskier
than investments in senior mortgage-backed securities because these subordinated
securities bear all credit losses prior to the related senior securities. The
risk associated with holding residual interest and subordinated securities is
greater than holding the underlying mortgage loans directly due to the
concentration of losses attributed to the subordinated securities.
If the projected value of our portfolio of residual interest and
subordinated debt instruments is incorrect we would have to write down the
value of these securities
We estimate future cash flows from these securities and value them
utilizing assumptions based in part on projected discount rates, mortgage loan
prepayments and credit losses. If our actual experience differs from our
assumptions, we would be required to reduce the value of these securities. The
market for our asset-backed securities is extremely limited and we cannot assure
you that we could sell these securities at their reported value, or at any value
or that we could recoup our initial investment.
In addition, we may not obtain our anticipated yield or we may incur losses
if the credit support available within certain mortgage-backed securities is
inadequate due to unanticipated levels of losses, or due to difficulties
experienced by the credit support provider. Delays or difficulties encountered
in servicing the mortgages in mortgage-backed securities may cause greater
losses and, therefore, greater resort to credit support than was originally
anticipated, and may cause a rating agency to downgrade certain classes of our
mortgage-backed securities, which might then equate to a reduction of the value
of the security.
We undertake additional risks by acquiring and investing in mortgage loans
We may be subject to losses on mortgage loans for which we do not obtain
credit enhancements
We do not obtain credit enhancements such as mortgage pool or special
hazard insurance for all of our mortgage loans and investments. Generally, we
require mortgage insurance on any loan with a loan-to-value ratio greater than
80%. During the time we hold mortgage loans for investment, we are subject to
risks of borrower defaults and bankruptcies and special hazard losses that are
not covered by standard hazard insurance. If a borrower defaults on a mortgage
loan that we hold, we bear the risk of loss of principal to the extent there is
any deficiency between the value of the related mortgaged property and the
amount owing on the mortgage loan and any insurance proceeds available to us
through the mortgage insurer. In addition, since defaulted mortgage loans,
which under our financing arrangements are mortgage loans that are generally 60
to 90 days delinquent in payments, may be considered ineligible collateral under
our borrowing arrangements, we could bear the risk of being required to own
these loans without the use of borrowed funds until they are ultimately
liquidated or possibly sold at a loss.
Non-conforming Alt-A mortgage loans expose us to greater credit risks
We are an acquirer and originator of non-conforming Alt-A residential
mortgage loans. These are residential mortgages that do not qualify for
purchase by government sponsored agencies such as the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation. Our operations may
be negatively affected due to our investments in non-conforming Alt-A mortgage
loans. Credit risks associated with
6
non-conforming Alt-A mortgage loans are greater than conforming mortgage loans.
The interest rates we charge on non-conforming Alt-A loans are often higher than
those charged for conforming loans in order to compensate for the higher risk
and lower liquidity. Lower levels of liquidity may cause us to hold loans or
other mortgage-related assets supported by these loans that we otherwise would
not hold. By doing this, we assume the potential risk of increased delinquency
rates and/or credit losses as well as interest rate risk. Additionally, the
combination of different underwriting criteria and higher rates of interest
leads to greater risk, including higher prepayment rates and higher delinquency
rates and/or credit losses.
Lending to non-conforming Alt-A borrowers may expose us to a higher risk of
delinquencies, foreclosures and losses
As a lender of non-conforming Alt-A mortgage loans, our market includes
borrowers who may be unable to obtain mortgage financing from conventional
mortgage sources. Loans made to such non-conforming Alt-A borrowers generally
entail a higher risk of delinquency and higher losses than loans made to
borrowers who utilize conventional mortgage sources. Delinquency, foreclosures
and losses generally increase during economic slowdowns or recessions. The
actual risk of delinquencies, foreclosures and losses on loans made to non-
conforming Alt-A borrowers could be higher under adverse economic conditions
than those currently experienced in the mortgage lending industry in general.
Further, any material decline in real estate values increases the loan-to-value
ratios of loans previously made by us, thereby weakening collateral coverage and
increasing the possibility of a loss in the event of a borrower default. Any
sustained period of increased delinquencies, foreclosures or losses after the
loans are sold could adversely affect the pricing of our future loan sales and
our ability to sell or securitize our loans in the future. In the past, certain
of these factors have caused revenues and net income of many participants in the
mortgage industry, including us, to fluctuate from quarter to quarter.
Our use of second mortgages exposes us to greater credit risks
Our security interest in the property securing second mortgages is
subordinated to the interest of the first mortgage holder and the second
mortgages have a higher cumulative loan-to-value ratio. As of September 30,
2001, 1% of our mortgages were second mortgages. If the value of the property
is equal to or less than the amount needed to repay the borrower's obligation to
the first mortgage holder upon foreclosure, our second mortgage loan will not be
repaid.
The geographic concentration of our mortgage loans increases our exposure
to risks in those areas
We do not set limitations on the percentage of our mortgage asset portfolio
composed of properties located in any one area (whether by state, zip code or
other geographic measure). Concentration in any one area increases our exposure
to the economic and natural hazard risks associated with that area. As of
September 30, 2001, 60% of the loans included in securitizations in which we
hold residual interests are secured by properties in California. Certain parts
of California have experienced an economic downturn in past years and have
suffered in the past the effects of certain natural hazards.
We may experience losses related to our recourse obligations
Mortgage-backed securities issued in connection with our securitizations
have been non-recourse to us, except in the case of a breach of standard
representations and warranties made by us when the loans are securitized. While
we have recourse against our customers, the correspondent sellers and mortgage
brokers of mortgage loans, we cannot assure you that they will honor their
obligations. We also engage in bulk whole loan sales pursuant to agreements
that provide for recourse by the purchaser against us. In some cases, the
remedies available to a purchaser of mortgage loans from us are broader than
those available to us against those who sell us these loans. If a purchaser
exercises its rights against us, we may not always be able to enforce whatever
remedies we may have against our customers.
7
Representations and warranties made by us in our loan sales and
securitizations may subject us to liability
In connection with our securitizations, we transfer loans acquired or
originated by us into a trust in exchange for cash and, in the case of a CMO,
residual certificates issued by the trust. The trustee will have recourse to us
with respect to the breach of the standard representations and warranties made
by us at the time such loans are transferred. While we generally have recourse
to our customers for any such breaches, there can be no assurance of our
customers' abilities to honor their respective obligations. Also, we engage in
bulk whole loan sales pursuant to agreements that generally provide for recourse
by the purchaser against us in the event of a breach of one of our
representations or warranties, any fraud or misrepresentation during the
mortgage loan origination process, or upon early default on such mortgage loan.
