o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a-12
Indymac
Bancorp, Inc.
(Name of Registrant as Specified In Its Charter)
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You are cordially invited to attend the Annual Meeting of
Stockholders of IndyMac Bancorp, Inc. (“Indymac”). The
meeting will be held on April 26, 2007, at 9:00 a.m.
at Indymac’s offices at 3465 Foothill Boulevard,
Pasadena, California.
2006 was another strong year for Indymac, as we achieved record
mortgage loan production, record net income and record
earnings-per-share
(EPS) and earned a strong 19 percent
return-on-equity.
This was accomplished during a very challenging time for housing
and the mortgage market — a year in which industry
volumes declined 17 percent, representing the third year in
a row of down industry volumes. However, our year ended on a
disappointing note, as our fourth quarter EPS declined both
sequentially and versus the fourth quarter of 2005 as the
housing and mortgage markets deteriorated further. While our
outlook for 2007 is that industry conditions will remain
difficult and Indymac’s EPS will be down from 2006, I
believe we will emerge from this challenging mortgage
environment a stronger and more competitive company.
We hope you will join us at the Annual Meeting, as during the
meeting I plan to provide a complete review of our performance
for 2006 and the first quarter of 2007 and discuss our outlook
for 2007 in detail and how we plan to adapt and improve our
financial performance in light of market conditions. Even if you
do plan to attend the meeting, we encourage you to sign, date
and return the enclosed proxy card, or submit your proxy vote
via telephone or the Internet. You may still vote in person at
the Annual Meeting if you desire by withdrawing your proxy, but
returning your proxy card now, or submitting your voting
instructions via telephone or the Internet, will assure that
your vote is counted if your plans change and you are unable to
attend the meeting.
As set forth in the attached Proxy Statement, the meeting will
be held to consider the following matters:
•
The election of 10 directors
•
The ratification of the appointment of Indymac’s
independent auditors for 2007.
Your vote is important, regardless of the number of shares you
own. We urge you to indicate your approval by voting FOR each of
the matters indicated in the notice and described in the proxy
statement.
Thank you for your support of Indymac. I look forward to seeing
you at the Annual Meeting.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 26, 2007
Location,
Date and Proposals
The Annual Meeting of Stockholders (the “Annual
Meeting”) of IndyMac Bancorp, Inc. (“Indymac”)
will be held at Indymac’s offices located at 3465 East
Foothill Boulevard, Pasadena, California on April 26, 2007
at 9:00 a.m., local time, for the following purposes:
1.
To elect the Board of Directors for the ensuing year;
2.
To ratify the appointment of Ernst & Young LLP as
Indymac’s independent auditors for the year ending Dec. 31,2007; and
3.
To transact such other business as may properly come before the
meeting or any adjournment thereof.
The proposals described above are more fully described in the
accompanying proxy statement, which forms a part of this Notice.
Attendance
Requirements
If you plan to attend the Annual Meeting, please notify the
undersigned at the address set forth above so that appropriate
preparations can be made. Please note that picture
identification will be required for entry into the Annual
Meeting.
Record
Date
The Board of Directors has fixed March 1, 2007 as the
record date for the Annual Meeting. Only stockholders of record
at the close of business on that date will be entitled to notice
of and to vote at the Annual Meeting or any adjournments or
postponements of the Annual Meeting. A list of those
stockholders will be available for inspection at our offices
located at 888 East Walnut Street, Pasadena,
California91101 commencing at least ten days before the
Annual Meeting.
Proxy
Card
Whether or not you plan to attend the Annual Meeting, please
sign, date and return the enclosed proxy card, or submit your
voting instructions electronically or via telephone in the
manner described on the enclosed proxy card. If you choose to
return the enclosed proxy card via United States mail, a return
envelope that requires no postage for mailing in the United
States is enclosed for this purpose. If you are present at the
Annual Meeting you may, if you wish, withdraw your proxy and
vote in person. Thank you for your interest and consideration of
the proposals listed above.
EACH VOTE IS IMPORTANT. TO VOTE YOUR SHARES,
PLEASE SIGN, DATE AND COMPLETE THE ENCLOSED PROXY CARD AND MAIL
IT IN THE ENCLOSED RETURN ENVELOPE, OR SUBMIT YOUR VOTING
INSTRUCTIONS ELECTRONICALLY OR VIA TELEPHONE IN THE MANNER
DESCRIBED ON THE ENCLOSED PROXY CARD.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 26, 2007
Location,
Date, Mailing Date
This Proxy Statement is furnished to stockholders of IndyMac
Bancorp, Inc. (“Indymac,” the “Company,”“we,”“us” or “our”) in connection
with the solicitation by the Board of Directors of Indymac of
proxies to be voted at the 2007 Annual Meeting of Stockholders
(the “Annual Meeting”) to be held at our offices
located at 3465 East Foothill Boulevard, Pasadena, California on
April 26, 2007, at 9:00 a.m. or at any adjournment or
postponement of the Annual Meeting. We expect to mail the proxy
solicitation materials for the Annual Meeting on or about
March 23, 2007.
Proxy
Solicitation
The principal solicitation of proxies for the Annual Meeting is
being made by mail. Officers, directors and employees of
Indymac, none of whom will receive additional compensation for
their assistance, may also solicit proxies by telephone or other
personal or electronic contact. Indymac has retained
Morrow & Co., Inc. to assist in the solicitation of
proxies for an estimated fee of $9,000 plus reimbursement of
expenses. Indymac will bear the cost of the solicitation of
proxies, including postage, printing and handling, and will
reimburse brokerage firms and other record holders of shares
beneficially owned by others for their reasonable expenses
incurred in forwarding solicitation material to beneficial
owners of shares.
Revocation
of Proxy
A stockholder may revoke his or her proxy at any time before it
is voted by delivering a later dated, signed proxy or other
written notice of revocation to the Corporate Secretary of
Indymac. Any stockholder present at the Annual Meeting may also
withdraw his or her proxy and vote in person on each matter
brought before the Annual Meeting. All shares represented by
properly signed and returned proxies in the accompanying form,
unless revoked, will be voted in accordance with the
instructions given on the proxy. If no instructions are given,
the shares will be voted in favor of Proposals One and Two
described in this Proxy Statement.
Record
Date
Only holders of shares of Indymac’s Common Stock, par value
$0.01 per share (the “Common Stock”), of record at the
close of business on the March 1, 2007, record date for the
Annual Meeting will be entitled to notice of and to vote at the
Annual Meeting or at any postponement or adjournment thereof. On
the record date, 73,188,235 shares of Common Stock were
outstanding. Stockholders will each be entitled to one vote per
share of Common Stock held by them.
Votes cast in person or by proxy at the Annual Meeting will be
tabulated by the inspector of elections appointed for the
meeting. Pursuant to Indymac’s Bylaws and the Delaware
General Corporation Law (the “DGCL”), the presence of
the holders of shares representing a majority of the outstanding
shares of Common Stock entitled to vote at the Annual Meeting,
whether in person or by proxy, is necessary to constitute a
quorum for the transaction of business at the Annual Meeting.
Abstentions and “broker non-votes” (that is, proxies
from brokers or nominees that do not have discretionary
authority to vote on a matter and have not received voting
instructions from the beneficial owners or other persons
entitled to vote with respect to such matter) will be treated as
present for purposes of determining the presence of a quorum.
Vote
Requirements
On Jan. 23, 2007, the Board of Directors of Indymac
approved amendments to Indymac’s Bylaws to, among other
things, clarify the majority voting standard for the election of
directors. In accordance with Indymac’s Bylaws, for a
director nominee to be elected, other than in a contested
election (i.e., where the number of director nominees exceeds
the number of directors to be elected), the director nominee
must receive a majority of votes cast with respect to such
director nominee, which means that there must be more votes cast
“for” than votes cast “against” the director
nominee. According to Indymac’s Bylaws, shares represented
by proxies that reflect abstentions will not be treated as votes
cast for the election of directors. As a result, abstentions
will not affect the election of director nominees. The Board of
Directors of Indymac also amended Indymac’s Bylaws to
provide that in a contested election of directors the director
nominees shall be elected by a plurality of the shares present
or represented by proxy and entitled to vote on the election of
directors.
At the Annual Meeting, the election of each of the director
nominees under Proposal One will require that the votes
cast for a director nominee exceed the votes cast against the
director nominee (assuming that the number of director nominees
does not exceed the number of directors to be elected) and the
approval of Proposal Two will require the affirmative vote
of a majority of the shares of Common Stock present or
represented by proxy and entitled to vote on the proposal at the
Annual Meeting. For purposes of determining approval of
Proposal Two, abstentions will be deemed present and
entitled to vote and will, therefore, have the same legal effect
as a vote “against” Proposal Two.
A broker non-vote will be deemed “not entitled to
vote” on the proposal for which the non-vote is indicated
and will, therefore, have no legal effect on the voting for
Proposals One and Two.
RECEIVE
YOUR ANNUAL REPORT AND
PROXY STATEMENT ON-LINE NEXT YEAR
You can save Indymac future postage and printing expense by
consenting to receive future annual reports and proxy statements
over the Internet instead of receiving paper copies in the mail.
Stockholders will be given the opportunity to consent to future
Internet delivery. You may consent to future Internet delivery
by so indicating in the space provided on the enclosed proxy
card. For some stockholders this option will only be available
if the brokerage firm, bank or other record holder of their
shares makes appropriate provision to obtain such consent, or if
they vote electronically by the Internet when they vote their
proxy this year.
If you are not given an opportunity to consent to Internet
delivery when you vote your proxy, contact the bank, broker or
other holder of record through which you hold your shares and
inquire about the availability of this means of delivery to you.
If you consent, your account will be so noted and, when the
proxy statement for the 2008 Annual Meeting of Stockholders and
Indymac’s 2007 Annual Report become available, you will be
notified on how to access them on the Internet.
Stockholders who elected last year to receive their Indymac
materials via the Internet this year will be notified of the
Internet location of the materials at the same time the
materials are distributed to all other Indymac stockholders.
If you elect to receive your Indymac materials via the Internet,
you can still request paper copies free of charge by writing to
Investor Relations at IndyMac Bancorp, Inc., 888 East
Walnut Street, P.O. Box 7211, Pasadena, California91109-7137.
In addition, if you own Common Stock in more than one account,
such as individually and also jointly with your spouse, you may
receive more than one set of these proxy materials. To assist us
in saving money and to provide you with better shareholder
services, we encourage you to have all your accounts registered
in the same name and address.
The following chart compares the total stockholder returns
(stock price increase plus dividends) on our common stock from
Dec. 31, 2001, through Dec. 31, 2006, with the total stockholder
returns for the Russell 1000 Index, as the broad market index,
and the Russell 1000 Financial Services Index, as the industry
or line of business index. The graph assumes that the value of
the investment in our common stock and each index was $100 on
Dec. 31, 2001, and that all dividends were reinvested.
COMPARISON
OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
We have included the additional graph below to show that our
stock has unfortunately performed poorly since the end of 2006.
We have managed through these difficult and volatile periods
before and remain confident that the strong
long-term
fundamentals of the mortgage business and Indymac remain intact,
and will provide shareholders with superior long-term returns
relative to the market.
The Board of Directors of Indymac is providing these materials
to you in connection with Indymac’s upcoming Annual Meeting
of Stockholders. As a stockholder, you are invited to attend the
Annual Meeting and entitled to vote on the items of business
described in this Proxy Statement.
What
information is contained in this Proxy Statement?
The information contained in this Proxy Statement describes the
proposals to be voted on at the upcoming Annual Meeting, the
voting process, compensation of the Company’s directors and
most highly paid executives, and certain other required
information.
Who is
entitled to vote?
Only shareholders of record at the close of business on
March 1, 2007, will be entitled to vote at the Annual
Meeting.
How do
I cast my vote?
If you are the shareholder of record you may cast your vote
using one of the following methods:
•
electronically, via the Internet,
•
over the telephone by calling a toll-free number,
•
by mail, by completing, signing and mailing the enclosed proxy
card, or
•
in person at the annual meeting.
If your stock is held in “street name,” that is,
through a brokerage account or bank, you will receive voting
instructions from your bank or broker describing how to vote
your stock.
To ensure that your proxy is voted, it should be received by the
close of business on April 25, 2007.
How
does the Board of Directors recommend that I vote?
The Board of Directors recommends voting:
•
FOR each nominee to the Board of Directors
•
FOR ratification of Ernst & Young LLP as auditors.
Who
will count the vote?
Representatives of The Bank of New York, our transfer agent,
will tabulate votes and act as independent inspectors of
election.
What
vote is required for the election of directors or for a proposal
to be approved?
•
To elect the directors, the votes cast “for” a
director nominee must exceed the votes cast “against”
a director nominee; and
To ratify the selection of our independent registered public
accountants requires the affirmative vote of a majority of the
votes cast.
What
if I do not specify how I want my shares voted?
If you do not indicate your vote on a matter submitted at the
meeting, your shares will be voted on that particular matter as
follows:
•
For, the election of each of the persons named under
“Proposal One, Election of Directors;”
•
For, ratification of the appointment of Ernst &
Young LLP as the Company’s independent registered public
accounting firm.
What
can I do if I change my mind after I vote my
shares?
To change your vote, you must cast a new vote:
•
By mailing a new proxy card with a later date; or
•
By telephone or the Internet
If you hold your shares in your name and you attend the Annual
Meeting and vote in-person, your in-person vote will change any
previously submitted proxy.
If you wish to revoke rather than change your vote, written
revocation must be sent to the Corporate Secretary, at the
address set forth below, prior to the Annual Meeting.
What
is the difference between a shareholder of record and a
“street name” holder?
If your shares are registered directly in your name with
Indymac’s transfer agent, The Bank of New York, you
are considered, with respect to those shares, the shareholder of
record, and these proxy materials are being sent directly to you
by us. As the shareholder of record, you have the right to grant
your voting proxy directly to the persons named in the proxy or
to vote in person at the meeting. Indymac has enclosed a proxy
card for you to use.
If your shares are held in a stock brokerage account or by a
bank or other nominee, you are considered the beneficial owner
of shares held in street name, and these proxy materials are
being forwarded to you by your broker or nominee who is
considered, with respect to those shares, the shareholder of
record. As the beneficial owner, you have the right to direct
your broker on how to vote and are also invited to the meeting.
However, since you are not the shareholder of record, you may
not vote these shares in person at the meeting. Your broker or
nominee has enclosed a voting instruction card for you to use.
Is my
vote confidential?
Yes. Your vote will not be disclosed to our Directors or
employees, except for a very limited number of employees
involved in coordinating the vote tabulation process. An
independent inspector reviews the vote tabulation process.
Our confidentiality policy does not apply to certain matters,
such as contested elections or disputed votes.
If I
want to attend the meeting what do I need to do?
If you plan to attend the Annual Meeting, please notify
Indymac’s Corporate Secretary at the address provided
below. Please note that picture identification will be required
for entry into the Annual Meeting.
As of Feb. 14, 2007, the following entities were known to
Indymac to be the beneficial owners of more than 5% of
Indymac’s outstanding Common Stock. The following table
shows: (1) the number of shares of Common Stock owned by
each such entity; and (2) the percentage of all outstanding
shares represented by such ownership (based upon the most
recently reported number of shares outstanding as of the date
the entity filed a Schedule 13G with the Securities and
Exchange Commission).
Based upon Schedule 13G filed Jan. 31, 2007 with the
Securities and Exchange Commission.
(2)
Based upon Amendment No. 6 to Schedule 13G filed Feb.14, 2007 with the Securities and Exchange Commission.
(3)
Based upon Amendment No. 9 to Schedule 13G filed Feb.7, 2007 with the Securities and Exchange Commission. Capital
Guardian Trust Company (“Capital Guardian”) is a
wholly owned subsidiary of Capital Group International, Inc.
(“Capital Group”) and the 4,832,660 shares
beneficially owned by Capital Guardian are included in those
shown as beneficially owned by Capital Group. In addition to the
5,154,560 shares beneficially owned by Capital Group,
3,650,000 shares, or 5.2% of shares outstanding, are owned
by accounts under the discretionary investment management of a
related entity, Capital Research and Management Company (CRMC).
As such, CRMC is considered the beneficial owner of the
3,650,000 shares.
Executive Vice President,
Secondary Marketing and Retained Assets
1999
Frank M. Sillman
43
Executive Vice President, Indymac
Bank, Chief Executive Officer, Indymac Mortgage Bank
1997
(1)
Unless otherwise noted, each executive officer is an officer of
both Indymac and Indymac Bank.
Michael W. Perry is Chairman of the Board of Directors
and Chief Executive Officer of Indymac Bancorp and Indymac Bank.
Mr. Perry assumed responsibility for the
day-to-day
operations of Indymac in 1993. Under his leadership, Indymac has
grown from four employees, total assets of $714 million and
a market cap of $75 million to over 8,000 employees, total
assets of over $29 billion and a market cap of
$3.2 billion as of Dec. 31, 2006. Additionally, during the
period from 1993 through Dec. 31, 2006, Indymac provided its
shareholders a compounded annual return of 23%, exceeding the
comparable returns of 12% and 11% for the Dow Jones Industrial
Average and S&P 500, respectively, for the same period.
Prior to joining Indymac in January 1993, Mr. Perry served
as Senior Executive Vice President in charge of the Mortgage
Banking Division of Commerce Security Bank, a state chartered
bank based in Sacramento, California. Mr. Perry has over
20 years of business experience with mortgage banking
companies, financial institutions, and real estate firms,
including four years as an auditor with KPMG Peat Marwick.
Mr. Perry’s civic involvement includes membership on
the Board of Trustees of Mayfield Junior School, where he serves
as Chairman of the Finance Committee and also serves on the
Executive Committee. In addition, Mr. Perry serves on the
non-profit Boards of “Homes for Working Families,” an
organization that addresses the shortage of homes that working
Americans can afford, and the Young Presidents Organization of
San Gabriel Valley. Mr. Perry is a Master Certified
Mortgage Banker, as designated by the Mortgage Bankers
Association, and is a Certified Public Accountant —
inactive. In
2002, Mr. Perry received the Los Angeles Entrepreneur of
the Year award in the financial services category.
Mr. Perry is an honors graduate of California State
University, Sacramento, with a B.S. degree in Business
Administration.
Richard H. Wohl is President of Indymac Bank. He became a
director of Indymac Bank in July 2005. Mr. Wohl oversees
the primary business divisions of Indymac Bank in both its
thrift and mortgage banking segments. Mr. Wohl previously
served Indymac in several capacities, including as Chief
Executive Officer of Indymac Mortgage Bank from February 2000 to
July 2005, Chief Operating Officer in charge of various
financial and administrative functions from February 1999 to
February 2000, and as general counsel and secretary from April
1994 to February 1999. Prior to joining Indymac in April 1994,
Mr. Wohl practiced as an attorney with Morrison &
Foerster in Los Angeles, California, where he worked in the
institutional lending and corporate areas with a focus on
mortgage banking. Mr. Wohl graduated with distinction from
Stanford University and received a J.D. from Harvard Law School,
where he was an editor of the Harvard Law Review.
S. Blair Abernathy is Executive Vice President,
Chief Investment Officer of Indymac and Indymac Bank.
Mr. Abernathy is responsible for the whole loan and
mortgage-backed securities investment portfolio and the mortgage
conduit and corporate finance functions of Indymac and Indymac
Bank. Previously, Mr. Abernathy was responsible for the
hedging, trading, product development, risk-based pricing and
secondary marketing functions of Indymac Bank. Prior to joining
Indymac in February 1994, Mr. Abernathy managed the
accounting and investment functions of Commerce Security Bank, a
state chartered bank in Sacramento, California, as Senior Vice
President and Chief Financial Officer. From July 1988 to January
1993, Mr. Abernathy served as Vice President and Controller
of Sunrise Bancorp of California, a publicly traded bank holding
company with banking and mortgage banking subsidiaries.
Mr. Abernathy received a B.S. in Business Administration
from California State University, Sacramento, where he graduated
with honors.
Ashwin Adarkar is Executive Vice President, Chief
Executive Officer, New Business Incubation, Organizational
Effectiveness and Mergers and Acquisitions. Mr. Adarkar is
responsible for all new businesses activity at Indymac Bank from
conducting Mergers and Acquisitions to launching
start-ups,
to operating new or underperforming businesses. Mr. Adarkar
joined Indymac Bank in September 2003 and previously served as
the CEO of the Consumer Bank and as the EVP of Human Resources.
Prior to joining Indymac Bank, Mr. Adarkar was a Principal
with McKinsey & Company, a management consulting firm,
where he established McKinsey’s practice in India, led its
West Coast Financial Services and Health Care Practices and its
Global Business Process Outsourcing Practice. Prior to joining
McKinsey & Company, Mr. Adarkar worked with
Goldman Sachs & Co. in its Mortgage Finance department.
Mr. Adarkar received an M.S. in Industrial Engineering and
a B.A. in Economics from Stanford University, where he was
elected to Phi Beta Kappa. He also received an M.B.A.
from Stanford where he was an Arjay Miller Scholar.
