-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, VxtKgWuhIf2qVzV1bOdGfkcFDNcswXp5CUcSnhCOqv5I5uDQuqSge/H4SXFI0zLg rvKfWVkNHhwPGxUG8XSubg== 0000912057-95-005966.txt : 19950807 0000912057-95-005966.hdr.sgml : 19950807 ACCESSION NUMBER: 0000912057-95-005966 CONFORMED SUBMISSION TYPE: DEFS14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950831 FILED AS OF DATE: 19950804 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HAWTHORNE FINANCIAL CORP CENTRAL INDEX KEY: 0000046267 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 952085671 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEFS14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-01100 FILM NUMBER: 95559143 BUSINESS ADDRESS: STREET 1: 2381 ROSECRANS AVE CITY: EL SEGUNDO STATE: CA ZIP: 90245 BUSINESS PHONE: 3107255000 MAIL ADDRESS: STREET 1: 2381 ROSECRANS AVE CITY: EL SEGUNDO STATE: CA ZIP: 90245 DEFS14A 1 DEFS14A SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant / / Filed by a Party other than the Registrant / / Check the appropriate box: / / Preliminary Proxy Statement / / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) /X/ Definitive Proxy Statement / / Definitive Additional Materials / / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): / / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A. / / $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). / / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. 1) Title of each class of securities to which transaction applies: ------------------------------------------------------------------------ 2) Aggregate number of securities to which transaction applies: ------------------------------------------------------------------------ 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): ------------------------------------------------------------------------ 4) Proposed maximum aggregate value of transaction: ------------------------------------------------------------------------ 5) Total fee paid: ------------------------------------------------------------------------ /X/ Fee paid previously with preliminary materials. / / Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: ------------------------------------------------------------------------ 2) Form, Schedule or Registration Statement No.: ------------------------------------------------------------------------ 3) Filing Party: ------------------------------------------------------------------------ 4) Date Filed: ------------------------------------------------------------------------ HAWTHORNE FINANCIAL CORPORATION 2381 Rosecrans Avenue El Segundo, CA 90245 ------------------- Dear Stockholder: I am writing to invite you to attend a Special Meeting of Stockholders of HAWTHORNE FINANCIAL CORPORATION (the "Company") that will be convened at 10:00 a.m. on Thursday, August 31, 1995 at the Radisson Plaza Hotel at 1400 Parkview Avenue, Manhattan Beach, California. The purpose of the Special Meeting is to renew consideration of the proposed amendments to Hawthorne Financial Corporation's Certificate of Incorporation presented at the Annual Meeting this year that (1) would increase to 20,000,000 the number of shares of Common Stock we are authorized to issue and (2) would authorize the issuance of up to 10,000,000 shares of Preferred Stock. The proposed amendments received the favorable vote of over 64% of the shares voting, representing 49.1% of the Company's total shares outstanding. Under Delaware law, however, the favorable vote of a majority of the outstanding shares is required for approval of the amendment. Since the date of the Annual Meeting, the Company's principal subsidiary, Hawthorne Savings, F.S.B., has been ordered by the Office of Thrift Supervision (the "OTS") to raise $15 to $20 million of new capital by not later than December 15, 1995. Your Board of Directors believes that authorization of additional Common Stock and of Preferred Stock is essential to assure that the Company is able to issue the amount and types of securities that investors may require to comply with the OTS order. Failure to comply with the OTS order could result in a forced liquidation of Hawthorne Savings at a distressed price under regulatory compulsion or the appointment of a conservator or receiver for Hawthorne Savings, in which case it is likely that your investment in Hawthorne Financial Corporation would become worthless. Important information concerning your Company and the proposals to be voted upon at the Special Meeting is contained in the accompanying proxy statement, which you should read carefully before deciding how to vote. In addition, I and the other officers of your Company welcome the opportunity to answer your questions in person or at the telephone numbers shown below. YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. WE HOPE YOU WILL ATTEND THE SPECIAL MEETING IN PERSON IF IT IS CONVENIENT FOR YOU TO DO SO. IF YOU ARE UNABLE TO ATTEND, PLEASE VOTE BY SIGNING, DATING AND RETURNING THE ENCLOSED PROXY CARD TODAY. Sincerely, Scott A. Braly President and Chief Executive Officer IMPORTANT: PLEASE SEND YOUR PROXY CARD TODAY. FAILURE TO VOTE WILL HAVE THE