<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] 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
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.
20371 IRVINE AVENUE
SANTA ANA HEIGHTS, CALIFORNIA 92707
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of the IMPERIAL CREDIT MORTGAGE HOLDINGS,
INC., a Maryland corporation (the "Company"), will be held at the Sutton Place
Hotel, 4500 MacArthur Boulevard, Newport Beach, California 92660, on July 25,
1996, at 9:00 a.m. Pacific Standard Time. Only stockholders of record at the
close of the business on May 31, 1996, (the "Record Date") will be entitled to
vote.
The Annual Meeting of the Stockholders of the Company is being held for the
following purposes:
1. To elect a Board of Directors to serve for the ensuing year.
2. To approve an amendment under the Company's 1995 Stock Option,
Deferred Stock and Restricted Stock Plan (the "Stock Option Plan") to
increase by 400,000 shares the number of shares of Common Stock that can be
optioned and sold under the Stock Option Plan.
3. To consider and act upon a proposal to ratify the appointment of KPMG
Peat Marwick LLP as the independent accountants of the Company for the year
ending December 31, 1996; and
4. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
Only holders of Common Stock of record at the close of business on May 31,
1996, will be entitled to vote at the meeting.
Your proxy is enclosed. You are cordially invited to attend the meeting, but
if you do not expect to attend, or if you plan to attend, but desire the proxy
holders to vote your shares, please date and sign your proxy and return it in
the enclosed postage paid envelope. The giving of this proxy will not affect
your right to vote in person in the event you find it convenient to attend.
Please return the proxy promptly to avoid the expense of additional proxy
solicitation.
Dated: June 10, 1996
For the Board of Directors
/s/ RICHARD J. JOHNSON
Richard J. Johnson, Secretary
<PAGE>
[LOGO OF IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.]
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PROXY STATEMENT
----------------
FOR ANNUAL MEETING TO BE HELD
JULY 25, 1996, AT 9:00 A.M. PACIFIC STANDARD TIME
The Annual Meeting of Stockholders of Imperial Credit Mortgage Holdings,
Inc. (the "Company") will be held on July 25, 1996 at 9:00 a.m. Pacific
Standard Time at the Sutton Place Hotel, 4500 MacArthur Boulevard, Newport
Beach, California 92660 (the "Meeting"). The approximate mailing date for this
proxy statement and the enclosed proxy is June 10, 1996. If a proxy in the
accompanying form is duly executed and returned, the shares represented by the
proxy will be voted as directed. If no direction is given, the shares
represented by the proxy will be voted for the election of the five (5)
nominees for Director named herein, to approve the proposed amendment to the
Company's 1995 Stock Option Plan and for the ratification of the appointment
of KPMG Peat Marwick LLP as the Company's independent accountants for the year
ending December 31, 1996. Any proxy given may be revoked at any time prior to
its exercise by notifying the Secretary of the Company in writing of such
revocation, by giving another proxy bearing a later date, or by attending and
voting in person at the Meeting.
The cost of this solicitation of proxies will be borne by the Company.
Solicitations will be made by mail. In addition, the officers and regularly
engaged employees of the Company may, in a limited number of instances,
solicit proxies personally or by telephone. The Company will reimburse banks,
brokerage firms, other custodians, nominees and fiduciaries for reasonable
expenses incurred in sending proxy materials to beneficial owners of Common
Stock of the Company.
The Company's Annual Report on Form 10-K for the year ended December 31,
1995, as filed with the Securities and Exchange Commission (the "Commission"),
is concurrently being provided to each stockholder. Additional copies are
available without charge to any stockholder upon request.
Holders of Common Stock of record at the close of business on May 31, 1996
will be entitled to vote at the Meeting. There were 4,250,000 shares of Common
Stock, $.01 par value per share, outstanding at that date. Each share is
entitled to one vote and a majority of the shares of Common Stock outstanding
is necessary to constitute a quorum for the Meeting. Directors are elected by
a plurality vote. A majority of the votes cast at a meeting of stockholders
duly called and at which a quorum is present shall be sufficient to approve
any other matter which may properly come before the meeting, unless more than
a majority of votes cast is required by statute or by the charter of the
Company. The other matters submitted for stockholder approval at the Meeting
will be decided by the affirmative vote of a majority of shares present in
person or represented by proxy and entitled to vote on each such matter.
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Directors are elected annually to serve until the next annual
meeting of stockholders and thereafter until their successors are elected. The
Company's Amended and Restated Articles of Incorporation and amendments
thereto (the "Charter") currently provides for a variable Board of Directors
with a range of between five and nine members, with the number currently set
at five. No proxy will be voted for more than five nominees for Director.
Unless otherwise directed by stockholders, the proxy holders will vote all
shares represented by proxies held by them for the election of the maximum
number of the following nominees, all of whom are now members of and
constitute the Company's Board of Directors. The Company is advised that all
of the nominees have indicated their availability and willingness to serve if
elected. In the event that any nominee becomes unavailable or unable to serve
as a Director of the Company prior to the voting, the proxyholders will
refrain from voting for the unavailable nominee or will vote for a substitute
nominee in the exercise of their best judgment.
INFORMATION CONCERNING NOMINEES
The following table sets forth certain information concerning the nominees
of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
H. Wayne Snavely................ 54 Chairman of the Board
Joseph R. Tomkinson(1)(2)....... 48 Vice Chairman of the Board and Chief
Executive Officer
James Walsh+(1)(2).............. 45 Director
Frank P. Filipps+(1)(2)......... 48 Director
Stephan R. Peers+(1)(2)......... 43 Director
</TABLE>
- --------
+ Unaffiliated Director
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
H. WAYNE SNAVELY has been the Chairman of the Board since the Company's
formation. He has been Chairman of the Board and Chief Executive Officer of
Imperial Credit Industries, Inc. ("ICII") since December 1991. Mr. Snavely is
also Chairman of the Board of Imperial Credit Advisors, Inc. ("ICAI" or the
"Manager"), a wholly-owned subsidiary of ICII. He has been a Director of
Imperial Bancorp and Imperial Bank since 1993, and was also a director of
Imperial Bank from 1975 to 1983. From 1983 to February 1991, Mr. Snavely
served as Executive Vice President of Imperial Bancorp and Imperial Bank with
direct management responsibility for the following bank subsidiaries and
divisions: Imperial Bank Mortgage, Southern Pacific Thrift and Loan, Imperial
Trust Company, Wm. Mason & Company, Imperial Ventures, Inc. and The Lewis
Horwitz Organization. From 1983 through 1986, Mr. Snavely was employed as
Chief Financial Officer of Imperial Bancorp and Imperial Bank.
JOSEPH R. TOMKINSON has been the Vice Chairman of the Board and Chief
Executive Officer of the Company since its formation. He has also been the
Chairman of the Board and Chief Executive Officer of ICI Funding Corporation
("ICIFC"), in which the Company owns 99% of the economic interest and ICII
owns all of the outstanding voting stock, and Imperial Warehouse Lending Group
("IWLG"). Mr. Tomkinson is also Vice Chairman of the Board of ICAI. Mr.
Tomkinson served as President of ICII from January 1992 to February 1996, and
from 1986 to January 1992, he was President of Imperial Bank Mortgage, a
subsidiary of Imperial Bank, one of the companies combined to become ICII in
1992. Mr. Tomkinson has been a Director of ICII since December 1991. From 1984
to 1986, he was employed as Executive Vice President of Loan Production for
American Mortgage Network, a privately owned mortgage banker. Mr. Tomkinson
brings 21 years of combined experience in real estate, real estate financing
and mortgage banking to the Company.
2
<PAGE>
JAMES WALSH has been a Director since August 1995. Mr. Walsh is an executive
vice president of Walsh Securities, Inc. where he is in charge of mortgage
loan production, sales and securitization. Mr. Walsh was an executive of
Donaldson, Lufkin and Jenrette Securities Corporation from January 1989 to
March 1996 where he oversaw residential mortgage securitization, servicing
brokerage and mortgage banking services. From February 1987 to December 1988,
Mr. Walsh was an executive in the mortgage banking department at Bear Stearns
& Company. From December 1985, to February 1987, Mr. Walsh was a senior
banking officer at Carteret Savings Bank.
FRANK P. FILIPPS has been a Director since August 1995. Mr. Filipps was
elected President of CMAC Investment Corporation and Chairman, President and
Chief Executive Officer of Commonwealth Mortgage Assurance Company ("CMAC") in
January 1995. Mr. Filipps joined CMAC in 1992 as Senior Vice President and
Chief Financial Officer, where he was responsible for the company's financial,
investment and data processing operations, as well as the legal and human
resources functions. In 1994, Mr. Filipps was promoted to Executive Vice
President and Chief Operating Officer for both CMAC Investment Corporation and
CMAC, where his additional responsibilities included the company's sales,
marketing, underwriting and risk management. In 1975, Mr. Filipps joined
American International Group, and from 1989 to 1992, he was Vice President and
Treasurer. Prior to that, he was a Second Vice President for Chase Manhattan
Bank, N.A., in New York.
STEPHAN R. PEERS has been a Director since October 1995. Since April 1993,
Mr. Peers has been an Executive Vice President of International Strategic
Finance Corporation, Ltd., where he performs corporate finance services for
overseas issuers. From April 1989 to April 1993, Mr. Peers was a Vice
President in corporate finance at Montgomery Securities where he specialized
in financial services institutions. From March 1987 to March 1989, Mr. Peers
was a Vice President at The First Boston Corporation in mortgage finance
specializing in mortgage related products. Mr. Peers has served as a Managing
Director of Resource Bancshares Corporation since August 1995.
There are no family relationships between any of the directors or executive
officers of the Company.
All Directors are elected at each annual meeting of the Company's
stockholders for a term of one year, and hold office until their successors
are elected and qualify. Replacements for vacancies occurring among the
unaffiliated directors will be elected by a majority vote of the remaining
Directors, including a majority of the unaffiliated directors (the
"Unaffiliated Directors"). The Company will pay an annual director's fee to
each Unaffiliated Director equal to $20,000 and will reimburse such
Unaffiliated Director's costs and expenses for attending such meetings.
COMMITTEES AND ATTENDANCE AT BOARD MEETINGS
No meetings of the Board of Directors were held in fiscal 1995.
The Company's Executive Committee meets weekly, primarily to consider and
act upon various aspects of the Company's ongoing operations. The Executive
Committee may, however, consider such matters as compensation and audit and
make recommendations on these or other matters to the Board of Directors.
Members of the Executive Committee are William S. Ashmore, Mary C. Glass,
Richard J. Johnson and Joseph R. Tomkinson. Mr. Ashmore is the President and
Chief Operating Officer of the Company, and Executive Vice President and a
director of ICIFC and IWLG. Ms. Glass is Vice President of the Company and
Senior Vice President, Operations, of ICIFC. Mr. Johnson is Senior Vice
President, Chief Financial Officer, Treasurer and Secretary of the Company,
ICIFC and IWLG and a director of ICIFC. The Executive Committee met two times
during 1995. The Audit Committee, established by the Board of Directors on
November 1, 1995, reviews the scope of auditing activities performed by the
Company's independent accountants, and the Compensation Committee was
established by the Board of Directors on November 16, 1995. No meetings were
held during 1995 for either of these committees. The Board of Directors
presently has no nominating committee.
3
<PAGE>
EXECUTIVE COMPENSATION
From November 20, 1995 to December 31, 1995, none of the executive officers
of the Company earned more than $100,000 in total compensation. However, the
following table contains information on the annual cash compensation to be
paid to the executive officers of the Company for the year ending December 31,
1996 for services rendered.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
--------------
FISCAL SALARY
NAME AND PRINCIPAL POSITION YEAR ($)(1)
--------------------------- ------ -------
<S> <C> <C>
Joseph R. Tomkinson, Vice Chairman of the Board 1996 250,000(2)(3)(4)
and Chief Executive of the Company and Chairman
of the Board and Chief Executive Officer of
ICIFC and IWLG
William S. Ashmore, President and Chief 1996 200,000(2)(3)(4)
Operating Officer of the Company and Executive
Vice President of ICIFC and IWLG
Richard J. Johnson, Senior Vice President, Chief 1996 100,000(2)(3)
Financial Officer, Treasurer and Secretary of
the Company, ICIFC and IWLG
Mary C. Glass, Vice President of the Company and 1996 90,000(2)(3)
Senior Vice President, Operations, of ICIFC and
IWLG
</TABLE>
- --------
(1) Pursuant to a certain management agreement, dated November 20, 1995, with
ICAI (the "Management Agreement"), the Company will reserve up to 1/5 of
the Company's 25% Incentive Payment (see "Certain Relationship and Related
Transactions--Relationships with the Manager") for distribution as bonuses
to its employees in amounts to be determined by the Company's Board of
Directors. Such payment shall be made in lieu of payment of a like amount
to ICAI under the Management Agreement.
(2) On November 20, 1995, each of the persons in the above table entered into
a five-year employment agreement at an annual salary as stated in the
table, subject to adjustment for inflation, plus bonuses described in
footnote (3) and in the case of Messrs. Tomkinson and Ashmore, those
additional bonuses described in footnote (4).
