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SCHEDULE 14A INFORMATION
(Rule 14a-101)
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 COMMERCIAL MORTGAGE INVESTMENT CORP.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] 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:
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IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT CORP.
11601 WILSHIRE BLVD., SUITE 2080
LOS ANGELES, CALIFORNIA 90025
(310) 231-1280
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 4, 1998
The Annual Meeting of Stockholders of IMPERIAL CREDIT COMMERCIAL MORTGAGE
INVESTMENT CORP., a Maryland corporation (the "Company"), will be held at the
Marriott Hotel, located at 3635 Fashion Way, Torrance, California 90503, on
Thursday, June 4, 1998, at 10:00 a.m. Pacific Daylight Time.
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 fiscal year;
2. 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, 1998; and
3. To transact such other business as may properly come before the meeting.
Only holders of Common Stock of record at the close of business on April 1,
1998 (the "Record Date") will be entitled to vote at the meeting.
Your proxy card 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.
For the Board of Directors
/s/ H. Wayne Snavely
H. WAYNE SNAVELY
Chairman
Dated: April 15, 1998
<PAGE>
[LOGO OF IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT CORP.]
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PROXY STATEMENT
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FOR ANNUAL MEETING TO BE HELD
JUNE 4, 1998, AT 10:00 A.M. PACIFIC DAYLIGHT TIME
The Board of Directors of Imperial Credit Commercial Mortgage Investment
Corp. (the "Company") is soliciting the accompanying proxy for use at the 1998
Annual Meeting of Stockholders to be held on Thursday, June 4, 1998 at 10:00
a.m. Pacific Daylight Time at the Marriott Hotel, located at 3635 Fashion Way,
Torrance, California 90503 (the "Meeting"). The approximate mailing date for
this proxy statement and the enclosed proxy is April 15, 1998. 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 SEVEN NOMINEES
FOR DIRECTOR NAMED HEREIN AND FOR THE RATIFICATION OF THE APPOINTMENT OF KPMG
PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE YEAR ENDING
DECEMBER 31, 1998. 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.
An Annual Report to Stockholders is being mailed together with this Proxy
Statement to all stockholders entitled to vote at the meeting. The Annual
Report to Stockholders is neither part of this Proxy Statement nor
incorporated by reference herein.
The cost of this solicitation of proxies, including the preparation,
assembly, printing and mailing of this Proxy Statement 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.
Holders of Common Stock of record at the close of business on April 1, 1998
will be entitled to vote at the Meeting and any adjournments thereof. There
were 34,500,000 shares of Common Stock, $.0001 par value per share,
outstanding as of that date. Each share is entitled to one vote (including one
vote for each director to be elected without cumulative voting) and a majority
of the shares of Common Stock outstanding is necessary to constitute a quorum
for the Meeting. The affirmative vote of a plurality of all of the votes cast
at a meeting at which a quorum is present is necessary for the election of a
director. The affirmative vote of a majority of all of the votes cast at a
meeting at which a quorum is present is necessary for any other matter that
properly may come before the meeting, unless more than a majority of votes
cast is required by statute or by the Charter of the Company. Abstentions and
broker non-votes will not be counted as votes cast and will have no effect on
the result of any vote, although they will count toward the presence of a
quorum.
The Board knows of no other matters to be presented at the meeting. If any
other matter should be presented at the meeting upon which a vote properly may
be taken, shares represented by all proxies received by the Board will be
voted with respect thereto in accordance with the best judgment of the persons
named as proxies therein.
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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") and Bylaws provide for a Board of Directors to be no
fewer than the minimum number required by Maryland law and no more than nine,
of which a majority are to be otherwise unaffiliated with the Company (the
"Independent Directors"). The Company's Bylaws give the Board of Directors the
authority to establish, increase or decrease the number of directors. The size
of the Company's Board of Directors is currently set at seven. No proxy will
be voted for more than seven 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.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES AS DIRECTORS OF
THE COMPANY.