We generally limit the potential remedies of such purchasers to the potential
remedies we receive from the people from whom we acquired or originated the
mortgage loans. However, in some cases, the remedies available to a purchaser
of mortgage loans from us may be broader than those available to us against the
sellers of the loans and should a purchaser enforce its remedies against us, we
may not always be able to enforce whatever remedies we have against our
customers.
In the ordinary course of our business, we are subject to claims made
against us by borrowers and trustees in our securitizations arising from, among
other things, losses that are claimed to have been incurred as a result of
alleged breaches of fiduciary obligations, misrepresentations, errors and
omissions of our employees, officers and agents (including our appraisers),
incomplete documentation and our failure to comply with various laws and
regulations applicable to our business. Any claims asserted against us may
result in legal expenses or liabilities that could have a material adverse
effect on our results of operations or financial condition.
We face conflicts of interests based on the ownership of the voting stock of
Impac Funding Corporation by certain officers and directors of Impac Mortgage
Holdings, Inc.
We are subject to conflicts of interest arising from our relationship with
Impac Mortgage Holdings, Inc., our long-term investment operations, Impac
Funding Corporation, our mortgage operations, and their officers and directors.
Our long-term investment operations acquires non-confirming Alt-A mortgage loans
from our mortgage operations. Impac Mortgage Holdings, Inc. owns all of the
preferred stock, and 99% of the economic interest in, Impac Funding Corporation.
Joseph R. Tomkinson, our Chairman and Chief Executive Officer, William S.
Ashmore, our Chief Operating Officer, President and a director, and Richard J.
Johnson, our Executive Vice President and Chief Financial Officer, are holders
of all of the outstanding voting stock of, and 1% of the economic interest in,
Impac Funding Corporation. They have the right to elect all directors of Impac
Funding Corporation and the ability to control the outcome of all matters for
which the consent of the holders of the common stock of Impac Funding
Corporation is required. Messer's Tomkinson, Ashmore and Johnson are also the
sole directors of Impac Funding Corporation. Decisions made by these officers
at one company may be at conflict with and have an adverse affect on the
operations of the other.
A substantial interruption in our use of IDASL may adversely affect our level of
mortgage loan acquisitions and originations
We utilize the Internet in our business principally for the implementation
of our automated loan origination program, IDASL, which stands for Impac Direct
Access System for Lending. IDASL is not a lead generator for mortgage brokers.
IDASL allows our customers to pre-qualify borrowers for various loan programs
based on criteria requested from the borrower and renders an automated
underwriting decision by issuing an approval of the mortgage loan or a referral
for further review or additional information. IDASL may be interrupted if the
Internet experiences periods of poor performance, if our computer systems or the
systems of our third-party service providers contain defects, or if customers
are reluctant to use or have inadequate connectivity to the Internet. Increased
government regulation of the Internet could also adversely affect our use of the
Internet in unanticipated ways and discourage our customers from using our
services. If our ability to use the Internet in providing our services is
impaired, our ability to originate or acquire loans on an automated basis could
be delayed or reduced. Any substantial delay and reduction in our mortgage loan
acquisitions and originations will reduce our net earnings for the applicable
period.
8
We are subject to risks of operational failure that are beyond our control
Substantially all of our operations are located in Newport Beach,
California. Our systems and operations are vulnerable to damage and
interruption from fire, flood, telecommunications failure, break-ins, earthquake
and similar events. Our operations may also be interrupted by power
disruptions, including rolling black-outs implemented in California due to the
state's continuing acute power shortage. We do not maintain alternative power
sources. Furthermore, our security mechanisms may be inadequate to prevent
security breaches to our computer systems, including from computer viruses,
electronic break-ins and similar disruptions. Such security breaches or
operational failures could expose us to liability, impair our operations, result
in losses, and harm our reputation.
Our reliance on third-party software for the implementation of IDASL exposes us
to risks
We have a licensing agreement with a third-party vendor for the use of
hardware and software for IDASL. All of our correspondents are submitting loans
through IDASL and all of our wholesale loans delivered by brokers are directly
underwritten through the use of IDASL. The termination or impairment of this
license could result in delays and reductions in the acquisition and origination
of mortgage loans until equivalent hardware and software could be licensed and
integrated, if at all possible, which may harm our business. In addition, we
would be harmed if the provider from whom we license software ceases to deliver
and support reliable products, enhance their current products or respond to
emerging industry standards. If the hardware or software provided by our vendor
fails for any reason, and the back-up hardware and software is not implemented
in a timely manner, it may also delay and reduce those mortgage loan
acquisitions and originations done through IDASL. The third-party hardware and
software also may not continue to be available to us on commercially reasonable
terms or at all. Any substantial delay and reduction in our mortgage loan
acquisitions and originations will reduce our net earnings for the applicable
period.
Competition for mortgage loans is intense and may adversely affect our
operations
We compete in acquiring and originating non-conforming Alt-A mortgage loans
and issuing mortgage-backed securities with:
. other mortgage conduit programs;
. investment banking firms;
. savings and loan associations;
. banks;
. thrift and loan associations;
. finance companies;
. mortgage bankers;
. insurance companies;
. other lenders; and
. other entities purchasing mortgage assets.
Some of our competitors are larger and have greater resources than we do.
Consolidation in the mortgage banking industry may adversely affect us by
reducing the number of current customers of our mortgage operations and our
potential customer base. As a result, we may have to purchase a larger
percentage of mortgage loans from a smaller number of customers, which may
reduce our profit margins, or increase the cost to acquire these types of loans.
We are exposed to potential credit losses in providing warehouse financing
As a warehouse lender, we lend money to mortgage bankers on a secured basis
and we are subject to the risks associated with lending to mortgage banks,
including the risks of fraud, borrower default and bankruptcy, any of which
could result in credit losses for us. Our claims as a secured lender in a
bankruptcy proceeding may be subject to adjustment and delay.
9
We may not pay dividends to stockholders
REIT provisions of the Internal Revenue Code generally require that we
distribute to our stockholders at least 90% of all of our taxable income. These
provisions restrict our ability to retain earnings and thereby renew capital for
our business activities. We may decide at a future date to terminate our REIT
status, which would cause us to be taxed at the corporate level, and cease
paying regular dividends.