(3) Each of the persons in the above table will be paid a quarterly bonus
equal to the aggregate dividend such person would have received from the
Company on all shares of Common Stock underlying unexercised stock options
held by such person which are outstanding as of November 21, 1995, and on
the date of payment of said bonus, provided however that (1) no such bonus
will be paid in calendar 1995, (2) quarterly bonuses will be paid for each
of the first three quarters of calendar 1996 only if the dividend that
would be payable by the Company on shares of its Common Stock for the
subject quarter after payment of all such quarterly bonuses equals or
exceeds ten percent (10%) (on an annualized basis) of $13.00, (3)
quarterly bonuses will be paid for the next four calendar quarters
thereafter only if the dividend that would be payable by the Company on
shares of its Common Stock for the subject quarter after payment of all
such quarterly bonuses equals or exceeds fifteen percent (15%) (on an
annualized basis) of $13.00 and (4) quarterly bonuses will be paid for
each calendar quarter thereafter, if the dividend that would be payable by
the Company on shares of its Common Stock for the subject quarter equals
or exceeds such level as determined by a majority of the Unaffiliated
Directors. Such persons will not be required to refund any portion of such
bonuses previously earned regardless of the level of dividends in
subsequent quarters. For the three months ended March 31, 1996 Messrs.
Tomkinson, Ashmore and Johnson and Ms. Glass received bonuses of $37,050,
$19,500, $9,750 and $9,750, respectively.
(4) Messrs. Tomkinson and Ashmore are each entitled to performance and
profitability bonuses but, in no event to exceed their respective base
salaries. For the three months ended March 31, 1996 Messrs. Tomkinson and
Ashmore received bonuses of $73,631 and $29,772.
4
<PAGE>
The following table sets forth the stock options granted to executive
officers under the Stock Option Plan as of December 31, 1995:
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(4)
------------------------------------------ -----------------
NUMBER OF
SHARES PERCENTAGE
UNDERLYING OF OPTIONS EXERCISE
OPTIONS GRANTED TO PRICE EXPIRATION
NAME GRANTED(1) EMPLOYEES ($/SH)(2) DATE(3) 5%($) 10%($)
---- ---------- ---------- --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Joseph R. Tomkinson..... 95,000 48.7% $11.25 8/30/2005 672,131 1,703,312
William S. Ashmore...... 50,000 25.7 11.25 8/30/2005 353,753 896,480
Richard J. Johnson...... 25,000 12.8 11.25 8/30/2005 176,877 448,240
Mary C. Glass........... 25,000 12.8 11.25 8/30/2005 176,877 448,240
</TABLE>
- --------
(1) Such stock options vest 100% on the third anniversary of the date of
grant.
(2) The exercise price for all options equals the fair market value of such
shares at the date of grant as determined by a committee of the Board of
Directors administering the Company's Stock Option Plan (the "Stock Option
Committee").
(3) Such stock options expire seven years from the date of vesting or earlier
upon termination of employment.
(4) Amounts reflect assumed risks of appreciation set forth in the
Commission's executive compensation disclosure requirements.
The Company has granted to Messrs. H. Wayne Snavely, Stephen Shugerman, and
Thomas O. Markel, officers or directors of ICAI, options to purchase 20,000,
20,000, and 15,000 shares of Common Stock respectively, at a per share
exercise price of $11.25, which was equal to the fair market value of such
shares at the date of grant as determined by the Stock Option Committee, with
the same terms as the options set forth above. On November 20, 1995, the
Company also granted to each of the Unaffiliated Directors options to purchase
15,000 shares of Common Stock at a per share exercise price equal to $13.00,
vesting 100% on the first anniversary of the date of grant.
PROPOSAL NO. 2
TO APPROVE AN AMENDMENT TO THE COMPANY'S 1995 STOCK OPTION,
DEFERRED STOCK AND RESTRICTED STOCK PLAN (THE "STOCK OPTION PLAN")
TO INCREASE BY 400,000 SHARES THE NUMBER OF SHARES OF COMMON STOCK THAT CAN BE
OPTIONED AND SOLD UNDER THE STOCK OPTION PLAN
On May 29, 1996, the Board of Directors of the Company approved an amendment
to the Company's Stock Option Plan. The amendment was to increase the total
number of options under the plan from 400,000 to 800,000 shares. At the 1996
Annual Meeting, the stockholders are being asked to ratify and approve such
amendment to the Stock Option Plan. As originally adopted, the number of
shares that could be optioned and sold under the Stock Option Plan was 400,000
shares of Common Stock. The Board of Directors believes that the adoption of
the amendment to the Stock Option Plan will promote the interests of the
Company and its stockholders by attaining and retaining highly qualified
employees and officers. In addition, the Board believes that the adoption of
the amendment will help align employees and officers interest with other
stockholders. The summary of the provisions of the Stock Option Plan which
follows is not intended to be complete.
SUMMARY OF THE PROVISIONS OF THE STOCK OPTION PLAN AS AMENDED
The Company has adopted a Stock Option Plan which provides for the grant of
qualified incentive stock options ("ISOs") that meet the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended, (the "Code")
stock options not so qualified ("NQSOs") and deferred stock, restricted stock,
stock appreciation rights and limited stock appreciation rights awards
("Awards"). The Stock Option Plan is administered by a committee of directors
appointed by the Board of Directors (the "Stock Option Committee"). ISOs may
be granted to the officers and key employees of the Company. NQSOs and Awards
may be granted to the directors,
5
<PAGE>
officers and key employees of the Company or any of its subsidiaries, to the
directors, officers and key employees of the Manager, or to the Manager itself,
and to the directors, officers and key employees of ICIFC. The exercise price
for any option granted under the Stock Option Plan may not be less than 100%
(or 110% in the case of ISOs granted to an employee who is deemed to own in
excess of 10% of the outstanding Common Stock) of the fair market value of the
shares of Common Stock at the time the option is granted. The purpose of the
Stock Option Plan is to provide a means of performance-based compensation in
order to attract and retain qualified personnel and to provide an incentive to
those whose job performance affects the Company. The effective date of the
Stock Option Plan was August 31, 1995.
Subject to anti-dilution provisions for stock splits, stock dividends and
similar events, the Stock Option Plan currently authorizes the grant of options
to purchase, and Awards of, up to 800,000 shares. If an option granted under
the Stock Option Plan expires or terminates, or an Award is forfeited, the
shares subject to any unexercised portion of such option or Award will again
become available for the issuance of further options or Awards under the Stock
Option Plan.
Under the Stock Option Plan, the Company may make loans available to stock
option holders, subject to Board of Directors' approval, in connection with the
exercise of stock options granted under the Stock Option Plan. If shares of
Common Stock are pledged as collateral for such indebtedness, such shares may
be returned to the Company in satisfaction of such indebtedness. If so
returned, such shares shall again be available for issuance in connection with
future stock options and Awards under the Stock Option Plan.
Unless previously terminated by the Board of Directors, no options or Awards
may be granted under the Stock Option Plan after August 31, 2005.
Options granted under the Stock Option Plan will become exercisable in
accordance with the terms of the grant made by the Stock Option Committee.
Awards will be subject to the terms and restrictions of the award made by the
Stock Option Committee. The Stock Option Committee has discretionary authority
to select participants from among eligible persons and to determine at the time
an option or Award is granted and, in the case of options, whether it is
intended to be an ISO or a NQSO, and when and in what increments shares covered
by the option may be purchased.
Under current law, ISOs may not be granted to any individual who is not also
an officer or employee of the Company. To ensure that the Company qualifies as
a Real Estate Investment Trust ("REIT"), the Stock Option Plan provides that no
options may be granted under the Stock Option Plan to any person who, assuming
exercise of all options held by such person, would own or be deemed to own more
than 9.5% of the outstanding shares of Common Stock of the Company.
Each option must terminate no more than 10 years from the date it is granted
(or 5 years in the case of ISOs granted to an employee who is deemed to own in
excess of 10% of the combined voting power of the Company's outstanding Common
Stock). Options may be granted on terms providing for exercise in whole or in
part at any time or times during their respective terms, or only in specified
percentages at stated time periods or intervals during the term of the option,
as determined by the Stock Option Committee.
The exercise price of any option granted under the Stock Option Plan is
payable in full (1) in cash, (2) by surrender of shares of the Company's Common
Stock already owned by the option holder having a market value equal to the
aggregate exercise price of all shares to be purchased including, in the case
of the exercise of NQSOs, restricted stock subject to an Award under the Stock
Option Plan, (3) by cancellation of indebtedness owed by the Company to the
option holder, (4) by a full recourse promissory note executed by the option
holder, or (5) by any combination of the foregoing. The terms of any promissory
note may be changed from time to time by the Board of Directors to comply with
applicable United States Internal Revenue Service or Commission regulations or
other relevant pronouncements.
The Board of Directors may from time to time revise or amend the Stock Option
Plan, and may suspend or discontinue it at any time. However, no such revision
or amendment may impair the rights of any participant
6
<PAGE>
under any outstanding Award without his consent or may, without stockholder
approval, increase the number of shares subject to the Stock Option Plan or
decrease the exercise price of a stock option to less than 100% of fair market
value on the date of grant (with the exception of adjustments resulting from
changes in capitalization), materially modify the class of participants
eligible to receive options or Awards under the Stock Option Plan, materially
increase the benefits accruing to participants under the Stock Option Plan or
extend the maximum option term under the Stock Option Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee and Audit Committee each consist of
Messrs. Tomkinson, Walsh and Peers.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee sets and administers the policies governing the
Company's compensation program, including incentive and stock option plans.
The Company participates in studies and surveys of comparable compensation
practices. The Committee considers these studies and surveys in determining
base salary, bonus and long-term stock-based compensation. The Committee
discusses and considers executive compensation matters and makes its
decisions, subject to review by the Company's Board of Directors.
The Company's compensation policies are structured to link the compensation
of the Chief Executive Officer and other executives of the Company with
corporate performance. Through the establishment of short- and long-term
compensation programs, the Company has aligned the financial interests of its
executives with the results of the Company's performance, which is designed to
put the Company in a competitive position regarding executive compensation and
also to ensure corporate performance, which will enhance stockholder value.
The Company's executive compensation philosophy is to set base salary at a
conservative market rate and then to provide performance-based variable
compensation which allows total compensation to fluctuate according to the
Company's earnings as well as value received by stockholders. Targeted levels
of executive compensation are set at levels that the Committee believes to be
consistent with others in the Company's industry, with such compensation
increasingly weighted towards programs contingent upon the Company's level of
annual and long-term performance. As a result, the Named Executive Officers',
those whose annual salary exceeds $100,000, actual compensation levels in any
particular year may be above or below those of the Company's competitors,
depending upon the Company's performance.
In line with the overall compensation program and the annual objectives set
by the Board of Directors, the Company's executive officers have a high
percentage of their total compensation at risk, dependent upon the Company's
financial performance. The compensation for the Named Executive Officers was
set on November 20, 1995.
Section 162(m) was added to the Internal Revenue Code as part of the Omnibus
Budget Reconciliation Act of 1933. Section 162(m) limits the deduction for
compensation paid to the Chief Executive Officer and the other Named Executive
officers to the extent that compensation of a particular executive exceeds
$1,000,000, unless such compensation was based upon performance goals or paid
pursuant to a binding contract that was in effect on February 17, 1993.
Proposed regulations to implement this new limitation were published in
December 1993. Based upon a review of the proposed regulations, the
compensation to be paid in 1995 to the Named Executive Officers will be
deductible. The Committee will review the Company's existing compensation
program to determine the deductibility of the future compensation paid or
awarded pursuant thereto and will seek guidance with respect to changes to the
Company's existing compensation program that will enable the Company to
continue to attract and retain key individuals while optimizing the
deductibility to the Company of amounts paid as compensation.
7
<PAGE>
The Committee believes that its overall executive compensation program will
be successful in providing competitive compensation appropriate to attract and
retain highly qualified executives and also to encourage increased performance
from the executive group which will create added stockholder value.