Canise M. Arredondo is Senior Vice President, Chief Audit
Executive of Indymac and Indymac Bank, leading the Internal
Audit department. Ms. Arredondo joined Indymac Bank in July
2004 and previously worked in Enterprise Risk Management, which
is comprised of Sarbanes-Oxley Compliance (SOX), Issues
Management, Companywide Policies and Procedures, and Regulatory
Relations Prior to joining Indymac Bank, Ms. Arredondo was
a senior manager with Deloitte & Touche, LLP, where she
spent almost 10 years in the Assurance and Advisory
Services practice and focused on clients in the
financial services industries. Ms. Arredondo has a B.A. in
Business Economics from the University of California, Santa
Barbara, and is a Certified Public Accountant.
Anthony L. Ebers is Executive Vice President of Indymac
Bank and Chief Executive Officer of the Consumer Bank division.
Mr. Ebers joined Indymac Bank in 2002 as Executive Vice
President of the Home Loan Servicing division and is currently
responsible for managing consumer banking, consumer direct
lending, home loan servicing and the customer retention and
cross-sell divisions of Indymac Bank. Prior to joining Indymac
Bank, Mr. Ebers was with Washington Mutual/HomeSide, where
he was Senior Vice President, Director of Operations.
Mr. Ebers graduated from the University of
Missouri — Columbia in 1988 with a BSBA in Finance and
Banking.
A. Scott Keys is Executive Vice President, Chief
Financial Officer of Indymac and Indymac Bank. Mr. Keys is
responsible for financial and managerial accounting, financial
reporting, financial planning, investor relations and tax. Prior
to joining Indymac in March 2002, Mr. Keys was a partner
with Ernst & Young LLP in its Columbus, Ohio office. He
most recently served as the partner in charge of the Ohio Valley
Banking Practice for Ernst & Young LLP, serving a
number of regional banking companies and large mortgage
companies. Prior to becoming a partner with Ernst &
Young LLP in October 1999, Mr. Keys held various
professional staff positions with the firm in its Columbus,
Ohio, and Los Angeles, California, offices beginning in
September 1986. Mr. Keys is a Certified Public Accountant
and received a B.S. in Accounting from Loyola Marymount
University.
James R. Mahoney is Chairman & Special Advisor of
Financial Freedom Senior Funding Corporation, a subsidiary of
Indymac Bank. Mr. Mahoney has been involved in the
development, design, marketing, origination, and servicing of
home equity conversion loans (reverse mortgages) since 1990.
Prior to the formation of Financial Freedom Senior Funding
Corporation, Mr. Mahoney was the President and CEO of
Freedom Home Equity Partners, a home equity conversion
originator that he helped develop from inception.
Mr. Mahoney was responsible for product development,
institutional and consumer marketing, as well as the overall
operations of the company. The company successfully marketed and
originated loans representing $115 million in home value in
its first two years of offering the program. Mr. Mahoney is
one of the leading authorities on reverse mortgage programs. He
is a founding member of The National Reverse Mortgage
Lender’s Association and currently serves as Co-Chairman.
He has been involved in both real estate development and
construction industries since 1975. As President and Chief
Executive Officer of The Stewart Company (a Southern California
real estate development company), Mr. Mahoney directed the
acquisition, development, construction and management of real
estate assets throughout Southern California, Arizona and
Colorado. He was also responsible for management of the
day-to-day
operations of this $70 million company. Mr. Mahoney
holds a B.S. degree form the University of California at Irvine.
Rayman K. Mathoda is Executive Vice President, Chief
People Officer and Chief Efficiency Officer of Indymac Bank.
Ms. Mathoda joined Indymac Bank in May 2004, leading
Indymac Bank’s company-wide Business Process Outsourcing
program. Prior to joining Indymac Bank, Ms. Mathoda spent
close to seven years with McKinsey & Company, a global
management consulting firm focusing on strategic issues and
performance transformation programs at Fortune 500
companies. Ms. Mathoda has an A.B. from the Woodrow Wilson
School of Public and International Affairs at Princeton
University. Ms. Mathoda also has an M.B.A. in Marketing and
Entrepreneurship from the Kellogg School of Business at
Northwestern University.
Ruthann K. Melbourne is Executive Vice President, Chief
Risk Officer of Indymac Bancorp and Indymac Bank. As the head of
Enterprise Risk Management, Ms. Melbourne is responsible
for the corporate oversight of the Company’s key risks,
including credit and interest rate risk as well as the valuation
of complex assets retained from the Bank’s loan sale and
securitization activities (e.g., mortgage servicing rights,
residual securities and non-investment grade bonds).
Ms. Melbourne is also responsible for corporate policies
and procedures as well as regulatory risk management. Prior to
joining Indymac in February 2003, Ms. Melbourne was the
Vice President in Market Risk Management at J.P. Morgan
Chase & Co. in its New York office from July 2000 to
February 2003. Ms. Melbourne has over 10 years of
experience in quantitative finance, risk management, risk
research, asset valuation and related systems. In addition,
Ms. Melbourne has extensive experience with credit/market
risk methodology, mortgage servicing right performance
measurement, pricing/valuation model validation, credit
derivative pricing, securitizations and interest rate and
volatility term structure modeling. Ms. Melbourne holds a
Ph.D. in Finance from the University of Wisconsin, an M.S. in
Electrical Engineering from the California Institute of
Technology (CalTech), and an undergraduate degree in Physics
from the University of California, Santa Cruz.
Michelle Minier is the Chief Executive Officer, Vice
Chairman of Financial Freedom Senior Funding Corporation.
Ms. Minier joined Indymac in March 1995 as Assistant
Controller and has since held positions as the President of
Warehouse Lending and, later, Executive Vice President and
President of B2B Lending as well as head of the Centralized
Mortgage Operations Unit. Prior to joining Indymac,
Ms. Minier served as Controller at Cypress Financial
Corporation and was the Assistant Treasurer at Shearson Lehman
Mortgage Corporation. Ms. Minier graduated from the
University of California, Santa Barbara with a B.A. in Economics.
John D. Olinski is Executive Vice President of Indymac
Bancorp and Indymac Bank and is responsible for managing Indymac
Bancorp’s and Indymac Bank’s Secondary Marketing and
Retained Assets groups. Previous responsibilities at Indymac
include Director of Corporate Finance/Treasury, Chairman of the
management Asset and Liability Committee, and management of the
Home Loan Servicing operations and Investment Portfolio. Prior
to joining Indymac in April 1999, Mr. Olinski was an equity
analyst focusing on consumer products for a regional investment
bank. Mr. Olinski, who is a Chartered Financial Analyst,
has 15 years of commercial and merchant banking experience
with Security Pacific Merchant Bank, Sanwa Bank California (now
Bank of the West) and Lloyds Bank California. Mr. Olinski
received a B.A. in Management Science from the University of
California, San Diego and an M.B.A. in Finance and Accounting
from the University of Southern California.
Frank M. Sillman is Executive Vice President of Indymac
Bank and Chief Executive Officer of Indymac Mortgage Bank.
Mr. Sillman is responsible for the mortgage professionals
business, including wholesale, correspondent, secondary
marketing, retained assets and warehouse lending.
Mr. Sillman joined Indymac in 1997 as a Senior Vice
President, was promoted to Executive Vice President of Sales and
Marketing, Indymac Mortgage Bank in 2003 and became Chief
Executive Officer of the Mortgage Professionals Group of Indymac
Mortgage Bank in 2004. Prior to joining Indymac, he was a senior
manager of two retail mortgage banking companies, TCM Mortgage
and American Home Credit. From mid-1986 to the end of 1992,
Mr. Sillman served as treasurer for Shearson Lehman
Mortgage. Mr. Sillman has 19 years of experience in
the mortgage banking industry. Mr. Sillman received his
bachelor’s degree from the University of California, San
Diego.
The following table provides information concerning the
beneficial ownership of Common Stock by each director nominee,
including Indymac’s Chairman and Chief Executive Officer,
each of Indymac’s other four most highly compensated
executive officers, which includes Indymac’s Chief
Financial Officer, and all executive officers and directors as a
group, as of Feb. 28, 2007. Except as otherwise indicated, all
persons listed below have sole voting power and dispositive
power with respect to their shares, except to the extent that
authority is shared by their spouses, and have record and
beneficial ownership of their shares.
Shares of
Common Stock
Percent
Name
Owned Beneficially(1)
of Class
Michael W. Perry
2,722,588
(2)
3.7
%
Louis E. Caldera
69,395
*
Lyle E. Gramley
129,737
(3)
*
Hugh M. Grant
106,242
*
Patrick C. Haden
116,449
(4)
*
Terrance G. Hodel
33,306
*
Robert L. Hunt II
77,767
(5)
*
Lydia H. Kennard
68,395
*
Senator John Seymour (ret.)
88,339
*
Bruce G. Willison
27,906
*
Richard H. Wohl
1,000,000
1.4
%
S. Blair Abernathy
275,958
*
A. Scott Keys
181,637
*
James R. Mahoney
55,676
*
All directors and executive officers as a group (23 persons)
5,494,926
7.5
%
*
Less than one percent of class.
(1)
Includes shares that may be purchased through stock options
currently exercisable or exercisable within 60 days of Feb.27, 2007 held by the following persons: Mr. Perry,
2,508,086 shares; Mr. Caldera, 56,519 shares;
Mr. Gramley, 51,427 shares; Mr. Grant,
102,063 shares; Mr. Haden, 102,063 shares;
Mr. Hodel, 21,738 shares; Mr. Hunt,
74,291 shares; Ms. Kennard, 66,519 shares;
Mr. Seymour, 82,063 shares; Mr. Willison,
23,530 shares; Mr. Wohl, 895,905 shares;
Mr. Abernathy, 262,320 shares; Mr. Keys,
177,478 shares; Mr. Mahoney, 50,612 shares; and
all directors and executive officers as a group,
4,937,490 shares.
(2)
Includes 1,608 shares held in Mr. Perry’s 401(k)
account.
(3)
Includes 13,225 shares owned by Marlys Gramley, the wife of
Mr. Gramley.
(4)
Includes 5,818 shares owned by Cindy Haden, the wife of
Mr. Haden, and 551 shares acquired by Mr. and
Mrs. Haden through dividend reinvestment.
(5)
Includes 1,600 shares held in Mr. Hunt’s IRA
account.
The amount for Mr. Mahoney for Feb. 28, 2006 is based on
the net value of vested options only. Mr. Mahoney became a
Section 16 Officer on May 23, 2006, and therefore,
common stock ownership was not required to be tracked prior to
that date.
Indymac currently has 10 directors. All 10 directors are
nominees for election as directors to serve until the next
annual meeting and until their successors are elected and have
qualified. Ms. Kennard, who has been on the Board of
Directors of Indymac Bank, Indymac’s principal operating
subsidiary, since 2002, was elected to the Board of Directors in
January 2007, based on recommendation by the Corporate
Governance Committee of the Board. In the absence of contrary
instructions, it is the intention of the proxy holder named in
the accompanying proxy card to vote for the nominees listed
below. If any nominee becomes unavailable to serve for any
reason, an event the Board of Directors does not anticipate, the
proxies solicited hereby will be voted for election of the
person, if any, designated by the Board of Directors to replace
that nominee. Pursuant to the terms of Mr. Perry’s
employment agreement, if Mr. Perry is not elected to the
Board of Directors and appointed Chairman, he may terminate his
employment agreement with Indymac for Good Reason.
On Jan. 23, 2007, the Board of Directors approved an
amendment to Indymac’s Bylaws to clarify the majority
voting standard for the election of directors and to provide for
a plurality voting standard in contested elections. According to
Indymac’s Bylaws, as amended, for a director nominee to be
elected, other than in a contested election (i.e., where the
number of director nominees exceeds the number of directors to
be elected), the director nominee must receive a majority of
votes cast with respect to such director nominee, which means
that there must be more votes cast “for” than votes
cast “against” the director nominee. According to
Indymac’s Bylaws, shares represented by proxies that
reflect abstentions will not be treated as votes cast for the
election of directors. As a result, abstentions will not affect
the election of director nominees. The Board of Directors of
Indymac also amended Indymac’s Bylaws to provide that in a
contested election of directors the director nominees shall be
elected by a plurality of the shares present or represented by
proxy and entitled to vote on the election of directors.
In addition, the amendment to Indymac’s Bylaws included a
director resignation policy that requires incumbent directors to
submit an irrevocable offer of resignation in order to become
eligible to be a
nominee for re-election which offer of resignation becomes
effective, among other occurrences, upon the nominee’s
failure to receive the required majority stockholder vote for
re-election and acceptance of such resignation by the Board of
Directors (under Delaware corporation law, if a nominee who is
serving as a director is not elected at the Annual Meeting,
absent the aforementioned resignation, that director would
ordinarily continue as a “holdover” director until his
or her successor was elected and qualified). Within 90 days
after receiving the certified vote pertaining to a director
election, the Board of Directors, acting on the recommendation
of the Corporate Governance Committee, must determine whether to
accept the resignation of any incumbent that receives a majority
of “against” votes and make a public disclosure with
respect to its decision regarding such resignation.
Any incumbent that receives a majority of “against”
votes in an election cannot participate in the Corporate
Governance Committee’s recommendation or the Board of
Director’s determination of whether to accept the
resignation offer. If each member of the Corporate Governance
Committee receives a majority of “against” votes at
the same stockholder meeting, then the independent members of
the Board of Directors must appoint a committee of independent
directors who did not receive a majority of “against”
votes to consider the resignation offers and make the
recommendations to the Board of Directors. If the number of
independent directors that receive a majority of “for”
votes is three or fewer, then all directors may participate in
the decision to accept or reject the resignation offers.
The following persons have been nominated to serve as directors
of Indymac for the ensuing year, each of whom has agreed to
serve as director until the next annual meeting if elected:
Michael W.
Perry, age 44, is
Chairman of the Board of Directors and Chief Executive Officer
of Indymac Bancorp and Indymac Bank. Mr. Perry assumed
responsibility for the
day-to-day
operations of Indymac in 1993. Under his leadership, Indymac has
grown from four employees, total assets of $714 million and
a market cap of $75 million to over 8,000 employees, total
assets of over $29 billion and a market cap of
$3.2 billion as of Dec. 31, 2006. Additionally, during
the period from 1993 through Dec. 31, 2006, Indymac provided its
shareholders a compounded annual return of 23%, exceeding the
comparable returns of 12% and 11% for the Dow Jones Industrial
Average and S&P 500, respectively, for the same period.
Prior to joining Indymac in January 1993, Mr. Perry served
as Senior Executive Vice President in charge of the Mortgage
Banking Division of Commerce Security Bank, a state chartered
bank based in Sacramento, California. Mr. Perry has over
20 years of business experience with mortgage banking
companies, financial institutions, and real estate firms,
including four years as an auditor with KPMG Peat Marwick.
Mr. Perry’s civic involvement includes membership on
the Board of Trustees of Mayfield Junior School, where he serves
as Chairman of the Finance Committee and also serves on the
Executive Committee. In addition, Mr. Perry serves on the
non-profit Boards of “Homes for Working Families,” an
organization that addresses the shortage of homes that working
Americans can afford, and the Young Presidents Organization of
San Gabriel Valley. Mr. Perry is a Master Certified
Mortgage Banker, as designated by the Mortgage Bankers
Association, and is a Certified Public Accountant —
inactive. In 2002, Mr. Perry received the Los Angeles
Entrepreneur of the Year award in the financial services
category. Mr. Perry is an honors graduate of California
State University, Sacramento, with a B.S. degree in
Business Administration.
Louis E. Caldera,
age 50, has been a
director of Indymac since May 2002. He is also a director of
Indymac Bank. Since August 2003, Mr. Caldera has been a
Professor of Law at the University of New Mexico, where he also
served as President until August 2006. Previously, commencing in
2001, Mr. Caldera served as Vice Chancellor for University
Advancement of The California State University System.
Mr. Caldera held two appointed posts in the Clinton
administration — Secretary of the Army from 1998 to
2001 and Managing Director and Chief Operating Officer of the
Corporation for National and Community Service from 1997 to
1998. Mr. Caldera served three terms in the California
State Assembly, from 1992 to 1997, representing the 46th
District. Prior to his election to the Assembly, he worked as a
deputy county counsel for the County of Los Angeles and as an
attorney in private practice, including at the law firm of
O’Melveny & Myers LLP. He currently serves on the
Board of Directors of Belo Corporation and Southwest Airlines
Co. Mr. Caldera received a B.S. from the United States
Military Academy, an M.B.A. from Harvard Business School and a
J.D. from Harvard Law School.
Lyle E. Gramley,
age 80, has been a
director of Indymac since January 1993. He is also a director of
Indymac Bank. Mr. Gramley is a former member of the Board
of Governors of the Federal Reserve System. From September 1985
through May 2002, he was employed by the Mortgage Bankers
Association of America as its chief economist and as a
consulting economist. During that period he also was
self-employed as an economic consultant. Since June 2002,
Mr. Gramley has been a Senior Economic Advisor with the
Stanford Washington Research Group.
Hugh M. Grant,
age 70, has been a
director of Indymac since May 2000. He is also a director of
Indymac Bank. Since 1996, Mr. Grant has been a business
consultant. Prior to 1996, he spent approximately 38 years
with Ernst & Young LLP (including service with Arthur
Young & Company before its 1989 merger with
Ernst & Whinney) where, among other things, he was
Vice-Chairman and Regional Managing Partner-Western United
States. He is a Director and Chairman of the Audit Committee of
Tetra Tech, Inc. and is also a member of their Compensation
Committee. Mr. Grant received a B.S. in Business, with
distinction, from the University of Kansas.
Patrick C. Haden,
age 54, has been a
director of Indymac since March 2000. He is also a director of
Indymac Bank. Mr. Haden has been a general partner of
Riordan, Lewis & Haden, a private equity investment
firm, since 1987. Mr. Haden serves on the Board of
Directors of Tetra Tech, Inc. and TCW Strategic Income Fund,
Inc. (fka TCW Convertible Securities Fund, Inc.). He serves on
the Compensation Committee and the Audit Committee of the Board
of Directors of Tetra Tech, Inc. and serves on the Audit
Committee of TCW Strategic Income Fund, Inc.
Terrance G. Hodel,
age 64, has been a
director of Indymac since July 2003. He is also a director of
Indymac Bank. Mr. Hodel most recently served as Chief
Executive Officer of Paymap, Inc. from 2001 to May 2003. Prior
to that, Mr. Hodel held the position of President and Chief
Operating Officer of North American Mortgage Company, from 1992
to 1997 when the company was acquired by Dime Bancorp, Inc.
Prior to his service at North American Mortgage Company,
Mr. Hodel served as President and Chief Executive Officer
of IMCO Realty Services, a large mortgage banking company, from
1985 to 1992, and was President and Chief Executive Officer of
Wells Fargo Mortgage Company from 1979 to 1985. Mr. Hodel
serves on the Board of Trustees of Marin Academy and Pomona
College. Mr. Hodel received an M.B.A. from Stanford
University.
Robert L. Hunt II,
age 56, has been a
director of Indymac since November 2001. Mr. Hunt is also a
director of Indymac Bank. Mr. Hunt held the position of
President and Chief Operating Officer of Coast Savings
Financial, Inc. and its subsidiary, Coast Federal Bank, from
1991 to 1998 when Coast was acquired by H.F. Ahmanson &
Company, the holding company for Home Savings of America. From
1998 to 2003, Mr. Hunt served as a trustee for the Coast
Federal Contingent Payments Rights Litigation Trust, a publicly
traded entity that was spun off by Coast Federal at the time of
its acquisition. He served as Chief Financial Officer and
Executive Vice President of Coast Federal Bank from 1983 to
1991. Prior to his service at Coast Federal Bank, Mr. Hunt
held the position of Vice President and Controller of Fidelity
Federal Savings and Loan from 1980 to 1983 and was an audit
manager at the public accounting firm of KPMG Peat Marwick where
he served from 1972 to 1980. Mr. Hunt is a graduate of the
University of Southern California.
Lydia H. Kennard,
age 52, has been a
director of Indymac since January 2007. She had also been a
director of Indymac Bank from May 2002 to January 2007.
Ms. Kennard was formerly Executive Director of Los Angeles
World Airports from August 1999 through November 2003 and again
from October 2005 through January 2007. She also serves on the
Boards of Directors of Intermec, Inc. (formerly Unova, Inc.) and
AMB Property Corporation. Ms. Kennard received a B.A. from
Stanford University, a Masters degree from the Massachusetts
Institute of Technology and a J.D. from Harvard Law School.
Senator John Seymour (ret.),
age 69, has been a
director of Indymac since April 2004 and he has been a director
of Indymac Bank since July 2000. He served as a California State
Senator from 1982 to 1991 and as a United States Senator from
1991 to 1992 as a late-term replacement for California’s
newly elected Governor. Senator Seymour is a housing and
governmental consultant. He was the Chief Executive Officer of
the Southern California Housing Development Corporation and
currently serves on the Board of Directors of Orange Coast
Title Insurance. Mr. Seymour previously served on the
Boards of Directors of Los Angeles Federal Savings Bank, Irvine
Apartment Communities, Inco Homes and Countrywide Financial
Services. He also has served the City of Anaheim, California as
Mayor and as a member of the City Council. Senator Seymour was
President and Chief Executive Officer of Seymour Realty and
Investment Company from 1964 to 1982. He received a B.S. in
Business and Finance from the University of California,
Los Angeles.