EFFECT OF A VOTE AGAINST THE PROPOSALS THAT WILL BE PRESENTED AT THE SPECIAL MEETING AND THAT THE BOARD OF DIRECTORS BELIEVES ARE ESSENTIAL FOR THE FUTURE SUCCESS OF YOUR COMPANY. COMPANY OFFICERS AND REPRESENTATIVES ARE AVAILABLE TO ANSWER YOUR QUESTIONS AT THE FOLLOWING TELEPHONE NUMBERS: D.F. KING & COMPANY AT (800) 290-6432 OR NORMAN MORALES OF HAWTHORNE FINANCIAL CORPORATION AT (310) 725-5631. HAWTHORNE FINANCIAL CORPORATION 2381 Rosecrans Avenue El Segundo, CA 90245 ------------------- NOTICE OF SPECIAL MEETING OF STOCKHOLDERS To be Held on August 31, 1995 ------------------- NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of HAWTHORNE FINANCIAL CORPORATION (the "Company") will be convened at 10:00 a.m. on Thursday, August 31, 1995 at the Radisson Plaza Hotel at 1400 Parkview Avenue, Manhattan Beach, California, to consider and vote upon the following matters: 1. A proposed amendment to Article FOURTH of the Company's certificate of incorporation that would increase the number of shares of Common Stock that the Company is authorized to issue to 20,000,000 shares and change the designated par value of the Company's common stock to $.01 per share. 2. A proposed amendment (together with the amendment described in Item 1 above, the "Amendments") to Article FOURTH of the Company's certificate of incorporation that would authorize the issuance of up to 10,000,000 shares of Preferred Stock, par value of $.01 per share, in one or more series from time to time as determined by the Board of Directors, and authorize the Board of Directors to determine the designations, rights, preferences, privileges and other terms of any series of such stock that may be issued. 3. Such other matters, if any, as may properly come before the Special Meeting or any adjournments or postponements thereof and may properly be voted upon. The Board of Directors of the Company has selected July 20, 1995 as the record date for the Special Meeting. Only those stockholders of the Company of record at the close of business on that date will be entitled to notice of and to vote at the Special Meeting or any postponements or adjournments thereof. By Order of the Board of Directors Norman A. Morales Executive Vice President Assistant Secretary El Segundo, California July 25, 1995 HAWTHORNE FINANCIAL CORPORATION 2381 Rosecrans Avenue El Segundo, CA 90245 ------------------------- PROXY STATEMENT ------------------------- This Proxy Statement is being sent to you in connection with the solicitation of proxies by the Board of Directors of Hawthorne Financial Corporation (the "Company") to be voted at the Special Meeting of Stockholders of the Company to be held on August 31, 1995, and at any postponement or adjournment thereof. The approximate date of mailing of this Proxy Statement is July 25, 1995. PROPOSED AMENDMENTS TO CERTIFICATE OF INCORPORATION Stockholders will be asked at the Special Meeting to approve amendments to Article FOURTH of the Company's Certificate of Incorporation (the "Amendments") that would (i) increase to 20 million the number of shares of Common Stock which the Company is authorized to issue without further approval of the stockholders of the Company from the 5 million shares currently so authorized and change the designated par value of the Common Stock to $.01 per share from the current par value of $1.00 per share, and (ii) authorize the issuance by the Company of up to 10 million shares of Preferred Stock, par value $.01 per share, in one or more series, from time to time and having such rights, preferences, privileges, designations and other terms, as the Board of Directors may determine without further approval of the stockholders of the Company. The Amendments were initially proposed at the 1995 Annual Meeting, together with a proposal to effect a one-for-three reverse split of the Company's outstanding shares of Common Stock (the "Reverse Stock Split"), for the purposes of increasing the number and kind of shares of stock available for raising capital and for the purpose of increasing the per share price of the Company's outstanding Common Stock. The Reverse Stock Split was approved by the stockholders at the Annual Meeting and will be completed by the Board of Directors. The Amendments received the favorable vote of over 64% of those shares voted on the proposal at the Annual Meeting, representing 49.1% of the outstanding shares. Under Delaware law, however, the affirmative vote of over 50% of the outstanding shares of Common Stock was required for approval of the Amendments. Because approval of the Amendments is necessary to maximize the ability of the Company, market conditions permitting, to increase the regulatory capital of its operating subsidiary, Hawthorne Savings, F.S.B. ("Hawthorne Savings") in compliance with the Directive (as defined below), and because of the closeness of the vote at the Annual Meeting, the Amendments are again being submitted to the Company's stockholders for their approval. The Board of Directors believe that, absent approval of the Amendments, the Company faces a significant risk of a forced liquidation under regulatory compulsion