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(2)..... 56 Chairman of the Board of Directors
Kevin E. Villani(1)..... 49 Vice Chairman of the Board of Directors
Mark S. Karlan.......... 39 President, Chief Executive Officer and Director
Patric H.
Hendershott+(2)........ 59 Director
Joseph A. Jaconi,
Jr.+(1)................ 53 Director
Louis H. Masotti+(1).... 63 Director
Kenneth A. Munkacy+(2).. 43 Director
</TABLE>
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+ Independent Director
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
H. WAYNE SNAVELY has been Chairman of the Board of Directors of the Company
since its inception in July 1997 and Chairman of the Board and Chief Executive
Officer of Imperial Credit Industries, Inc. ("Imperial Credit") since December
1991 and President since February 1996. Mr. Snavely is Chairman of the Board
of Southern Pacific Funding Corporation (NYSE: SFC), IMPAC Mortgage Holdings,
Inc. (AMEX: IMH) and Franchise Mortgage Acceptance Corp. (Nasdaq: FMAX). From
1986 to February 1992, Mr. Snavely served as Executive Vice President of
Imperial Bancorp and Imperial Bank. From 1983 through 1986, Mr. Snavely was
employed as Chief Financial Officer of Imperial Bancorp and Imperial Bank. Mr.
Snavely served as a director of Imperial Bank from 1975 to 1983 and from 1993
to 1998.
KEVIN E. VILLANI has been Vice Chairman of the Board of Directors of the
Company since its inception in July 1997 and Executive Vice President and
Chief Financial Officer of Imperial Credit since September 1995 and a member
of the Imperial Credit Board of Directors since October 1997. Mr. Villani
joined the University of Southern California as the Wells Fargo Visiting
Professor of Finance in 1990 and remained on the full-time faculty through
1997, and from 1990 to 1995 he also served as a consulting economist at the
World Bank and International Finance Corporation on housing, banking, finance
and investment issues in emerging markets. From 1985 to 1990, he was the
Executive Vice President and Chief Financial Officer for Imperial Corporation
of America, where he was responsible for portfolio management of a $12 billion
portfolio as well as the asset management of all mortgage and asset-backed
securities, high yield bonds, leasing and venture capital. From
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1982 to 1985, he served in various capacities at the Federal Home Loan
Mortgage Corporation, including Chief Economist and Chief Financial Officer,
where his responsibilities included asset and portfolio management. From 1975
to 1982, he served as Financial Economist, Director for the Division of
Housing Finance Analysis, and Deputy Assistant Secretary for the Office of
Economic Affairs and Chief Economist for the Department of Housing and Urban
Development. From 1974 to 1975, he was an economist for the Federal Reserve
Bank of Cleveland.
MARK S. KARLAN has served as a Member of the Board of Directors of the
Company and its President and Chief Executive Officer since its inception in
July 1997. From 1990 to 1997, Mr. Karlan was a private real estate investor
managing all aspects of approximately $100 million of real estate transactions
including the acquisition, financing, leasing and sale of office, retail,
industrial and residential assets. From 1984 to 1990, Mr. Karlan served in the
acquisition group of JMB Realty Corporation ("JMB"), most recently as Senior
Vice President. Mr. Karlan acquired for institutional clients more than one
hundred commercial properties including shopping centers, office buildings,
apartment complexes and hotels located throughout the United States and
Canada, with a gross asset value exceeding $6 billion. Mr. Karlan had full
responsibility for negotiating, structuring and analyzing all assets he
acquired for JMB, including valuation and credit analyses and cash flow
projections. Mr. Karlan's primary focus was larger portfolio acquisitions. In
1987, Mr. Karlan led the 100 person JMB acquisition team during the $5 billion
leveraged acquisition of Cadillac Fairview, Inc., a real estate company. In
1987, Mr. Karlan became the youngest partner of JMB. Mr. Karlan received a
Bachelor of Arts degree in Economics, magna cum laude, from Harvard College in
1980 and was awarded a John Harvard Scholarship for academic achievement of
the highest distinction. Mr. Karlan received a Master of Business
Administration degree with second year honors from the Harvard Business School
and a Juris Doctor degree, cum laude, from the Harvard Law School, both in
1984.