Bruce G. Willison,
age 58, became a
director of Indymac in July 2005. He is also a director of
Indymac Bank. Mr. Willison is the former Dean and a
Professor of Management of the John E. Anderson Graduate School
of Management at the University of California, Los Angeles. From
1999 to 2005 he was the Dean of the John E. Anderson Graduate
School of Management. He was previously the President and Chief
Operating Officer of H.F. Ahmanson & Company. Prior to
that Mr. Willison served as the Vice Chairman of First
Interstate Bancorp. Concurrently, Mr. Willison served as
the Chairman, President and Chief Executive Officer for First
Interstate Bank of California. Prior to his 18 year tenure
with First Interstate, Mr. Willison spent six years as a
Vice President for Bank of America NT&SA. He currently
serves as a corporate director for HealthNet, Inc., Move, Inc.
(fka Homestore, Inc.) and Sun America Inc.’s
Fund Complex. He also serves on numerous community boards.
Mr. Willison received a degree in Economics from the
University of California, Los Angeles, and an M.B.A. in Finance
from the University of Southern California. He served as a
Lieutenant in the United States Navy from 1970 to 1972.
The Board of Directors recommends that stockholders vote FOR
each of the nominees. Proxies solicited by the Board of
Directors will be so voted unless the stockholder specifies
otherwise.
The Board of Directors held 10 meetings, in person or by
telephone, during 2006. Each Board member is expected to
dedicate sufficient time, energy and attention to ensure the
diligent performance of his or her duties. In 2006, each Board
member, except for one, attended 100% of the meetings of the
Board and Committee of which he was a member. The exception
related to a Board member missing one Board meeting. It is
estimated that during 2006 on average each Board member spent
approximately 175 to 235 hours in Board and Committee meetings
and in preparation time for those meetings. In addition to
attendance at Board and Committee meetings, each member of the
Board is expected to attend each Annual Meeting of Stockholders
and all members of the Board attended the 2006 Annual Meeting of
Stockholders.
The Committees of the Board of Directors are as follows:
Board Committee
Members
Responsibilities and Meetings Held
Audit Committee(1)
Mr. Grant,
Chairman
Mr. Hunt
Mr. Willison
The primary purpose of this
Committee is to assist the Board in fulfilling its oversight
responsibilities with respect to the integrity of Indymac’s
financial statements, reports and other financial information
provided by Indymac to its stockholders and others. In addition,
the Committee, among other responsibilities, reviews
Indymac’s compliance with legal and regulatory requirements
(in concert with other committees), the independent
auditor’s qualifications, performance and independence, and
the performance of Indymac’s internal audit function. The
Committee monitors Indymac’s audit, accounting and
financial reporting processes and system of internal controls.
The Committee held six meetings in 2006.
Corporate Governance Committee
Mr. Seymour,
Chairman
Mr. Caldera
Mr. Grant
This Committee sets guidelines for
corporate governance and monitors the governance of Indymac to
assure that Indymac has a ‘best practices’ corporate
governance program. Specifically the Committee reviews and
recommends to the Board of Directors, among other things,
nominees for election as directors at each Annual Meeting,
membership of the committees of the Board and matters relating
to the evaluation, performance, compensation and independence of
Board members. The Committee considers candidates for the Board
of Directors suggested by its members and other Board members,
with input from the Chief Executive Officer. The Committee also
is authorized to retain a third-party executive search firm to
identify candidates for the Board of Directors from time to
time. The Committee will consider candidates for the Board that
are recommended by stockholders of Indymac as further discussed
in “Corporate Governance”. The Committee held nine
meetings in 2006.
Enterprise Risk Management Committee
Mr. Hunt,
Chairman
Mr. Gramley
Mr. Hodel
The primary purpose of this
Committee is to ensure the establishment of company-wide risk
management policies and strategies governing key risk factors
related to capital adequacy, asset quality, management,
earnings, liquidity, and sensitivity to market risk. The
Committee also oversees certain regulatory matters. The
Committee held four meetings in 2006.
Management Development and
Compensation Committee (Compensation Committee or MDC)
Mr. Seymour,
Chairman
Mr. Caldera
Mr. Grant
This Committee establishes, reviews
and monitors Indymac’s compensation philosophy and
practices in order to assist the Board in the discharge of its
responsibilities relating to (a) the fair and competitive
compensation of the Chief Executive Officer and other key
executives, (b) orderly succession planning related to the
Chief Executive Officer and President of the Bank, (c) the
employee retirement, health and welfare plans of Indymac,
including overseeing management’s administration of
Indymac’s defined benefit pension plan and deferred
compensation plan, and (d) the creation of a corporate
environment where ethical behavior is the standard. The
Compensation Committee also administers Indymac’s stock
award plans. The Committee held 13 meetings in 2006.
Qualified Legal Compliance Committee
Mr. Hunt,
Chairman
Mr. Gramley
Mr. Hodel
The purpose of the QLCC is to
(1) adopt written procedures for the confidential receipt,
retention, and consideration of any report of evidence submitted
to the QLCC by an attorney appearing and practicing before the
Securities and Exchange Commission in the representation of the
Corporation or its subsidiaries (the “Attorneys” and
individually an “Attorney”) of a (a) material
violation of federal or state securities law, (b) material
breach of fiduciary duty arising under United States federal or
state law, or (c) similar violation of any United States
federal or state law in compliance with the requirements of Part
205 (a “Part 205 Report”), (2) review and take
appropriate action with respect to any Part 205 Report, and (3)
otherwise fulfill the responsibilities of a qualified legal
compliance committee pursuant to Section 307 of the Sarbanes
Oxley Act of 2002 and Part 205. The Committee held no meetings
in 2006.
Strategic Financial Planning
Committee
Mr. Haden,
Chairman
Mr. Gramley
Mr. Hodel
Mr. Hunt
Ms. Kennard
Mr. Willison
This Committee assists the Board in
fulfilling its oversight responsibilities with respect to
defining Indymac’s mission, vision and long-term and annual
strategic and financial plan. The Committee reviews and makes
recommendations to the Board regarding Indymac’s overall
business foundation, financial and non-financial objectives, the
scope of business in which it competes, its source of
competitive advantage, and significant decisions made by the
Chief Executive Officer in key strategic areas. The Committee
held four meetings in 2006.
(1)
In the opinion of the Board of Directors of Indymac, all current
members of the Audit Committee are independent directors as
required and defined by the New York Stock Exchange (see the
further discussion regarding director independence and audit
committee financial experts in “Corporate Governance”
and “Audit Committee Matters”).
Each member of the Indymac Board of Directors also serves as a
director of Indymac Bank, Indymac’s principal operating
subsidiary. The Indymac Bank Board of Directors also has two
independent directors and one executive
officer-director
who do not serve on the Indymac Board of Directors. The Indymac
and Indymac Bank Board of Directors meetings are held
concurrently. The following are the persons who serve as
directors of Indymac Bank only:
Gabrielle E.
Greene, age 46,
has been a director of Indymac Bank since January 2007.
Ms. Greene is a General Partner of Rustic Canyon/Fontis
Partners, a private equity fund based in Pasadena, California.
Prior to joining RC/Fontis, she was Chief Financial Officer of
Gluecode Software, a venture-backed open source software
company, which was sold to IBM in May 2005. Previously she had
been CFO of Crown Services, a California based consolidation of
commercial contractors. Before joining Crown Services,
Ms. Greene was a general partner of the Citigroup sponsored
BE/Greenwich Street Equity Fund. Prior to joining BE/Greenwich
Street in 1998, Ms. Greene was a principal of HPB
Associates, a New York based hedge fund, where she invested in
both public and private companies, and also served as CFO of one
of the HPB portfolio companies. From 1992 to 1994
Ms. Greene was the founding managing director of the
Commonwealth Enterprise Fund in Boston, a private equity fund
formed by a consortium of New England Banks. From 1987 to 1992
Ms. Greene was a principal at UNC Partners in Boston, where
she was responsible for private equity investments in diverse
industries. Prior to completing her graduate school education,
Ms. Greene worked for several years as an associate
consultant at Bain & Company, a strategic management
consulting firm based in Boston. Ms. Greene received her
B.A. from Princeton University in 1981, where she graduated from
the Urban Studies program at the Woodrow Wilson School. In 1987,
she received her M.B.A. from Harvard Business School and J.D.
from Harvard Law School. Ms. Greene serves on the boards of
Bright Horizons, where she serves on the audit committee, and
Whole Foods, where she is chairman of the audit committee and
serves on the compensation committee. She has served on several
non-profit boards, including the Boston Children’s Museum,
and the Boston Partnership, where she chaired the audit
committee. She has also served on numerous private company
boards. Ms. Greene is a member of the Massachusetts State
Bar, and is a Henry Crown Fellow of the Aspen Institute. She
serves on the Company’s Audit Committee.
Stuart A. Gabriel,
age 53, has been a
director of Indymac Bank since September of 2004.
Mr. Gabriel is a Director and the Lusk Chair in Real
Estate, Lusk Center for Real Estate, and Professor of Finance
and Business Economics, Policy, Planning and Development in the
Marshall School of Business and the School of Policy, Planning
and Development of the University of Southern California. He
also is
Co-Director
of the USC Ross Minority Program in Real Estate Finance and
Development. During
1997-1999,
Mr. Gabriel served as Deputy Dean at the USC Marshall
School of Business. In 2004, he was elected as President of the
American Real Estate and Urban Economics Association.
Mr. Gabriel serves on the editorial boards of Real
Estate Economics, Journal of Real Estate Finance and Economics,
Journal of Housing Economics, Journal of Housing Research,
Housing Policy Debate, Real Estate Finance, and Journal of Real
Estate Research. He also is a Fellow of the Homer Hoyt
Institute for Advanced Real Estate Studies. Mr. Gabriel
serves as a consultant to numerous corporate and governmental
entities and is a Director of KBS REIT. Prior to joining the USC
faculty in 1990, Mr. Gabriel served on the economics staff
of the Federal Reserve Board in Washington, D.C. In recent
years, he also has been a Visiting Scholar at the Federal
Reserve Bank of San Francisco. Mr. Gabriel received a Ph.D.
in Economics from the University of California, Berkeley.
Richard H. Wohl,
age 48, is
President of Indymac Bank. He became a director of Indymac Bank
in July 2005. Mr. Wohl oversees the primary business
divisions of Indymac Bank in both its thrift and mortgage
banking segments. Mr. Wohl previously served Indymac in
several capacities, including as Chief Executive Officer of
Indymac Mortgage Bank from February 2000 to July 2005, Chief
Operating Officer in charge of various financial and
administrative functions from February 1999 to February 2000,
and as general counsel and secretary from April 1994 to February
1999. Prior to joining Indymac in April 1994, Mr. Wohl
practiced as an attorney with Morrison & Foerster in
Los Angeles, California where he worked in the institutional
lending and corporate areas with a focus on mortgage banking.
Mr. Wohl graduated with distinction from Stanford
University and received a J.D. from Harvard Law School, where he
was an editor of the Harvard Law Review.
In addition to the Committees of the Indymac Board of Directors
referenced above, the Indymac Bank Board also has a Compliance
and Technology Committee as follows:
Board Committee
Members
Responsibilities and Meetings Held
Compliance and
Technology
Committee
Ms. Kennard, Chair
Mr. Gabriel
Ms. Greene
Mr. Wohl
The primary purpose of this
Committee is to assist the Board in its oversight of the
Bank’s compliance with all consumer regulatory, fair
lending and compliance laws and regulations. In addition, this
Committee also provides strategic oversight of Indymac
Bank’s information technology and security activities. The
Committee held five meetings in 2006.
Fee amount deferred at the election of the director to a
subsequent year are included in amount reported.
(2)
Amounts reflect the amounts recognized for financial statement
reporting purposes in fiscal year 2006, computed in accordance
with Statement of Financial Accounting Standards No. 123(R)
Share-Based Payment (“SFAS No. 123(R)”)
without taking into consideration a forfeiture assumption, as
required by the Securities Exchange Commission (SEC) for
disclosure purposes in this Director Compensation Table. See
Note 24 — Benefit Plans in Indymac’s 2006
Form 10-K
for an explanation of the valuation model assumptions used.
(3)
As of Dec. 31, 2006, the aggregate number of restricted stock
and option awards outstanding for each director was as
follows:
1,876 shares of restricted stock and options to purchase
56,519 shares for Mr. Caldera;
1,876 shares of restricted stock and options to purchase
51,427 shares for Mr. Gramley;
1,876 shares of restricted stock and options to purchase
102,063 shares for Mr. Grant;
1,876 shares of restricted stock and options to purchase
102,063 shares for Mr. Haden;
5,237 shares of restricted stock and options to purchase
21,738 shares for Mr. Hodel;
1,876 shares of restricted stock and options to purchase
74,291 shares for Mr. Hunt;
1,876 shares of restricted stock and options to purchase
82,063 shares for Mr. Seymour;
1,876 shares of restricted stock and options to purchase
23,530 shares for Mr. Willison;
(4)
Includes the above-market nonqualified deferred compensation
earnings during 2006, which is the required disclosure in this
Director Compensation Table. See the detailed discussion
concerning the Deferred Compensation Plan, including the
methodology for setting the annual rate of return, in the
section captioned “Deferred Compensation Plans” on
page 45 of this Proxy Statement.
(5)
Includes for each current director a $1,000 annual charitable
contribution made by Indymac to a charity chosen by each
director on each director’s birthday.
(6)
Includes the following: membership dues paid on behalf of
Mr. Caldera to a nonprofit organization in support of
Indymac Bank’s Hispanic lending initiatives, miscellaneous
gifts, recreation fees and $1,000 annual charitable contribution
described in footnote (5).
(7)
Includes $5,000 in fees for serving on the Compliance and
Technology Committee of the Board of Indymac Bank, F.S.B.
(8)
Includes director fees of $5,000 for serving on the Board of
Financial Freedom Senior Funding Corporation, a subsidiary of
Indymac Bank, F.S.B.
For 2006, our board compensation included the following:
•
An annual cash retainer of $75,000 for all non-employee
directors;
•
An additional annual cash retainer of $20,000 for service on the
Audit Committee;
•
An additional annual cash retainer of $4,000 paid at the
beginning of his or her term as Presiding Director (Prior to
April of 2006, an additional cash retainer of $20,000 for the
Presiding Director);
•
A $2,500 cash fee for Committee Chairman for each Committee
meeting chaired in a calendar year;
•
A $2,500 cash fee for Committee members for each Committee
meeting attended (after the fourth Committee meeting attended in
a calendar year);
•
A $2,500 daily fee for attendance at other qualifying
board-related functions;
•
Non-qualified stock options and restricted stock awards for all
non-employee directors;
•
A stock ownership requirement for non-employee directors
equivalent to three times the annual board retainer fee.
See also the description of the Director Emeritus program
included in this section.
For 2007, the board compensation policy has been amended. Among
other things, this revision reduced the Presiding
Director’s annual cash retainer to $3,000 paid at the
beginning of his or her term.
For 2006, each non-employee director received an automatic
annual grant of a nonqualified stock option to purchase a number
of shares of Common Stock equal to 0.0125% of the issued and
outstanding shares of such Common Stock as of the end of the
preceding fiscal year (excluding treasury shares), but in no
event less than 3,750 shares. Additionally, each
non-employee director will receive, on an annual
basis, a number of shares of restricted common stock having a
fair market value equal to the value of such option, determined
using the same valuation method as then used by Indymac for
financial reporting.
As in the past, options and restricted stock were granted
automatically on the same date that annual grants of equity
incentive awards are made to employees. Under the board
compensation policy, if a non-employee director is elected
within six months following the annual grant date, he or she
will receive options for the number of shares covered by the
most recent annual director grant. If a non-employee director is
elected more than six months following the most recent annual
grant date, but before the next annual grant date, he or she
will receive options for one-half the number of shares covered
by the most recent annual director grant. The number of shares
of restricted stock granted to such non-employee directors will
be determined according to the value of the option grant, as
described above.
Options will have an exercise price equal to the fair market
value of Common Stock on the date of grant, will vest on the
first anniversary of the grant date, and will expire on the
latest date permitted under the 2002 Plan or earlier in the
event of a non-employee director’s termination of service.
Restricted stock vests in equal annual installments over a
three-year period, and any dividends on such shares will accrue
and vest at the same time.
Vesting for options and restricted stock will accelerate in full
upon a change in control of Indymac, a non-employee
director’s death or disability, or a non-employee
director’s failure to be renominated or reelected to the
board after five years of service as a director, provided that
the director remains on the board until his or her normal term
expires. In addition, the options and restricted stock will
become immediately vested in the event that a non-employee
director ceases to be a director pursuant to the Board of
Director’s acceptance of the non-employee director’s
resignation after such director fails to receive a sufficient
number of votes for re-election in accordance with the majority
vote requirements in Indymac’s Bylaws.
For 2006, each non-employee director who has served on the Board
for at least three years was expected to own Common Stock with a
value equal to $225,000, which is equal to three times his or
her base annual retainer fee. The value of vested options (net
of tax), as determined by Indymac, will be counted towards the
ownership requirements. Any non-employee director failing to
meet these ownership guidelines will not be required to purchase
stock in the open market in order to meet these requirements but
will be prohibited from selling shares until he or she becomes
compliant.
Historically, Indymac has maintained a Director Emeritus Plan,
which provides certain retiring non-employee directors with a
benefit based upon length of service as a director and the level
of cash compensation received as a director prior to retirement.
Participating directors are prohibited from competing with
Indymac during the benefit period. Pursuant to the Board
Compensation Policy, the Director Emeritus Plan is available
only for non-employee directors who were serving on the board as
of Dec. 31, 2005, or who already were participating in the
Director Emeritus Plan as of such date.
On Jan. 24, 2006, Indymac entered into a Director Emeritus
Participation Agreement with Mr. Ukropina, who retired from
the Board of Directors in April of 2006. Pursuant to the
Participation Agreement and in recognition of
Mr. Ukropina’s service on the Indymac board, Indymac
waived the seven year service requirement and agreed to pay
Mr. Ukropina compensation at the rate of $50,000 per annum
for a period of five years and two months. The Participation
Agreement also requires that Mr. Ukropina refrain
from competing with Indymac, seeking a position on the Board
other than pursuant to Indymac’s request, and engaging in
activities which may lead to a change in control of Indymac.
The Audit Committee of the Board of Directors has appointed
Ernst & Young LLP as the independent auditors to audit
Indymac’s consolidated financial statements for the fiscal
year ending Dec. 31, 2007. Ernst & Young LLP has
acted as the independent auditors for Indymac since 2001. In
accordance with a resolution of the Audit Committee, this
appointment is being presented to stockholders for ratification
at this meeting. If the stockholders do not ratify the
appointment of Ernst & Young LLP, the Audit Committee
will reconsider their appointment. A representative of
Ernst & Young LLP will be present at the Annual
Meeting, will have an opportunity to make a statement if he or
she wishes to do so, and will be available to respond to
appropriate questions.
The affirmative vote of a majority of the shares of Common Stock
present or represented by proxy and entitled to vote on this
proposal at the Annual Meeting is required for ratification.
The Board of Directors recommends a vote FOR ratification of
the appointment of Ernst & Young LLP as Indymac’s
independent auditors for the fiscal year ending Dec. 31,2007. Proxies solicited by the Board of Directors will be so
voted unless the stockholder specifies otherwise.
Indymac adopted formal corporate governance standards in January
2002 and has a Corporate Governance Committee (the
“CGC”) of the Board of Directors (the
“Board”) with the primary function of setting
guidelines for corporate governance and reviewing governance
standards annually to ensure they incorporate recent corporate
governance developments and generally meet the corporate
governance needs of Indymac. Specifically, the CGC
(a) assists the Board by identifying individuals qualified
to become Board members and recommends to the Board the director
nominees for the next annual meeting of shareholders and for
Board committee assignments, (b) recommends to the Board
the Corporate Governance Guidelines, Board Committee Charters
and Board Policies applicable to the Company, and (c) leads
the Board in its annual review of the Board’s performance
and other governance related matters.
You may obtain the Board of Directors’ Guidelines for
Corporate Governance Issues and the charters of each of the
Board’s committees, including the Audit Committee,
Qualified Legal Compliance Committee, Enterprise Risk Management
Committee, Management Development and Compensation Committee,
Corporate Governance Committee and Strategic and Financial
Planning Committee by accessing the “Corporate
Governance” subsection of the “Investors” section
of www.indymacbank.com, or by writing to Indymac’s
Corporate Secretary at IndyMac Bancorp, Inc., 888 East
Walnut Street, Pasadena, California91101.
As of Feb. 27, 2007, Institutional Shareholder Services,
Inc. ranked Indymac’s governance at the 100th percentile of
its industry group and at the 98th percentile of the
S&P 400 group, meaning that Indymac outperformed
100 percent of the companies in the bank group and
98 percent of the companies in the S&P 400 Index.