or the appointment of a conservator or a receiver for Hawthorne Savings. If such event were to occur, the Company's stockholders could lose their entire investment. REASONS FOR PROPOSAL; REGULATORY ACTION The Company's only significant asset is its investment in Hawthorne Savings. Hawthorne Savings has been under intense regulatory scrutiny by the Office of Thrift Supervision ("OTS"), its primary regulator, and by the Federal Deposit Insurance Corporation, since 1991 because of its very large amounts of foreclosed properties, delinquent loans and other problem assets and the losses and reserves for possible loss associated therewith. As a result of these losses, which have aggregated over $64 million since January 1, 1992, the regulatory capital of Hawthorne Savings has been severely reduced and regulatory restrictions and requirements have been placed on its operations pursuant to the "prompt corrective action" regulations of the OTS. As further described below, these have included the requirement that Hawthorne Savings increase its regulatory capital to acceptable levels within time frames set by the OTS. In October 1994, the OTS and Hawthorne Savings entered into a Supervisory Agreement (the "Agreement"), which superseded all previous directives of and agreements with the OTS. The Agreement required Hawthorne Savings to (i) achieve minimum core and risk-based capital ratios of 6% and 11%, respectively, by June 30, 1995, (ii) operate for the term of the Agreement consistent with an annual business plan approved by the OTS, (iii) retain qualified compliance and Community Reinvestment Act ("CRA") officers and staff, (iv) fully comply with the organizational provisions of its assets review policy, and (v) maintain effective and comprehensive compliance and CRA programs to ensure compliance with all applicable consumer and compliance laws and regulations. The required capital was not raised by the June 30, 1995 deadline specified in the Agreement. As discussed below, the Agreement has been superseded and Hawthorne Savings has been given a limited amount of additional time to raise new capital. As a result of further losses incurred in the first quarter of 1995, the regulatory capital of Hawthorne Savings has been reduced below permitted levels. Hawthorne Savings was notified on May 8, 1995 by the OTS that it had been classified as an "undercapitalized" institution under the OTS's prompt corrective action regulations, and on June 23, 1995, Hawthorne Savings submitted a revised plan for raising the required capital (the "Revised Plan") to the OTS. On June 30, 1995 the OTS issued a prompt corrective action directive (the "Directive") to Hawthorne Savings which superseded the Agreement. Compliance with the Directive is a condition to the OTS's approval of the Revised Plan. Hawthorne Savings and its Board of Directors have stipulated and consented to the issuance of the Directive. The Directive requires Hawthorne Savings, among other things, (i) to comply with the terms of its Revised Plan, (ii) to achieve a capital infusion of between $15 and $20 million by December 15, 1995 (the "Recapitalization"), (iii) to retain an investment banking firm to assist in the Recapitalization, (iv) to comply with all of the mandatory prompt corrective action provisions 2 automatically applicable to Hawthorne Savings based upon its prompt corrective action capital category, and (v) to maintain its total assets at a level not to exceed its total assets as of year-end 1994. EXPLANATION OF PROPOSED AMENDMENTS The proposed Amendments to Article FOURTH of the Company's Certificate of Incorporation have been approved by the Board of Directors and is being recommended by the Board for approval by the stockholders in order to assist the Company in raising additional capital for the Company's business. As described above, Hawthorne Savings is subject to a Directive issued by its principal regulator, the OTS, pursuant to which Hawthorne Savings is required to, among other things, increase the level of its regulatory capital by not later than December 15, 1995. The Board of Directors believes that the most likely means of enabling Hawthorne Savings to comply with the Directive will be a public or private offering of equity securities, including debt securities convertible into equity securities, of the Company, with all or a portion of the proceeds of such issuances being made available to Hawthorne Savings in the form of contributions to its equity capital or in other forms permitted pursuant to applicable OTS regulations. It is expected, however, that any such issuances of equity securities would result in substantial dilution of the investments of existing stockholders whether or not the proposed Amendments are approved. The requirement in the Directive that the regulatory capital of Hawthorne Savings be increased is the result of the adverse results of operations of Hawthorne Savings and its high levels of nonperforming assets. Based on informal discussions that the Company has had with various investment banking firms, management and the Board of Directors believed that the Company will not be in