PATRIC H. HENDERSHOTT has served as a Member of the Board of Directors of
the Company since September 1997. Dr. Hendershott holds the Galbreath Chair in
Real Estate at Ohio State University where he has been Professor of Finance
since 1981. From 1969 to 1981, Dr. Hendershott was a Professor of Economics
and Finance at Purdue University where he was Chairman of the Economics Group
from 1971 to 1974. Dr. Hendershott was an Assistant Professor of Economics at
Northwestern University from 1967 to 1969, and he was a Research Economist at
the Federal Reserve Board from 1964 to 1967. He has served as a consultant to
major national and international organizations including the World Bank from
1991 to 1993, the U.S. government Accounting Office from 1982 to 1990 and the
National Swedish Institute for Building Research since 1991. Dr. Hendershott
has been a Research Associate at the National Bureau of Economic Research
since 1979 and he was the Director of Housing and Real Estate Finance Research
at Price Waterhouse from 1994 to 1997. His honors and awards include the
George Bloom Award for Outstanding Contributions to the Field of Real Estate
in 1992, Fellow of the Homer Hoyt Advanced Studies Institute since 1991,
Academic Fellow of the Urban Land Institute since 1990, Fulbright Senior
Research Scholar in 1989, President of the American Real Estate and Urban
Economics Association in 1985 and he has been a Member of the Fulbright Senior
Awards Committee since 1995. Dr. Hendershott has written more than one hundred
articles in academic and professional journals on real estate and mortgage
finance, and he currently serves on the editorial boards of seven finance and
real estate journals. Dr. Hendershott received a Ph.D. in Economics from
Purdue University in 1965.
JOSEPH A. JACONI, JR. has served as a Member of the Board of Directors of
the Company since September 1997. Mr. Jaconi has been involved in the real
estate development industry in California since 1971. Mr. Jaconi began the
development of real property for his own account in 1976, completing projects
such as the Wilshire-Grand Building, a 16 story office building in downtown
Los Angeles; the Marina Business Center, a 400,000 square foot office and
business park in Marina Del Rey; the Village Del Amo, a 30 acre retail and
office building project in Torrance; redevelopment projects at Corte Madera
Mall and Garden Grove Mall totaling 400,000 square feet; and the 100 acre
Bakersfield Airport Business Center. From 1971 to 1976, Mr. Jaconi practiced
law and specialized in real estate development, representing clients such as
Carter Hawley Hale Stores, Inc., Ernest W. Hahn, Inc., Security Pacific
National Bank, Barclay-Curci Investment Company, Transpacific Development
Company, Business Properties and Real Property Resources. Mr. Jaconi received
a Bachelor of
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Arts degree from the University of Santa Clara in 1966 and he received a Juris
Doctor degree from the University of Southern California School of Law in
1969.
LOUIS H. MASOTTI has served as a Member of the Board of Directors of the
Company since September 1997. Dr. Masotti is Professor of Management and Urban
Development in the Graduate School of Management at the University of
California, Irvine, where he has served as the Director of the Program in Real
Estate Management since 1992. Dr. Masotti also serves as President of Louis H.
Masotti, Ltd., a management, real estate and urban development consulting
firm. From 1970 to 1992, Dr. Masotti was Professor of Management and Urban
Development at the Kellogg Graduate School of Management at Northwestern
University, and between 1989 and 1992, Dr. Masotti also taught real estate and
urban development courses as a Visiting Professor at the Anderson Graduate
School of Management at UCLA and at Stanford Business School. In 1985, Dr.
Masotti founded the Kellogg Center for Real Estate Research at Northwestern
University and served as its Director until 1992. From 1970 to 1980, Dr.