The Corporate Governance Committee of the Board of Directors has
adopted criteria and procedures for evaluating the independence
of Indymac’s directors based on the listing standards of
the New York Stock Exchange, which can be found on the
Company’s Web site at www.indymacbank.com. Pursuant to
these procedures, an independence review must be made when a
director joins the Board, annually prior to re-election, and at
any time that a director’s circumstances change such that
the Committee or the Board determines that an independence
assessment should be conducted. The Board undertook its annual
review of director independence in January 2007. During this
review, the Board considered relationships and transactions
during the past three years between each director or any member
of his or her immediate family and Indymac and its subsidiaries
and affiliates. In addition to the transactions reported under
“Certain Transactions and Business Relationships,” the
Board considered the following:
•
Membership dues paid on behalf of Mr. Caldera to a
nonprofit organization in support of Indymac Bank’s
Hispanic lending initiatives. These dues have been reported as a
perk in the Director Compensation Table;
•
Messrs. Grant and Haden’s positions as members of the
Compensation Committee of a company that leases space from
Indymac Bank. These positions and the lessee’s occupancy
were established prior to Indymac Bank’s purchase of said
space, as part of the expansion of its regional operations
center in Pasadena, California;
•
Mr. Haden’s position as a partner of a company that
owns a 10% interest in an investment banking firm that Indymac
Bank has engaged from time to time. Any benefit to
Mr. Haden derived from his passive investment in the Firm
is de minimis. These transactions were in the ordinary course of
business and were on substantially the same terms as those
prevailing at the time for comparable transactions with
unrelated persons; and
•
Mr. Willison’s position as a director of Move, Inc.
which has done business with Indymac Bank from time to time.
These transactions were in the ordinary course of business and
were on substantially the same terms as those prevailing at the
time for comparable transactions with unrelated persons.
Further, the Board considered directors’ board and
committee service with companies which do not do business with
Indymac. The purpose of the review was to determine whether any
such relationships or transactions were inconsistent with a
determination that the director is independent.
Based on the review, the Board of Directors affirmatively
determined that Messrs. Caldera, Gramley, Grant, Haden,
Hodel, Hunt, Seymour and Willison and Ms. Kennard,
constituting all of the directors nominated for election at the
Annual Meeting other than Mr. Perry, Indymac’s
Chairman of the Board and Chief Executive Officer, are
independent of Indymac and its management under the criteria
established by the Corporate Governance Committee. Accordingly,
90% of the Board-elect consists of independent directors.
The Board of Directors’ Guidelines for Corporate Governance
Issues require the Board to appoint presiding directors who are
independent directors and shall serve on a rotating basis as the
presiding director at the Executive Sessions held during the
following year. The Board appointed Mr. Caldera to serve as
presiding director from April 26, 2006 through May 24,2006; Mr. Gramley to serve as presiding director from
May 25, 2006 through July 25, 2006; Mr. Haden to
serve as presiding director July 26, 2006 through
Sept. 19, 2006; Mr. Hodel to serve as presiding
director Sept. 20, 2006 through Dec. 5, 2006;
Mr. Hunt to serve as presiding director Dec. 6, 2006
through Jan. 23, 2007; Mr. Seymour to serve as
presiding director Jan. 24, 2007 through Feb. 27,2007; Mr. Willison to serve as presiding director
Feb. 28, 2007 through April 24, 2007; and Lydia
Kennard to serve as presiding director April 25, 2007
through May 21, 2007. The Board of Directors met in
Executive Session at eight of its 10 meetings in 2006.
You may communicate with the presiding director or the Board as
a group by writing to Presiding Director, IndyMac Bancorp, Inc.,
888 East Walnut Street, Pasadena, California91101.
Communications to specific non-management directors may be
submitted to the attention of the Corporate Secretary at the
same address. The Corporate Secretary will regularly forward to
the Board a summary or copies of all such correspondence that,
in the opinion of the Corporate Secretary, relates to the
functions of the Board or committees thereof or that she
otherwise determines requires their attention. Directors may at
any time request copies of any correspondence so summarized.
Alternatively, a director may request that all correspondence
addressed to him or her be forwarded to him or her. Concerns
relating to accounting, internal controls or auditing matters
may be communicated in this manner, or may be submitted via the
Accounting/Audit link under the “Contact Us” section
of www.IndymacBank.com. These concerns are immediately brought
to the attention of Indymac’s internal audit department and
handled in accordance with procedures established by the Audit
Committee with respect to such matters.
Pursuant to the applicable rules of the Securities and Exchange
Commission, the Board undertook a review of the qualifications
and expertise of the Audit Committee members in January 2007.
Based on this review, the Board of Directors has determined that
Messrs. Grant, Hunt and Willison, all of the members of the
Audit Committee, are “audit committee financial
experts,” as defined by the Securities and Exchange
Commission rules.
The Corporate Governance Committee will consider candidates
recommended by stockholders of Indymac for nomination for
election to the Board of Directors at Indymac’s Annual
Meeting. A stockholder who wishes to recommend a candidate for
nomination to the Board of Directors must submit such
recommendation to the Corporate Secretary of Indymac in
accordance with Indymac’s Bylaws and the Corporate
Governance Committee’s Policy and Guidelines on Director
Candidates Recommended by Stockholders, which requires such
notice be delivered to and received no later than one hundred
twenty (120) days prior to the anniversary date of the
mailing of the proxy statement in connection with the previous
year’s annual meeting. All such recommendations will be
forwarded by the Corporate Secretary to the chairman of the
Corporate Governance Committee.
All stockholder recommendations of candidates for nomination for
election to Indymac’s Board must be in writing and must set
forth as to each director candidate recommended the following:
(1) name, age,
business address and residence address of the individual;
(2) the principal occupation or employment of the
individual during the five-year period preceding the date of the
recommendation; (3) the class and number of shares of
capital stock of Indymac that are owned beneficially or of
record by the individual; (4) any other information
relating to the individual that would be required to be included
in a proxy statement prepared in connection with the
solicitation of proxies for an election of directors pursuant to
applicable law and regulations; and (5) a statement of
whether the individual, if elected, intends to tender, promptly
following the individual’s election, an irrevocable offer
of resignation as contemplated by the majority vote provisions
of Indymac’s Bylaws. Certain information as to the
stockholder providing the recommendation must be included, such
as, the name and address of the stockholder, the class and
number of shares of capital stock of Indymac which are owned
beneficially or of record by the stockholder and a description
of certain types of material agreements and arrangements between
the stockholder and its related persons, on one hand, and the
director candidate and its related persons, on the other hand.
Each recommendation must be accompanied by: (i) a completed
and signed questionnaire together with certain representations
specified in Indymac’s Bylaws relating to the absence of
certain commitments and agreements that might otherwise
interfere with the candidate’s ability to carry out the
duties of a director; and (ii) the written consent of each
individual recommended, which must include a statement that if
the individual were to be nominated and elected, the individual
would serve as a director of Indymac and permission to
investigate the individual for purposes of considering the
individual as a director nominee.
The Corporate Governance Committee will consider prospective
nominees for the Board of Directors based on the need for
additional Board members to fill vacancies or to expand the size
of the Board. Once the Corporate Governance Committee has
identified a prospective nominee, the Committee makes an initial
determination as to whether to conduct a full evaluation of the
candidate. This initial determination is based on whatever
information is provided to the Committee with the recommendation
of the prospective candidate, as well as the Committee’s
own knowledge of the prospective candidate, which may be
supplemented by inquiries to the stockholder making the
recommendation. The Committee then evaluates the prospective
nominee against the standards and qualifications set forth in
Indymac’s Guidelines for Corporate Governance Issues,
including relevant experience, industry expertise, intelligence,
independence, diversity of background and outside commitments.
Stockholders may also make nominations of persons for election
to the Board of Directors at the annual meeting in accordance
with the Bylaws of Indymac, if the stockholder provides notice
of such nomination to the Corporate Secretary (1) not less
than 90 days nor more than 120 days prior to the
anniversary date of the immediately preceding annual meeting of
stockholders and (2) in the form required by the Bylaws of
Indymac. No stockholder nominations of persons for election to
the Board of Directors were received in connection with the 2007
Annual Meeting.
Indymac has a Code of Business Conduct and Ethics that is
applicable to all employees and officers of Indymac, including
the principal executive officer, the principal financial officer
and the principal accounting officer. In addition, Indymac has a
Director Code of Ethics that sets forth the policy and standards
concerning ethical conduct for directors of Indymac. You may
obtain the Code of Business Conduct and Ethics and the Director
Code of Ethics by accessing the “Corporate Governance”
subsection of the “Investors” section of
www.indymacbank.com, or free of charge by writing to
Indymac’s Corporate Secretary at IndyMac Bancorp, Inc.,
888 East Walnut Street, Pasadena, California91101.
Indymac intends to post amendments to or waivers from the Code
of Business Conduct and Ethics (to the extent applicable
to Indymac’s principal executive officer, principal
financial officer or principal accounting officer) and the
Director Code of Ethics at this location on its website.
Indymac recognizes that transactions with related persons
present a heightened risk of actual or perceived conflicts of
interest or improper valuation. Nevertheless, Indymac recognizes
that there are situations where such transactions may be in, or
may not be inconsistent with, the best interests of Indymac and
its shareholders. The SEC requires public companies to report
certain related person transactions in their public reports. For
the first time in 2007, the SEC also is requiring public
companies to describe their policies and procedures relating to
the review, approval or ratification of related person
transactions. Historically, Indymac’s practices and
procedures to monitor and disclose related person transactions
have included:
•
The adoption of a policy requiring prior approval of loans to
directors, officers, and persons residing in their household, in
accordance with the requirements of OTS Regulation O,
•
The adoption of an Employee Code of Business Conduct and Ethics,
and a Director Code of Ethics, which govern potential conflicts
of interest, and
•
The use of annual questionnaires requiring directors and
executive officers to report related person transactions to
Indymac.
In addition, on Feb. 27, 2007, Indymac adopted a formal,
written policy which requires the Chairman of the Corporate
Governance Committee to determine whether any transaction in
which all of the following are present is a “related person
transaction” under applicable rules and regulations:
•
Indymac or any of its subsidiaries was, is or will be a
participant,
•
any director, nominee for director, executive officer, 5%
shareholder, immediate family member of such persons, or company
in which any of such persons is a controlling party (such as a
senior officer, senior manager, partner, principal, or 5%
shareholder) has or will have a direct or indirect interest, and
•
the amount involved exceeds or may exceed $120,000 individually
or when aggregated with all similar transactions with such
person.
Any related person or senior manager who becomes aware of a
potential related person transaction is required to notify the
Chief Governance Officer, who will inform the Chairman of the
Corporate Governance Committee and the General Counsel’s
office. If the Chairman of the Corporate Governance Committee
determines that the proposed transaction would be a related
person transaction, it must be pre-approved by the Corporate
Governance Committee at the next regularly scheduled meeting. If
it is not practicable or desirable to wait until the next
meeting, the transaction may be pre-cleared by the Chairman of
the Corporate Governance Committee or the Presiding Director.
Any transaction involving the hiring of a related person, other
than an independent director or an immediate family member of an
independent director, to an ordinary position at Indymac for an
ordinary level of compensation will not require pre-approval but
will be reviewed and ratified, amended, or terminated by the
Corporate Governance Committee on an annual basis. If the Chief
Executive Officer or any senior manager becomes aware of a
related person transaction that is pending or ongoing that has
not been previously reviewed in accordance with the policy, the
transaction will be reported to the Corporate
Governance Officer, who will present it to the Chairman of the
Corporate Governance Committee for consideration. If the
Chairman of the Corporate Governance Committee determines that
the transaction is a related person transaction, it must be
presented to the Corporate Governance Committee for review and
ratification, amendment or termination.
Only transactions that the Corporate Governance Committee (or
the Committee Chairman or Presiding Director acting under
delegated authority) determine in good faith to be in, or not
inconsistent with, the best interests of Indymac and its
shareholders will be pre-approved or ratified. Transactions
involving extensions of credit required to be approved in
accordance with Indymac’s Regulation O policy will be
handled in accordance with that policy.
Mortgage
Loans and Extensions of Credit
From time to time, certain directors and executive officers of
Indymac and its subsidiaries, and family members of such
persons, were indebted to Indymac Bank as customers in
connection with mortgage loans and other extensions of credit by
Indymac Bank. These transactions were in the ordinary course of
business and were on substantially the same terms, including
interest rates and collateral, as those prevailing at the time
for comparable transactions with unrelated persons. None of
these loans have involved more than the normal risk of
collectibility or presented other unfavorable features. In
addition, directors, officers and employees of Indymac and its
subsidiaries are entitled to receive certain discounts or
waivers of fees or commissions for certain products and services
offered by Indymac Bank.
Senior
Officer Loans
Indymac had a special loan program for senior officers to assist
them in relocating to the Pasadena area. For senior officers who
are eligible for the program, Indymac will extend a second
mortgage loan in an amount up to $500,000, secured by the senior
officer’s home. Pursuant to the terms of the loan, no
interest or principal is due unless the senior officer’s
employment is terminated for any reason, at which point the
interest rate is modified and interest and principal payments
are calculated to ensure payment in full on the maturity date.
Each loan is forgiven over a four or five year period, with 25%
or 20%, as applicable, being forgiven on each of the first four
or five anniversaries of the origination date. In compliance
with the Sarbanes-Oxley Act of 2002, which prohibits loans from
Indymac to executive officers, this loan program is no longer
offered to Indymac’s executive officers. Indymac extended
loans to executive officers under this program prior to the
enactment of the Sarbanes-Oxley Act of 2002, and pursuant to the
grandfather provisions of such law, these loans may remain
outstanding (so long as they are not modified) until maturity.
The total amount of loans outstanding to all senior officers
under this loan program as of Dec. 31, 2006, was $1,342,563.
Indymac also had a special loan program to assist senior
officers with initiation fees for country club memberships to be
used for business purposes. The loan program was discontinued in
July 2002. Pursuant to the terms of the outstanding loans, the
loans bear no interest and no principal is due unless the senior
officer’s employment is terminated or he/she relinquishes
the membership, at which point, the lesser of the value of the
membership or the entire principal amount is due and payable.
Indymac extended loans to executive officers under this program
prior to the enactment of the Sarbanes-Oxley Act of 2002, and
pursuant to the grandfather provisions of such law, these loans
may remain outstanding (so long as they are not modified) until
maturity. The total amount of loans outstanding to all senior
officers under this loan program as of Dec. 31, 2006, was
$287,788.
The following table sets forth information concerning loans
outstanding to Indymac’s named executive officers under the
two loan programs described above:
The loan is currently at a 0%
interest rate and was forgiven over a five-year period that
ended in February 2007.
(2)
The loan was paid off by
Mr. Perry in March 2007.
Family
Member Employees
During 2006, certain family members of Messrs. Perry and
Sillman, and Ms. Minier and Ms. Mathoda worked for
Indymac or one of its subsidiaries or affiliates as set forth in
the following table. None of Mr. Perry’s family
members resided in his household during the year. Neither
Messrs. Perry or Sillman, nor Ms. Minier or
Ms. Mathoda was involved in the direct management of their
respective family members. Indymac’s general policy is to
hire employees based on each employee’s qualifications for
the position for which the employee is considered regardless of
the employee’s relationship to directors, officers or
employees of Indymac and its subsidiaries and affiliates.
Additionally, Indymac compensates
Executive Vice President, Chief
Executive Officer, Mortgage Bank
337,500
836,388
—
—
1,173,888
Rayman K. Mathoda
Nikhil Shahi
(brother-in-law)(4)
Vice President, Strategic Planning
30,000
40,050
—
—
70,050
(1)
Mr. Perry is an independent building inspector who is hired
by Indymac Bank’s Homebuilder division from time to time at
standard market rates to inspect properties that secure Indymac
Bank construction loans. Indymac Bank was reimbursed for the
indicated amount through fees paid by the subject borrowers.
(2)
For 2006, Mr. Perry was the top producer of new loan
commitments within the division.
(3)
For 2006, Ms. Moe ranked number 16 out of 733 for all
Wholesale Business Development Managers, and number 2 out of 59
in her respective region.
Under Section 16(a) of the Securities Exchange Act of 1934,
Indymac’s directors and executive officers are required to
report their ownership of and transactions in Common Stock to
the Securities and Exchange Commission and the New York Stock
Exchange. Copies of these reports are also required to be
supplied to Indymac. Specific dates for filing these reports
have been established by the Securities and Exchange Commission,
and Indymac is required to report in this Proxy Statement any
failure of its directors and executive officers to file by the
relevant due date any of these reports during 2006. Based
Management is responsible for Indymac’s internal controls
and the financial reporting process. The independent auditors
are responsible for performing an independent audit of
Indymac’s consolidated financial statements in accordance
with the standards of the Public Company Accounting Oversight
Board and to issue a report thereon. The Audit Committee’s
responsibility is to monitor and oversee these processes, but
the Audit Committee is not responsible for preparing
Indymac’s financial statements or auditing those financial
statements, which are the responsibilities of management and the
independent auditors, respectively.
The Audit Committee has reviewed with Ernst & Young
LLP, who, as Indymac’s independent auditors, are
responsible for expressing an opinion on the conformity of the
audited financial statements with generally accepted accounting
principles, Ernst & Young LLP’s judgment as to the
quality, not just the acceptability, of Indymac’s
accounting principles and such other matters as are required to
be discussed with the Audit Committee under generally accepted
auditing standards. The Audit Committee has also discussed with
Indymac’s internal auditors and Ernst & Young LLP
the overall scope and plans for their respective audits. The
Audit Committee meets separately with the internal auditors and
the independent auditors (without management present) to discuss
the results of their examinations, their evaluations of
Indymac’s internal controls and the overall quality of
Indymac’s financial reporting.
In the context of the foregoing, the Audit Committee has
reviewed the audited consolidated financial statements of
Indymac for the fiscal year ended Dec. 31, 2006 with management.
In connection with that review, management represented to the
Audit Committee that Indymac’s consolidated financial
statements were prepared in accordance with generally accepted
accounting principles.
The Audit Committee has reviewed management’s report on its
assessment of internal controls over financial reporting, as
required under the Sarbanes-Oxley Act of 2002 and the FDIC
Improvement Act of 1991. In its report, management provided a
positive assertion that internal controls over financial
reporting were in place and operating effectively as of Dec. 31,2006. The Audit Committee also has reviewed with
Ernst & Young LLP its attestation report on
management’s assertions.
The Audit Committee has discussed the consolidated financial
statements with Ernst & Young LLP and it also has
discussed with Ernst & Young LLP the matters required
to be discussed by the Statement on Auditing Standards
No. 61 (Communication with Audit Committees) and the New
York Stock Exchange rules relating to the conduct of the audit.
The Audit Committee also has received written disclosures and a
letter from Ernst & Young LLP regarding its
independence from Indymac as required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit
Committees), has discussed with Ernst & Young LLP the
independence of the firm, and has considered all of the above
communications as well as all audit, audit-related and non-audit
services provided by Ernst & Young LLP. In reliance
upon the foregoing, the Audit Committee has determined that
Ernst & Young LLP are independent auditors with respect
to Indymac within the meaning of the federal securities laws and
the rules and regulations thereunder and Rule 3600T of the
Public Company Accounting Oversight Board, which designates as
interim independence standards Rule 101 of the American
Institute of Certified Public
Accountants’ Code of Professional Conduct and Standards
Nos. 1, 2 and 3 of the Independence Standards Board. In
connection with Ernst & Young LLP’s audit of
Indymac’s consolidated financial statements, Indymac
entered into an engagement agreement with Ernst & Young
LLP, which set forth the terms by which Ernst & Young
LLP will perform audit services for Indymac. That agreement is
subject to alternative dispute resolution procedures.
All three members of the Audit Committee have been determined by
the Board of Directors of Indymac to be independent directors
and financial experts as more fully described in “Corporate
Governance”. The oversight and other responsibilities of
the Audit Committee are described in the Audit Committee
Charter, which can be found in the Corporate Governance section
of our Website at www.indymacbank.com.
In reliance upon the above materials and discussions, the Audit
Committee has recommended to the Board of Directors that the
audited financial statements be included in Indymac’s
Annual Report on
Form 10-K
for the fiscal year ended Dec. 31, 2006.
The Audit Committee, in its capacity as a committee of the
Indymac Board of Directors, is directly responsible for the
appointment, compensation, retention and oversight of
Indymac’s independent auditors. The Audit Committee is
required to approve all engagements with the independent
auditors, including both audit services and non-audit services
prior to such services being rendered. The Audit Committee has
delegated to the Audit Committee Chairman the ability to
pre-approve non-audit service engagements with the independent
auditors involving fees of up to $100,000 per engagement. Any
such services pre-approved by the Chairman are to be reported at
the next full Audit Committee meeting. In approving such
non-audit services, the Audit Committee (or Chairman when
applicable) considers whether the proposed services are
prohibited under current law or regulations. The Audit Committee
(or Chairman when applicable) must, in order to approve the
proposed non-audit services, also be of the opinion that the
proposed services, both individually and collectively with all
other provided services, will not impair the independence of the
independent auditors relative to the financial statement audit
opinion discussed above. The Audit Committee also receives
assurances from the independent auditors for every proposed
engagement that the independent auditors believe that the
proposed engagement is not a prohibited service under applicable
laws and regulations and that the proposed service will not
impair the auditors’ independence relative to their audit
opinion regarding Indymac’s financial statements.