COMPENSATION COMMITTEE
Joseph R. Tomkinson
James Walsh
Frank P. Filipps
Stephen R. Peers
8
<PAGE>
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a performance graph comparing the cumulative total
stockholder return on the Company's Common Stock, the S & P 500 Stock Index
and an index average of the Company's peer group, composed of comparable
publicity-traded companies in the mortgage banking business, in each case for
the period commencing on November 21, 1995 through December 31, 1995. Such
peer groups include CWM Mortgage Holdings, Inc., Mortgage Capital, Inc.,
Capstead Mortgage Corporation, Thornburg Mortgage Asset Corporation, and
Redwood Trust, Inc. The graph assumes $100 invested on November 21, 1995, in
the Company's Common Stock, the S & P 500 Stock Index and the Stock Index of
the peer group.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG IMPERIAL CREDIT MTGE HLDG*, PEER GROUP AND BROAD MARKET*
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period IMPERIAL PEER BROAD
(Fiscal Year Covered) CREDIT MTGE HLDG* GROUP MARKET*
- --------------------- ----------------- ------- -------
<S> <C> <C> <C>
Measurement Pt- 11/21/95 $100 $100 $100
FYE 12/31/95 $101.92 $109.04 $101.93
</TABLE>
- --------
* The Broad Market indicator and the Imperial Credit Mortgage Holdings, Inc.
indicator overlap.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES ACT OF 1934
Section 16(a) of the Securities Act of 1934 requires the Company's Directors
and executive officers, and persons who own more than ten percent of a
registered class of the Company's securities, to file with the Commission
initial reports of ownership and reports of changes in ownership of the Common
Stock and other equity securities of the Company. Officers, Directors and
greater than ten percent stockholders are required by the Commission's
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company during the fiscal year which ended December
31, 1995, all Section 16(a) filing requirements applicable to its officers,
Directors and greater than ten percent beneficial owners were satisfied by
such persons.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PRINCIPAL STOCKHOLDER; CONTROL OF THE COMPANY; LIMITATIONS ON INVESTMENT;
CONFLICTS OF INTEREST
ICII currently owns 374,538 shares of Common Stock of the Company, or 8.8% of
the outstanding Common Stock, Southern Pacific Thrift & Loan Association
("SPTL") currently owns 50,000 shares of Common Stock of the Company, or 1.2%.
RELATIONSHIPS WITH THE MANAGER
GENERAL
The Manager, ICAI, is a recently formed corporation, which commenced
operations as of January 23, 1995 and has no prior experience in managing or
operating a real estate investment trust ("REIT"). Each of the executive
officers of the Manager has significant experience in purchasing, financing,
servicing and investing in mortgage loans and mortgage securities; however,
they have not previously managed a REIT.
The Company has elected an outside advisor and in particular an advisor
associated with ICII in order to efficiently and economically coordinate,
assist and manage the duties and responsibilities of the Company. The Company
believes that ICAI is more adequately suited than the Company to provide or
advise it with contract negotiation, market information, implementation of cost
controls, asset/liability modeling and management, servicing systems and
management information systems. In addition, the Company believes that ICAI is
better equipped than the Company to manage human resources, and facilities
because ICAI and ICII, with which ICAI has to entered into a submanagement
agreement to perform such administrative services for the Company as ICAI deems
necessary. The Company believes that ICAI, as an affiliate of ICII, is
particularly appropriate to act as the Company's advisor because ICAI provides
continuity to those businesses to be contributed pursuant to the Contribution
Transaction and because of ICII's familiarity with such businesses.
The address of the Manager is 20371 Irvine Avenue, Santa Ana Heights,
California 92707, telephone (714) 474-8500.
MANAGEMENT AGREEMENT
On November 20, 1995, the Company entered into a Management Agreement with
the Manager for an initial term of one year. Successive extensions, each for a
period not to exceed one year, may be made by agreement between the Company and
the Manager. The Management Agreement may be terminated by the Company or the
Manager without cause at any time upon 60 days' written notice. Any such
termination or failure to extend by the Company without cause shall result in
the payment of a termination or non-renewal fee to the Manager determined by an
independent appraisal. In addition, the Company and the Manager have the right
to terminate the Management Agreement upon the occurrence of certain specified
events, including a breach by the other party of any provision contained in the
Management Agreement which remains uncured for 30 days. The Company may renew
or terminate the Management Agreement by a majority vote of its Unaffiliated
Directors or by a vote of the holders of a majority of the outstanding shares
of Common Stock. The Manager may terminate the Management Agreement by a
majority vote of its Board of Directors.
After November 20, 1995, ICIFC conducted its operations under substantially
identical principles, practices and policies employed when it was a subsidiary
of ICII. The Manager oversees the operations of ICIFC to ensure that such
principles, practices and policies are employed and followed.
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<PAGE>
The terms of the Management Agreement, including the management fees, were
determined by arms-length discussion based upon what management of both ICAI
and the Company believe are comparable with other advisory relationships and
have been approved by the Board of Directors of ICAI and the Unaffiliated
Directors of the Company. The Company Bylaws provide that the Unaffiliated
Directors shall determine at least annually that the compensation paid to the
Manager is reasonable in relation to the nature and quality of the services
performed by the Manager.
The Manager is at all times subject to the supervision of the Company's
Board of Directors and provides advisory services to the Company in accordance
with the terms of the Management Agreement. The Manager is involved in three
primary activities: (1) capital management--primarily the oversight of the
Company's structuring, analysis, capital raising and investor relations
activities; (2) asset management--primarily the analysis and oversight of the
acquisition, management and disposition of Company assets; and (3) operations
management--primarily the oversight of the Company's operating subsidiaries.
The Manager has entered into a submanagement agreement with ICII to perform
certain administrative services for the Company as the Manager deems
necessary. The Manager may enter into additional contracts with other parties,
including ICII, to provide any such services for the Manager, which third
party shall be approved by the Company's Board of Directors.
As of March 31, 1996, ICAI had a total of nine officers and directors to be
dedicated to the oversight of the Company's operations.
MANAGEMENT FEES
The Manager is entitled to receive a per annum base management fee payable
monthly in arrears of an amount equal to (1) 3/8 of 1% of Gross Mortgage
Assets of the Company composed of other than Agency Certificates, conforming
mortgage loans or mortgage-backed securities secured by or representing
interests in conforming mortgage loans, plus (2) 1/8 of 1% of the remainder of
Gross Mortgage Assets of the Company plus (3) 1/5 of 1% of the average daily
asset balance of the outstanding amounts under IWLG's warehouse lending
facilities. The term "Gross Mortgage Assets" means for any month the weighted
average book value of the Mortgage Assets, before reserves for depreciation or
bad debts or other similar noncash reserves, computed at the end of such
month. The term "Mortgage Assets" means (1) mortgage loans, (2) mortgage-back
securities and any of the mortgage interests which constitute interests in
real property, interests in mortgage on real property and regular interests in
REMICS. The term "Agency Certificates" means Pass-Through Certificates
guaranteed by the Federal National Mortgage Association, the Federal Home Loan
Mortgage Corporation or by the Government National Mortgage Association. A
"Pass-Through Certificate" is a security (or an interest therein) which is a
Qualified REIT Asset (a mortgage loan and other assets of the type described
in Code Section 856(c)(b)(B)) evidencing an undivided interest in a pool of
mortgage loans. For the three months ended on March 31, 1996, and for the year
ended on December 31, 1995, the Manager earned $426,000 and $38,000 in
management fees, respectively.
The Manager is entitled to receive as incentive compensation for each fiscal
quarter, an amount equal to 25% of the Net Income of the Company, before
deduction of such incentive compensation, in excess of the amount that would
produce an annualized Return on Equity equal to the Ten Year U.S. Treasury
Rate plus 2% (the "25% Incentive Payment"). The term "Return on Equity" is
calculated for any quarter by dividing the Company's Net Income for the
quarter by its Average Net Worth for the quarter. For such calculations, the
"Net Income" of the Company means the income of the Company determined in
accordance with generally accepted accounting principles before the Manager's
incentive compensation, the deduction for dividends paid and any net operating
loss deductions arising from losses in prior periods. A deduction for all of
the Company's interest expenses for borrowed money is also taken in
calculating Net Income. "Average Net Worth" for any period means the
arithmetic average of the sum of the gross proceeds from any offering of its
equity securities by the Company, before deducting any underwriting discounts
and commissions and other expenses and costs relating to the offering, plus
the Company's retained earnings (without taking into account any losses
incurred in prior
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<PAGE>
periods) computed by taking the daily average of such values during such
period. The definition "Return on Equity" is only for purposes of calculating
the incentive compensation payable, and is not related to the actual
distributions received by stockholders. "Ten Year U.S. Treasury Rate" means
the average of the weekly average yield to maturity for U.S. Treasury
securities (adjusted to a constant maturity of 10 years) as published weekly
by the Federal Reserve Board during a quarter. The 25% Incentive Payment to
the Manager will be calculated quarterly in arrears before any income
distributions are made to stockholders for the corresponding period. For the
three months ended March 31, 1996, and for the year ended December 31, 1995,
the Manager earned $129,000 and zero, respectively, for the Manager's
Incentive Payment.
Pursuant to the Management Agreement, the Company will reserve up to 1/5 of
the Company's 25% Incentive Payment for distribution as bonuses to its
employees in amounts to be determined by the Company's Board of Directors.
Such payment shall be made in lieu of payment of a like amount to the Manager
under the Management Agreement.
The Manager's base and incentive fees are calculated by the Manager within
60 days after the end of each calendar quarter, with the exception of the
fourth quarter for which compensation will be computed within 30 days, and
such calculation shall be promptly delivered to the Company. The Company is
obligated to pay the base fee within 90 days after the end of each calendar
quarter.
EXPENSES
Pursuant to the Management Agreement, the Company also pays all operating
expenses except those specifically required to be borne by the Manager under
the Management Agreement. The operating expenses generally required to be
borne by the Manager include the compensation and other employment costs of
the Manager's officers in their capacities as such and the cost of office
space and out-of-pocket costs, equipment and other personnel required for
oversight of the Company's operations. The expenses that will be paid by the
Company will include issuance and transaction costs incident to the
acquisition, disposition and financing of investments, regular legal and
auditing fees and expenses of the Company, the fees and expenses of the
Company's Directors, premiums for directors' and officers' liability
insurance, premiums for fidelity and errors and omissions insurance, servicing
and subservicing expenses, the costs of printing and mailing proxies and
reports to stockholders, and the fees and expenses of the Company's custodian
and transfer agent, if any. Reimbursements of expenses incurred by the Manager
which are the responsibility of the Company are made monthly. For the three
months ended March 31, 1996 and for the year ended December 31, 1995, there
were no monies paid to the Manager as reimbursement of expenses.
STOCK OPTION PLAN
The Company has adopted the Stock Option Plan and the Manager and the
directors, officers and employees of the Manager may be granted certain
options or rights under the Stock Option Plan.
LIMITS OF RESPONSIBILITY
Pursuant to the Management Agreement, the Manager does not assume any
responsibility other than to render the services called for thereunder and is
not responsible for any action of the Company's Board of Directors in
following or declining to follow its advice or recommendations. The Manager,
its directors, officers, shareholders and employees, reliable to the Company,
any mortgage security issuer, any subsidiary of the Company, the Unaffiliated
Directors, the Company's stockholders or any subsidiary's shareholders for
acts performed in accordance with and pursuant to the Management Agreement,
except by reason of acts or omissions constituting bad faith, willful
misconduct, gross negligence or reckless disregard of their duties under the
Management Agreement. The Manager is a newly formed company and does not have
significant assets. Consequently, there can be no assurance that the Company
would be able to recover any damages for claims it may have against the
Manager. The Company has agreed to indemnify the Manager, and its directors,
officers, shareholders and employees with respect to all expenses, losses,
damages, liabilities, demands, charges and
12
<PAGE>
claims arising from any acts or omissions of the Manager made in good faith in
the performance of its duties under the Management Agreement.
RELATIONSHIPS WITH AFFILIATES
ICII is a publicly traded company whose shares of common stock are listed on
the Nasdaq National Market. ICAI, a wholly-owned subsidiary of ICII, is the
Manager and provides advisory services to the Company in accordance with the
terms of the Management Agreement. As previously described, the Company
utilizes the mortgage banking experience, management expertise and resources
of ICII and ICAI in conducting its business. At May 15, 1996, ICII and SPTL,
its wholly owned subsidiary, owned in the aggregate 10.0% of the Common Stock
of the Company. In addition, a number of Directors and officers of the Company
and ICIFC also serve as Directors and/or officers of ICII and ICAI. The
Company currently utilizes ICII as a resource for loan servicing, technology,
information services, human resources services, management information
services and accounting. However, the amount of services provided by ICII are
expected to decrease as the Company takes on certain of these
responsibilities. As of March 31, 1996, ICII owned all of the voting common
stock and a 1% economic interest in ICIFC, and the Company owned all of the
non-voting preferred stock of ICIFC, representing 99% of the economic interest
in ICIFC. ICII has the power to elect all of the directors of ICIFC and the
ability to control the outcome of all matters for which the consent of the
holders of the common stock of ICIFC is required.
With a view toward protecting the interests of the Company's stockholders,
the Charter and the Bylaws of the Company provide that a majority of the Board
of Directors (and a majority of each committee of the Board of Directors) must
not be "Affiliates" of ICAI, as that term is defined in the Bylaws, and that
the investment policies of the Company must be reviewed annually by a majority
of the Unaffiliated Directors. Moreover, approval, renewal or termination of
the Management Agreement requires the affirmative vote of a majority of the
Unaffiliated Directors. The Management Agreement may be terminated by either
the Company or the Manager upon 60 days' notice. Any such termination or
failure to extend by the Company without cause shall result in the payment of
a termination or non-renewal fee to the Manager determined by an independent
appraisal. In addition, any transaction between the Company and any Affiliated
Person requires the affirmative vote of a majority of the Unaffiliated
Directors.