an optimal position to access the capital markets until further improvements have been made in reducing problem assets, enhanced operating margins are achieved, and such improvements have been reflected in the Company's results of operations. Based on these considerations, management urged the OTS to give the Company until June 30, 1996 to complete the Recapitalization. The OTS, however, declined to do so. Accordingly, the Board of Directors does not have a current specific plan for the issuance of additional securities, whether Common or Preferred Stock or debt securities. Management and the Board are actively exploring the possibility of conducting the Recapitalization in the form of a "rights offering" of Common Stock to current stockholders and to other investors, either alone or in combination with one or more other transactions. No assurance can be given, however, that a rights offering will be determined to be feasible within the financial, time and other constraints with which the Company is faced. Of the 5 million shares of Common Stock currently authorized by the Company's certificate of incorporation, a total of 2,599,275 shares were issued and outstanding prior to the Company's 1995 Annual Meeting and an additional 455,000 shares were reserved for possible future issuance pursuant to the Company's stock option plan. After completion of the Reverse Stock Split, as approved by the Company's stockholders at the 1995 Annual Meeting, the Company will have a total of approximately 866,425 shares of Common Stock outstanding. 3 The Board of Directors believes that the proposed increase in the authorized number of shares of Common Stock that the Company may issue is advisable in order to assure that the Company has sufficient flexibility to issue additional Common Stock as market opportunities arise in order to raise the capital required to comply with the Directive. The shares of Common Stock proposed to be authorized pursuant to the Amendments will be available for issuance in one or more public offerings or private placements of such stock, or of securities convertible into such stock, by action of the Board of Directors from time to time without further approval of the stockholders, for the purpose of raising additional capital or for any other corporate purpose, including acquisitions, stock dividends and stock-based employee compensation arrangements. The Company has no current plans to use such authorized shares for any purpose other than meeting the requirements of the Directive. The Company's Certificate of Incorporation does not currently authorize the issuance of any shares of Preferred Stock. The proposed Amendments would authorize the Board of Directors, without any further stockholder approval, to approve the issuance of one or more series of Preferred Stock and to establish the terms thereof, including, without limitation, any preferences upon liquidation, preferential dividend rights or voting rights as the Board of Directors may deem appropriate. The Board of Directors believes that this flexibility is necessary to enable it to tailor the specific terms of any series of Preferred Stock that may be issued to meet market conditions and financing opportunities as they arise without the expense and delay that would be entailed in calling a stockholders meeting to approve the terms of any specific series of Preferred Stock. In this regard, the Board of Directors has been advised that, as a practical matter in today's financial markets, it is seldom practicable to delay potential issuances of Preferred Stock for the period that would be necessary to obtain stockholder approval of any particular series of Preferred Stock. The Board of Directors does not have any current plan to issue Preferred Stock. The Board of Directors believes, however, that the ability to issue Preferred Stock may be helpful in structuring financings in order to comply with the requirements of the Directive. Preferred Stock may also be used for acquisitions and other corporate purposes. In the event that any shares of Preferred Stock are issued, the holders of such stock may receive payment of dividends from the Company at times when no dividends, or lesser amounts of dividends, are paid on the Company's Common Stock. In addition, holders of Preferred Stock may be entitled to receive distributions upon liquidation of the Company that are prior in right of payment to the entitlement of holders of Common Stock in such event. Preferred Stock may also be given general or special voting rights, which may include the right to elect one or more directors upon nonpayment of specified amounts of dividends or at any time. In their consideration of the proposed Amendments, stockholders may wish to take into account the possibility that issuances of Common Stock or of one or more series of Preferred Stock could be used to impede attempts to acquire control of the Company that are not negotiated with the Board of Directors, regardless of whether such transactions may be favored by some or most of the stockholders. The Company is not aware of any current 4 attempts to acquire control of the Company