The following table sets forth the aggregate fees agreed upon
with and/or billed to Indymac for the fiscal years ended Dec.31, 2006 and 2005 by Ernst & Young LLP:
Type of Fee
2006
2005 (1)
Audit Fees(2)
$
1,496,000
$
1,385,000
Audit Related Fees(3)
1,135,000
512,000
Tax Fees(4)
830,000
320,000
All Other Fees(5)
10,000
10,000
(1)
Fees for the fiscal year ended Dec. 31, 2005, have been
reclassified to conform to the current year presentation.
(2)
Includes fees for the audit of Indymac’s annual
consolidated financial statements, review of the consolidated
financial statements included in Indymac’s
Form 10-Qs
for the fiscal year, and audit related accounting consultations.
(3)
Includes fees for mortgage compliance procedures, due diligence
for mortgage securitizations and other mortgage related
transactions, acquisition due diligence and other transactions,
and audits of the employee benefit plan.
(4)
Includes fees relating to research and development tax credit
study (considered a tax consulting engagement), earnings and
profit study, state tax planning and other tax-related strategic
initiatives, as well as the preparation of income tax returns
and tax advice.
(5)
Fees are for the use of Ernst & Young LLP’s
on-line research tool.
The Audit Committee is required to pre-approve all audit and
non-audit services provided by the independent auditor and has
considered whether the provision of the services relating to
these fees is compatible with maintaining the auditors’
independence. None of the services relating to these fees were
rendered pursuant to a waiver of the Committee’s
pre-approval procedures.
Management
Development and Compensation Committee
The purpose of the Management Development and Compensation
Committee (the “Compensation Committee”) is to
establish, review and monitor the compensation philosophy and
practices of IndyMac Bancorp, Inc., and its direct and indirect
subsidiaries in order to assist the Board of Directors (the
“Board”) in the discharge of its responsibilities
relating to (a) the fair and competitive compensation of
the Chief Executive Officer (the “CEO”) and senior
executives, (b) the incentive compensation, employee
retirement, health and welfare plans of the Company,
(c) the development of, and orderly succession planning
related to key senior executive personnel, and (d) the
creation of a corporate environment where ethical behavior is
the standard.
The duties and responsibilities of the Compensation Committee
include reviewing and approving appropriate corporate goals and
objectives for the next year, which are then discussed with the
full Board; evaluating the performance of the CEO in meeting the
prior year’s corporate goals and objectives, which
performance is then discussed with the full Board; consider the
total compensation paid to the CEO for the prior year, including
base salary, cash incentive, equity incentive and any other
compensation, including but not limited to, perquisites and
potential severance payments; and then review and approve the
compensation level of the CEO. Annually, or more frequently if
required by the terms of any employment contract between the
Company and the CEO, the Compensation Committee will consider
the
performance of the Company; consult with such other information
it deems appropriate, which may include the value of such awards
granted to other CEOs of similarly situated companies, the
financial services industry and industry in general; the total
compensation paid to the CEO, including the number of equity
incentives granted in prior years; and then, review and approve
the long-term incentive award for the CEO. The Compensation
Committee is charged with negotiating the terms of the
CEO’s employment agreement and approving the final terms of
such agreement. In 2006, the Compensation Committee exercised
this duty and negotiated a new contract with Mr. Perry
effective in September 2006 (see Appendix for further details).
The Compensation Committee periodically reviews the
Company’s philosophy regarding overall executive
compensation and discusses alternate compensation approaches
with the CEO as appropriate. This includes: annually reviewing
data to assess the Company’s competitive position for the
three components of executive compensation (base salary, annual
incentives, and long-term incentives); reviewing on an
alternating annual basis an internal analysis provided by
management regarding these components and an external
compensation analysis provided by an outside expert on
compensation, which may include surveys compiled by third-party
consultants and other supplemental general industry compensation
information used to determine that total compensation paid to
the Company’s Senior Managers is reasonable.
The Compensation Committee reviews and approves all Executive
Officer compensation for compliance with Section 16 of the
Securities and Exchange Act and Section 162(m) of the
Internal Revenue Code and any other applicable laws and
regulations and administers and makes recommendations to the
Board regarding the adoption, amendment or rescission of equity
incentive plans and assures that payments under these plans are
in conformance with any restrictions placed thereon by the Board
and shareholders. The Compensation Committee reviews the
performance of the fiduciaries who manage the retirement, health
and welfare plans as defined by the Employee Retirement Security
Act of 1974 (“ERISA”) sponsored by the Company and all
subsidiaries and render appropriate reports to the Board.
Additionally, the Compensation Committee issues a report on
executive compensation for inclusion in the Company’s proxy
statement.
The Compensation Committee reviews and monitors the
Company’s compensation and hiring practices in support of a
diverse workforce and compliance with applicable laws and
regulations, including laws regarding nondiscrimination in
employment and human resource practices.
The Compensation Committee consists of three directors, each of
whom the Board has determined has no material relationship with
us and is otherwise independent under the rules of the New York
Stock Exchange and the IndyMac Bancorp, Inc., Guidelines for
Corporate Governance Issues. The members of the Compensation
Committee are Mr. John Seymour (Chair), Mr. Louis
Caldera and Mr. Hugh Grant. In 2006, the Compensation
Committee met 13 times.
Compensation
Committee Report on Executive Compensation
Compensation for the executive officers of Indymac is
administered under the direction of the Management Development
and Compensation Committee of the Board of Directors, also
referred to as the Compensation Committee. In fulfilling its
oversight responsibilities, the Compensation Committee reviewed
and discussed with management the Compensation Discussion and
Analysis set forth in this Proxy Statement.
In reliance on the review and discussions referred to above, the
Compensation Committee recommended to the Board that the
Compensation Discussion and Analysis be included in the
Company’s Annual Report on
Form 10-K
for the fiscal year ended Dec. 31, 2006 and the
Company’s Proxy Statement to be filed in connection with
the Company’s 2007 Annual Meeting of Stockholders, each of
which will be filed with the Securities and Exchange Commission.
This section provides information regarding the compensation
program in place for our principal executive officer, principal
financial officer and the three most highly-compensated
executive officers other than the principal executive officer
and the principal financial officer, collectively considered the
“named executive officers” (“NEOs”). The
information presented includes, among other things, the overall
objectives of our compensation plan and each element of
compensation we provide.
Adhering to the guidelines issued by the Securities Exchange
Commission, Indymac has identified the following five executives
as the Company’s NEOs:
•
Michael W. Perry, Chairman and Chief Executive Officer, IndyMac
Bancorp, Inc., by virtue of the fact that he was the
Company’s only Principal Executive Officer for 2006
•
A. Scott Keys, Executive Vice President and Chief Financial
Officer, by virtue of the fact that he was the Company’s
only Principal Financial Officer for 2006
•
Richard H. Wohl, President, Indymac Bank, by virtue of the fact
that he is one of the Company’s most highly compensated
executives
•
S. Blair Abernathy, Executive Vice President and Chief
Investment Officer, by virtue of the fact that he is one of the
Company’s most highly compensated executives
•
James R. Mahoney, Chairman, Financial Freedom, by virtue of the
fact that he is one of the Company’s most highly
compensated executives
A
foundation of meritocracy that rewards performance
We believe that a corporate culture based on the foundation of a
“meritocracy,” where individuals and teams are
evaluated and rewarded based solely on their
performance — without regard to politics —
is the approach that will foster an environment of excellence
and lead to the greatest level of business success for the
Company. And we believe business success will drive competitive
financial returns for our shareholders.
The objectives of Indymac’s compensation programs and
meritocracy culture are to attract, motivate and retain the type
of executives needed to develop and execute the Company’s
core strategies, which in turn should maximize the
Company’s financial performance and long-term shareholder
value creation. Indymac seeks to promote an entrepreneurial
environment of creativity and distinctiveness.
Indymac’s compensation philosophy supports its culture of
meritocracy by tying the incentive compensation of its senior
managers — including all NEOs — to their
performance against the goals established for them. The specific
goals for each of the NEOs relating to 2006 are described in
more detail below. For Mr. Perry, these goals are based on
the Company’s earnings per share (EPS), return on equity
(ROE), and growth in these measures on a
year-over-year
basis. For Mr. Keys, these goals are based on the
achievement of qualitative goals and milestones in his area of
responsibility. Messrs. Wohl, Abernathy and Mahoney all
have goals that use growth in net income and ROE, in their
respective divisions, as the measurement for achievement. The
Company uses net income and ROE relating to their areas of
responsibility for evaluating the performance of these NEOs, as
it believes these are the metrics that are most important in
meeting the Company’s long-term strategic mission.
While we adopt a highly metrics-focused approach to the design
of our compensation plans, we must leave in some subjectivity in
order to encourage a creative response to market opportunities.
This is balanced with sound overall enterprise risk management.
The four principles that support our compensation philosophy are
outlined below.
1.
A
Predominant Portion of NEO Compensation Should Be Performance
Based
Our compensation program, the engine of our meritocracy, is
designed to reward improvements in actual results. Shareholder
value is generally created by improvement in corporate
performance; therefore, our compensation plans are structured to
reward improved performance by our NEOs on a
year-over-year
basis. Consequently, Indymac’s compensation packages do not
reward the status quo. To maximize compensation, NEOs have a
strong incentive to continually improve their performance.
2.
A
Substantial Portion of NEO Compensation Should Be Delivered in
the Form of Equity or Other Long-Term Incentive Awards Which
Align Management’s Interests With Those of Indymac’s
Shareholders
We believe that a substantial portion of total compensation for
the NEOs should be provided in the form of equity and other
long-term incentive compensation, in order to align the
interests of our NEOs with the interests of our shareholders. In
2006, equity awards, including both stock options and restricted
stock, were granted based on 2005 performance to
Messrs. Keys, Abernathy and Mahoney. The old employment
agreement of Mr. Perry and the current employment agreement
of Mr. Wohl were structured to provide substantial equity
awards at the time these agreements were signed in 2002 and
therefore, no equity grants were made to them in 2006 for 2005
performance.
Based on 2006 performance, all NEOs except Messrs. Wohl and
Perry received long-term incentive awards, which included a
combination of stock options, restricted stock, and other
long-term incentive compensation, all granted in the first
quarter of 2007. Mr. Perry entered into a new five-year
employment agreement in September 2006 and per the terms of that
agreement is eligible to receive an equity award in
2007. Option grants primarily vest equally over three years from
the date of grant and restricted stock vests on the third
anniversary of the date of grant.
3.
Our
Compensation Program for NEOs Should Enable Us to Compete for
First-Rate Executive Talent
We are dedicated to creating shareholder value and believe the
way to build shareholder value is by recruiting, motivating and
retaining talented executives through compensation packages that
are competitive, but fair. In recent years the mortgage industry
has reported record volumes of origination and growth, which in
turn has increased the competition among originators for
experienced executives. In 2002, the National Mortgage News
ranked Indymac the
24th
largest originator in the nation. Since the third quarter of
2005, this publication has consistently ranked Indymac among the
country’s top 10 originators (in Q4 2006 the Company was
ranked
7th).
The Company believes the substantial growth it has experienced
in the last five years is substantially due to the top talent it
has been able to attract and retain with its performance-driven
compensation packages. Success in the mortgage banking business
requires a team with very specific and unique skills. The field
of candidates is narrow — and the field of candidates
that have the talent, as well as the attitude and aptitude for
Indymac’s meritocracy culture, is narrower still. We have
structured our compensation packages to ensure we can compete
for this talent.
In November 2005, Indymac’s Management Development and
Compensation Committee (the “MDC”) engaged Mercer
Human Resources Consulting, a top human resources consulting
firm, to assist in benchmarking the Company’s executive
compensation.
For the purposes of benchmarking, a “Peer Group” was
selected. The group was limited to public companies because of
the detailed information regarding total compensation for NEOs
available in publicly filed proxy statements. Indymac believes
that due to our unique hybrid thrift/mortgage banking business
model, there are no true peers to benchmark the Company against;
however, these particular competitors were selected because they
have similarities to Indymac, such as mortgage banking divisions
and/or thrift operations. Other larger multi-line financial
services companies were not included, even though we compete
with them for talent, as their NEOs do not generally include the
heads of mortgage banking divisions or the divisions that
support a mortgage banking business model.
The following 13 publicly traded financial services competitors
were selected for the Mercer study:
Astoria Financial Corp
Countrywide Financial Corporation
Downey Financial Corp.
First Horizon National Corporation
Flagstar Bancorp Inc.
Golden West Financial Corporation (the Federal Reserve approved
Wachovia
The Mercer study found that base salaries for
Indymac’s NEOs are at the median of those of our
competitors. It also found that actual total compensation
packages for Indymac’s NEOs are at or above the
75th
percentile mark of the total compensation paid by companies in
our Peer Group. For the purposes of this review, total
compensation included salary, short-term incentives and
long-term incentives. We attribute this difference to
Indymac’s superior performance, which exceeded the Peer
Group average significantly over the relevant period. The
Company does not target any particular percentile of its Peer
Group, but the MDC believes these results show that
Indymac’s ranking of compensation against its competitors
reflects the Company’s philosophy of pay for performance.
We believe that providing a median salary, combined with the
potential for significant short- and long-term incentive
compensation upside and downside based on individual
performance, will attract and retain the type of executive we
wish to employ and drive the financial performance we wish to
attain.
The MDC also reviewed other compensation surveys with respect to
general trends in executive compensation among a broader group
of large U.S. companies. Surveys used for comparison purposes
included the 2005 Mercer US Benchmark Survey, Watson Wyatt
2004/2005 Industry Report on Top Management Compensation and
Towers Perrin CDB.
As the industry transitions to more normalized volumes and
competition among mortgage originators intensifies, the Company
believes it is of paramount importance to attract and retain the
top achievers in our field in order to remain competitive in our
industry. Experience has shown this can be accomplished with
competitive, performance-based compensation packages.
The Peer Group, with an emphasis on Countrywide Financial Corp.
and Washington Mutual, Inc., adjusting to an extent for relative
size, and the addition of Fannie Mae and Freddie Mac, was used
for benchmarking Mr. Perry’s compensation. The MDC
thought this was appropriate given the similarities in duties
between the CEOs and other key executive officers of these
institutions and those of Mr. Perry. These similarities of
duties include the oversight of mortgage divisions, depository
divisions, investment divisions, companywide risk management,
and secondary marketing functions, such as the securitization
and sale of mortgage-backed securities.
4.
Our
Compensation Program for NEOs Should Be Fair, and Perceived as
Such, Both Internally and Externally
The MDC’s intent is to structure a compensation program
that will be perceived as fair, both internally and externally.
It accomplishes this by comparing the compensation that is
provided to NEOs to two benchmarks: 1) the compensation, as
described above, provided to officers of the companies included
in the Peer Group, which measures external fairness; and
2) the compensation provided to other selected and
comparable senior managers of the Company, as a means to measure
internal fairness.
Internal and external benchmarking is done by the Company when a
senior manager is eligible, recommended, or otherwise reviewed
for any kind of change in compensation. Internal benchmarking
for the Company’s Executive Committee is also done on an
annual basis, when the MDC reviews the total compensation of
each EC member. This is to ensure that changes in compensation
are in line with positions of similar responsibilities. Outside
consultants benchmark our executive compensation every two years.
This section describes the elements of our compensation program
for NEOs, together with a discussion of various matters relating
to those elements, including the reasons the MDC chooses to
include the elements in the compensation program. The elements
are:
•
Salary
•
Short-term cash incentive
•
Long-term incentive and equity compensation
•
Perquisites
•
Pension plan, which is frozen
The elements of our compensation program have consistently been
based on rewarding improved performance; however, the form of
the awards has changed from an emphasis on equity to a balance
of cash and equity, as further discussed below.
Indymac’s compensation plan for NEOs for 2006 was
structured so that approximately two-thirds of total
compensation was delivered in the form of cash, through a base
salary and the Company’s Short-Term Cash Incentive Plan.
Salaries are based on the NEOs employment agreement —
and any subsequent changes made by the CEO and MDC as a result
of changes in job responsibilities — and Short-Term
Cash Incentives are based on the achievement of goals specified
in each individual NEO’s performance-based incentive plan.
Salary is provided in the NEO compensation package because the
MDC believes it is appropriate that a portion of the
compensation that is provided to each of the NEOs is a form that
is fixed and liquid. The Cash Incentive is provided because the
MDC believes that it is the most effective performance-based,
short-term incentive.
Based on the results of the Mercer study discussed above, the
base salary component of NEOs’ compensation comprises
32 percent of total compensation, compared to
39 percent for the competitive market; however, Short-Term
Cash Incentives comprise 35 percent of total compensation,
compared to 26 percent for the competitive market. The
heavier weighting of the Short-Term Cash Incentive component for
Indymac NEOs reflects Indymac’s philosophical commitment to
performance-based compensation packages. The final component,
made up of long-term incentive equity grants, comprises
33 percent of total compensation, in line with the
competitive market’s 35 percent.
The base salary for each of the NEOs is initially stipulated in
the individual employment agreement for each executive and is
subject to review during the year due to a change in position or
responsibilities. Any increase in base salary for an NEO must be
approved by the CEO and MDC. At Mr. Perry’s request,
his salary has been capped at $1 million so that it would
be fully deductible under Section 162(m) of the U.S. tax
code.
The salary provided to Messrs. Perry, Wohl and Abernathy is
generally formulated to be roughly equal to or less than their
Short-Term Cash Incentives, which are leveraged to the
performance of the Company in Mr. Perry’s case and to
their respective areas of responsibility for the other NEOs.
This arrangement reflects the Committee’s belief that a
substantial portion of cash compensation should be tied to
meeting the performance goals of each NEO. To summarize these
performance goals, for Mr. Perry, the goal is long-term
company-wide EPS growth while the incentive plans of
Messrs. Wohl and Abernathy
are based on net income growth and ROEs for their respective
areas of responsibility. Mr. Keys, whose position as Chief
Financial Officer is considered administrative, is evaluated and
compensated on the achievement of milestone goals related to the
performance of various tasks related to his job, rather than
performance metrics. Due to the use of milestone goals, his
incentive compensation was formulated to be less than his
salary. Finally, Mr. Mahoney began 2006 with a similar plan
as Messrs. Wohl and Abernathy, but when the Company bought
his minority interest in Financial Freedom Senior Funding
Corporation (“Financial Freedom”) in June 2006, the
terms of his employment changed. As of July 1, 2006, he
became Co-CEO and Chairman of Financial Freedom for the
remainder of 2006. Beginning on Jan. 1, 2007,
Mr. Mahoney was no longer Co-CEO of Financial Freedom, but
remains Chairman. As such, his employment contract provides only
a salary and no incentive compensation. For year one, his salary
will be $1,500,000; in year two of the agreement his salary will
be $1,250,000; in year three it will be $1,000,000; in years
four and five it will be $500,000.
NEOs are eligible for Short-Term Annual Cash Incentive
Compensation. Each NEO must have a written incentive plan
specifying their goals, which have been approved by the
NEO’s supervisor, the CEO and the MDC. Each goal must be to
either improve upon a measurable and calculable metric, or to
achieve an objective measure or milestone.
Generally speaking, Short-Term Cash Incentives based on
achieving metric-related goals are calculated by multiplying a
performance payout factor times the NEO’s Cash Incentive
payments in the prior calendar year (the “Incentive
Basis”). In order for the NEO to receive a 100 percent
payout factor, we generally expect improvement relative to
performance from the prior year specified for each of the stated
metrics of the NEO’s cash incentive plan; this expectation
can vary, based on market conditions. For those NEO’s whose
responsibilities include new business incubation or business
turnaround, their actual performance is measured against an
approved plan. Payout ratios generally range from zero percent
to 150 percent of the Incentive Basis.
Goals and
Their Weighting for Individual NEO Short-Term Cash Incentive
Awards
The following provides details on individual NEO goals for 2006
and their weighting toward the NEOs’ performance-based
Short-Term Cash Incentive award:
Michael
W. Perry
Mr. Perry’s 2006 Short-Term Cash Incentive was
entirely performance based, determined by Indymac’s 2006
EPS and ROE. Thresholds of 2005’s EPS and a 14 percent
ROE were specified on an award matrix, growing to a
$1 million award when EPS grew 15 percent and ROE
exceeded 19 percent. Based on Indymac’s 2006 EPS of
$4.82, an 8.8 percent growth, and a 19.1 percent ROE,
the award matrix yielded a $791,300 payout. The MDC retained the
right to make a potential downward adjustment to this amount if
regulatory ratings worsened or if certain strategic criteria
were not met. Based on 2006 results, the MDC made no adjustments.