Masotti served as the Director of the Center for Urban Policy Research at
Northwestern. Dr. Masotti has authored and edited 14 books and published many
articles on real estate, urban development and public policy issues. His views
are often quoted in the national media, including The Wall Street Journal,
Barron's, The New York Times, Business Week, Time and Newsweek. His honors and
awards include Fellow of the Homer Hoyt Advanced Studies Institute since 1993
and Senior Fulbright Fellow in 1969. Dr. Masotti has served as a director of
Samuel Zell's Manufactured Home Communities Inc. REIT since 1993, and he
served from 1993 to 1996 as a director of the Tucker Company REIT, both listed
on the NYSE. Dr. Masotti earned his Bachelor of Arts degree at Princeton
University in 1956 and he received a Ph.D. degree in political science from
Northwestern University in 1964.
KENNETH A. MUNKACY has served as a Member of the Board of Directors of the
Company since September 1997. Mr. Munkacy is the Managing Director of
TrizecHahn Asia-Pacific, a subsidiary of TrizecHahn, a NYSE listed commercial
real estate company. Mr. Munkacy is responsible for TrizecHahn's investment
and development activities in Asia. From 1994 to 1997, Mr. Munkacy served as
President of Koll Asia Pacific, an affiliate of the Koll Real Estate Group.
From 1989 to 1994, Mr. Munkacy was a Senior Vice President and partner of
Golub & Co, a Chicago based real estate investment and development company,
and he served from 1987 to 1989 as the Director of Development and
Acquisitions for Xerox Realty Corp., a Xerox subsidiary with an $850 million
real estate portfolio. Mr. Munkacy was the Director of Development Services
and a partner at Halcyon Real Estate Advisors from 1981 to 1987. Mr. Munkacy
has published articles on commercial real estate in The Real Estate Finance
Journal, Real Estate Review and Urban Land, and his real estate perspectives
have been quoted in the Wall Street Journal, Real Estate Finance & Investment,
Journal of Property Management, Commercial Property News and Real Estate
Forum. He has lectured on real estate investing at Harvard, Wharton, Stanford,
Northwestern, the University of Texas at Austin, and the Urban Land Institute.
Mr. Munkacy received a Bachelor of Arts degree in Economics-Government from
Franklin and Marshall College in 1976 and a Masters of City Planning from the
University of Pennsylvania in 1981.
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 duly elected and qualified. Replacements for vacancies occurring among the
unaffiliated directors will be elected by a majority vote of the remaining
Directors, including a majority of the Independent Directors.
COMMITTEES AND ATTENDANCE AT BOARD MEETINGS
Two quarterly meetings of the Board of Directors were held in 1997. Each
Director attended all meetings held by (i) the Board of Directors and (ii)
those committees of the Board of Directors on which such Director served.
The Audit Committee, established by the Board of Directors on September 22,
1997, consists of three (3) directors, Messrs. Jaconi, Masotti and Villani,
and reviews the scope of auditing activities performed by the Company's
independent accountants. Mr. Jaconi is Chairman of the Audit Committee. The
Audit Committee did not meet during 1997, but has met in 1998.
4
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The Compensation Committee, established by the Board of Directors on
September 22, 1997, consists of three (3) directors, Messrs. Hendershott,
Munkacy and Snavely, and is primarily responsible for reviewing and approving
the Company's general compensation policies for the Company's executive
officers and the granting of options under the 1997 Stock Option Plan. Dr.
Hendershott is Chairman of the Compensation Committee. The Compensation
Committee met one time during 1997.
The Board of Directors presently has no nominating committee.
COMPENSATION OF DIRECTORS
The Company pays an annual director's fee to each Independent Director of
$20,000, paid in quarterly installments. Each Independent Director also
receives a fee of $500 for each meeting of the Board of Directors or committee
thereof attended in person or by telephone by such Independent Director. In
addition, an annual fee of $2,000 is paid to any Independent Director who
serves as chair of any committee of the Board. On October 16, 1997, each
Independent Director received a non-qualified option for 30,000 shares of
Common Stock. Each option first is exercisable in three equal installments of
10,000 shares on October 16th of the years 1998, 1999 and 2000.