and will consider any proposals to acquire control of the Company that may arise in the future in accordance with their fiduciary duties and their judgment as to the best interest of the stockholders of the Company at that time. In addition, any issuances of Common or Preferred Stock by the Company in the future will be subject to the fiduciary duties of the Board of Directors to all stockholders. The proposed change in the par value of the Company's Common Stock is intended solely to reduce the amount of filing fee payable by the Company to the State of Delaware, which is the state of incorporation of the Company. The Delaware filing fee is based upon the aggregate par value of the shares of stock authorized by a Delaware corporation's Certificate of Incorporation. The change in par value will not affect in any manner any rights of the stockholders of the Corporation, nor is it expected to have any effect on the market value of their Company stock. BOARD RECOMMENDATION The Board of Directors believes that it is in the best interests of the Company and its stockholders to approve the Amendments. Approval of the Amendments will require the affirmative vote of a majority of the outstanding shares of Common Stock entitled to vote at the Special Meeting. VOTING RIGHTS AND OTHER PROXY INFORMATION The Board of Directors of the Company has selected July 20, 1995 as the record date for the determination of stockholders entitled to notice of and to vote at the Special Meeting. The Company had 2,599,275 shares of common stock, par value of $1.00 per share (the "Common Stock"), issued and outstanding on that date. Holders of shares of the Company's Common Stock will be entitled to cast one vote for each share held of record as of the close of business on the record date. All valid proxies received in response to this solicitation will be voted in accordance with the instructions indicated thereon by the stockholders giving such proxies. Each valid proxy received without specific directions will be voted FOR approval of each of the proposed Amendments to Article FOURTH of the certificate of incorporation of the Company as further described in this proxy statement and, FOR any proposal that may be presented to adjourn the Special Meeting if, in the judgement of the proxy holders, such adjournment is necessary to permit the solicitation of additional proxies in favor of such Amendments. Each proxy delivered may be revoked by the stockholder who executed it at any time before it is voted by filing written notice of revocation, which may consist of a later dated proxy, with the Secretary of the Company prior to the vote on the matters described herein or by attending the Special Meeting and voting in person. 5 A majority of the outstanding shares of Common Stock of the Company, represented in person or by proxy, will constitute a quorum for the transaction of business. Abstentions will be treated as shares that are present and entitled to vote for purposes of determining the presence of a quorum, but as unvoted for purposes of determining the approval of any matter submitted for a vote of the stockholders. Because approval of the Amendments described herein that are to be presented at the Special Meeting will require the affirmative vote of the majority of the outstanding shares of Common Stock, abstentions will have the same effect as a vote against the Amendments. If a broker indicates on the proxy that the broker does not have discretionary authority to vote on a particular matter as to certain shares, those shares will be counted for general quorum purposes but will not be considered as present and entitled to vote with respect to that matter. The Board of Directors does not know of any business to be presented for action at the meeting other than that stated herein. If any other business is properly presented at the meeting and may properly be voted upon, the proxies solicited hereby will be voted on such matters in accordance with the best judgment of the proxy holders named therein. The expenses of this proxy solicitation will be borne by the Company. The original mail solicitation may be supplemented by additional mail solicitation or by telephone, telegram, facsimile transmission, or personal solicitation, made by directors, officers and employees of the Company, who will not receive any additional compensation for such solicitation. The Company has also retained D.F. King & Co., a proxy solicitation firm, to assist in the solicitation of proxies for a fee of $3,500 plus reimbursement of certain expenses. The Company will request record holders of shares beneficially owned by others to send proxy material to the beneficial owners of such shares and will reimburse such holders for their reasonable expenses incurred in doing so. By Order of the Board of Directors Norman A. Morales Executive Vice President Assistant Secretary July 25, 1995 6 ANNEX I The full text of Article FOURTH of the Certificate of Incorporation of the Company as it would be amended by the proposed Amendments, and including the amendment to Article FOURTH implementing the Reverse Stock Split approved by