Richard
H. Wohl
Mr. Wohl’s incentive compensation award was related to
net income and ROE for his areas of responsibility. These areas
and their weightings are as follows: Mortgage Professional
(45%); Thrift and
Servicing, including the Consumer Construction, Home Equity, and
Home Builder divisions, and the MSR and Retained Assets
portfolios (30%); and Consumer Direct and Retention Lending
(25%).
While Consumer Direct and Retention Lending currently makes a
small contribution to the Company’s overall net income, the
substantial weighting of the performance of this division in
Mr. Wohl’s Cash Incentive Plan reflects the importance
of this area in the Company’s long-term corporate strategic
plan, which calls for increased retention in its servicing
division and the growth of its consumer and retail banking
business.
Based on a Mortgage Professional contribution decline of
27 percent, a Thrift and Servicing contribution improvement
of 26 percent, and a Consumer Lending improvement of
$17 million of net income, Mr. Wohl’s payout
factor was 90 percent, yielding a $546,375 Short-Term Cash
Incentive award payout.
S.
Blair Abernathy
Mr. Abernathy’s Short-Term Incentive compensation
awards were related to net income and ROE for his areas of
responsibility, which include Conduit Lending (40%), and the
Whole Loan and MBS portfolios (60%). His award also included a
component for Indymac’s rating agency ratings and broker
dealer net income. As the mortgage industry transitions to more
normalized historical volumes, Conduit Lending is an important
addition to the Company’s mortgage production. Whole Loan
and Mortgage-backed Securities portfolios are a key component of
the Company’s hybrid thrift/mortgage banking model,
providing stable returns through interest income on assets held
for investment. The Company believes higher ratings from the
ratings agencies are a desirable goal, as they decrease the
Company’s cost of borrowing, which directly contributes to
the Company’s net income. The Company has emphasized broker
dealer net income in line with its goal to vertically integrate
into this business to reduce costs associated with the
securitization of mortgage loans, increase its transparency and
access to the secondary market, and enhance its competitiveness
and profitability in its mortgage banking and thrift businesses.
Based on a Conduit Lending contribution improvement of
200 percent, a Portfolio contribution decline of
9 percent, and a rating agency upgrade,
Mr. Abernathy’s payout factor was 103 percent,
yielding a $592,631 Short-Term Cash Incentive award payout.
James
R. Mahoney
As noted previously, during the first-half of 2006, as CEO of
Indymac’s subsidiary, Financial Freedom, Mr. Mahoney
was on an incentive-based plan that was geared to rewarding
growth in net income and ROE, which yielded a payout of
$500,000. When Indymac purchased the remainder of
Mr. Mahoney’s minority interest in Financial Freedom
in mid-year 2006 a new contract was negotiated. Per the terms of
the new contract, he served as Co-CEO and Chairman of Financial
Freedom for the remainder of 2006. As of Jan. 1, 2007, his sole
position with the Company is as Chairman and Special Advisor to
the CEO. In this position Mr. Mahoney’s attention will
shift from the
day-to-day
operations of Financial Freedom to the vision and overall
strategy of the company, and representing Financial Freedom on
reverse mortgage industry issues. Due to these changes,
Mr. Mahoney did not receive a short-term cash incentive
award payout for the second half of 2006.
As the Company’s Chief Financial Officer, Mr. Keys has
goals that are milestone based, rather than revenue based, as
his position is one of administration, not revenue generation.
Those goals include: (1) exhibiting strong command and
control of people and costs in his areas of responsibility,
including recruitment of outstanding talent and strong oversight
of both corporate and decentralized finance functions; and
(2) the maintenance of a strong, effective, and automated
financial reporting control environment, including the timely
resolution of any financial reporting control
issues/deficiencies discovered by Mr. Keys, other members
of Indymac management, Internal Audit, and the Company’s
independent registered public accounting firm, Ernst &
Young, LLP. This includes policies and procedures for all his
areas of responsibility, especially external and internal
financial reporting.
Based on the achievement of these objectives, Mr. Keys was
awarded a $240,000 Short-Term Cash Incentive payout.
Indymac has two long-term incentive programs for its NEOs, the
Senior Manager Long-Term Incentive Plan and the Executive
Committee Stock Incentive Plan. These programs operate under our
2002 Incentive Plan, which was approved by shareholders. Payouts
of both plans are formulaic and based on compensation provided
through salary and Short-Term Cash Incentives.
Senior
Manager Long-Term Incentive Plan
All NEOs are eligible for the Company’s Senior Manager
Long-Term Incentive Plan. Historically, the plan provided stock
options and/or restricted stock annually in an amount equal to
25 percent of the combined total of the individual
executive’s salary and Short-Term Cash Incentive that was
earned in the respective year. Generally, the stock options
granted under this program vested ratably over a three-year
period, and restricted stock granted under this plan vested
100 percent at the end of a three-year period.
In April 2006, Indymac’s 2002 Incentive Plan, which governs
all awards of cash and equity incentives to Company employees,
was amended to allow for an additional 5.2 million shares
to be granted to employees as stock options or restricted stock.
In conjunction with this amendment the Company made a commitment
to its shareholders that it would not exceed an average equity
grant burn rate of 2.46 percent by the end of three years
(2006 through 2008). This commitment was required by a
shareholder advisory service to gain their recommendation for a
positive vote — key to ensuring shareholder
approval — for the amendment. The burn rate is defined
as the number of equivalent shares granted per year divided by
the total common shares outstanding at the end of each year.
Under the previous equity compensation granting practices, the
burn rate was 3.08 percent for 2005, and through managing
the mix of equity grants and changes to our equity policy,
declined to 2.60 percent for 2006.
For 2006, the Senior Manager equity grant alone accounted for
32 percent of the 2006 burn rate and was the highest
contributor to the burn rate. Given these circumstances, a
modified long-term incentive program for Senior Managers was
developed. This program is intended to retain a tie to
shareholder value creation, while moving to a cash-based program
in order to reduce potential dilution and equity burn rate.
The revisions to the Senior Manager Long-Term Incentive Plan are
expected to be neutral from an economic standpoint for Senior
Managers. Under the new program Senior Managers will still
receive a
long-term incentive award valued at 25 percent of their
earned base salary and short-term cash incentive for the
respective year. However, rather than receiving restricted stock
or stock options, the award will be made in deferred cash, which
will vest at the end of three years, and may only be invested in
an interest-bearing account or in an Indymac common stock
account.
Additionally, in order to make more stock options available, in
2002 Mr. Perry returned 500,000 stock options that had been
provided to him under the terms of the contract he signed that
year, so that they could be used for employee awards.
Executive
Committee Stock Incentive Plan
All NEOs are members of Indymac’s Executive Committee
(“EC”). Members of the EC are eligible to receive an
annual grant of stock options valued at 50 percent of the
amount of their Short-Term Cash Incentive for the respective
year, but this amount cannot exceed 75 percent of their
prior year Short-Term Cash Incentive. As the Executive Committee
Stock Incentive Plan is based on the Short-Term Cash Incentive,
it is automatically leveraged against the executive’s
improvement in performance over prior periods. The options
granted under this plan vest ratably over a three-year period.
The target date for issuing the annual equity grants to eligible
employees is March 15th, with the final grant date to be no
later than the day the quarterly blackout period begins for the
first quarter of that year (approximately April 5th).
On the target grant date, the MDC will determine if option and
stock fair-market values are significantly above or below the
trailing
90-day
average option and stock fair-market values, considered to be a
range of significantly more than plus or minus 10 percent
of the trailing
90-day
average values. This evaluation and range was put in place to
help ensure the annual equity grant is not made on a day when
the stock price is unusually low or high for a short duration of
time due to extraordinary events or news.
If prices are within the acceptable range, the MDC will move
forward with its meeting and the granting of all equity awards
on that date. If prices fall outside the acceptable range, the
MDC Chair will consult with the other members of the MDC and may
move the target grant date to the next business day, and repeat
the same process. The MDC will retain discretion to consider
other events that may impact
90-day
average values, such as market adjustments and industry mergers.
On the grant date, the MDC will meet to review and approve the
final equity grant values and number of shares to be
distributed. Option value, option strike price and stock
fair-market value are set on the grant date, as required by
Indymac’s shareholder-approved incentive plans.
Quarterly
Equity Grants
The MDC has delegated authority to the CEO, in his capacity as
an officer and director, to approve certain quarterly equity
grants. These grants can be used for new hires, production
personnel compensation plans and for purposes of special
incentive and retention. The MDC has imposed caps for each
category, an annual total share limit and an annual individual
grant limit, for both restricted stock and stock options.
Additionally, the CEO may not approve equity grants to
Section 16 Officers at any time; they must be approved by
the MDC.
The quarterly grant date is set each quarter at three business
days following the release of earnings for the respective
quarter. Option value, option strike price and stock fair market
value are set on the grant date, as required by Indymac’s
shareholder-approved incentive plans. On the grant date, the CEO
reviews and approves equity grant schedules, which includes
employee-level detail of each grant in each category, and the
total shares granted.
The MDC believes that timing the quarterly issuance of equity
grants after the quarterly earnings release provides time for
the markets to digest the Company’s earnings report and
thus avoids any conflict of interest that may arise if equity
awards were issued prior to earnings. Additionally, this
coincides with the end of the Company’s quarterly blackout
period.
Stock
Ownership Guidelines
The Corporate Governance Committee and the MDC have adopted
stock ownership requirements for Indymac’s directors and
executive officers. These requirements specify that directors
who have served on the Board for at least three years are
expected to own common stock (including 70 percent of the
net value of vested stock options) with a value equal to three
times the annual Board retainer fee. Indymac’s Chief
Executive Officer, whose tenure now exceeds five years, is
expected to own common stock (including 70 percent of the
net value of vested stock options) with a value equal to five
times his annual base salary. All other Indymac NEOs with tenure
of more than five years are expected to own common stock
(including 70% of the net value of vested stock options) with a
value equal to two times their base salary. NEOs whose tenure is
more than three years, but less than five years, are expected to
own common stock (including 70 percent of the net value of
vested stock options) equal to one year’s salary. Although
these stock ownership requirements do not mandate the purchase
of common stock, any NEO who has not met the ownership
requirements is expected to refrain from selling any common
stock until he or she has met the ownership requirements.
Currently, all of the NEOs meet or exceed these requirements.
Indymac provides or pays for various perquisites for its NEOs.
These perquisites can include financial planning services,
memberships in social and professional clubs, car allowances,
executive medical programs and gross up payments equal to the
taxes payable on certain perquisites.
The MDC feels the use of professional and social clubs furthers
the Company’s interests by creating opportunities for
professional networking and exposure to new ideas. Additionally,
the visibility provided by these venues for our NEOs raises the
Company’s profile in the communities where we do business,
which we believe is in our shareholders’ best interests.
The types of perquisites provided by Indymac are also provided
by many of the companies in our Peer Group to their NEOs and it
is therefore valuable for retention and recruitment purposes.
Generally, the MDC believes the perquisites it provides to its
NEOs are minimal and in the best interests of its shareholders.
It is the Company’s policy to disclose all perquisites
provided to NEOs regardless of whether they meet the SEC’s
minimum threshold for disclosure of $10,000.
The Company’s Defined Benefit Pension Plan was frozen to
new participants on January 1, 2003. Employees hired prior
to January 1, 2003, with one or more years of service, are
entitled to annual pension benefits beginning at normal
retirement age (65 years of age) equal to a formula
approximating
0.9% of final average compensation multiplied by credited
service (not in excess of 35 years), subject to a vesting
requirement of five years of service. Participants can also
become vested upon attainment of Normal Retirement Age while
still employed by the Company on such date or termination of
employment (other than a termination for cause) within two years
following a change in control of the Company, as defined in the
Plan. Compensation for benefit computation purposes is limited
under the Code to $220,000 for Plan Year 2006. Currently, the
Company is examining alternatives with respect to the Plan,
which may include freezing benefits for all participants. As of
December 31, 2006, Messrs. Perry, Wohl, Abernathy and
Keys were eligible for this benefit.
The Company has always offered, and continues to offer, a 401(k)
plan with a corporate match of up to 3 percent for all its
employees. This 401(k) plan is the primary retirement benefit
offered by the Company to its employees going forward.
The employment agreements between Indymac and its NEOs have
severance provisions for certain terminations or a termination
in conjunction with a change of control. These provisions
provide payments and other benefits if the NEO’s employment
is terminated for a qualifying event or circumstance, such as
being terminated without “Cause” or leaving employment
for “Good Reason,” as these terms are defined in the
employment agreements. We have also entered into transitional
compensation agreements with each of our NEOs upon a qualifying
event or circumstance after there has been a
“Change-in-Control”
(as defined in the agreements) of the Company. Additional
information including a definition of key terms and a
quantification of benefits that would have been received by our
NEOs had termination occurred on December 31, 2006, is
found under the heading “Potential Payments Upon
Termination or
Change-in-Control”
on page 56 of this Proxy Statement.
Compensation for Indymac’s NEOs is founded on a culture of
meritocracy, where performance against predetermined goals is
the basis for financial reward. Performance means providing
extraordinary value to our customers and superior financial
returns to our shareholders.
Mortgage
Banking Expertise
Mortgage banking is a cyclical business with low barriers to
entry. During boom times, typically characterized by falling
interest rates, new players rush in and almost all make money,
making it difficult to distinguish good management teams from
bad. During lean times, when interest rates rise and economic
expansion slows, many of these same players are forced to close
their doors or are acquired by larger firms, because they lack
the skills to navigate tough times. But the mortgage bankers
that survive — and thrive — have strong
management teams that can weather the storms of rising interest
rates and falling industry volumes. Mortgage banking requires
all the skills needed for any successful business, such as
strong marketing, sales and operational skills, workforce
management and state of the art technology. Additionally, and
critically, it requires the financial expertise to properly
price products, hedge against changes in interest rates and
manage credit risk.
Mortgage banking also requires an understanding of the impact of
changing interest rates on product demand and mortgage servicing
prepayment rates — and the appropriate use of hedging
instruments to provide stable returns in all interest rate
environments.
Strong execution in the secondary markets — the sale
of loans and securities to investors — is vital to
ensure profitability in mortgage banking. Understanding the best
execution for a given product and packaging it attractively for
investors — as well as profitably for the
Company — takes highly specialized knowledge and an
understanding of competing products and the general market
environment for various securities. Managing pricing and cost
control is essential. Mortgage banking offers high returns on
invested capital, but requires quick asset turn rates and strong
execution to realize those returns.
Thrift
Investing and Risk Management Expertise
Thrift investing offers lower returns on equity, but greater
stability in profits. Interest rate volatility is a major risk
when duration matching interest-bearing assets with the
liabilities used to fund them. Historically, we have effectively
hedged this risk through a variety of economic environments,
including high and low interest rates, flat and inverted yield
curves, and economic recessions and expansions.
As a savings and loan association, credit and enterprise risk
management is a priority for Indymac. The Company believes we
have some of the best talent in this area and our recent upgrade
by Standard & Poor’s to investment grade quality
is evidence of our strong performance in this area.
Indymac’s most highly compensated executives have expertise
in all of the critical areas discussed above. Their experience,
knowledge, and most importantly, their performance, are the
reasons they are our five named executive officers.
The
Indymac Bank, F.S.B. Deferred Compensation Plan
During fiscal year 2006, NEOs of Indymac and Indymac Bank were
eligible to participate in Indymac’s Deferred Compensation
Plan (“DCP”). Under the DCP, participants were allowed
to defer up to 25 percent of base salary and up to
100 percent of total Short-Term Cash Incentives or
commissions.
Under the DCP, participants must defer at least a minimum amount
of $2,000 annually for a number of years designated by each
participant. Participants may choose a short-term payout, with a
minimum deferral period of five years, a retirement payout, with
either a lump sum paid out at retirement, or annual payments
over five, ten, 15 or 20 years following retirement. This
initial election is irrevocable. However, under the retirement
election, participants may elect, at least one year prior to
retirement, to further defer the payment at least five years
following the original payment date elected.
For fiscal year 2006, the DCP provided a return of
6.18 percent. The rate of return provided by the DCP is
reset by Indymac Bank on an annual basis and is based on an
estimate of Indymac’s funding cost for long-term senior
unsecured debt. The rate is calculated by adding the current
Treasury yield and the corresponding financial spread to
Treasury based on the debt rating. The Nonqualified Deferred
Compensation Earnings amount included in the Summary
Compensation Table of this Proxy Statement represents the
earnings for each named executive officer “above
market” as defined by the SEC. The above-market amount is
the incremental earnings over 120 percent of the applicable
federal rate. For fiscal year 2006, that rate was calculated as
5.976 percent. For fiscal year 2006, eligible participants
included the top 5 percent of the most highly compensated
employees of Indymac Bank and its subsidiaries and affiliates,
including all senior vice presidents and above and the directors
of Indymac and Indymac Bank.
Indymac does not fund the DCP. This benefit is provided to allow
our employees to defer the obligation to pay taxes on certain
elements of their compensation. We believe providing this
benefit is an
important retention and recruitment tool, as many of the
companies with which we compete for executive talent provide a
similar benefit for their executives.
While we consider the DCP a benefit to our employees, the
Company also believes it is a benefit to Indymac, as it provides
a convenient, low-cost source of funds for our operations.
The
IndyMac Bancorp, Inc. Senior Manager Deferred Compensation
Plan
In December 2006 the Company’s Board of Directors adopted
the new Senior Manager Deferred Compensation Plan. Under this
new plan, senior managers will be required to defer their annual
long-term incentive award and may invest in an interest bearing
Indymac security or an Indymac common stock account (see Senior
Manager Long-Term Incentive Plan on page 41 for further
details).
Section 162(m) of the Internal Revenue Code limits the
corporate deduction for annual NEOs’ compensation to
$1 million, unless the amount by which such compensation
exceeds the $1 million threshold is based upon performance
goals that are subject to MDC and shareholder approval
(“performance-based compensation”).
The MDC’s policy on deductibility is generally to develop
compensation plans that provide for the payment of compensation
that is tax deductible to Indymac, while recognizing that the
legitimate interests of Indymac and its shareholders may at
times be better served by compensation arrangements that may not
be fully deductible. Additionally, annual NEO incentive plans
are subject to MDC approval within the first calendar quarter of
the service year.
The following table sets forth information concerning total NEO
compensation, as proscribed by the new SEC guidelines, on a GAAP
basis. These amounts combine both compensation earned and paid
in 2006 with compensation awarded or earned relative to prior
years, but expensed this year. Indymac believes that the
information provided below makes it difficult to analyze its pay
for performance compensation, as it does not reflect the total
values of long-term incentive awards earned in 2006 (awarded in
2007), nor is it comparable to the summary compensation tables
disclosed in prior proxy statements.
For these reasons, a supplementary table is shown at the end of
this section on page 50, which reflects the value of
compensation as earned in each year. This disclosure makes it
easier to properly analyze pay for performance compensation, and
is consistent with the way our management team provides
incentive for performance.
Change in
Pension
Value and
Nonqualified
Non-Equity
Deferred
Option
Incentive Plan
Compensation
All Other
Salary
Stock Awards
Awards($)
Compensation
Earnings
Compensation
Name and Principal Position
Year
($) (1)
($) (2)
(2)
($) (1) (3)
($) (4)
($) (5)
Total($)
Michael W. Perry,
2006
$
1,000,000
$
—
$
1,810,987
$
791,300
$
30,210
$
335,853
$
3,968,350
Chairman and Chief
2005
1,000,000
—
3,357,792
1,000,000
35,465
72,372
5,465,629
Executive Officer
A. Scott Keys,
2006
480,375
45,143
364,676
487,951
9,509
133,185
1,520,839
Executive Vice President,
2005
400,000
—
394,433
250,000
6,941
146,230
1,197,604
Chief Financial Officer
Richard H. Wohl,
2006
750,000
—
615,303
546,375
26,599
23,405
1,961,682
President, Indymac Bank
2005
646,017
—
1,393,291
607,500
20,071
32,094
2,698,973
S. Blair Abernathy,
2006
627,000
142,856
238,994
1,016,939
20,160
20,092
2,066,041
Executive Vice President,
2005
570,788
56,825
585,883
504,349
13,598
28,283
1,759,726
Chief Investment Officer
James R. Mahoney,
2006
925,000
54,966
216,874
584,375
—
23,876
1,805,091
Executive Vice President,
2005
350,000
—
138,257
441,568
—
18,523
948,348
Chairman of the Financial Freedom
Board of Directors and Special Advisor to the Financial Freedom
Chief Executive Officer
(1)
Salary and Non-Equity Incentive Plan Compensation amounts
deferred at the election of the named executive officer to a
subsequent year are included for the fiscal year in which such
amounts were earned.
(2)
Amounts reflect the amounts recognized for financial statement
reporting purposes in fiscal year 2006 and 2005, computed in
accordance with Statement of Financial Accounting Standards
No. 123(R) Share-Based Payment
(“SFAS No. 123(R)”) without taking into
consideration a forfeiture assumption, as required by the SEC
for disclosure purposes in this Summary Compensation Table. See
Note 24 — Benefit Plans in Indymac’s 2006
Form 10-K
for an explanation of the valuation model assumptions used.