Certain activities of ICII and its affiliates may adversely affect the
Company's operations. For a further description of such activities and the
possible effects to the Company therefrom, including the terms and conditions
of the Non-Compete Agreement and the Right of First Refusal. See "Other
Transactions--The Contribution Transaction" and "--Other Arrangements and
Transactions with ICII."
OTHER TRANSACTIONS
THE CONTRIBUTION TRANSACTION
On November 20, 1995, ICII contributed to ICIFC certain of the operating
assets and certain customer lists of ICII's mortgage conduit operations
including all of ICII's mortgage conduit operations' commitments to purchase
mortgage loans subject to rate locks from correspondents (having a principal
balance of $44.3 million at November 20, 1995), in exchange for shares
representing 100% of the common stock and 100% of the outstanding non-voting
preferred stock of ICIFC. Simultaneously, on November 20, 1995, in exchange
for 500,000 shares of Common Stock, ICII (1) contributed to the Company all of
the outstanding non-voting preferred stock of ICIFC, which represents 99% of
the economic interest in ICIFC, (2) caused SPTL to contribute to the Company
certain of the operating assets and certain customer lists of SPTL's warehouse
lending division, and (3) executed the Non-Compete Agreement and the Right of
First Refusal Agreement, each having a term of two years from November 20,
1995 (the "Contribution Transaction"). Of the 500,000 shares issued pursuant
to the Contribution Transaction, 450,000 shares were issued to ICII and 50,000
shares were issued to SPTL. All of the outstanding shares of common stock of
ICIFC will be retained by ICII. Lastly, the Company contributed all of the
aforementioned operating assets of SPTL's warehouse lending operations
contributed to it by SPTL to IWLG in exchange for shares representing 100% of
the common stock of IWLG thereby forming it as a wholly
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<PAGE>
owned subsidiary. At November 20 1995, the net tangible book value of the
assets contributed pursuant to the Contribution Transaction was $525,000. ICII
and SPTL will retain all other assets and liabilities related to the
contributed operations which at November 20, 1995 consisted mostly of $11.7
million of Mortgage Servicing Rights ("MSRs"), $22.4 million of finance
receivables and $26.6 million in advances made by ICII and SPTL to fund
mortgage conduit loan acquisitions and to fund finance receivables,
respectively.
Pursuant to the Non-Compete Agreement, ICII, except as set forth below, and
any 25% entity may not compete with the IWLG and may not establish a network
of third party correspondent loan originators or another end-investor in non-
conforming mortgage loans. ICII has also agreed (1) that, in addition to any
other remedy that may be available to the Company, it will sell all of the
outstanding shares of common stock of ICIFC to be retained by ICII pursuant to
the Contribution Transaction to any third party reasonably acceptable to the
Company in the event that ICII or a 25% entity establishes a network of third
party correspondent loan originators during the term of the Non-Compete
Agreement and (2) that any sale by ICIFC of shares of its capital stock or
sale or transfer by ICII of any shares of the common stock of ICIFC which ICII
owns may only be made to a party reasonably acceptable to the Company.
Pursuant to the Non-Compete Agreement, SPTL may continue to act as an end-
investor in non-conforming mortgage loans and Southern Pacific Funding
Corporation, a wholly-owned subsidiary of ICII, may continue its business,
which is primarily to act as a wholesale originator and bulk purchaser of non-
conforming mortgage loans. Pursuant to the Right of First Refusal Agreement,
ICII will grant ICIFC a right of first refusal to purchase all non-conforming
mortgage loans that ICII or any 25% entity originates or acquires and
subsequently offers for sale and ICIFC will grant ICII, or any 25% entity
designated by ICII, a right of first refusal to purchase all conforming
mortgage loans that ICIFC acquires and subsequently offers for sale.
ARRANGEMENTS AND TRANSACTIONS WITH ICII
The Company and ICII have entered into agreements for the purpose of
defining their ongoing relationships. These agreements have been developed in
the context of a parent/subsidiary relationship and therefore are not the
result of arm's-length negotiations between independent parties. It is the
intention of the Company and ICII that such agreements and the transactions
provided for therein, taken as a whole, are fair to both parties, while
continuing certain mutually beneficial arrangements. However, there can be no
assurance that each of such agreements, or the transactions provided for
therein, have been effected on terms at least as favorable to the Company as
could have been obtained from unaffiliated third parties.
The Company has entered into a sublease with ICII to lease a portion of its
facilities as the Company's executive offices and administrative facilities.
The Company believes that the terms of the sublease are at least as favorable
as could have been obtained from an unaffiliated third party. For the three
months ended March 31, 1996 and for the year ended December 31, 1995, $38,700
and $12,900, respectively, were paid by the Company to ICII under the
sublease.
Additional or modified arrangements and transactions may be entered into by
the Company, ICII, and their respective subsidiaries, in the future. Any such
future arrangements and transactions will be determined through negotiation
between the Company and ICII, and it is possible that conflicts of interest
will be involved. The Unaffiliated Directors, consisting of directors
independent of the Company, any manager of the Company (including ICAI) and
ICII and its Affiliated Persons, must independently approve all transactions
by and between the Company and ICII. The term "Affiliated Person" means of any
entity: (1) any person directly or indirectly owning, controlling, or holding
with the power to vote, five percent (5%) or more of the outstanding
securities of such entity; (2) any person five percent (5%) or more of whose
outstanding voting securities are directly or indirectly owned, controlled, or
held with power to vote, by such entity; (3) any person directly or indirectly
controlling, controlled by, or under common control with, such entity; or (4)
any officer, director or employee of such entity or any person set forth in
(1), (2) or (3) above. Any person who owns beneficially, either directly or
through one or more controlled companies, more than twenty-five percent (25%)
of the voting securities of any entity shall be presumed to control such
entity. Any person who does not so own more than twenty-five percent
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<PAGE>
(25%) of the voting securities of any entity shall be presumed not to control
such entity. A natural person shall be presumed not to be a controlled entity.
The following is a summary of certain arrangements and transactions between
the Company and ICII.
TAX AGREEMENT
The Company has entered into an agreement (the "Tax Agreement") effective as
of November 20, 1995 with ICII for the purposes of (1) providing for filing
certain tax returns, (2) allocating certain tax liability and (3) establishing
procedures for certain audits and contests of tax liability.
Under the Tax Agreement, ICII has agreed to indemnify and hold the Company
harmless from any tax liability attributable to periods ending on or before
November 20, 1995, in excess of such taxes as the Company has already paid or
provided for. For periods ending after November 20, 1995, the Company will pay
its tax liability directly to the appropriate taxing authorities. To the
extent (1) there are audit adjustments that result in a tax detriment to the
Company or (2) the Company incurs losses that are carried back to an earlier
year and any such adjustment described in (1) or loss described in (2) results
in a tax benefit to ICII or its affiliates, then ICII will pay to the Company
an amount equal to the tax benefit as that benefit is realized. ICII will also
agree to indemnify the Company for any liability associated with the
contribution of the preferred stock of ICIFC and certain operational assets of
SPTL's warehouse lending division or any liability arising out of the filing
of a federal consolidated return by ICII or any return filed with any state or
local counterpart liability. To the extent there are audit adjustments that
result in any tax detriment to ICII or any of its affiliates with respect to
any period ending on or before November 20, 1995, and, as a result thereof,
the Company for any taxable period after November 20, 1995, realizes a tax
benefit, then the Company shall pay to ICII the amount of such benefit at such
time or times as the Company realizes such benefit.
ICII generally controls audits and administrative and judicial proceedings
with respect to periods ending on or before November 20, 1995, although ICII
cannot compromise or settle any issue that increases the Company's liability
without first obtaining the consent of the Company. The Company generally
controls all other audits and administrative and judicial proceedings.
SERVICES AGREEMENT
Prior to November 20, 1995, the predecessors of ICIFC and IWLG were
historically allocated expenses of various administrative services provided by
ICII. The costs of such services were not directly attributable to a specific
division or subsidiary and primarily included general corporate overhead, such
as accounting and cash management services, human resources and other
administrative functions. These expenses were calculated as a pro rata share
of certain administrative costs based on relative assets and liabilities of
the division or subsidiary, which management believed was a reasonable method
of allocation. The allocations of expenses for the period January 1, 1995 to
November 19, 1995, the three months ended March 31, 1995, and for the years
ended December 31, 1994 and 1993 were $269,000, $75,000, $517,000, and
$459,000, respectively.
The Company and ICII have entered into a services agreement effective as of
November 20, 1995, (the "Services Agreement") under which ICII provides
various services to the Company, including data processing, human resource
administration, general ledger accounts, check processing and payment of
accounts payable. ICII charges fees for each of the services which it provides
under the Services Agreement based upon usage. The Services Agreement has an
initial term that ends on December 31, 1996 and is renewable annually
thereafter. The Company may terminate the Services Agreement, in whole or in
part, upon one month's written notice. As part of the services to be provided
under the Services Agreement, ICII provides the Company with insurance
coverage and self insurance programs, including health insurance. The charge
to the Company for coverage will be based upon a pro rata portion of the costs
to ICII for the various policies. Management believes that the terms of the
Services Agreement are as favorable to the Company as could be obtained from
independent third parties. For the three months ended March 31, 1996, and for
the period November 20, 1995 to December 31, 1995, total expenses allocated to
the Company related to these service agreement were $114,000 and $29,000,
respectively.
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LOAN PURCHASE AND ADMINISTRATIVE SERVICES AGREEMENT
To facilitate the acquisition of mortgage loans and to monitor loans not
serviced by ICIFC, the Company entered into an agreement (the "Loan Purchase
and Administrative Services Agreement") with ICIFC effective as of November
20, 1995.
To assure a source of mortgage loans for the Company, ICIFC granted the
Company an option to purchase all non-conforming mortgage loans meeting the
Company's investment criteria and policies. Commitments to acquire loans will
obligate the Company to purchase such loans from ICIFC upon the closing and
funding of the loans, pursuant to the terms and conditions specified in the
commitment. Commitment fees to be paid by ICIFC in connection with the loans
purchased by the Company shall be determined based on criteria established
from time to time by ICIFC's Board of Directors, including a majority of the
Unaffiliated Directors, at amounts which, in its judgment, are comparable to
commitment fees then generally paid by other mortgage loan originators for
loans of similar size and credit characteristics to those being acquired.
In the event that a commitment expires or is canceled because the underlying
loan does not close, ICIFC may renegotiate and the Company may agree to
purchase a new loan with the borrower. As to each renegotiated loan, ICIFC,
after deducting its customary expenses for such loan, shall reduce the price
of such loan sold to the Company by 50% of the excess, if any, of (i) the
Company's then current effective price for a similar mortgage loan with an
identical interest rate at the time of the renegotiation over (ii) ICIFC's
realized price from the borrower for such mortgage loan. ICIFC will furnish
reports to the Company on a periodic basis with respect to the calculation and
amounts of such differentials retained by ICIFC.
To provide additional protection for the Company's investments, ICIFC
monitors and administers the servicing of the Company's mortgage loans which
it is not then servicing, other than loans pooled to secure the issuance of
mortgage-backed securities. Such monitoring and administrative services
include, but not be limited to, the following activities: serving as the
Company's consultant with respect to the servicing of loans; collection of
information and submission of reports pertaining to the mortgage loans and to
monies remitted to ICIFC or the Company by services; periodic review and
evaluation of the performance of each servicer to determine its compliance
with the terms and conditions of each servicing agreement and, if deemed
appropriate, recommending to the Company the termination of such servicing
agreement; acting as a liaison between services and the Company and working
with services to the extent necessary to improve their servicing performance;
review of and recommendations as to fire losses, easement problems and
condemnation, delinquency and foreclosure procedures with regard to the
mortgage loans; review of services' delinquency, foreclosure and other reports
on mortgage loans; supervising claims filed under any mortgage insurance
policies; enforcing the obligation of any servicer to repurchase mortgage
loans from the Company; and coordinating and overseeing the performance of the
servicing of the mortgage loans by the services to ensure that the mortgage
loans meet the Company's eligibility requirements.
Under the terms of the Loan Purchase and Administrative Services Agreement,
ICIFC advances and remits to the Company any payment of principal and interest
and any principal prepayments which another servicer fails to advance or remit
on a timely basis, excluding certain nonrecoverable advances. In addition, if
a servicer defaults in the performance of its servicing duties or, with the
consent of the Company, assigns such duties to the Company, ICIFC assumes the
servicing function of that servicer and all responsibilities set forth in the
related servicing agreement, for the same fee the servicer was receiving at
the time of such default.
Pursuant to the terms of the Loan Purchase and Administrative Services
Agreement, ICIFC receives a monthly administrative services fee equal to 0.02%
of the outstanding principal balance, as of the last day of the month for
which the fee is paid, of the mortgage loans monitored and administered under
the agreement on which principal and interest remittances for such month have
been made in full to the Company. Additionally, ICIFC is be paid for services
rendered under any master servicing agreement which it may enter into with the
Company or any subsidiary of the Company that has issued Collateralized
Mortgage Obligations ("CMOs") or other mortgage collateralized debt, an amount
equal to 0.02% of the average CMO assets for each fiscal quarter. For
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the three months ended March 31, 1996 and the year ended December 31, 1995, no
fees were paid or earned associated with the Loan Purchase and Administrative
Service Agreement.