In addition, for any year that we do not generate taxable income, we are
not required to declare and pay dividends to maintain our REIT status. For
instance, due to losses incurred in 2000, we did not declare any dividends from
September 2000 until September 25, 2001.
To date, a portion of our taxable income and cash flow has been
attributable to our receipt of dividend distributions from Impac Funding
Corporation, our mortgage operations affiliate. Impac Funding Corporation is
not a REIT and is not, therefore, subject to the above-described REIT
distribution requirements. Because Impac Funding Corporation is seeking to
retain earnings to fund the future growth of our mortgage operations business,
its board may decide that Impac Funding Corporation should cease making dividend
distributions in the future. This would materially reduce the amount of our
taxable income and in turn, would reduce the amount we would be required to
distribute as dividends.
We may be exposed to potential alternative minimum tax liability
To the extent we have a net operating loss carryover for federal income tax
purposes, we can offset our regular taxable income for the 2001 taxable year
with the net operating loss carryover and thereby eliminate our liability for
regular corporate income tax on the amount of income so offset. In computing
alternative minimum tax, however, we will be allowed to use only 90% of the net
operating loss deduction allowable for purposes of computing the regular income
tax. Thus, to the extent we shelter our income with the net operating loss
carryover deduction, we will be subject to alternative minimum tax at a rate of
20% on 10% of the income offset by the net operating loss for regular tax
purposes. In other words, the effective federal income tax rate on the amount
offset by the net operating loss deduction is 2%.
If we fail to maintain our REIT status, we may be subject to taxation as a
regular corporation
We believe that we have operated and intend to continue to operate in a
manner that enables us to meet the requirements for qualification as a REIT for
federal income tax purposes. We have not requested, and do not plan to request,
a ruling from the Internal Revenue Service that we qualify as a REIT.
Moreover, no assurance can be given that legislation, new regulations,
administrative interpretations or court decisions will not significantly change
the tax laws with respect to qualification as a REIT or the federal income tax
consequences of such qualification. Our continued qualification as a REIT will
depend on our satisfaction of certain asset, income, organizational and
stockholder ownership requirements on a continuing basis.
If we fail to qualify as a REIT, we would not be allowed a deduction for
distributions to stockholders in computing our taxable income and would be
subject to federal income tax at regular corporate rates. We also may be
subject to the federal alternative minimum tax. Unless we are entitled to
relief under specific statutory provisions, we could not elect to be taxed as a
REIT for four taxable years following the year during which we were
disqualified. Therefore, if we lose our REIT status, the funds available for
distribution to you would be reduced substantially for each of the years
involved. Failure to qualify as a REIT could adversely affect the value of our
common stock.
Delayed mortgage loan sales or securitization closings could have a material
adverse affect on our operations
A delay in closing a particular mortgage loan sale or securitization would
increase our exposure to interest rate fluctuations by lengthening the period
during which our variable rate borrowings under our warehouse facilities are
outstanding. If we were unable to sell a sufficient number of mortgage loans at
a premium during a particular
10
reporting period, our revenues for that period would decline, which could have a
material adverse affect on our operations.
Our share prices have been and may continue to be volatile
Historically, the market price of our common stock has been volatile.
During 2000, our stock reached a high of $4.38 per share on June 16 and June 22
and a low of $1.83 per share on December 5. During 2001, our common stock
reached a high of $9.35 per share on December 24 and a low of $2.85 per share on
January 2. The market price of our common stock is likely to continue to be
highly volatile and could be significantly affected by factors including:
. the amount of dividends paid;
. availability of liquidity in the securitization market;
. loan sale pricing;
. calls by warehouse lenders or changes in warehouse lending rates;
. unanticipated fluctuations in our operating results;
. prepayments on mortgages;
. valuations of securitization related assets;
. cost of funds; and
. general market conditions.
In addition, significant price and volume fluctuations in the stock market
have particularly affected the market prices for the common stock of mortgage
REIT companies such as ours. These broad market fluctuations have adversely
affected and may continue to adversely affect the market price of our common
stock. If our results of operations fail to meet the expectations of securities
analysts or investors in a future quarter, the market price of our common stock
could also be materially adversely affected and we may experience difficulty in
raising capital.
If actual prepayments or defaults with respect to mortgage loans serviced occurs
more quickly than originally assumed, the value of our mortgage servicing rights
would be subject to downward adjustment
When we purchase loans that include the associated servicing rights, the
allocated cost of the servicing rights is reflected on our financial statements
as mortgage servicing rights. To determine the fair value of these servicing
rights, we use assumptions to estimate future net servicing income including
projected discount rates, mortgage loan prepayments and credit losses. If
actual prepayments or defaults with respect to loans serviced occur more quickly
than we originally assumed, we would have to reduce the carrying value of our
mortgage servicing rights. We do not know if our assumptions will prove
correct.
Our operating results may be adversely affected by the results of our hedging
activities
To offset the risks associated with our mortgage operations, we enter into
transactions designed to hedge our interest rate risks. To offset the risks
associated with our long-term investment operations, we attempt to match the
interest rate sensitivities of our adjustable rate mortgage assets held for
investment with the associated financing liabilities. Our management determines
the nature and quantity of the hedging transactions based on various factors,
including market conditions and the expected volume of mortgage loan purchases.
We do not limit management's use of certain instruments in such hedging
transactions. While the Company believes that it is properly hedging its
interest rate risk, the accounting for such hedging activities may not, and in
some cases do not, qualify for hedge accounting under accounting principles
generally accepted in the United States of America and FAS 133. The effect of
the Company's hedging strategy may result in some volatility in its quarterly
earnings as interest rates go up or down. While the Company believes it is
properly hedging its interest rate risk, we cannot assure you that our hedging
transactions will offset the risk of adverse changes in net interest margins.
11
A reduction in the demand for residential mortgage loans and our non-conforming
loan products may adversely affect our operations
The availability of sufficient mortgage loans meeting our criteria is
dependent in part upon the size and level of activity in the residential real
estate lending market and, in particular, the demand for non-conforming mortgage
loans, which is affected by:
. interest rates;
. national economic conditions;
. residential property values; and
. regulatory and tax developments.