(3)
Amounts include each NEO’s Short- and Long-Term Cash
Incentive expensed in 2006, and the payout of the 2004 Long-Term
Cash Incentive Award Program and are all payable upon the
approval of
the Management Development and Compensation Committee, scheduled
in March 2007. The 2004 Long-Term Cash Incentive Award Program
payout was based upon the achievement of corporate performance
goals over a three-year performance period. Only one award was
made under the program in 2004 prior to its cancellation. The
performance period for this award was 2004 through 2006. The
following table provides a breakout of the amounts reported in
this column:
Short-Term Cash
Long-Term Cash
2004 Long-Term Cash
Incentive
Incentive
Incentive Award
Name
Compensation
Compensation
Program Payout
Total
Michael W. Perry
$
791,300
—
—
$
791,300
A. Scott Keys
240,000
90,047
157,904
487,951
Richard H. Wohl
546,375
—
—
546,375
S. Blair Abernathy
592,631
152,454
271,854
1,016,939
James R. Mahoney
500,000
84,375
—
584,375
(4)
Includes the above-market nonqualified deferred compensation
earnings during 2006, which is the required disclosure in this
Summary Compensation Table. The total nonqualified deferred
compensation earnings are reported in the Deferred Compensation
Table on page 56 of this Proxy Statement. See the detailed
discussion concerning the Deferred Compensation Plan, including
the methodology for setting the annual rate of return, and the
pension plan in the sections captioned “Deferred
Compensation Plan” on page 45 and “Defined
Benefit Pension Plan” on page 43 of this Proxy
Statement. The following table provides a breakout of the
amounts reported in this column:
Above-Market
Nonqualified
Deferred
Pension Plan
Compensation
Actuarial Value
Name
Earnings
Increase
Total
Michael W. Perry
$
13,218
$
16,992
$
30,210
A. Scott Keys
445
9,064
9,509
Richard H. Wohl
4,640
21,959
26,599
S. Blair Abernathy
2,987
17,173
20,160
James R. Mahoney
—
—
—
(5)
Perquisites included in All Other Compensation are valued at the
aggregate incremental cost to Indymac. These perquisites are a
car allowance for Messrs. Perry and Wohl, club dues for all
named executive officers, the executive medical program for
Messrs. Perry and Keys, financial and tax planning for
Messrs. Perry, Abernathy and Mahoney, reimbursement for
payment of legal fees for Mr. Keys, reimbursement for
payment of taxes for Messrs. Perry and Keys, and loan
forgiveness for Mr. Keys.
Indymac reimbursed Mr. Keys for legal fees and expenses
incurred in connection with a matter related to his prior
employment. The matter was concluded in 2006 with no impact on
Mr. Keys.
(2)
Reimbursements of taxes were paid to Mr. Perry in
connection with the payment of his financial and tax planning
expenses and to Mr. Keys in connection with the payment of
his legal fees.
(3)
See the detailed discussion concerning this loan forgiveness in
Related Party Transactions and Business Relationships.
(4)
The Other amounts for all other NEO’s represent golf fees
and other resort fees in connection with the Annual Board and
Executive Retreat.
(5)
Club Dues for Mr. Perry include a one-time initiation
payment of $260,000 for membership in a country club, negotiated
as part of his five-year employment agreement, which was renewed
in 2006.
(6)
Pursuant to Mr. Perry’s employment agreement, Indymac
will pay the expense of his travel by chartered plane for
business purposes. The total cost to Indymac in 2006 was
$235,825 for 10 business trips. Indymac does not own a private
plane.
The following table sets forth information concerning the total
compensation earned by our NEO’s for 2006 and 2005 based on
Indymac’s pay for performance compensation philosophy. The
amounts included in the table below include short- and long-term
incentive compensation earned for performance in 2006, and paid
in 2006 or in the first quarter of 2007, as well as amounts
earned in 2005.
Change in
Pension
Long-Term
Long-Term
Long-Term
Value and
Short-Term
Incentive
Incentive
Incentive
Nonqualified
Cash Incentive
Compensation:
Compensation:
Compensation:
Deferred
All Other
Compensation
Restricted Stock
Cash Awards
Option Awards
Compensation
Compensation
Name and Principal Position
Year
Salary ($)
($)
Awards ($) (1)
($)(1)
($) (1)
Earnings($)
($)
Total($)
Michael W. Perry,
2006
$
1,000,000
$
791,300
$
—
$
—
$
—
$
30,210
$
335,853
(2)
$
2,157,363
Chairman and
2005
1,000,000
1,000,000
—
—
—
35,465
72,372
2,107,837
Chief Executive Officer
A. Scott Keys,
2006
480,375
240,000
—
180,094
120,000
9,509
133,185
1,163,163
Executive Vice President,
2005
400,000
250,000
162,500
—
125,000
6,941
146,230
1,090,671
Chief Financial Officer
Richard H. Wohl,
2006
750,000
546,375
—
—
—
26,599
23,405
1,346,379
President, Indymac Bank
2005
646,017
607,500
—
—
—
20,071
32,094
1,305,682
S. Blair Abernathy,
2006
627,000
592,631
—
304,908
296,316
20,160
20,092
1,861,107
Executive Vice President,
2005
570,788
504,349
268,784
—
252,175
13,598
28,283
1,637,977
Chief Investment Officer
James R. Mahoney,
2006
925,000
500,000
84,375
84,375
250,000
—
23,876
1,867,626
Executive Vice President,
2005
350,000
441,568
197,892
—
220,784
—
18,523
1,228,767
Chairman of the Financial Freedom
Board of Directors and Special Advisor to the Financial Freedom
Chief Executive Officer
(1)
Amounts included in Long-Term Incentive Compensation columns
represent the total value of awards earned in 2006 and granted
in March 2007.
(2)
All Other Compensation amount includes a one-time initiation
payment of $260,000 for membership in a country club, negotiated
as part of Mr. Perry’s five-year employment agreement,
which was renewed in 2006. Not including that amount, his total
compensation for 2006 would have been $1,897,363, a
10 percent decrease from 2005.
The following table sets forth individual grants of equity and
non-equity incentive awards made to each named executive officer
during 2006. The final amount earned by each NEO pursuant to
their respective 2006 short-term cash non-equity incentive plan
award is included in the Summary Compensation Table of this
Proxy Statement and was paid to each NEO in March 2007.
All Other
All Other
Stock
Option
Exercise
Closing
Awards:
Awards:
or Base
Market
Grant Date
Number of
Number of
Price of
Price of
Fair Value
Equity or
Estimated Future Payouts Under
Shares of
Securities
Option
Option
of Stock
Grant
Non-Equity
Date of
Non-Equity Incentive Plan Awards
Stock or
Underlying
Awards
Awards
and Option
Name
Date
Award
Action(1)
Threshold($)
Target($)
Maximum($)
Units(#)
Options(#)
($/Sh)(3)
($/Sh)
Awards($)(4)
Michael W. Perry
3/8/2006
Non-Equity
—
$
—
$
500,000
$
1,000,000
—
—
—
—
—
A. Scott Keys
3/15/2006
Equity
3/8/2006
—
—
—
—
13,691
$
39.075
$
39.450
124,999
3/15/2006
Equity
3/8/2006
—
—
—
4,159
—
—
—
162,513
5/23/2006
Non-Equity
—
—
250,000
275,000
—
—
—
—
—
12/5/2006
(2)
Non-Equity
—
—
90,047
—
—
—
—
—
—
Richard H. Wohl
5/23/2006
Non-Equity
—
—
737,000
911,250
—
—
—
—
—
S. Blair Abernathy
3/15/2006
Equity
3/8/2006
—
—
—
—
27,620
$
39.075
$
39.450
252,171
3/15/2006
Equity
3/8/2006
—
—
—
6,879
—
—
—
268,797
5/23/2006
Non-Equity
—
—
604,000
1,000,000
—
—
—
—
—
12/5/2006
(2)
Non-Equity
—
—
152,454
—
—
—
—
—
—
James R. Mahoney
3/15/2006
Equity
3/8/2006
—
—
—
—
24,182
$
39.075
$
39.450
220,782
3/15/2006
Equity
3/8/2006
—
—
—
5,064
—
—
—
197,876
5/23/2006
Non-Equity
—
—
589,000
1,000,000
—
—
—
—
—
12/5/2006
(2)
Non-Equity
—
—
84,375
—
—
—
—
—
—
(1)
The Committee met on March 8, 2006 to review and approve
the annual equity grants to the named executive officers, as
well as all other employees receiving stock or option awards. At
that meeting, the Committee identified the grant date as
March 15, 2006, which is consistent with the Company’s
prior years annual grants to employees. The entries in this
column without dates reflect awards for which the date of action
was the same as the date of grant.
(2)
Target amounts represent one-half of the Short-Term Cash
Incentive Compensation awards earned by Messrs. Keys,
Abernathy and Mahoney in 2006 and awarded in March 2007. The
payout of this award is included in the Non-Equity Incentive
Award column in the Summary Compensation Table. The second half
of their awards was awarded as restricted stock in March 2007.
See Compensation Discussion and Analysis section of this Proxy
Statement for further explanation of the Short-Term Cash
Incentive Compensation Plan.
(3)
The exercise price of $39.075 represents the average of the high
and low sales prices for the Common Stock on the date of grant,
as published in the Western Edition of the Wall Street
Journal. This method of determining the exercise price is
pursuant to the Company’s shareholder approved incentive
plans and is consistent with the Company’s historical
practice for determining exercise price.
(4)
See Note 24 — Benefit Plans in Indymac’s
2006
Form 10-K
for an explanation of the valuation model assumptions used to
value option and stock awards under SFAS No. 123(R).
During 2006, all of the NEOs were employed pursuant to
agreements with our Company. Each employment agreement sets
forth, among other things, the NEO’s base salary,
short-term cash incentive
opportunities, long-term incentive opportunities and entitlement
to participate in our benefit plans. The employment agreements
have the following expiration dates: Mr. Perry,
Dec. 31, 2011; Mr. Keys, Dec. 31, 2009; Mr. Wohl,
Dec. 31, 2007; Mr. Abernathy, Dec. 31, 2009;
Mr. Mahoney, June 30, 2011.
Pursuant to their respective employment agreements, the
2006 year-end base salaries for the NEOs were:
Mr. Perry, $1,000,000; Mr. Keys, $490,500;
Mr. Wohl, $750,000; Mr. Abernathy, $627,000; and
Mr. Mahoney, $1,500,000.
The amounts included in the Stock Awards and Option Awards
columns represent the dollar amount of compensation cost
recognized in 2006 as required by SFAS No. 123(R).
These amounts include compensation costs recognized in
Indymac’s financial statements with respect to awards
granted in previous fiscal years, as well as in 2006. For
Mr. Perry, $1,810,987 in stock option compensation cost was
recognized; for Mr. Keys, $45,143 in restricted stock
compensation cost and $364,676 in stock option compensation cost
was recognized; for Mr. Wohl, $615,303 in stock option
compensation cost was recognized; for Mr. Abernathy,
$142,856 in restricted stock compensation cost and $238,994 in
stock option compensation cost was recognized; for
Mr. Mahoney, $54,966 in restricted stock compensation cost
and $216,874 in stock option compensation cost was recognized.
The amounts included under the Non-Equity Incentive Compensation
represent three items: 1) 2006 Short-Term Cash Incentive
Compensation; (2) for Messrs. Keys and Abernathy, the
payout of the 2004 Cash Incentive Award, as disclosed in
previous Proxy Statements; and (3) For Messrs. Keys,
Abernathy and Mahoney, the cash component of their Senior
Manager Long-Term Incentive Award earned in 2006.
Pursuant to the employment agreements, each of the NEOs is also
entitled to customary perquisites, consistent with our past
practices, such as memberships in social and professional clubs,
car allowances, executive medical programs and gross up payments
equal to taxes payable on certain perquisites.
The employment agreements provide that each NEO will be entitled
to participate in each employee benefit plan maintained by the
Company, as well as peer group incentive plans, including
participation in the
Short-Term
Cash Incentive Plan, the Senior Manager
Long-Term
Incentive Plan and the Executive Committee Stock Incentive Plan.
General. Equity awards have been granted to
directors and officers of Indymac and Indymac Bank pursuant to
Indymac’s two active stock award plans: the 2002 Incentive
Plan, as Amended and Restated (“2002 Plan”) and the
2000 Stock Incentive Plan, as amended (“2000 Plan”).
Both plans were approved by the stockholders of Indymac.
Additional equity awards were also granted to directors and
executive officers of Indymac under prior stock award plans that
have since been terminated. The termination of the prior plans
did not affect the validity of equity awards granted there
under, some of which are currently outstanding. The 2002 Plan
and the 2000 Plan are administered by the Management Development
and Compensation Committee of the Board of Directors also
referred to as the Compensation Committee.
Restricted stock awarded to our NEOs under the Senior Manager
Long-Term Incentive Plan vests fully on the third anniversary of
the date of grant. Restricted stock awards include the right to
vote and the right to receive dividends, but may not be sold or
transferred during the vesting period. Dividends on restricted
stock will be earned on the same terms and at the same rate as
that paid to the Company’s
common shareholders, but are not
paid until fully vested. Restricted stock was awarded to three
of our NEOs as follows: Mr. Keys, 4,159 shares;
Mr. Abernathy, 6,879 shares; Mr. Mahoney,
5,064 shares.
The MDC granted options to three of our NEOs on March 15,2006, under our Executive Committee Stock Incentive Plan. These
options vest in three annual installments on the first through
third anniversaries of the date of grant. Stock options were
awarded as follows: Mr. Keys, 13,691 options;
Mr. Abernathy, 27,620 options; Mr. Mahoney, 24,182
options.
Messrs. Perry and Wohl did not receive equity awards during
2006, and have not received any equity awards since 2002,
pursuant to Mr. Perry’s previous employment agreement
and Mr. Wohl’s current agreement, both of which
stipulated that they would receive option awards at the time
their agreements were signed.
The following table provides information concerning options and
unvested restricted stock held by each named executive officer
as of Dec. 31, 2006:
Option Awards
Stock Awards
Number of
Number of
Number of
Securities
Securities
Shares or
Market Value of
Underlying
Underlying
Units of
Shares or Units
Unexercised
Unexercised
Option
Option
Stock That
of Stock That
Options
Options
Exercise
Expiration
Have Not
Have Not
Name
(#)Exercisable
(#)Unexercisable
Price($)
Date
Vested(#)
Vested($)
Notes
Michael W. Perry
1,000,000
—
$
25.0200
5/1/2012
—
—
—
1,000,000
—
$
24.4150
2/5/2011
—
—
—
508,086
—
$
11.1875
2/3/2010
—
—
—
A. Scott Keys
—
13,691
$
39.0750
3/15/2016
4,159
$
187,820
(1
)
12,376
24,754
$
35.4050
3/15/2015
—
—
(2
)
9,884
4,943
$
35.3800
3/15/2014
—
—
(3
)
33,335
—
$
19.1600
3/4/2013
—
—
—
80,000
20,000
$
24.6550
3/15/2012
—
—
(4
)
Richard H. Wohl
400,000
100,000
$
18.5500
12/2/2012
—
—
(5
)
495,905
—
$
24.4150
2/5/2011
—
—
—
S. Blair Abernathy
—
27,620
$
39.0750
3/15/2016
12,657
$
571,590
(1
)
8,076
16,154
$
35.4050
3/15/2015
—
—
(2
)
13,417
6,709
$
35.3800
3/15/2014
—
—
(3
)
16,835
—
$
19.1600
3/4/2013
—
—
—
200,000
—
$
24.4150
2/5/2011
—
—
—
James R. Mahoney
—
24,182
$
39.0750
3/15/2016
5,064
$
228,690
(1
)
12,943
25,886
$
35.4050
3/15/2015
—
—
(2
)
16,666
8,334
$
32.5950
11/2/2014
—
—
(6
)
(1)
Represents a stock option award and a restricted stock award
both granted on March 15, 2006. The stock option award
vests in three equal annual installments starting on the first
anniversary of the grant date and will be fully vested on
March 15, 2009. The restricted stock award vests 100% on
the third anniversary of the grant date, March 15, 2009.
Represents an award granted on March 15, 2005, which vests
in three equal annual installments starting on the first
anniversary of the grant date. The award will be fully vested on
March 15, 2008.
(3)
Represents an award granted on March 15, 2004, which vests
in three equal annual installments starting on the first
anniversary of the grant date. The award will be fully vested on
March 15, 2007.
(4)
Represents an award granted on March 15, 2002, which vests
in five equal annual installments starting on the first
anniversary of the grant date. The award will be fully vested on
March 15, 2007.
(5)
Represents an award granted on Dec. 2, 2002, which vests in
five equal annual installments starting on the first anniversary
of the grant date. The award will be fully vested on
Dec. 2, 2007.
(6)
Represents an award granted on Nov. 2, 2004, which vests in
three equal annual installments starting on the first
anniversary of the grant date. The award will be fully vested on
Nov. 2, 2007.
The following table provides information regarding all of the
options that were exercised by the named executive officers
during 2006. No restricted shares held by such officers vested
during 2006.
Option Awards
Stock Awards
Number of
Number of
Shares
Value Realized
Shares
Acquired on
on Exercise
Acquired on
Value Realized
Name
Exercise(#)
($)(1)
Vesting(#)
on Vesting($)
Michael W. Perry
—
—
—
—
A. Scott Keys
—
—
—
—
Richard H. Wohl
4,095
$
63,452
—
—
S. Blair Abernathy
—
—
—
—
James R. Mahoney
—
—
—
—
(1)
Value Realized on Exercise represents the amount equal to the
excess of the closing market price of the shares on the date of
exercise over the exercise price of the options.
The following table provides information regarding Indymac
common stock sold by the named executive officers during 2006:
Equity Compensation Plan Approved
by Security Holders
7,703,205
$
26.3082
5,499,319
Equity Compensation Plans Not
Approved by Security Holders
—
—
—
Total
7,703,205
$
26.3082
5,499,319
(1)
Includes shares of Common Stock available for future grants
under Indymac’s 2000 Plan and 2002 Plan. As of
Dec. 31, 2006, up to 37,752 shares may be issued under
the 2000 Plan, of which 5,781 may be issued as restricted stock
awards, and up to 5,461,567 shares may be issued under the
2002 Plan. Under the 2002 Plan, one share issued as a restricted
stock award reduces the share availability by 3.5 shares.
As such, up to 1,560,447 shares may be issued as restricted
stock awards under the 2002 Plan.
Through Dec. 31, 2002, we provided a defined benefit
pension plan (the “DBP Plan”) to substantially all of
our employees. Employees hired prior to Jan. 1, 2003, with
one or more years of service, are entitled to annual pension
benefits beginning at normal retirement age (65 years of
age) equal to a formula approximating 0.9% of final average
compensation multiplied by credited service (not in excess of
35 years), subject to a vesting requirement of five years
of service. Our policy is to contribute the amount actuarially
determined to be necessary to pay the benefits under the DBP
Plan, and in no event to pay less than the amount necessary to
meet the minimum funding standards of the Employment Retirement
Income Security Act of 1974 (“ERISA”). Employees hired
after Dec. 31, 2002 are not eligible for the DBP Plan.
The table below shows the present value of the current accrued
benefit with respect to each NEO under the DBP Plan:
Payments
Number of Years of
Present Value of
During Last
Credited
Accumulated
Fiscal Year
Name
Plan Name
Service(#)
Benefit($)
($)
Michael W. Perry
DBP Plan
13
$
97,609
$—
Scott Keys
DBP Plan
4
30,074
—
Richard H. Wohl
DBP Plan
12
121,777
—
S. Blair Abernathy
DBP Plan
12
95,507
—
James R. Mahoney
DBP Plan
—
—
—
The compensation used for Pension Plan purposes is the amount
shown in the Salary column of the Summary Compensation Table,
subject to the $220,000 limitation under the Code. Benefits are
100% vested after five years of service. Any NEO would become
fully vested in his or her accrued normal retirement benefit
regardless of the NEO’s length of service if the
participant’s employment is terminated
by Indymac other than for “Cause” within a two-year
period following a “Change in Control” (as both terms
are defined in the Pension Plan). Consistent with the
assumptions used for financial accounting purposes under GAAP,
the Present Value of Accumulated Benefit was determined based on
a 6.0% discount rate, and the 1983 Group Annuity Mortality table
post-retirement.
Currently, the Company is examining alternatives with respect to
the Plan, which may include freezing benefits for all
participants. Indymac has always offered, and continues to
offer, a 401(k) plan with a corporate match of up to
3 percent for all its employees. This 401(k) plan is the
primary retirement benefit offered by the Company to its
employees going forward.
The following tables sets forth certain information concerning
the contributions, earnings, withdrawals/distributions and
balance under Indymac’s Deferred Compensation Plan for the
named executive officers. For further information on this
program, please see the discussion of this benefit on
page 45 of the “Compensation Discussion and
Analysis.”