The Loan Purchase and Administrative Services Agreement remains in force
until one year after November 20, 1995 and thereafter it will be automatically
renewed unless written notice is delivered by either the Company or ICIFC 30
days prior to the end of the term or any renewal term of the agreement.
The Company may terminate the Loan Purchase and Administrative Services
Agreement upon 30 days' notice following the happening of one or more events
specified in the agreement. Such events relate generally to ICIFC's proper and
timely performance of its duties and obligations under the agreement. In
addition, either party may terminate the Loan Purchase and Administrative
Services Agreement without cause upon 30 days' notice.
OTHER TRANSACTIONS
MANAGEMENT AND SUB-SERVICING AGREEMENTS
ICAI oversees the day-to-day operations of the Company, subject to the
supervision of the Company's Board of Directors, pursuant to the Management
Agreement.
ICIFC acts as a servicer of mortgage loans acquired on a servicing released
basis by the Company in its long-term investment operations pursuant to the
terms of a Servicing Agreement which became effective on November 20, 1995.
ICIFC subcontracts all of its servicing obligations under such loans to ICII
pursuant to a sub-servicing agreement. The Company believes that the terms of
such agreement are comparable to industry standards. In the first quarter of
1996, ICII contracted to sell substantially all of its mortgage servicing
portfolio and eliminate a substantial portion of its mortgage servicing
department. In response to ICII's decision to exit the mortgage servicing
business, ICIFC is in the process of negotiations with another third party
sub-servicer. ICIFC expects that the transfer of servicing responsibilities
will take place in June, 1996. However, there are no assurances that ICIFC
will be able to complete the transfer by this date.
BULK MORTGAGE LOAN PURCHASES
During the three months ended March 31, 1996, ICIFC purchased from ICII bulk
mortgage loans packages of 30-year fully amortizing six-month adjustable LIBOR
(London interbank offered rate) and 30- and 15-year fixed rate first and
second trust deed mortgages having a principal balance of $164.2 million with
net premiums paid of $1.9 million. Servicing rights on all mortgage loans were
released to ICIFC.
On December 5, 1995 and December 13, 1995, ICIFC purchased from ICII two
bulk mortgage loan packages of 30-year fully amortizing six-month adjustable
LIBOR and one-year adjustable Treasury Bill rate loans and 30- and 15-year
fixed rate second trust deed mortgages with servicing rights on all mortgage
loans released to ICIFC. The principal balances of the mortgages at the time
of purchase were $172.9 million with net premiums paid of $3.7 million.
On December 29, 1995, ICIFC purchased from SPTL two bulk mortgage loan
packages of 30-year fully amortizing six-month adjustable LIBOR, one-year
adjustable Treasury Bill rate loans and 30- and 15-year fixed rate fully
amortizing mortgage loans. The principal balances of the loans in the
servicing released and servicing retained bulk packages at the time of
purchase were $3.5 million with net premiums paid of $3.5 million.
ICIFC had a 90 day recourse period from the dates of the purchase from ICII
and SPTL for any loan(s) that were 30 to 60 day delinquent and/or lead to
foreclosure. In this case, ICII or SPTL will repurchase the loans from ICIFC
within 15 days of written notice from ICIFC. As to loans that do not have a
prepayment penalty that pay off within the first six months of purchase, ICII
and SPTL will reimburse ICIFC the premium paid at purchase. ICIFC had 60 days
from the date of purchases to complete its due diligence. Any loan that was
found by ICIFC during this period to not comply with ICIFC's underwriting
guidelines, unless an exception is approved by ICIFC, is subject to repurchase
by ICII and SPTL, ICII and SPTL will repurchase the loan(s) within 15 days of
written notice from ICIFC and reimburse ICIFC any fee paid at purchase.
17
<PAGE>
PURCHASE OF MORTGAGE-BACKED SECURITIES
On December 29, 1995, the Company purchased from SPTL DLJ Mortgage
Acceptance Corp. Pass-Through Certificates Series 1995-4, Class B-1 and Class
B-2 issued August 29, 1995. These certificates are backed primarily by a pool
of certain conventional, 11th District Cost of Funds adjustable rate, one-to-
four family, first lien mortgage loans, with terms to maturity of not more
than 30 years. The mortgage loans underlying the certificates were originated
or acquired by ICII. All of the mortgage loans are serviced by ICII in its
capacity as master servicer. The Company purchased Class B-1 certificates
having a current principal balance of $4.8 million and Class B-2 certificates
having a current principal balance of $2.3 million, at a discount of $1.0
million and $0.7 million, respectively. The Class B-1 certificates are "B"
rated and the Class B-2 are "BB" rated. There was no gain or loss recorded by
either party as a result of this transaction.
PURCHASE OF OTHER INVESTMENTS
On December 29, 1995, the Company purchased a subordinated interest in a
lease receivable securitization from Imperial Business Credit, Inc. ("IBC"), a
wholly-owned subsidiary of ICII. The lease receivables underlying the security
were originated by IBC. The Company purchased the subordinated lease
receivables at the present value of estimated cash flows based on a discount
rate of 12% amounting to a purchase price of $8.4 million. As a result of this
transaction, IBC recorded a gain of $164,000. The discount rate used in
determining the purchase price of the asset was confirmed by an independent
third party.
On March 28, 1996, the Company purchased from ICII the beneficial interest
in the Class A Trust Certificate for the Franchise Loan Receivable Trust 1995-
B. The trust is securitized by loans originated by Franchise Mortgage
Acceptance Company, LLC, in which ICII has a 67% ownership interest, and by
the franchisee's assets for the loan. The purchase price was $2.8 million
based upon a discount rate of 16%.
On March 8, 1996, the Company purchased from ICII $5.0 million of its Senior
Note obligations at a price of $4.5 million plus accrued interest. The
obligations are currently unregistered debt of ICII and cannot be traded or
sold by the Company. ICII has agreed to register the notes under the
Securities Act so the Company has the ability to sell them in the future.
The Company may, from time to time, enter into additional transactions in
the ordinary course of business with institutions with which certain of the
Unaffiliated Directors are employed.
18
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company with
respect to beneficial ownership of the Company's Common Stock as of May 15,
1996, by (1) each person known to the Company to beneficially own more than
five percent of the Company's Common Stock, (2) each Director, (3) the
Company's executive officers, and (4) all Directors and executive officers as
a group. Unless otherwise indicated in the footnotes to the table, the
beneficial owners named have, to the knowledge of the Company, sole voting and
investment power with respect to the shares beneficially owned, subject to
community property laws where applicable.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED
------------------------ ------------------ ------------------
<S> <C> <C>
Imperial Credit Industries, Inc.(1)...... 374,538 8.8%
Southern Pacific Thrift and Loan
Association(2).......................... 50,000 1.2%
H. Wayne Snavely......................... -- --
Joseph R. Tomkinson...................... -- --
William S. Ashmore....................... 1,075 (*)
Richard J. Johnson....................... 3,076 (*)
Mary C. Glass............................ -- --
James Walsh.............................. -- --
Frank P. Filipps......................... -- --
Stephan R. Peers......................... -- --
All directors and executive officers as a
group (10 persons)...................... 4,151 (*)
</TABLE>
- --------
(*) Less than 1%.
(1) ICII's address is 23550 Hawthorne Boulevard, Building 1, Suite 110,
Torrance, California 90505.
(2) SPTL's address is 12300 Wilshire Boulevard, Los Angeles, California 90025.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected and appointed KPMG Peat
Marwick LLP to act as the Company's independent accountants for the year
ending December 31, 1996. In recognition of the important role of the
independent accountants, the Board of Directors has determined that its
selection of such accountants should be submitted to the stockholders for
review and ratification on an annual basis.
KPMG Peat Marwick LLP has examined the financial statements of the Company
since its inception. Management is satisfied with their performance to date.
The affirmative vote of a majority of the shares voting on this proposal is
required for its adoption. In view of the difficulty and the expense involved
in changing independent accountants on short notice, if the proposal is not
approved, it is contemplated that the appointment for 1996 may be permitted to
stand, unless the Board of Directors finds other compelling reasons for making
a change. Disapproval of this Proposal will be considered as advice to the
Board of Directors to select other independent accountants for the following
year. Representatives of KPMG Peat Marwick LLP are expected to be present at
the Annual Meeting and will have the opportunity to make a statement if they
desire to do so. They will also be available to respond to appropriate
questions.
19
<PAGE>
STOCKHOLDERS' PROPOSALS
Stockholders' proposals intended to be presented at the Company's next
Annual Meeting of Stockholders to be held in 1997 must be received at the
Company's principal executive offices no later than March 27, 1997, in order
to be considered for inclusion in the proxy statement and form of proxy
relating to that meeting.
OTHER BUSINESS
The Board of Directors knows of no other matter to be acted upon at the
meeting. However, if any other matter shall properly come before the meeting,
the proxyholders named in the proxy accompanying this Proxy Statement will
have discretionary authority to vote all proxies in accordance with their best
judgment.
By Order of the Board of Directors
/s/ RICHARD J. JOHNSON
Richard J. Johnson, Secretary
Dated: June 10, 1996
Santa Ana Heights, California
20
<PAGE>
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON JULY 25, 1996. THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Joseph R. Tomkinson and Richard J. Johnson,
or either of them, each with full power of substitution, as proxies of the
undersigned to attend the Annual Meeting of Stockholders of Imperial Credit
Mortgage Holdings, Inc., at the Sutton Place Hotel, 4500 MacArthur Boulevard,
Newport Beach, California 92660, on the 25th day, July, 1996, at 10:00 A.M.
Pacific Standard Time, and any adjournment or postponement thereof, and to vote
the number of shares the undersigned would be entitled to vote if personally
present on the following.
1. Election of Directors [_] FOR all nominees listed [_] WITHHOLD AUTHORITY
to
below (except as marked vote for all nominees listed
below to the contrary below)
H. Wayne Snavely . Joseph R. Tomkinson . James Walsh
Frank P. Filipps . Stephan R. Peers
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
- -------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR each of the nominees.
2. To approve the amendment of the 1995 Stock Option, Deferred Stock and
Restricted Stock Plan.
The Board of Directors recommends a vote FOR.
FOR [_] AGAINST [_] ABSTAIN [_]
<PAGE>
3. To ratify the appointment of KPMG Peat Marwick LLP as independent
accountants for the year ending December 31, 1996.
The Board of Directors recommends a vote FOR.
FOR [_] AGAINST [_] ABSTAIN [_]
4. In their discretion, upon any and all such other matters as may properly
come before the meeting or any adjournment or postponement thereof.
Dated: , 1996
----------------
----------------------------
Signature
----------------------------
Signature, if held jointly
<PAGE>
EXHIBIT 10.1
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.
1995 STOCK OPTION, DEFERRED STOCK
AND
RESTRICTED STOCK PLAN
SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS.
------------------------------------
(a) This plan is intended to implement and govern the Stock Option,
Deferred Stock and Restricted Stock Plan (the "Plan") of Imperial Credit
Mortgage Holdings, Inc., a Maryland corporation (the "Company"). The Plan was
adopted by the Board on August 31, 1995, subject to the approval of the
Company's stockholders. The purpose of the Plan is to enable the Company, its
Subsidiaries, ICI Funding Corporation, a California corporation ("ICIFC"), and
Imperial Credit Advisors, Inc., a California corporation and a wholly-owned
subsidiary of Imperial Credit Industries, Inc. (the "Manager"), to obtain and
retain competent personnel who will contribute to the Company's success by their
ability, ingenuity and industry, and to provide incentives to such personnel and
members that are linked directly to increases in stockholder value, and will
therefore, inure to the benefit of all stockholders of the Company.
(b) For purposes of the Plan, the following terms shall be defined as set
forth below:
(1) "Award" means any award of Deferred Stock, Restricted Stock, Stock
-----
Appreciation Right, Limited Stock Appreciation Right or Stock Option.
(2) "Board" means the Board of Directors of the Company.
-----
(3) "Code" means the Internal Revenue Code of 1986, as amended from time to
----
time, or any successor thereto.
(4) "Committee" means the Compensation Committee of the Board plus such
---------
additional directors of the Company as the Board shall designate.
(5) "Company" means Imperial Credit Mortgage Holdings, Inc., a corporation
-------
organized under the laws of the State of Maryland (or any successor
corporation).
(6) "Deferred Stock" means an award made pursuant to Section 7 below of the
--------------
right to receive Stock at the end of a specified deferral period.
(7) "Disability" means permanent and total disability as determined under
----------
the Company's disability program or policy.
1
<PAGE>
(8) "Effective Date" shall mean the date provided pursuant to Section 16.
--------------
(9) "Eligible Employee" means an employee of the Company, any Subsidiary,
-----------------
ICIFC or the Manager eligible to participate in the Plan pursuant to Section 4.