If our mortgage loan purchases decrease, we will have:
. decreased economies of scale;
. higher origination costs per loan;
. reduced fee income;
. smaller gains on the sale of non-conforming mortgage loans; and
. an insufficient volume of loans to generate securitizations which thereby
causes us to accumulate loans over a longer period.
Our delinquency ratios and our performance may be adversely affected by the
performance of parties who sub-service our loans
We contract with third-party sub-servicers for the sub-servicing of all the
loans in which we retain servicing rights, including those in our
securitizations. Our operations are subject to risks associated with inadequate
or untimely servicing. Poor performance by a sub-servicer may result in greater
than expected delinquencies and losses on our loans. A substantial increase in
our delinquency or foreclosure rate could adversely affect our ability to access
the capital and secondary markets for our financing needs. Also, with respect to
loans subject to a securitization, greater delinquencies would adversely impact
the value of any interest-only, principal-only and subordinated securities we
hold in connection with that securitization.
In a securitization, relevant agreements permit us to be terminated as
servicer or master servicer under specific conditions described in these
agreements, such as the failure of a sub-servicer to perform certain functions
within specific time periods. If, as a result of a sub-servicer's failure to
perform adequately, we were terminated as servicer of a securitization, the
value of any servicing rights held by us would be adversely affected.
Potential characterization of distributions or gain on sale as unrelated
business taxable income to tax-exempt investors
If (1) all or a portion of our assets are subject to the rules relating to
taxable mortgage pools, (2) we are a "pension-held REIT," (3) a tax-exempt
stockholder has incurred debt to purchase or hold our common stock, or (4) the
residual REMIC interests we buy generate "excess inclusion income," then a
portion of the distributions to and, in the case of a stockholder described in
(3), gains realized on the sale of common stock by such tax-exempt stockholder
may be subject to Federal income tax as unrelated business taxable income under
the Internal Revenue Code.
Classification as a taxable mortgage pool could subject us to increased taxation
If we have borrowings with two or more maturities and, (1) those borrowings
are secured by mortgage loans or mortgage-backed securities and, (2) the
payments made on the borrowings are related to the payments received on the
underlying assets, then the borrowings and the pool of mortgage loans or
mortgage backed securities to which such borrowings relate may be classified as
a taxable mortgage pool under the Internal Revenue Code. If any part of our
company were to be treated as a taxable mortgage pool, then our REIT status
would not be impaired, but a portion of the taxable income we recognize may,
under regulations to be issued by the Treasury Department, be characterized as
"excess inclusion" income and allocated among our stockholders to the extent of
and generally in proportion to the distributions we make to each stockholder.
Any excess inclusion income would:
12
. not be allowed to be offset by a stockholder's net operating losses;
. be subject to a tax as unrelated business income if a stockholder were a
tax-exempt stockholder;
. be subject to the application of federal income tax withholding at the
maximum rate (without reduction for any otherwise applicable income tax
treaty) with respect to amounts allocable to foreign stockholders; and
. be taxable (at the highest corporate tax rate) to us, rather than to our
stockholders, to the extent the excess inclusion income relates to stock
held by disqualified organizations (generally, tax-exempt companies not
subject to tax on unrelated business income, including governmental
organizations).
Based on advice of our tax counsel, we take the position that our existing
financing arrangements do not create a taxable mortgage pool.
Our operations may be adversely affected if we are subject to the Investment
Company Act
We intend to conduct our business at all times so as not to become
regulated as an investment company under the Investment Company Act. The
Investment Company Act exempts entities that are primarily engaged in the
business of purchasing or otherwise acquiring mortgages and other liens on and
interests in real estate.
In order to qualify for this exemption we must maintain at least 55% of our
assets directly in mortgage loans, qualifying pass-through certificates and
certain other qualifying interests in real estate. Our ownership of certain
mortgage assets may be limited by the provisions of the Investment Company Act.
If the Securities and Exchange Commission adopts a contrary interpretation with
respect to these securities or otherwise believes we do not satisfy the above
exception, we could be required to restructure our activities or sell certain of
our assets. To insure that we continue to qualify for the exemption we may be
required at times to adopt less efficient methods of financing certain of our
mortgage assets and we may be precluded from acquiring certain types of higher-
yielding mortgage assets. The net effect of these factors will be to lower at
times our net interest income. If we fail to qualify for exemption from
registration as an investment company, our ability to use leverage would be
substantially reduced, and we would not be able to conduct our business as
described. Our business will be materially and adversely affected if we fail to
qualify for this exemption.
If we conduct future offerings the market price of our securities may be
adversely affected
We may elect to increase our capital resources by making additional private
or public offerings of securities in the future. We do not know:
. the actual or perceived effect of these offerings;
. the timing of these offerings;
. the dilution of the book value or earnings per share of our securities then
outstanding; and
. the effect on the market price of our securities then outstanding.
Sales of additional common stock may adversely affect its market price
The sale or the proposed sale of substantial amounts of our common stock in
the public market could materially adversely affect the market price of our
common stock or other outstanding securities.
As of the date of this prospectus, HBK Master Fund L.P. beneficially owns
approximately 3,843,888 shares of our common stock, all of which are registered
with the SEC for sale to the public pursuant to an effective registration
statement. The sale of a large amount of shares by HBK Master Fund L.P. or the
perception that such sales may occur could adversely affect the market price for
our common stock or other outstanding securities.
We are a defendant in purported class actions and may not prevail in these
matters
We are a defendant in nine purported class actions pending in six different
state courts; two cases in the United States District Court for the Western
District of Tennessee and one in the United States District Court for the
Northern District of Illinois. All, except for the Illinois matter, allege
generally that the loan originator improperly charged fees in violation of
various state lending or consumer protection laws in connection with mortgage
loans
13
that we acquired. The Illinois matter alleges that we charged fees for services
that constitute the unauthorized practice of law and that were not proper
charges. Although the suits are not identical, they generally seek unspecified
compensatory damages, punitive damages, pre- and post-judgment interest, costs
and expenses and rescission of the loans, as well as a return of any improperly
collected fees. These actions are in the early stages of litigation and,
accordingly, it is difficult to predict the outcome of these matters. We believe
we have meritorious defenses to the actions and intend to defend against them
vigorously; however, an adverse judgment in any of these matters could have a
material adverse effect on us.