Executive
Registrant
Aggregate
Aggregate
Contributions
Contributions
Earnings in
Aggregate
Aggregate
Balance at Last
in Last Fiscal Year
in Last Fiscal
Last Fiscal
Distributions
Withdrawals
Fiscal Year End
Name
($)(1)
Year($)
Year($)
($)(2)
($)
($)(3)(4)
Michael W. Perry
$
—
$
—
$
400,427
$
740,961
$
—
$
6,650,867
A. Scott Keys
12,500
—
13,482
—
—
233,898
Richard H. Wohl
—
—
140,553
—
—
2,345,516
S. Blair Abernathy
422,736
—
90,478
210,507
—
1,689,434
James R. Mahoney
—
—
—
—
—
—
(1)
Amounts reported are included in the Non-Equity Incentive Plan
Compensation column of the Summary Compensation Table for 2006
for Mr. Keys and are included in the Salary and Non-Equity
Incentive Plan Compensation columns of the Summary Compensation
Table for 2006 for Mr. Abernathy ($156,750 in the Salary
column and $265,986 in the Non-Equity Incentive Plan
Compensation column).
(2)
Amounts distributed in 2006 are pursuant to a previously elected
and planned distribution date.
(3)
Amounts reported were included as compensation to
Messrs. Perry and Abernathy in the Summary Compensation
Table for previous years.
(4)
Aggregate Balance equals each of officer’s vested balance
except for Messrs. Wohl and Keys, who had vested balances
at Dec. 31, 2006 of $1,956,072 and $206,018, respectively.
As noted in the “Compensation Discussion and Analysis”
section of this Proxy Statement, the employment agreements of
our NEOs have severance provisions for certain terminations or a
termination in conjunction with a
change-in-control.
Severance
Payments for CEO
Mr. Perry’s employment agreement specifies the
payments and benefits to which Mr. Perry is entitled upon
his termination of employment for specified reasons, including
death, disability, termination by
Indymac with or without cause, a
change-in-control,
and resignation by Mr. Perry with or without good reason
(as such terms are defined in the employment agreement).
Under the employment agreement, Mr. Perry would be entitled
to a severance payment equal to two and one-half (2.5) times the
sum of his average annual base salary in effect for the two
years immediately preceding the termination and an amount equal
to his prior year base level short-term annual incentive
compensation (as defined in his employment agreement) if he is
terminated other than for Cause or if he resigns for Good
Reason. In either such event, Mr. Perry’s unvested
equity grants would immediately vest, and any such vested stock
options would become exercisable for a period of twelve months
from the termination date. He would also be entitled to a
prorated portion of his short- and long-term annual incentive
compensation based on Indymac’s actual performance up to
the date of termination in the year in which the termination
takes place, and to lifetime medical coverage for himself, his
spouse, and his eligible dependents.
If there is a Change in Control and Mr. Perry is terminated
other than for Cause or Disability, or resigns for Good Reason
within two years thereafter, or if he is terminated other than
for Cause in anticipation of a Change in Control at the
initiation of the acquiring party, he would be entitled to a
payment equal to three (3) times the sum of his average
annual base salary in effect for the two years immediately
preceding the termination and an amount equal to his prior year
base level short-term annual incentive compensation. In
addition, all of Mr. Perry’s unvested equity grants
would immediately vest, and any such vested stock options would
become exercisable for a period of twelve months from the
termination date. He would also be entitled to a prorated
portion of his short- and long-term annual incentive
compensation and to lifetime medical coverage for himself, his
spouse, and his eligible dependents. Upon a Change in Control,
Mr. Perry would also be entitled to receive an additional
payment to compensate for any increased excise, income or
payroll taxes payable by him.
The employment agreement also provides that Mr. Perry will
not solicit any of Indymac’s employees, customers or
business, for a period of one year from the date his employment
terminates if it terminates before the agreement expires.
The following table sets forth the amount of severance cash
compensation and the estimated cost of the lifetime medical
coverage to Mr. Perry in the event of his resignation,
disability, death (which includes a term life insurance benefit
of four times his annual base salary), termination without
Cause, termination for Cause, termination for Good Reason and a
Change in Control, assuming termination of employment occurred
on Dec. 31, 2006 and, for a Change in Control, that the
Change in Control occurred within the two years prior to
Dec. 31, 2006. As of Dec. 31, 2006, Mr. Perry
does not have any unvested equity grants that would be
accelerated. In the event that any of the payments are subject
to federal excise taxes under the “golden parachute”
provisions of the tax code, Indymac is required to pay
Mr. Perry a
gross-up for
any such excise taxes plus any additional excise, income or
payroll taxes owed on the
gross-up
payment. Based on the above circumstances under a Change in
Control termination, Mr. Perry would not be liable for any
additional excise taxes.
In consideration of an agreement from each of
Messrs. Abernathy, Keys and Mahoney not to solicit
customers, business or employees of Indymac for a period of
eighteen months after termination of employment, and for a
period of one year after termination of employment for
Mr. Wohl, Indymac Bank has agreed to continue to employ
Messrs. Wohl, Abernathy, Keys and Mahoney, to provide the
compensation and benefits described in their respective
employment agreements, and to provide certain severance payments
upon termination of employment for reasons other than for Cause
or Resignation for Messrs. Abernathy, Keys and Mahoney and
for reasons other than for Cause, Resignation or Poor
Performance for Mr. Wohl.
The cash severance amounts that each of Messrs. Wohl,
Abernathy, Keys and Mahoney would receive upon termination,
assuming termination of employment occurred on Dec. 31,2006, and for a Change in Control, assuming that the Change in
Control occurred within the two years prior to Dec. 31,2006, are set forth below (including the fair value of
accelerated stock awards valued as of Dec. 31, 2006). In
the event that any of the severance payments are subject to
federal excise taxes under the “golden parachute”
provisions of the tax code, Indymac is required to pay the
executives a
gross-up for
any such excise taxes plus any excise, income or payroll taxes
owed on the payment of the
gross-up for
the excise taxes. Where applicable, these amounts are reflected
in the table under the Change in Control column.
Poor
No Cause
Cause
Performance
Good Reason
Change in
Officer
Resignation
Disability
Death
Termination
Termination
Termination
Termination
Control
Richard H. Wohl(1)
—
$
3,131,538
$
6,506,538
$
5,349,288
—
N/A
$
5,349,288
$
5,349,288
S. Blair Abernathy(2)
—
1,988,465
2,273,427
1,171,267
—
$
627,000
N/A
4,855,863
A. Scott Keys(3)
—
1,794,861
2,011,573
1,385,027
—
490,500
N/A
3,688,456
James R. Mahoney(4)
—
4,195,349
3,785,540
2,559,622
—
1,500,000
N/A
5,631,915
(1)
Mr. Wohl’s cash severance payment other than for Cause
would equal the sum of (a) his annual base salary through
the last day of employment, (b) a single cash payment equal
to two times his then current annual base salary rate and
targeted annual incentive compensation rate, plus a pro rata
bonus for the year in which he is terminated, the amount of
which will be determined in the sole discretion of Indymac
Bank’s Board of Directors, and (c) the additional
medical benefits described in his employment agreement for two
years following the date of termination. In addition, unvested
equity grants that would otherwise vest under normal conditions
within one year of termination would accelerate and
Mr. Wohl would have three months from termination to
exercise any such vested stock options. The amount indicated in
the event of death includes a term life insurance benefit equal
to three times his then current annual base salary rate. The
payout for a termination for Good Reason is the same as a payout
for a termination other than for Cause except that all unvested
equity grants would accelerate in a Good Reason termination. The
amount indicated in the event of a Change in Control is for a
termination within one year following a Change in Control, and
the payout is the same as for a termination for Good Reason.
(2)
Mr. Abernathy’s cash severance payment in the event of
termination other than for Cause would equal the sum of
(a) his annual base salary through the last day of
employment, (b) his short-term cash incentive award for the
period in which such termination occurs, prorated to the
termination date, (c) a cash payment equal to one and
one-half (1.5) times his current annual base salary rate,
provided that if the termination occurs within two years of a
Change in Control, as declared by the Board of Directors, and
during the term of the officer’s employment agreement, then
the cash payment will be equal
to two times the officer’s total cash compensation (base
salary plus short-term annual incentive compensation) for the
fiscal year preceding the date of termination, and (d) the
additional medical benefits described in his employment
agreement for one year following the date of termination. In
addition, unvested equity grants that would otherwise vest under
normal conditions within one year of termination would
accelerate, except that if the termination was pursuant to a
Change in Control, all unvested equity grants would be
accelerated, and Mr. Abernathy would have three months from
termination to exercise any such vested stock options.
Mr. Abernathy’s severance payment in the event of
termination for Poor Performance would equal his current annual
base salary rate.
(3)
Mr. Keys’ cash severance payment in the event of
termination other than for Cause would equal the sum of
(a) his annual base salary through the last day of
employment, (b) his short-term cash incentive award for the
period in which such termination occurs, prorated to the
termination date, (c) a cash payment equal to one and
one-half (1.5) times his current annual base salary rate,
provided that if the termination occurs within two years of a
Change in Control, as declared by the Board of Directors, and
during the term of the officer’s employment agreement, then
the cash payment will be equal to two times the officer’s
total cash compensation (base salary plus short-term annual
incentive compensation) for the fiscal year preceding the date
of termination, and (d) the additional medical benefits
described in his employment agreement for one year following the
date of termination. In addition, unvested equity grants that
would otherwise vest under normal conditions within one year of
termination would accelerate, except that if the termination was
pursuant to a Change in Control, all unvested equity grants
would be accelerated, and Mr. Keys would have three months
from termination to exercise any such vested stock options.
Mr. Keys’ severance payment in the event of
termination for Poor Performance would equal his current annual
base salary rate.
(4)
Mr. Mahoney’s cash severance payment in the event of
termination other than for Cause would equal the sum of
(a) his annual base salary through the last day of
employment, (b) a cash payment equal to one and one-half
(1.5) times his current annual base salary rate, provided that
if the termination occurs within two years of a Change in
Control, as declared by the Board of Directors, and during the
term of the officer’s employment agreement, then the cash
payment will be equal to two times the officer’s current
annual base salary rate, and (c) the additional medical
benefits described in his employment agreement for one year
following the date of termination. In addition, unvested equity
grants that would otherwise vest under normal conditions within
one year of termination would accelerate, except that if the
termination was pursuant to a Change in Control, all unvested
equity grants would be accelerated, and Mr. Mahoney would
have three months from termination to exercise any such vested
stock options. Mr. Mahoney’s severance payment in the
event of termination for Poor Performance would equal his
current annual base salary rate.
The Stock Performance Graph, the Compensation Committee Report
on Executive Compensation and the Audit Committee Report
(including the reference to the independence and financial
expertise of the Audit Committee members), each contained in
this Proxy Statement, are not deemed filed with the Securities
and Exchange Commission and shall not be deemed incorporated by
reference into any prior or future filings made by Indymac under
the Securities and Exchange Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the
extent that Indymac specifically incorporates such information
by reference.
The Board of Directors knows of no matters to be brought before
the Annual Meeting other than those listed in the attached
Notice of Annual Meeting. If any other matters should properly
come before the Annual Meeting, the person named in the enclosed
proxy will vote all proxies given to him in accordance with his
best judgment on such matters.
The 2006 Annual Report to Stockholders containing the
consolidated financial statements of Indymac for the year ended
Dec. 31, 2006, including the Annual Report on
Form 10-K
for the year ended Dec. 31, 2006, accompanies this Proxy
Statement.
Stockholders may obtain without charge an additional copy of
Indymac’s Annual Report on
Form 10-K
for the fiscal year ended Dec. 31, 2006 as filed with the
Securities and Exchange Commission, without the accompanying
exhibits, by writing to Investor Relations, IndyMac Bancorp,
Inc., 888 East Walnut Street, P.O. Box 7211, Pasadena,
California91109-7137.
A list of exhibits is included in the
Form 10-K,
and exhibits are available from Indymac upon payment to Indymac
of the cost of furnishing them.
Proposals of stockholders intended to be included in the proxy
statement and presented at the 2008 Annual Meeting pursuant to
Rule 14a-8
under the Securities Exchange Act of 1934, as amended, must be
received by the Corporate Secretary of Indymac, 888 East Walnut
Street, Pasadena, California91101, not later than Nov. 15,2007 to be considered for inclusion in Indymac’s proxy
materials for that meeting.
Stockholders intending to present business at Indymac’s
2008 Annual Meeting other than pursuant to
Rule 14a-8
must comply with the requirements set forth in Indymac’s
Bylaws. To bring business before an annual meeting,
Indymac’s Bylaws require, among other things, that the
stockholder submit written notice thereof complying with the
Bylaws to the Corporate Secretary of Indymac not less than
90 days nor more than 120 days prior to the
anniversary of the preceding year’s annual meeting.
Therefore, Indymac must receive notice of a stockholder proposal
submitted other than pursuant to
Rule 14a-8
no sooner than Dec. 26, 2007 and no later than
Jan. 25, 2008. If the notice is received before
Dec. 27, 2007 or after Jan. 24, 2008, it will be
considered untimely and the stockholder will not be entitled to
present the proposal at the 2008 Annual Meeting.
CHAIRMAN
OF THE BOARD AND CHIEF EXECUTIVE OFFICER COVERING 2007
In September 2006, the Company’s Chief Executive Officer
and Chairman, Michael W. Perry, signed a new contract with
IndyMac Bancorp, Inc. that is structured largely as a
pay-for-performance
arrangement where incentive compensation is targeted as a
percentage of net income and is earned based on Indymac
achieving certain EPS growth targets. Mr. Perry’s base
salary will be $1 million.
The employment agreement provides that Mr. Perry will
receive his annual bonus for 2006 in accordance with the terms
of his prior employment agreement, dated Feb. 1, 2002.
Mr. Perry’s targeted annual incentive compensation is
set at 50% of his base salary, with his maximum annual incentive
compensation set at 100% of his base salary, depending upon
attainment of financial and strategic objectives that are
established by the Committee after consultation with
Mr. Perry.
Commencing with the 2007 fiscal year, Mr. Perry will
receive the incentive compensation described below.
Short-Term Annual Incentive Compensation. Each
year during the term of the employment agreement, Mr. Perry
will receive a short term annual incentive compensation award
(“STAIC”) based upon Indymac’s one-year growth in
earnings per share and prior year net income. The “Base
Level” STAIC is 1% of prior year’s net income, which
will be paid out when Indymac EPS growth is 15%. The payout
amount of the STAIC ranges from 0% of the Base Level for EPS
growth less than 5% to 125% of the Base Level for EPS growth
greater than or equal to 17%. The Committee may reduce the STAIC
award by up to 20% based on mutually agreed upon qualitative
factors including, but not limited to, succession planning,
leadership, quality of earnings, quality and effectiveness of
enterprise risk management and quality of relationship and
compliance with regulatory agencies.
In the event that Indymac’s net income for a prior year was
negative or, in the sole discretion of the Committee, reflected
a substantial decline from the previous year, the Committee may
base the STAIC upon the net income of the then-current fiscal
year, rather than net income of the prior year. In such an
event, the STAIC may be 0.75% of Indymac’s net income for
the then-current year.
Special Reduction in STAIC. The annual STAIC
payable to Mr. Perry will be reduced by ten percent (10%)
for the stated purpose of funding a scholarship program for
children of employees of Indymac.
Discretionary Annual Incentive Award. In the
event the STAIC award is less than $1,000,000 in a given year,
the Committee may, in its discretion, grant Mr. Perry a
special bonus in lieu of the STAIC (which bonus in the aggregate
will not exceed $1,000,000) conditioned upon the
Committee’s determination that Indymac’s performance
was substantially better than that of key industry peers.
Long Term Annual Incentive Compensation. Each
year during the term of the employment agreement, Mr. Perry
will receive an annual Long Term Annual Incentive Compensation
(“LTAIC”) award consisting of the following:
(1) An amount equal to twenty-five percent (25%) of the sum
of Mr. Perry’s base salary and prior year’s
STAIC, which will be awarded, in the discretion of the
Committee, as either (1) restricted stock having a vesting
schedule of not greater than three years, or (2) a deferred
cash amount credited to Mr. Perry’s account under the
terms of a deferred compensation plan has been adopted by
Indymac, which will include an option to invest in Indymac
stock; and
(2) An amount equal to fifty percent (50%) of
Mr. Perry’s prior year’s STAIC, which will be
awarded in the form of stock options that will vest ratably on
each of the three anniversaries of the grant date.
Mr. Perry’s LTAIC award will have no forfeiture or
clawback provisions based on his post-employment activities. The
employment agreement provides that Mr. Perry will be
eligible to receive an LTAIC award in 2007 (for 2006) under
the terms of the employment agreement as if such programs were
already in place, provided that the portion of
Mr. Perry’s LTAIC award described in (1) above
will be paid in the form of stock options that will vest ratably
on each of the first three anniversaries of the grant of such
stock options.
Benefits. Mr. Perry’s employment
agreement provides that he will be entitled to medical, dental
and vision insurance coverage for each of his and his
spouse’s lifetime and for any eligible dependents until the
maximum age for a dependent allowable by Indymac’s health
plan (“Lifetime Medical Coverage”). The employment
agreement also provides that Mr. Perry may participate in
any stock purchase plan, pension plan, deferred compensation
plan, life and medical insurance policy, or other plans or
benefits that are generally provided for the senior officers of
Indymac. Mr. Perry is also entitled to receive certain
perquisites, such as club memberships, car allowance, financial
planning services, life insurance and long-term disability
coverage.
Termination of Employment. The employment
agreement also specifies the payments and benefits to which
Mr. Perry is entitled upon his termination of employment
for specified reasons, including death, disability, termination
by Indymac with or without cause and resignation by
Mr. Perry with or without good reason (as such terms are
defined in the employment agreement). Details regarding
Mr. Perry’s termination of employment provisions can
be found on page 56 under “Potential Payments upon
Termination or
Change-in-Control”.
Gross-up
Payment. In the event that any of the severance
payments described are subject to federal excise taxes under the
“golden parachute” provisions of the tax code, the
payments will include
gross-up for
any such excise taxes plus any excise, income or payroll taxes
owed on the payment of the
gross-up for
the excise taxes.
Restrictive Covenants. Mr. Perry’s
employment agreement requires him to refrain from soliciting
customers, business or employees of Indymac and its affiliates
for one-year period after termination of employment, and to
refrain from disclosing any confidential information or trade
secrets of Indymac. Although a non-competition provision could
not be included in the employment agreement under applicable
law, Mr. Perry recognizes that he should and does have a
moral and ethical obligation to Indymac, its shareholders and
its employees not to compete with Indymac within one year after
any resignation from his position.
• Follow the simple instructions that
appear on your computer screen.
OR
• Have your proxy card
ready.
• Follow the simple
recorded instructions.
OR
• Detach your proxy card.
• Return your proxy card in the
postage-paid envelope provided.
Your telephone or Internet vote authorizes the named proxy to vote your shares in the same
manner as if you marked, signed and returned the proxy card. If you have submitted your proxy by
telephone or Internet there is no need for you to mail back your proxy card.
DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY TELEPHONE OR INTERNET
Please sign, date and
return this proxy card in
the enclosed envelope.
x
Votes must be indicated (x)
in Black or Blue Ink.
1.
Election of Directors.
FOR
ALL
o
WITHHOLD
FOR ALL
o
*EXCEPTIONS
o
Nominees:
01 — Michael W. Perry, 02 — Louis E. Caldera, 03 — Lyle E. Gramley, 04 — Hugh M.
Grant, 05 — Patrick C. Haden, 06 — Terrance G. Hodel, 07 — Robert L. Hunt II, 08 — Lydia H.
Kennard, 09 — Senator John Seymour (ret.), 10 — Bruce G. Willison
(INSTRUCTIONS:
To withhold authority to vote for any individual nominee, mark the “Exceptions” box
and write that nominee’s name in the space provided below).
*Exceptions
Consent to future electronic delivery of Annual
Report/Proxy Statement (see explanation on
page (ii) of the Proxy Statement).
o
To change your
address, please
mark this box and
correct at left.
o
To include any
comments, please
mark this box, and use
reverse side.
o
I PLAN TO ATTEND
THE MEETING.
o
2.
Ratification of the appointment of
Ernst & Young LLP as Indymac’s
independent auditors for the year
ending December 31, 2007.
FOR
o
AGAINST
o
ABSTAIN
o
UNMARKED PROXIES WILL BE VOTED IN FAVOR OF EACH OF THESE MATTERS unless specified to the
contrary.
SCAN LINE
Please date and sign exactly as your name appears on this card. Joint owners should each sign.
If the signer is a corporation, please sign full corporate name by a duly authorized officer.
Executors, trustees etc. should give full title as such.
The undersigned hereby appoints Michael W. Perry, with full power of substitution, as the attorney
and proxy of the undersigned, to appear and to vote all of the shares of stock of IndyMac Bancorp,
Inc. (“Indymac”) which the undersigned would be entitled to vote if personally present at the
Annual Meeting of Stockholders of Indymac to be held at Indymac’s offices located at 3465 East
Foothill Boulevard, Pasadena, California on April 26, 2007 at 9:00 a.m. PDT and any adjournments or
postponements thereof.
Receipt of copies of the Annual Report to Stockholders, the Notice of the Annual Meeting of
Stockholders and the Proxy Statement for the Annual Meeting is hereby acknowledged.