(10) "Fair Market Value" means, as of any given date, with respect to any
-----------------
Awards granted hereunder, at the discretion of the Committee and subject to such
limitations as the Committee may impose, (A) the closing sale price of the Stock
on such date as reported in the Western Edition of the Wall Street Journal
Composite Tape or (B) the average on such date of the closing price of the Stock
on each day on which the Stock is traded over a period of up to twenty trading
days immediately prior to such date or (C) if on the date for which current fair
market value is to be determined the Stock is not listed on any securities
exchange or quoted in the NASDAQ System or over-the-counter market, the current
fair market value of the Stock shall be the highest price per share which the
Company could then obtain from a willing buyer (not a current employee or
director) for shares of the Stock sold by the Company, from authorized but
unissued shares, as determined in good faith by the Board.
(11) "ICIFC" means ICI Funding Corporation, a California corporation.
-----
(12) "Incentive Stock Option" means any Stock option intended to be
----------------------
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
(13) "IPO" means the Company's initial public offering of its Stock on
---
Registration Statement Form S-11.
(14) "Limited Stock Appreciation Right" means a Stock Appreciation Right
--------------------------------
that can be exercised only in the event of a Change of Control as defined in
Section 10.
(15) "Manager" means the Imperial Credit Advisors, Inc., a California
-------
corporation and a wholly-owned subsidiary of Imperial Credit Industries, Inc.
(16) "Non-Qualified Stock Option" means any Stock Option that is not an
--------------------------
Incentive Stock Option, including any Stock Option that provides (as of the time
such option is granted) that it will not be treated as an Incentive Stock
Option.
(17) "Parent Corporation" means any corporation (other than the Company) in
------------------
an unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
combined voting power of all classes of stock in one of the other corporations
in the chain.
2
<PAGE>
(18) "Participant" means any Eligible Employee selected by the Committee,
-----------
pursuant to the Committee's authority in Section 2 below, to receive grants of
Stock Options or Awards or any combination of the foregoing.
(19) "Restricted Period" means the period set by the Committee as it
-----------------
pertains to Deferred Stock or Restricted Stock awards pursuant to Section 7.
(20) "Restricted Stock" means an award of shares of Stock that is subject
----------------
to restrictions under Section 7 that will lapse with the passage of time or upon
the attainment of performance objectives.
(21) "Stock" means the Common Stock, $.01 par value per share, of the
-----
Company.
(22) "Stock Appreciation Right" means the right pursuant to an award
------------------------
granted under Section 6 below to receive an amount equal to the difference
between (i) the Fair Market Value, as of the date such Stock Appreciation Right
or portion thereof is surrendered, of the shares of Stock covered by such right
or such portion thereof and (ii) the aggregate exercise price of such right or
such portion thereof.
(23) "Stock Option" means any option to purchase shares of Stock granted
------------
pursuant to Section 5.
(24) "Subsidiary" means any corporation (other than the Company) in an
----------
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
SECTION 2. ADMINISTRATION.
(a) The Plan shall be administered by the Committee which shall be
appointed by the Board and which shall serve at the pleasure of the Board.
(b) The Committee shall have the power and authority to grant to Eligible
Employees, pursuant to the terms of the Plan: (A) Stock Options, (B) Stock
Appreciation Rights, (C) Deferred Stock, (D) Restricted Stock, or (E) any
combination of the foregoing.
In particular, the Committee shall have the authority;
(1) to select those employees of the Company, any Subsidiary, ICIFC or the
Manager who are Eligible Employees;
(2) to determine whether and to what extent Stock Options, Stock
Appreciation Rights, Deferred Stock, Restricted
3
<PAGE>
Stock or a combination of the foregoing, are to be granted to Eligible Employees
hereunder;
(3) to determine the number of shares of Stock to be covered by each such
Award;
(4) to determine the terms and conditions, not inconsistent with the terms
of the Plan, of any such Award including, but not limited to, (x) the restricted
period applicable to Deferred Stock or Restricted Stock awards, (y) the date or
dates on which restrictions applicable to such Deferred Stock or Restricted
Stock shall lapse during such period, and (z) when and in what increments shares
covered by Stock Options may be purchased; and
(5) to determine the terms and conditions, not inconsistent with the terms
of the Plan, which shall govern all written instruments evidencing the Stock
Options, Stock Appreciation Rights, Deferred Stock, Restricted Stock or any
combination of the foregoing.
(c) The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall
from time to time deem advisable; to interpret the terms and provisions of the
Plan and any Award issued under the Plan; and to otherwise supervise the
administration of the Plan.
(d) All decisions made by the Committee pursuant to the provisions of the
Plan shall be final and binding on all persons, including the Company, any
Subsidiaries, ICIFC, the Manager and the Participants.
SECTION 3. STOCK SUBJECT TO PLAN.
(a) The total number of shares of Stock reserved and available for issuance
under the Plan shall be 800,000 shares. Such shares shall consist of authorized
but unissued shares.
(b) To the extent that (i) a Stock Option expires or is otherwise
terminated without being exercised or (ii) any shares of Stock subject to any
Deferred Stock or Restricted Stock award granted hereunder are forfeited, such
shares shall again be available for issuance in connection with future Awards
under the Plan. If any shares of Stock have been pledged as collateral for
indebtedness incurred by a Participant in connection with the exercise of a
Stock Option and certificates representing such shares are surrendered to the
Company in satisfaction of such indebtedness, such shares shall again be
available for issuance in connection with future Awards under the Plan.
(c) In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Stock, a substitution or
4
<PAGE>
adjustment shall be made in (i) the aggregate number of shares reserved for
issuance under the Plan, and (ii) the kind, number and option price of shares
subject to outstanding Stock Options granted under the Plan as may be determined
by the Committee, in its sole discretion, provided that the number of shares
subject to any Award shall always be a whole number. Such other substitutions or
adjustments shall be made as may be determined by the Committee, in its sole
discretion. An adjusted option price shall also be used to determine the amount
payable by the Company upon the exercise of any Stock Appreciation Right.
SECTION 4. ELIGIBILITY.
(a) Officers and other key employees of the Company, any Subsidiaries,
ICIFC or the Manager who are responsible for or contribute to the management,
growth and/or profitability of the business of the Company or its Subsidiaries,
and the directors of the Company, ICIFC and the Manager, shall be eligible to be
granted Non-Qualified Stock Options, Stock Appreciation Rights, and Deferred
Stock or Restricted Stock awards hereunder. Officers and other key employees of
the Company or its Subsidiaries shall also be eligible to be granted Incentive
Stock Options hereunder. The Participants under the Plan shall be selected from
time to time by the Committee, in its sole discretion, from among Eligible
Employees recommended by the senior management of the Company, and the Committee
shall determine, in its sole discretion, the number of shares covered by each
Award.
(b) The Manager shall be eligible to be granted Non-Qualified Stock Options
hereunder.
(c) Notwithstanding the foregoing, an Eligible Employee shall not be
eligible to be granted an Award under this Plan if he/she is deemed to own more
than 9.7% (in value or in number of shares, whichever is more restrictive) of
the aggregate of the outstanding shares of Common Stock of the Company. For
this purpose, the term "ownership" is defined in accordance with the Real Estate
Investment Trust provisions of the Code, the constructive ownership provisions
of section 544 of the Code, as modified by Section 856(1)(b) of the Code, and
Rule 13d-3 promulgated by the Securities and Exchange Commission under the
Exchange Act of 1934, as amended.
SECTION 5. STOCK OPTION FOR ELIGIBLE EMPLOYEES AND THE MANAGER.
(a) Stock Options may be granted to Eligible Employees or the Manager
alone or in addition to other Awards granted under the Plan. Any Stock Option
granted under the Plan shall be in such form as the Committee may from time to
time approve, and the provisions of Stock Options need not be the same with
respect to each optionee. Recipients of Stock Options shall enter into a Stock
Option Agreement with the Company, in such form as the Committee shall
determine, which agreement shall set forth, among other
5
<PAGE>
things, the exercise price of the option, the term of the option and provisions
regarding exercisability of the option granted thereunder.
i) The Stock Options granted under the Plan to Eligible Employees
may be of two types: (x) Incentive Stock Options and (y) Non-
Qualified Stock Options.
ii) The Committee shall have the authority to grant any Eligible
Employee (x) Incentive Stock Options (provided such Eligible
Employee is also an employee of the Company or its Subsidiaries),
(y) Non-Qualified Stock Options, or (z) both types of Stock
Options (in each case with or without Stock Appreciation Rights
or Limited Stock Appreciation Rights). To the extent that any
Stock Option does not qualify as an Incentive Stock Option, it
shall constitute a separate Non-Qualified Stock Option.
iii) The Stock Options granted under the Plan to the Manager must
be Non-Qualified Stock Options.
(b) Stock Options granted under this Section 5 shall be subject to
the following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee shall
deem desirable:
i) Option Price. The option price per share of Stock purchasable
------------
under a Stock Option shall be determined by the Committee at the
time of grant but shall be not less than 100% of the Fair Market
Value of the Stock on such date. If an employee owns or is
deemed to own (by reason of the attribution rules applicable
under Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company or any Parent
Corporation or Subsidiary and an Incentive Stock Option is
granted to such employee, the option price of such Incentive
Stock Option (to the extent required by the Code at the time of
grant) shall be no less than 110% of the Fair Market Value of the
Stock on the date such Incentive Stock Option is granted.
ii) Option Term. The term of each Stock Option shall be fixed
-----------
by the Committee, but no Stock Option shall be exercisable more
than ten years after the date such Stock Option is granted;
provided, however, that if an employee owns or is deemed to own
-------- -------
(by reason of the attribution rules
6
<PAGE>
of Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company or any Parent
Corporation or Subsidiary and an Incentive Stock Option is
granted to such employee, the term of such Incentive Stock Option
(to the extent required by the Code at the time of grant) shall
be no more than five years from the date of grant.
(c) Exercisability. Stock Options shall be exercisable at such time
--------------
or times and subject to such terms and conditions as shall be determined by the
Committee at or after grant; provided, however, that, except as provided herein
-------- -------
or unless otherwise determined by the Committee at or after grant, Stock Options
shall be exercisable one year following the date of grant of the option. If the
Committee provides, in its discretion, that any Stock Option is exercisable only
in installments, the Committee may waive such installment exercise provisions at
any time in whole or in part based on such factors as the Committee may
determine in its sole discretion.
(d) Method of Exercise. Subject to Section 5(c) above, Stock Options
------------------
may be exercised in whole or in part at any time during the option period, by
giving written notice of exercise to the Company specifying the number of shares
to be purchased, accompanied by payment in full of the purchase price in cash or
its equivalent, as determined by the Committee. As determined by the Committee,
in its sole discretion, payment in whole or in part may also be made (i) in the
form of unrestricted Stock already owned by the optionee, or, in the case of the
exercise of a Non-Qualified Stock Option, Restricted Stock subject to an Award
hereunder (based, in each case, on the Fair Market Value of the Stock on the
date the option is exercised), (ii) by cancellation of any indebtedness owed by
the Company to the optionee, (iii) by a full recourse promissory note executed
by the optionee, or (iv) by any combination of the foregoing; provided, however,
-------- -------
that in the case of an Incentive Stock Option, the right to make payment in the
form of already owned shares may be authorized only at the time of grant. An
optionee shall generally have the rights to dividends and other rights of a
stockholder with respect to shares subject to the option only after the optionee
has given written notice of exercise, has paid in full for such shares, and, if
requested, has given the representation described in paragraph (a) of
Section 11.
(e) The Committee may require the voluntary surrender of all or a
portion of any Stock Option granted under the Plan as a condition precedent to a
grant of a new Stock Option. Subject to the provisions of the Plan, such new
Stock Option shall be exercisable at the price, during such period and on such
other terms and conditions as are specified by the Committee at the time the new
Stock Option is granted; provided, however, should the Committee so require, the
-------- -------
number of shares subject to such new Stock Option shall not be greater than the
number of shares subject to the surrendered Stock Option. Upon their surrender,
the Stock
7
<PAGE>
Options shall be canceled and the shares previously subject to such canceled
Stock Options shall again be available for the grants of Stock Options and other
Awards hereunder.
(f) Loans. The Company may make loans available to Stock Option
-----
holders as the Committee, in its discretion, may determine in connection with
the exercise of outstanding options granted under the Plan. Such loans shall
(i) be evidenced by promissory notes entered into by the holders in favor of the
Company, (ii) be subject to the terms and conditions set forth in this Section
5(f) and such other terms and conditions, not inconsistent with the Plan, as the
Committee shall determine, (iii) bear interest, if any, at such rate as the
Committee shall determine and (iv) be subject to Board approval. In no event
may the principal amount of any such loan exceed the sum of (x) the exercise
price less the par value of the shares of Stock covered by the option, or
portion thereof, exercised by the holder and (y) any Federal, state, local
income tax attributable to such exercise. The initial term of the loan, the
schedule of payments of principal and interest under the loan, the extent to
which the loan is to be with or without recourse against the holder with respect
to principal or interest and the conditions upon which the loan will become
payable in the event of the holder's termination of employment shall be
determined by the Committee; provided, however, that the term of the loan,
-------- -------
including extensions, shall not exceed seven years. Unless the Committee
determines otherwise, when a loan shall have been made, shares of Common Stock
having a Fair Market Value at least equal to the principal amount of the loan
shall be pledged by the holder to the Company as security for payment of the
unpaid balance of the loan, and such pledge shall be evidenced by a pledge
agreement, the terms of which shall be determined by the Committee, in its
discretion; provided, however, that each loan shall comply with all applicable
-------- -------
laws, regulations and rules of the Board of Governors of the Federal Reserve
System and any other governmental agency having jurisdiction.