We may be subject to possible adverse consequences as a result of limits on
ownership of our shares
Our charter limits ownership of our capital stock by any single stockholder
to 9.5% of our outstanding shares unless waived by the board of directors. Our
board of directors may increase the 9.5% ownership limit. In addition, to the
extent consistent with the REIT provisions of the Internal Revenue Code, our
board of directors may, pursuant to our articles of incorporation, waive the
9.5% ownership limit for a stockholder or purchaser of our stock. In order to
waive the 9.5% ownership limit our board of directors must require the
stockholder requesting the waiver to provide certain representations to the
Company to ensure compliance with the REIT provisions of the Internal Revenue
Code. Our charter also prohibits anyone from buying shares if the purchase would
result in us losing our REIT status. This could happen if a share transaction
results in fewer than 100 persons owning all of our shares or in five or fewer
persons, applying certain broad attribution rules of the Internal Revenue Code,
owning more than 50% (by value) of our shares. If you or anyone else acquires
shares in excess of the ownership limit or in violation of the ownership
requirements of the Internal Revenue Code for REITs, we:
. will consider the transfer to be null and void;
. will not reflect the transaction on our books;
. may institute legal action to enjoin the transaction;
. will not pay dividends or other distributions with respect to those shares;
. will not recognize any voting rights for those shares;
. may redeem the shares; and
. will consider the shares held in trust for the benefit of a charitable
beneficiary as designated by us.
The trustee shall sell the shares held in trust and the owner of the excess
shares will be entitled to the lesser of:
(a) the price paid by the owner;
(b) if the owner did not purchase for the excess shares, the closing price
for the shares on the national securities exchange on which the
company is listed; or
(c) the price received by the trustee from the sale of the shares.
Limitations on acquisition and change in control ownership limit
The 9.5% ownership limit discussed above may have the effect of precluding
acquisition of control of our company by a third party without consent of our
board of directors.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of
common stock pursuant to this prospectus. When the selling stockholders sell
their common stock to others, all sale proceeds will be received by the selling
stockholders.
14
SELLING STOCKHOLDERS
The following table shows the names of the selling stockholders and the
number of shares of common stock that may be sold by them pursuant to this
prospectus. Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, each stockholder named in the table has sole
voting and investment power with respect to the shares set forth opposite that
stockholder's name. The selling stockholders will determine the actual number
of shares, if any, that they will sell. The table assumes all options held by
the selling stockholders are exercisable within 60 days of the date of the
prospectus. Because the selling stockholders may sell all, some or none of the
shares of common stock that they hold, we are unable to estimate the amount or
percentage of shares of common stock that they will hold after completion of the
offering.
The number of shares beneficially owned by each selling stockholder is as
of January 31, 2002. Applicable percentage ownership of our common stock prior
to the offering is based on 39,302,829 shares of common stock outstanding as of
February 20, 2002.
Shares Beneficially Owned Number of Shares of Common Stock
Prior to Offering which
----------------------------------------
Selling Stockholder Number Percent May be Offered
-------------------------------------------------------------------------------------------------------------------
Joseph R. Tomkinson 528,586/(1)/ 1.3 340,000
William S. Ashmore 423,612/(2)/ 1.1 300,000
Richard J. Johnson 376,526/(3)/ 1.0 240,000
Ronald M. Morrison 101,729/(4)/ * 87,500
Gretchen D. Verdugo 53,299/(5)/ * 42,000
James Walsh 80,000/(6)/ * 57,500
Frank P. Filipps 80,000/(6)/ * 57,500
Stephan R. Peers 80,000/(6)/ * 57,500
William E. Rose 47,500/(7)/ * 47,500
Leigh J. Abrams 47,500/(7)/ * 47,500
----------------------------
* indicates less than 1% ownership interest.
(1) Includes 100,000 shares underlying options granted under the 2001 Stock
Option, Deferred Stock and Restricted Stock Plan (the "2001 Stock Plan")
and 240,000 shares underlying options granted under the 1995 Stock Option,
Deferred Stock and Restricted Stock Plan (the "1995 Stock Plan").
(2) Includes 100,000 shares underlying options granted under the 2001 Stock
Plan and 200,000 shares underlying options granted under the 1995 Stock
Plan.
(3) Includes 100,000 shares underlying options granted under the 2001 Stock
Plan and 140,000 shares underlying options granted under the 1995 Stock
Plan.
(4) Includes 75,000 shares underlying options granted under the 2001 Stock Plan
and 12,500 shares underlying options granted under the 1995 Stock Plan.
(5) Includes 20,000 shares underlying options granted under the 2001 Stock Plan
and 22,000 shares underlying options granted under the 1995 Stock Plan.
(6) Includes 25,000 shares underlying options granted under the 2001 Stock Plan
and 32,500 shares underlying options granted under the 1995 Stock Plan.
(7) Includes 25,000 shares underlying options granted under the 2001 Stock Plan
and 22,500 shares underlying options granted under the 1995 Stock Plan.
Joseph R. Tomkinson is Chairman of the Board and Chief Executive Officer of
Impac Mortgage Holdings, Inc., Impac Funding Corporation, our mortgage
operations, and Impac Warehouse Lending Group, Inc, our warehouse lending
operations. William S. Ashmore is President and a Director of Impac Mortgage
Holdings, Inc., our mortgage operations and our warehouse lending operations.
Richard J. Johnson is Executive Vice President and Chief Financial Officer of
Impac Mortgage Holdings, Inc., our mortgage operations and our warehouse lending
operations. He is also a director of our mortgage operations and warehouse
lending operations. Messrs. Tomkinson, Ashmore and Johnson are holders of all of
the outstanding voting stock of, and 1% of the economic interest, in Impac
Funding Corporation, our mortgage operations. Ronald M. Morrison is General
Counsel and Secretary of Impac Mortgage Holdings, Inc, our mortgage operations
and our warehouse lending operations. Gretchen D. Verdugo is Executive Vice
President of our warehouse lending operations. James Walsh, Frank P. Filipps,
Stephan R. Peers, William E. Rose and Leigh J. Abrams are Directors of Impac
Mortgage Holdings, Inc.