the stockholders at the 1995 Annual Meeting, is as follows: FOURTH: The total number of shares of all classes of capital stock which this Corporation shall have authority to issue is thirty million (30,000,000), of which twenty million (20,000,000) shares shall be Common Stock, par value $.01 per share, and ten million (10,000,000) shares shall be Preferred Stock, par value $.01 per share. Upon the effectiveness of the amendment to this Article FOURTH set forth in this sentence, the shares of Common Stock then outstanding shall be deemed combined into the number of whole outstanding shares most nearly equal to one- third, rounded down, of the number of shares of Common Stock outstanding immediately prior thereto, and all other such formerly outstanding shares shall be returned to the status of authorized but unissued shares of stock. The shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors of this Corporation shall have authority to fix by resolution or resolutions the designations and the powers, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof, including without limitation the voting rights, the dividend rate, conversion rights, redemption price and liquidation preference, of any series of shares of Preferred Stock, to fix the number of shares constituting any such series and to increase or decrease the number of shares of any such shares (but not below the number of shares thereof then outstanding). In case the number of shares of any such series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution or resolutions originally fixing the number of shares of such series. The holders of the capital stock shall be entitled to one vote for each share held at all meetings of the stockholders of the Corporation. At all elections of directors of the Corporation each holder of shares of capital stock of the Corporation entitled to be voted thereat shall be entitled to as many votes as shall equal the number of shares of stock of such holder multiplied by the number of directors to be elected, and each stockholder may cast all of such votes for a single director or may distribute them among the total number of directors to be voted for, or among any two or more of such directors, as such stockholder may see fit. 7 No stockholder of the Corporation shall by reason of his holding shares of any class have any pre-emptive or preferential right to purchase or subscribe to any shares of any class of the Corporation, now or hereafter to be authorized, or any notes debentures, bonds, or other securities convertible into or carrying options or warrants to purchase shares of any class, nor or hereafter to be authorized, whether or not the issuance of any shares, or such notes, debentures, bonds or other securities, would adversely affect the dividend or voting rights of such stockholder. 8 REVOCABLE PROXY HAWTHORNE FINANCIAL CORPORATION The undersigned hereby appoints Scott A. Braly, with full power of substitution, as the lawful proxy and agent of the undersigned at the Special Meeting of Stockholders of Hawthorne Financial Corporation (the "Company") to be held on August 31, 1995, or any adjournment thereof, for the purpose of voting on the matters referred to below, to represent the undersigned and to vote all shares of stock of the Company held of record by the undersigned on July 20, 1995, as indicated below: (1) Approval of amendment to Article FOURTH of the Company's Certificate of Incorporation to increase the number of authorized shares of Common Stock to 20,000,000 and to change the par value of such Common Stock from $1.00 to $.01 per share. / / FOR / / AGAINST / / ABSTAIN (2) Approval of amendment to Article FOURTH of the Company's Certificate of Incorporation to authorize the issuance of up to 10,000,000 shares of Preferred Stock. / / FOR / / AGAINST / / ABSTAIN (3) In their discretion, the proxies are authorized to vote upon all such other matters as may properly come before the Special Meeting.
THE BOARD OF DIRECTORS OF HAWTHORNE FINANCIAL CORPORATION RECOMMENDS A VOTE FOR THE PROPOSALS DESCRIBED IN ITEMS 1 AND 2. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF HAWTHORNE FINANCIAL CORPORATION. IMPORTANT: PLEASE DATE AND SIGN THIS PROXY ON THE OTHER SIDE. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSALS DESCRIBED IN ITEMS 1 AND 2 AND IN THE BEST JUDGMENT OF THE PROXY HOLDER ON MATTERS DESCRIBED IN ITEM 3. DATED: _______________, 1995 (Be sure to Date Proxy) -------------------------------- (Signature) -------------------------------- (Signature) IMPORTANT: Please sign your name or names exactly as indicated on this Proxy. Only one signature is required in the case of joint account. If signing as an attorney, executor, administrator, trustee or guardian, please give your full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by an authorized person. Your signature acknowledges receipt of the Notice of Special Meeting and the Proxy Statement relating to the Special Meeting prior to signing this Proxy. PLEASE VOTE, SIGN, DATE, AND RETURN THIS PROXY AS PROMPTLY AS POSSIBLE IN THE POSTPAID ENVELOPE PROVIDED. -----END PRIVACY-ENHANCED MESSAGE-----