(g) Non-transferability of Options. No Stock Options shall be
------------------------------
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee. No disposition of an Optioned Share
may be made by optionee within two (2) years from the date of the granting of
the Option(s) nor within one (1) year after the transfer of such Optioned Share
to him.
(h) Termination by Death. If an optionee's employment with the
--------------------
Company and any Subsidiary terminates by reason of death, the Stock Option may
thereafter be immediately exercised, to the extent then exercisable (or on such
accelerated basis as the Committee shall determine at or after grant), by the
legal representative of the estate or by the legatee of the optionee under the
will of the optionee, for a period of twelve months (or such shorter period as
the Committee shall specify at grant) from
8
<PAGE>
the date of such death or until the expiration of the stated term of such Stock
Option, whichever period is shorter.
(i) Termination by Reason of Disability. If an optionee's employment
-----------------------------------
with the Company, any Subsidiary, ICIFC or the Manager terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable at the time of such termination (or on such
accelerated basis as the Committee shall determine at the time of grant), for a
period of twelve months (or such shorter period as the Committee shall specify
at grant) from the date of such termination of employment or until the
expiration of the stated term of such Stock Option, whichever period is shorter;
provided, however, that, if the optionee dies within such twelve-month period
- -------- -------
(or such shorter period as the Committee shall specify at grant) and prior to
the expiration of the stated term of such Stock Option, any unexercised Stock
Option held by such optionee shall thereafter be exercisable to the extent to
which it was exercisable at the time of death for a period of twelve months (or
such shorter period as the Committee shall specify at grant) from the time of
death or until the expiration of the stated term of such Stock Option, whichever
period is shorter. In the event of a termination of employment by reason of
Disability, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, such
Stock Option will thereafter be treated as a Non-Qualified Stock Option.
(j) Other Termination. Except as otherwise provided in this paragraph
-----------------
or otherwise determined by the Committee, if an optionee's employment with the
Company, any Subsidiary, ICIFC or the Manager terminates for any reason other
than death or Disability, the Stock Option may be exercised until the earlier to
occur of (A) three months from the date of such termination or (B) the
expiration of such Stock Option's term.
(k) Annual Limit on Incentive Stock Options. To the extent that the
---------------------------------------
aggregate Fair Market Value (determined as of the date the Incentive Stock
Option is granted) of the shares of Stock with respect to which Incentive Stock
Options granted under this Plan and all other option plans of the Company, its
Parent Corporation and any Subsidiary become exercisable for the first time by
an optionee during any calendar year exceed $100,000, such options shall be
treated as Non-Qualified Stock Options.
(l) Annual Limit on Stock Options. More than one Stock Option may be
-----------------------------
granted to an Eligible Employee during any fiscal year of the Company, but the
aggregate number of shares of Stock underlying Stock Options granted to any
Eligible Employee during any such fiscal year shall not exceed fifty percent
(50%) of the shares of Stock reserved for issuance under the Plan pursuant to
Section 3 of the Plan.
9
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SECTION 6. STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise. Stock Appreciation Rights may be granted to
------------------
Eligible Employees either alone ("Free Standing Rights") or in conjunction with
all or part of any Stock Option granted under the Plan ("Related Rights"). In
the case of a Non-Qualified Stock Option, Related Rights may be granted either
at or after the time of the grant of such Stock Option. In the case of an
Incentive Stock Option, Related Rights may be granted only at the time of the
grant of the Incentive Stock Option.
A Related Right or applicable portion thereof granted with respect to
a given Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Stock Option, except that, unless
otherwise provided by the Committee at the time of grant, a Related Right
granted with respect to less than the full number of shares covered by a related
Stock Option shall only be reduced if and to the extent that the number of
shares covered by the exercise or termination of the related Stock Option
exceeds the number of shares not covered by the Stock Appreciation Right.
A Related Right may be exercised by an optionee, in accordance with
paragraph (b) of this Section 6, by surrendering the applicable portion of the
related Stock Option. Upon such exercise and surrender, the optionee shall be
entitled to receive an amount determined in the manner prescribed in paragraph
(b) of this Section 6. Stock Options which have been so surrendered, in whole or
in part, shall no longer be exercisable to the extent the Related Rights have
been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject
--------------------
to such terms and conditions, not inconsistent with the provisions of the Plan,
as shall be determined from time to time by the Committee, including the
following;
i) Stock Appreciation Rights that are Related Rights ("Related
Stock Appreciation Rights") shall be exercisable only at such
time or times and to the extent that the Stock Options to which
they relate shall be exercisable in accordance with the
provisions of Section 5 and this Section 6 of the Plan; provided,
--------
however, that any Related Stock Appreciation Right shall not be
-------
exercisable during the first six months of the term of the
Related Stock Appreciation Right, except that this additional
limitation shall not apply in the event of death or Disability of
the optionee prior to the expiration of the six-month period.
ii) Upon the exercise of a Related Stock Appreciation Right, an
optionee shall be entitled to receive up to, but not more than,
an amount in cash or that number of shares of Stock (or in some
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<PAGE>
combination of cash and shares of Stock) equal in value to the
excess of the Fair Market Value of one share of Stock over the
option price per share specified in the related Stock Option
multiplied by the number of shares in respect of which the
Related Stock Appreciation Right shall have been exercised, with
the Committee having the right to determine the form of payment.
(c) Related Stock Appreciation Rights shall be transferable only when
and to the extent that the underlying Stock Option would be transferable under
paragraph (g) of Section 5 of the Plan.
(d) Upon the exercise of a Related Stock Appreciation Right, the
Stock Option or part thereof to which such Related Stock Appreciation Right is
related shall be deemed to have been exercised for the purpose of the limitation
set forth in Section 3 of the Plan on the number of shares of Stock to be issued
under the Plan, but only to the extent of the number of shares issued under the
Related Stock Appreciation Right.
(e) A Related Stock Appreciation Right granted in connection with an
Incentive Stock Option may be exercised only if and when the market price of the
stock subject to an Incentive Stock Option exceeds the exercise price of such
Stock Option.
(f) Stock Appreciation Rights that are Free Standing Rights ("Free
Standing Stock Appreciation Rights") shall be exercisable at such time or times
and subject to such terms and conditions as shall be determined by the Committee
at or after grant; provided, however, that Free Standing Stock Appreciation
-------- -------
Rights shall not be exercisable during the first six months of the term of the
Free Standing Stock Appreciation Right, except that this limitation shall not
apply in the event of death or Disability of the recipient of the Free Standing
Stock Appreciation Right prior to the expiration of the six-month period.
(g) The term of each Free Standing Stock Appreciation Right shall be
fixed by the Committee, but no Free Standing Stock Appreciation Right shall be
exercisable more than ten years after the date such right is granted.
(h) Upon the exercise of a Free Standing Stock Appreciation Right, a
recipient shall be entitled to receive up to, but not more than, an amount in
cash or that number of shares of Stock (or any combination of cash or shares of
Stock) equal in value to the excess of the Fair Market Value of one share of
Stock over the price per share specified in the Free Standing Stock Appreciation
Right (which shall be no less than 100% of the Fair Market Value of the Stock on
the date of grant) multiplied by the number of shares in respect to which the
right is being exercised, with the Committee having the right to determine the
form of payment.
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(i) No Free Standing Stock Appreciation Right shall be transferable by
the recipient otherwise than by will or by the laws of descent and distribution,
and all such rights shall be exercisable, during the recipient's lifetime, only
by the recipient.
(j) In the event of the termination of an employee who has received
Free Standing Stock Appreciation Rights, such rights shall be exercisable to the
same extent that a Stock Option would have been exercisable in the event of the
termination of the optionee.
SECTION 7. DEFERRED STOCK AND RESTRICTED STOCK.
(a) General. Deferred Stock and Restricted Stock awards may be issued
-------
to Eligible Employees either alone or in addition to other Awards granted under
the Plan. The Committee shall determine to whom, and the time or times at
which, grants of Deferred Stock or Restricted Stock awards will be made; the
number of shares to be awarded; the price, if any, to be paid by the recipient
of Deferred Stock or Restricted Stock awards; the Restricted Period (as defined
in paragraph (c) hereof) applicable to Deferred Stock or Restricted Stock
awards; the performance objective applicable to Deferred Stock or Restricted
Stock awards; the date or dates on which restrictions applicable to such
Deferred Stock or Restricted Stock awards shall lapse during such Restricted
Period; and all other conditions of the Deferred Stock or Restricted Stock
awards. The Committee may also condition the grant of Deferred Stock or
Restricted Stock awards upon the exercise of Stock Options, or upon such other
criteria as the Committee may determine, in its sole discretion. The provisions
of Deferred Stock or Restricted Stock awards need not be the same with respect
to each recipient.
(b) Awards and Certificates. The prospective recipient of a
-----------------------
Deferred Stock or Restricted Stock award shall not have any rights with respect
to such Award, unless and until such recipient has executed an agreement
evidencing the Award (an "Award Agreement") and has delivered a fully executed
copy thereof to the Company, within a period of sixty days (or such other period
as the Committee may specify after the Award date).
Each Participant who is awarded Restricted Stock shall be issued a
stock certificate in respect of such shares of Restricted Stock; and such
certificate shall be registered in the name of the Participant, and shall bear
an appropriate legend referring to the terms, conditions, and restrictions
applicable to such Award, substantially in the following form:
The shares of stock represented by this certificate are subject to
restrictions and limitations on transferability contained in the Imperial
Credit Mortgage Holdings, Inc. 1995 Stock Option, Deferred Stock and
Restricted Stock Plan (the "Plan") and a Restricted Stock Award Agreement
(the "Agreement") entered into between
12
<PAGE>
the registered owner of the shares of stock represented by this certificate
and Imperial Credit Mortgage Holdings, Inc., a Maryland corporation (the
"Company"). Copies of the Plan and the Agreement will be furnished by the
Company to any holder of this certificate upon request and without charge.
The Company shall require that the stock certificates evidencing such
shares be held in the custody of the Company until the restrictions thereon
shall have lapsed, and that, as a condition of any Restricted Stock award, the
Participant shall have delivered a stock power, endorsed in blank, relating to
the Stock covered by such Award.
With respect to Deferred Stock awards, at the expiration of the
Restricted Period, stock certificates in respect of such shares of Deferred
Stock shall be delivered to the Participant, or his legal representative, in a
number equal to the shares of Stock covered by the Deferred Stock award.
(c) Restriction and Conditions. The Deferred Stock or Restricted
--------------------------
Stock awards granted pursuant to this Section 7 shall be subject to the
following restrictions and conditions:
(i) Subject to the provisions of the Plan and the Deferred Stock or
Restricted Stock Award Agreements, during such period as may be set by the
Committee commencing on the grant date (the "Restricted Period"), the
Participant shall not be permitted to sell, transfer, pledge or assign shares of
Deferred Stock awarded under the Plan. Within these limits, the Committee may,
in its sole discretion, provide for the lapse of such restrictions in
installments and may accelerate or waive such restrictions in whole or in part
based on such factors and such circumstances as the Committee may determine, in
its sole discretion, including, but not limited to, the attainment of certain
performance related goals, the Participant's termination, death or Disability or
the occurrence of a "Change of Control" as defined in Section 10 below.
(ii) With respect to Deferred Stock awards, the Participant shall
generally not have the rights of a stockholder of the Company, including the
right to vote the shares during the Restricted Period; provided, however, that
-------- -------
dividends declared during the Restricted Period with respect to the number of
shares covered by a Deferred Stock award shall be paid to the Participant.
Certificates for shares of unrestricted Stock shall be delivered to the
Participant promptly after, and only after, the Restricted Period shall expire
without forfeiture in respect of such shares of Deferred Stock, except as the
Committee shall otherwise determine. With respect to the shares of Restricted
Stock, except as provided in paragraph (b) of this Section 7, the Participant
shall have all of the rights of a stockholder of the Company, including the
right to vote the shares, and the right to receive any dividends thereon during
the Restricted Period.
13
<PAGE>
(iii) Subject to the provisions of the Deferred Stock or Restricted
Stock Award Agreement and this Section 7, upon termination of employment for any
reason during the Restricted Period, all shares still subject to restriction
shall be forfeited by the Participant, and the Participant shall only receive
the amount, if any, paid by the Participant for such Deferred Stock or
Restricted Stock, plus simple interest at 8% per year.
SECTION 8. AMENDMENT AND TERMINATION.