15
PLAN OF DISTRIBUTION
The selling stockholders and any of their pledgees, donees, assignees,
transferees or successors-in-interest selling shares received from a named
selling stockholder as a gift, partnership distribution or other non-sale
related transfer after the date of this reoffer prospectus may, from time to
time, sell all or a portion of the shares of common stock offered hereby on the
American Stock Exchange or any stock exchange, market or trading facility on
which the shares are traded. Further, the selling stockholders may choose to
dispose of the shares offered hereby by gift to a third party or as a donation
to a charitable or other non-profit entity. These sales may be made at market
prices prevailing at the time of the sale or at negotiated or fixed prices. The
selling stockholders will act independently of Impac Mortgage Holdings, Inc. in
making decisions with respect to the timing, manner and size of each sale.
The selling stockholders may use any one or more of the following methods
when selling shares:
. ordinary brokerage transactions and transactions in which the broker-
dealer solicits purchasers;
. block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
. purchases by a broker-dealer as principal and resale by the broker-
dealer for its account;
. an exchange distribution in accordance with the rules of the
applicable exchange;
. privately negotiated transactions;
. underwritten offerings;
. short sales;
. agreements by the broker-dealer and the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
. a combination of any such methods of sale; and
. any other method permitted by applicable law.
The selling stockholders and any underwriters, brokers, dealers, financial
institutions or agents that participate in the distribution of the common stock
may be deemed to be "underwriters" under the Securities Act of 1933, and any
profit on the sale of the common stock by them and any discounts, commissions or
concessions received by any such underwriters, dealers, financial institutions
or agents might be deemed to be underwriting discounts and commissions under the
Securities Act.
Any broker-dealer participating in such transactions as agent may receive
commissions from the selling stockholders (and, if such broker acts as agent for
the purchaser of such shares, from such purchaser). Usual and customary
brokerage fees will be paid by the selling stockholders. Broker-dealers may
agree with the selling stockholders to sell a specified number of shares at a
stipulated price per share, and, to the extent the broker-dealer is unable to do
so acting as agent for the selling stockholders, to purchase as principal any
unsold shares at the price required to fulfill the broker-dealer commitment to
the selling stockholders. Broker-dealers who acquire shares as principal may
thereafter resell such shares from time to time in transactions (which may
involve crosses and block transactions and which may involve sales to and
through other broker-dealers, including transactions of the nature described
above) in the over-the-counter market, in negotiated transactions or otherwise
at market prices prevailing at the time of sale or at negotiated prices, and in
connection with such resales may pay to or receive from the purchasers of such
shares commissions computed as described above.
Unless otherwise prohibited, the selling stockholders may enter into
hedging transactions with broker-dealers or other financial institutions in
connection with distributions of the shares or otherwise. In such transactions,
broker-dealers or financial institutions may engage in short sales of the shares
in the course of hedging the position they assume with the selling stockholders.
The selling stockholders may also engage in short sales, puts and calls,
forward-exchange contracts, collars and other transactions in our securities or
derivatives of our securities and may sell or deliver shares in connection with
these trades. If the selling stockholders sell shares short, they may redeliver
the shares to close out such short positions. The selling stockholders may also
enter into option or other transactions with broker-dealers or financial
institutions which require the delivery to the broker-dealer or the financial
institution of the shares. The broker-dealer or financial institution may then
resell or otherwise transfer such shares pursuant to this reoffer prospectus. In
addition, the selling stockholders may loan their shares to broker-dealers or
financial institutions who are counterparties to hedging transactions and the
broker-dealers, financial
16
institutions or counterparties may sell the borrowed shares into the public
market. The selling stockholders may also pledge their shares to their brokers
or financial institutions and under the margin loan the broker or financial
institution may, from time to time, offer and sell the pledged shares. The
selling stockholders have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters, broker-
dealers, or financial institutions regarding the sale of their shares other than
ordinary course brokerage arrangements, nor is there an underwriter or
coordinating broker acting in connection with the proposed sale of shares by the
selling stockholders.
The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states the shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and complied with.
Impac Mortgage Holdings, Inc. will file a supplement to this reoffer
prospectus, if required, under Rule 424(b) under the Securities Act upon being
notified by a selling stockholder that any material arrangement has been entered
into with a broker-dealer or financial institution for the sale of shares
through a block trade, special or underwritten offering, exchange distribution
or secondary distribution or a purchase by a broker, dealer or financial
institution. Such supplement will disclose: the name of each selling
stockholder and of the participating broker-dealer(s) or financial
institution(s); the number of shares involved; the price at which such shares
were sold; the commissions paid or discounts or concessions allowed to such
broker-dealer(s) or financial institution(s), where applicable; that such
broker-dealer(s) or financial institution(s) did not conduct any investigation
to verify the information set out or incorporated by reference in this reoffer
prospectus; and other facts material to the transaction.
In addition, upon being notified by a selling stockholder that a donee or
pledgee intends to sell more than 500 shares, we will file a supplement to this
reoffer prospectus.
We will pay all the expenses of the registration of the shares and will not
receive proceeds from the sale of the shares by the selling stockholders. We
will not pay any of the expense associated with sales by the selling
stockholders. The selling stockholders may agree to indemnify any broker-dealer
or agent that participates in transactions involving sales of the shares against
certain liabilities in connection with the offering of the shares arising under
the Securities Act.
The selling stockholders and any other person participating in the
distribution will be subject to the applicable provisions of the Securities
Exchange Act of 1934 and the rules and regulations under the Exchange Act. The
Exchange Act rules include, without limitation, Regulation M, which may limit
the timing of any other person participating in the distribution. In addition,
Regulation M of the Exchange Act may restrict the ability of any person engaged
in the distribution of the common stock to engage in market-making activities
with respect to the particular shares of common stock being distributed for a
period of up to five business days prior to the commencement of the
distribution. This may affect the marketability of the shares of common stock
and the ability of any person or entity to engage in market-making activities
with respect to the shares of common stock.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, or under Section 4(1) of the Securities Act,
rather than under this reoffer prospectus. In general, under Rule 144 as
currently in effect, a person (or persons whose shares are aggregated),
including any person who may be deemed to be our "affiliate," is entitled to
sell within any three month period "restricted shares" beneficially owned by him
or her in an amount that does not exceed the greater of (i) 1% of the then
outstanding shares of common stock of the company or (ii) the average weekly
reported trading volume in shares of our common stock during the four calendar
weeks preceding such sale, provided that at least one year has elapsed since
such shares were acquired from us or any of our affiliates. Sales are also
subject to certain requirements as to the manner of sale, notice and
availability of current public information regarding IMH. However, a person who
has not been our "affiliate" at any time within three months prior to the sale
is entitled to sell his or her shares without regard to the volume limitations
or other requirements of Rule 144, provided that at least two years have elapsed
since such shares were acquired from us or any of our affiliates.
There can be no assurance that the selling stockholders will sell any or
all of the shares of common stock offered hereunder.
17
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Maryland General Corporation Law, as amended from time to time, permits
a Maryland corporation to include in its charter a provision limiting the
liability of its directors and officers to the corporation and its stockholders
for money damages except for liability resulting from (a) actual receipt of an
improper benefit or profit in money, property or services or (b) active and
deliberate dishonesty established by a final judgment as being material to the
cause of action. Our charter contains such a provision which eliminates such
liability to the maximum extent permitted by Maryland law.
Our charter authorizes us, to the maximum extent permitted by Maryland law,
to obligate us to indemnify and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to (1) any present or former
director or officer or (2) any individual who, while a director of Impac
Mortgage Holdings Inc. and at our request, serves or has served another
corporation, real estate investment trust partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner or
trustee of such corporation, real estate investment trust partnership, joint
venture, trust, employee benefit plan or other enterprise from and against any
claim or liability to which such person may become subject or which such person
may incur by reason of his status as a present or former director or officer of
Impac Mortgage Holdings Inc. Our bylaws obligate us, to the maximum extent
permitted by Maryland law, to indemnify and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to (1) any present or
former director or officer who is made a party to the proceeding by reason of
his service in that capacity or (2) any individual who, while a director of
Impac Mortgage Holdings Inc. and at our request, serves or has served another
corporation, real estate investment trust partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner or
trustee of such corporation, real estate investment trust partnership, joint
venture, trust, employee benefit plan or other enterprise and who is made a
party to the proceeding by reason of his service in that capacity. Our charter
and bylaws also permit us to indemnify and advance expenses to any person who
served a predecessor of Impac Mortgage Holdings Inc. in any of the capacities
described above and to any of our employees or agents or a predecessor of Impac
Mortgage Holdings Inc.
The Maryland General Corporation Law requires a corporation (unless its
charter provides otherwise, which our charter does not) to indemnify a director
or officer who has been successful, on the merits or otherwise, in the defense
of any proceeding to which he is made a party by reason of his service in that
capacity. Maryland law permits a corporation to indemnify its present and former
directors and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection with
any proceeding to which they may be made a party by reason of their service in
those or other capacities unless it is established that (1) the act or omission
of the director or officer was material to the matter giving rise to the
proceeding and (i) was committed in bad faith or (ii) was the result of active
and deliberate dishonesty, (2) the director or officer actually received an
improper personal benefit in money, property or services or (3) in the case of
any criminal proceeding, the director or officer had reasonable cause to believe
that the act or omission was unlawful. However, under Maryland law, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation or for a judgment of liability on the basis that
personal benefit was improperly received, unless in either case a court orders
indemnification and then only for expenses. In addition, the Maryland law
permits a corporation to advance reasonable expenses to a director or officer
upon the corporation's receipt of (1) a written affirmation by the director or
officer of his good faith belief that he has met the standard of conduct
necessary for indemnification by the corporation and (2) a written undertaking
by him or on his behalf to repay the amount paid or reimbursed by the
corporation if it shall ultimately be determined that the standard of conduct
was not met. In addition, we have entered into an Indemnity Agreement with each
of our officers and directors. We maintain for the benefit of our officers and
directors, officers' and directors' insurance.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
18
LEGAL MATTERS
The legality of the securities will be passed upon for us by Kirkpatrick &
Lockhart LLP, Los Angeles, California. All matters of Maryland law will be
passed upon for us by McKee Nelson LLP, Washington, D.C.
EXPERTS
The consolidated financial statements of Impac Mortgage Holdings, Inc. and
of Impac Funding Corporation as of December 31, 2000 and 1999, and for each of
the years in the three-year period ended December 31, 2000, have been
incorporated by reference herein and in the registration statement in reliance
upon the report of KPMG LLP, independent auditors, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
19
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
We incorporate by reference the following documents in this
Registration Statement which we have filed with the SEC (File No. 1-14100) under
the Securities Exchange Act of 1934 (the "Exchange Act"):
. Our Annual Report on Form 10-K for the fiscal year ended December 31,
2000 as filed on March 30, 2001 and as amended by Form 10-K/A
(Amendment No. 1) filed on October 17, 2001 and Form 10-K/A (Amendment
No. 2) filed on January 16, 2002;
. Our Definitive Proxy Statement filed on April 30, 2001 and amended on
May 17, 2001;
. Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2001
as filed on May 15, 2001;
. Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2001
as filed on August 14, 2001 and as amended by Form 10-Q/A filed on
October 12, 2001;
. Our Quarterly Report on Form 10-Q for the quarter ended September 30,
2001 as filed on November 14, 2001;
. Our Current Reports on Form 8-K filed on February 8, 2002, January 29,
2002, October 26, 2001, October 24, 2001 and September 5, 2001;
. The description of our common stock contained in our registration
statement on Form 8-A, including all amendments and reports filed for
the purpose of updating such description; and
. The description of our preferred stock purchase rights contained in our
registration statement on Form 8-A, as amended, including all
amendments and reports filed for the purpose of updating such
description.
We incorporate by reference the documents listed above and any
documents subsequently filed with the SEC pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act, prior to the filing of a post-effective amendment
which indicates that all securities offered have been sold or which deregisters
all securities then remaining unsold, shall be deemed to be incorporated by
reference in the Registration Statement and to be part thereof from the date of
filing of such documents.
Item 4. Description of Securities.
The class of securities to be offered is registered under Section 12(b)
of the Exchange Act.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
The Maryland General Corporation Law, as amended from time to time,
permits a Maryland corporation to include in its charter a provision limiting
the liability of its directors and officers to the corporation and its
stockholders for money damages except for liability resulting from (a) actual
receipt of an improper benefit or profit in money, property or services or (b)
active and deliberate dishonesty established by a final judgment as being
material to the cause of action. Our charter contains such a provision which
eliminates such liability to the maximum extent permitted by Maryland law.