(a) The Board may amend, alter or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made that would impair the
rights of the Participant under any Award theretofore granted without such
Participant's consent, or that without the approval of the stockholders (as
described below) would:
(i) except as provided in Section 3, increase the total number of
shares of Stock reserved for the purpose of the Plan;
(ii) except as provided in this Plan, decrease the option price of any
Stock Option to less than 100% of the Fair Market Value on the
date of the grant of the option;
(iii) materially change the employees or class of employees eligible to
participate in the Plan;
(iv) materially increase the benefits accruing to Participants under
the Plan; or
(v) extend the maximum option period under paragraph (b) of Section 5
of the Plan.
(b) The Committee may amend the terms of any Award theretofore
granted, prospectively or retroactively, but, subject to Section 3 above, no
such amendment shall impair the rights of any holder without his or her consent.
SECTION 9. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments not yet made to a Participant or
optionee by the Company, nothing contained herein shall give any such
Participant or optionee any rights that are greater than those of a general
creditor of the Company.
SECTION 10. CHANGE OF CONTROL.
The following acceleration and valuation provisions shall apply in the
event of a "Change of Control", as defined in paragraph (b) of this Section 10:
14
<PAGE>
(a) in the event of a "Change of Control," unless otherwise determined
by the Committee or the Board in writing at or after grant (including under any
individual agreement), but prior to the occurrence of such Change of Control;
(i) any Stock Appreciation Rights outstanding for at least six
months and any Stock Options awarded under the Plan not previously exercisable
and vested shall become fully exercisable and vested;
(ii) the restrictions applicable to any Restricted Stock or
Deferred Stock awards under the Plan shall lapse, and such shares and Awards
shall be deemed fully vested;
(iii) any indebtedness incurred pursuant to Section 5(f) above
shall be forgiven and the collateral pledged in connection with any such loan
shall be released; and
(iv) the value of all outstanding Stock Options, Stock
Appreciation Rights, Limited Stock Appreciation Rights, Restricted Stock and
Deferred Stock awards shall, to the extent determined by the Committee at or
after grant, be cashed out on the basis of the "Change of Control Price" (as
defined in paragraph (c) of this Section 10) as of the date the Change of
Control occurs or such other date as the Committee may determine prior to the
Change of Control.
(b) For purposes of paragraph (a) of this Section 10, a "Change of
Control" shall be deemed to have occurred if;
(i) Any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934 (the "Exchange Act") (other than the
Company; any trustee or other fiduciary holding securities under an employee
benefit plan of the Company; or any company owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as their
ownership of the Stock of the Company) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company (not including in the securities beneficially owned by
such Person or any securities acquired directly from the Company or its
affiliates) representing 30% or more of the combined voting power of the
Company's then outstanding securities; or
(ii) during any period of two consecutive years (not including any
period prior to the Effective Date), individuals who at the beginning of such
period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clause (i), (iii) or (iv) of this Section
10(b)) whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for
15
<PAGE>
election was previously so approved, cease for any reason to constitute at least
a majority thereof; or
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (A) a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, at
least 75% of the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation or (B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquires more than 50% of the combined voting power of the Company's then
outstanding securities; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
(c) For purposes of this Section 10, "Change of Control Price" means
the higher of (i) the highest price per share paid or offered in any transaction
related to a Change of Control of the Company or (ii) the highest price per
share paid in any transaction reported on the exchange or national market system
on which the Stock is listed, at any time during the preceding sixty day period
as determined by the Committee, except that, in the case of Incentive Stock
Options and Stock Appreciation Rights or Limited Stock Appreciation Rights
relating to Incentive Stock Options, such price shall be based only on
transactions reported for the date on which the Committee decides to cash out
such options.
SECTION 11. GENERAL PROVISIONS.
(a) The Committee may require each person (including the Manager)
purchasing shares pursuant to a Stock Option to represent to and agree with the
Company in writing that such person is acquiring the shares without a view to
distribution thereof. The certificates for such shares may include any legend
which the Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock delivered under the Plan shall be
subject to such stock-transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commissions, any stock exchange upon which the Stock is
then listed, and any applicable Federal or state securities law, and the
Committee may cause a legend or legends to be placed on any such certificates to
make appropriate reference to such restrictions.
16
<PAGE>
(b) Nothing contained in the Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of the
Plan shall not confer upon any employee of the Company or any Subsidiary any
right to continued employment with the Company or a Subsidiary, as the case may
be, nor shall it interfere in any way with the right of the Company or a
Subsidiary to terminate the employment of any of its employees at any time.
(c) Each Participant shall, no later than the date as of which the
value of an Award first becomes includable in the gross income of the
Participant for Federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Committee regarding payment of, any Federal,
state, or local taxes of any kind required by law to be withheld with respect to
the Award. The obligations of the Company under the Plan shall be conditional
on such payment or arrangements, and the Company (and, where applicable, its
Subsidiaries) shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise due to the Participant.
(d) No member of the Board or the Committee, nor any officer or
employee of the Company acting on behalf of the Board or the Committee, shall be
personally liable for any action, determination, or interpretation taken or made
in good faith with respect to the Plan, and all members of the Board or the
Committee and each and any officer or employee of the Company acting on their
behalf shall, to the extent permitted by law, be fully indemnified and protected
by the Company in respect of any such action, determination or interpretation.
SECTION 12. SPECIFIC PERFORMANCE.
The Stock Options granted under this Plan and the Shares issued
pursuant to the exercise of such Stock Options cannot be readily purchased or
sold in the open market, and, for that reason among others, the Company and its
stockholders will be irreparably damaged in the event that this Plan is not
specifically enforced. In the event of any controversy concerning the right or
obligation to purchase or sell any such Option or Optioned Stock, such right or
obligation shall be enforceable in a court of equity by a decree of a specific
performance. Such remedy shall, however, be cumulative and not exclusive, and
shall be in addition to any other remedy which the parties may have.
SECTION 13. INVALID PROVISION.
In the event that any provision of this Plan is found to be invalid or
otherwise unenforceable under any applicable law, such invalidity or
unenforceability shall not be construed as rendering any other provisions
contained herein invalid or unenforceable, and all such other provisions shall
be given full
17
<PAGE>
force and effect to the same extent as though the invalid unenforceable
provision was not contained herein.
SECTION 14. APPLICABLE LAW.
This Plan shall be governed by and construed in accordance with the
laws of the State of Maryland.
SECTION 15. SUCCESSORS AND ASSIGNS.
This Plan shall be binding on and inure to the benefit of the Company
and the employees to whom an Option is granted hereunder, and such employees'
heirs, executors, administrators, legatees, personal representatives, assignees
and transferees.
SECTION 16. EFFECTIVE DATE OF PLAN.
The Plan became effective (the "Effective Date") on August 31, 1995.
SECTION 17. TERM OF PLAN.
No Stock Option, Stock Appreciation Right, Deferred Stock or
Restricted Stock award shall be granted pursuant to the Plan on or after the
tenth anniversary of the Effective Date, but Awards theretofore granted may
extend beyond that date.
18
<PAGE>
IN WITNESS WHEREOF, pursuant to the due authorization and adoption of this
plan by the Board on the day and year first above written, the Company has
caused this Plan to be duly executed by its duly authorized officers.
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.
By:___________________________________
Joseph R. Tomkinson,
Chief Executive Officer
19
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EXHIBIT 13
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.
1995 ANNUAL REPORT
IMH has been integral in the
mortgage financing industry
since its inception. By correctly
matching investors with mortgage
products, IMH creates financing
[ART]
opportunities allowing all
Americans to realize the "American
Dream" of home ownership while
providing a valuable investment
opportunity for others.
<PAGE>
Imperial Credit Mortgage Holdings, Inc.
[The management's inherent ability to react to ever changing market conditions
makes Imperial Credit Mortgage Holdings stand apart from the competition.
Kathy Murray,
Vice President,
Operations,
ICIFC]
Fellow Stockholders:
[ART]
On behalf of the management team of Imperial Credit Mortgage Holdings, Inc. (the
"Company," AMEX-"IMH"), we would like to welcome you as a stockholder.
On November 20, 1995 the Company was formed as a Real Estate Investment
Trust ("REIT") with three goals in mind: (1) to create quality, higher yielding
non-conforming mortgage loans through our conduit operation, ICI Funding
Corporation ("ICIFC"); (2) to retain a certain amount of these mortgage loans
which meet our investment criteria for the long-term investment portfolio; and
(3) to securitize and sell the remaining mortgage loans in the secondary market.
The objective of this strategy is to increase stockholder value through
consistent earnings and quarterly dividends. To realize these goals, the Company
operates three compatible businesses: the newly-formed REIT together with two
ongoing operations contributed by Imperial Credit Industries, Inc. (NASDAQ -
"ICII"), a leading diversified specialty finance company and sponsor of the
Company's initial public offering. The two businesses contributed by ICII are
ICIFC and Imperial Warehouse Lending Group, Inc. ("IWLG").
ICIFC specializes in acquiring higher-yielding, quality non-conforming
mortgage loans which do not correspond to the Federal National Mortgage
Association's ("Fannie Mae") and Federal Home Loan Mortgage Corporation's
("Freddie Mac") investment guidelines. We believe higher-yielding, quality
loans characteristically provide our Company with a higher net yield in a
historically low interest rate environment. Securitization of these loans by the
investment banking community has also increased dramatically as well, thus
providing more liquidity in the market for these loans. The decline of interest
rates in general make non-conforming loans more affordable to borrowers, and the
end of the "refi boom" of 1992 and 1993 have caused mortgage bankers to seek
alternative financing for customers. These issues, coupled with the minimal
income growth in the United
2
<PAGE>
States over the past 15 years, have paved the way for our Company to secure
itself as a low-cost provider, purchaser and investor of innovative mortgage
loans designed to meet the needs of our borrowers.
The philosophy of the Company is to provide our customers with a marketing
strategy that offers efficient response time in the purchase process, direct and
frequent contact through a capable, experienced sales force and flexible
mortgage loan programs with competitive pricing. Additionally, ICIFC provides
its customers, through IWLG, short-term lines of credit ("warehouse lines") to
assist customers in the funding of their mortgages.
During the period November 20, 1995 through December 31, 1995 and for the
quarter ended March 31, 1996, ICIFC acquired $540.6 million and $280.5 million,
respectively, in mortgage loans. The mortgage loans were acquired through bulk
purchases and ICIFC's internal acquisitions together with acquisitions from ICII
and its subsidiary, Southern Pacific Thrift and Loan Association. Through this
unique relationship with ICII and its subsidiaries, the Company is able to take
advantage of synergistic opportunities not commonly available with other
mortgage REITs. In addition, ICII provides the Company with the ability to
predict operating costs by outsourcing many services, such as management
information systems, human resources and facilities management.
Our management team has established a culture that empowers employees to
create, design, implement and manage their business as if it were their own. The
result of this culture is the core of our mission statement, "Attain
profitability and growth through consistently exceeding our customers'
expectations."
For the period November 20, 1995 through December 31, 1995, the Company
reported net income and earnings per share of $315,443 or $0.07. On January 25,
1996, the Company paid a dividend of $0.08 per share to our stockholders which
is well above analyst expectations. On April 16, 1996, the Company reported its
first full
[I believe this company has great potential for temperate growth. Unlike the
competition, it can shrink and grow with changes in mortgage levels with minimal
impact to the Company's organizational structure.
Jim Dickinson
Vice President,
Seller Administration,
ICIFC]
3
<PAGE>
Imperial Credit Mortgage Holdings, Inc.
[PHOTO] H. Wayne Snavely
[PHOTO] Joseph R. Tomkinson
[PHOTO] William Ashmore
quarter results for the period ended March 31, 1996. Net income and earnings per
share were $1,693,639 and $0.39, respectively. The Company declared a dividend
to its stockholders of $0.39 which was paid on April 30, 1996. The annualized
yield for the period of November 20, 1995 through December 31, 1995 and for
the first quarter 1996 was 5% and 12%, respectively. Return on the average
stockholder's equity for the quarter ended March 31, 1996 was 15%. Net interest
income and net interest margins were $4.0 million and 2.6% for the quarter
ended March 31, 1996.
Consistent with the Company's foresight and business strategy, the Company
completed its first securitization of $175 million of fixed rate, non-conforming
mortgage loans during the first quarter of 1996. The Company also committed to
securitize an additional $300 million of non-conforming mortgage loans to be
structured as a Collateralized Mortgage Obligation ("CMO"). The financial impact
of the CMO will be to more easily predict the prospective income of the Company.
In the future, the Company will continue capitalizing on its relationship
with ICII and its subsidiaries. ICII offers the Company numerous opportunities
on a first-look basis to buy a variety of loan products which the Company may,
in turn, hold for investment or sell to the secondary market. Finally, the
Company plans to expand its mortgage warehouse lending relationships to small
and to medium-sized mortgage banks.
We express our sincere gratitude for investing in IMH. Our ultimate goal is
to consistently make IMH a highly profitable Company, well deserving of a valued
place in your investment portfolio.
Cordially,
/s/ H. Wayne Snavely /s/ Joseph R. Tomkinson
H. Wayne Snavely Joseph R. Tomkinson
Chairman Vice Chairman and
Chief Executive Officer
/s/ William Ashmore
William Ashmore
President
May 15, 1996
4