Our charter authorizes us, to the maximum extent permitted by Maryland
law, to obligate us to indemnify and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to (1) any present or former
director or officer or (2) any individual who, while a director of Impac
Mortgage Holdings Inc. and at our request, serves or has served another
corporation, real estate investment trust partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner or
trustee of such corporation, real estate investment trust partnership, joint
venture, trust, employee benefit plan or other enterprise from and against any
claim or liability to which such person may become subject or which such person
may incur by reason of his status
II-1
as a present or former director or officer of Impac Mortgage Holdings Inc. Our
bylaws obligate us, to the maximum extent permitted by Maryland law, to
indemnify and to pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to (1) any present or former director or officer who
is made a party to the proceeding by reason of his service in that capacity or
(2) any individual who, while a director of Impac Mortgage Holdings Inc. and at
our request, serves or has served another corporation, real estate investment
trust partnership, joint venture, trust, employee benefit plan or any other
enterprise as a director, officer, partner or trustee of such corporation, real
estate investment trust partnership, joint venture, trust, employee benefit plan
or other enterprise and who is made a party to the proceeding by reason of his
service in that capacity. Our charter and bylaws also permit us to indemnify and
advance expenses to any person who served a predecessor of Impac Mortgage
Holdings Inc. in any of the capacities described above and to any of our
employees or agents or a predecessor of Impac Mortgage Holdings Inc.
The Maryland General Corporation Law requires a corporation (unless its
charter provides otherwise, which our charter does not) to indemnify a director
or officer who has been successful, on the merits or otherwise, in the defense
of any proceeding to which he is made a party by reason of his service in that
capacity. Maryland law permits a corporation to indemnify its present and former
directors and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection with
any proceeding to which they may be made a party by reason of their service in
those or other capacities unless it is established that (1) the act or omission
of the director or officer was material to the matter giving rise to the
proceeding and (i) was committed in bad faith or (ii) was the result of active
and deliberate dishonesty, (2) the director or officer actually received an
improper personal benefit in money, property or services or (3) in the case of
any criminal proceeding, the director or officer had reasonable cause to believe
that the act or omission was unlawful. However, under Maryland law, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation or for a judgment of liability on the basis that
personal benefit was improperly received, unless in either case a court orders
indemnification and then only for expenses. In addition, the Maryland law
permits a corporation to advance reasonable expenses to a director or officer
upon the corporation's receipt of (1) a written affirmation by the director or
officer of his good faith belief that he has met the standard of conduct
necessary for indemnification by the corporation and (2) a written undertaking
by him or on his behalf to repay the amount paid or reimbursed by the
corporation if it shall ultimately be determined that the standard of conduct
was not met.
In addition, we have entered into an Indemnity Agreement (Exhibit 10.4
of our Registration Statement on Form S-11 (File No. 33-96670) and Amendments
No. 1, 2 and 3 filed with the Securities and Exchange Commission on September 7,
1995, October 23, 1995, October 30, 1995 and November 8, 1995, respectively)
with our officers and directors. We maintain for the benefit of our officers and
directors, officers' and directors' insurance.
Item 7. Exemption From Registration Claimed.
Not applicable.
Item 8. Exhibits.
Exhibit
Number
-------
4.1* Impac Mortgage Holdings, Inc. 2001 Stock Option, Deferred
Stock and Restricted Stock Plan.
4.1(a) Amendment to 2001 Stock Option, Deferred Stock and
Restricted Stock Plan.
4.2** Form of Stock Option Agreement for the Impac Mortgage
Holdings, Inc. 2001 Stock Option, Deferred Stock and
Restricted Stock Plan.
5.1 Opinion of Kirkpatrick & Lockhart LLP.
5.2 Opinion of McKee Nelson LLP.
23.1 Consent of KPMG LLP re: Impac Mortgage Holdings, Inc.
23.2 Consent of KPMG LLP re: Impac Funding Corporation.
23.3 Consent of Kirkpatrick & Lockhart LLP (contained in Exhibit
5.1).
23.4 Consent of McKee Nelson LLP (contained in Exhibit 5.2).
24 Power of Attorney (contained on signature page).
_____________________________
II-2
* Previously filed with the Commission as Appendix A to the Registrant's
Definitive Proxy Statement on Schedule 14A filed with the Commission on April
30, 2001 and incorporated herein by reference.
** Incorporated by reference to the corresponding exhibit to the
Company's Registration Statement on Form S-8 (Registration No. 333-68128), filed
with the Commission on August 22, 2001.
Item 9. Undertakings
(a) The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(b) The Registrant hereby undertakes, for the purposes of determining any
liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange
Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Newport Beach, State of California, on this 28th day
of February, 2002.
IMPAC MORTGAGE HOLDINGS, INC.
By: /s/ Richard J. Johnson
----------------------
Richard J. Johnson, Executive Vice
President and Chief Financial Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of Impac Mortgage Holdings,
Inc., do hereby constitute and appoint Joseph R. Tomkinson or Richard J.
Johnson, and each of them, as his true and lawful attorneys-in-fact and agents,
with full power of substitution for him in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Names Title Date
/s/ Joseph R. Tomkinson Chairman of the Board and Chief Executive
---------------------------------------------
Joseph R. Tomkinson Officer (Principal Executive Officer) February 28, 2002
/s/ William S. Ashmore
---------------------------------------------
William S. Ashmore President and Director February 28, 2002
Executive Vice President and Chief Financial
/s/ Richard J. Johnson Officer (Principal Financial and Accounting
---------------------------------------------
Richard J. Johnson Officer) February 28, 2002
/s/ James Walsh
---------------------------------------------
James Walsh Director February 28, 2002
/s/ Frank P. Filipps
---------------------------------------------
Frank P. Filipps Director February 28, 2002
/s/ Stephan R. Peers
---------------------------------------------
Stephan R. Peers Director February 28, 2002
/s/ William E. Rose
---------------------------------------------
William E. Rose Director February 28, 2002
/s/ Leigh J. Abrams
---------------------------------------------
Leigh J. Abrams Director February 28, 2002
II-4
EXHIBIT INDEX
4.1(a) Amendment to 2001 Stock Option, Deferred Stock and Restricted
Stock Plan
5.1 Opinion of Kirkpatrick & Lockhart LLP.
5.2 Opinion of McKee Nelson LLP.
23.1 Consent of KPMG LLP re: Impac Mortgage Holdings, Inc.
23.2 Consent of KPMG LLP re: Impac Funding Corporation.
23.3 Consent of Kirkpatrick & Lockhart LLP (contained in Exhibit 5.1).
23.4 Consent of McKee Nelson LLP (contained in Exhibit 5.2).
24 Power of Attorney (contained on signature page).