Each director who also is an employee of the Company, Imperial Credit or
Imperial Credit Commercial Asset Management Corp., a California corporation
wholly-owned by Imperial Credit that serves as the manager of the Company (the
"Manager"), is not paid any director's fees. Messrs. Snavely, Villani and
Karlan are not separately compensated for serving as Directors. On October 16,
1997, however, Mr. Snavely, the Chairman of the Board, was granted an option
for 258,750 shares of the Company's Common Stock, Mr. Villani, the Vice
Chairman of the Board, was granted an option for 258,750 shares of Common
Stock and Mr. Karlan was granted an option for 517,500 shares of Common Stock.
Each option first is exercisable in equal annual installments on October 16th
of the years 1998, 1999 and 2000.
All Directors are reimbursed for their costs and expenses in attending all
meetings of the Board of Directors.
EXECUTIVE COMPENSATION
The Company does not pay a salary, bonus or any other compensation to its
executive officers, other than stock options which may be granted to them from
time to time under the 1997 Stock Option Plan, nor does it currently have any
long-term incentive programs other than the 1997 Stock Option Plan. The
Manager, at its expense, provides all personnel necessary to conduct the
regular business of the Company. The Manager receives various fees for
advisory and other services performed under the Management Agreement between
the Company and the Manager. The Manager pays all salaries, bonuses and other
compensation (other than options received by the executive officers of the
Company). A description of the Management Agreement between the Company and
the Manager and the fees paid by the Company thereunder is included below
under the caption "Management Agreement."
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The following table sets forth information regarding compensation paid to
the Company's executive officers. None of the Company's executive officers
earned more than $100,000 in total compensation from the Company.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
STOCK
NAME AND PRINCIPAL POSITION YEAR OPTION(S) OTHER
- --------------------------- ---- ------------ -----
<S> <C> <C> <C>
Mark S. Karlan..................................... 1997 517,500(1),(2) --
President and Chief Executive Officer
Joseph R. Parise................................... 1997 86,250(1),(3) --
Managing Director and Senior Vice President
Norbert M. Seifert................................. 1997 69,000(1),(4) --
Senior Vice President, General Counsel and
Secretary
Daniel J. Occelli.................................. 1997 34,500(1),(5) --
Senior Vice President
Sebastian M. Hoppe................................. 1997 (6)
(Former Senior Vice President)
</TABLE>
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(1) Option granted pursuant to the 1997 Stock Option Plan on October 16, 1997.
The option can be separated into two parts, (i) an incentive stock option
for 19,998 shares of Common Stock exercisable in three equal installments
of 6,666 shares on or after October 16 of the years 1998, 1999 and 2000,
and (ii) a non-qualified stock option for the number of shares of Common
Stock described in (2), (3), (4) and (5) below, exercisable in three equal
installments on or after October 16 of the years 1998, 1999 and 2000.
(2) Includes non-qualified stock option for 497,502 shares of Common stock
exercisable in three equal installments of 165,834 shares.
(3) Includes non-qualified stock option for 66,252 shares of Common Stock
exercisable in three equal installments of 22,084 shares.
(4) Includes non-qualified stock option for 49,002 shares of Common Stock
exercisable in three equal installments of 16,334.
(5) Includes non-qualified stock option for 14,502 shares of Common Stock
exercisable in three equal installments of 4,834 shares.
(6) Mr. Hoppe, formerly a Senior Vice President of the Company, is no longer
with the Company and the options originally granted to him have been
cancelled.
MANAGEMENT AGREEMENT
The Company entered into a Management Agreement with the Manager effective
on October 22, 1997, for an initial term expiring on October 21, 1999. The
Company thereafter may renew the Management Agreement for additional one year
terms subject to the consent of the Manager and the affirmative vote of a
majority of the Independent Directors. The Management Agreement may be
terminated by the Company without cause at any time after the first two years
upon 60 days' written notice by a majority vote of the Independent Directors.
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 each may terminate the Management Agreement without the payment of any
termination fee 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 the applicable cure period. The Company
may renew or terminate the Management Agreement by a majority vote of its
Independent Directors. The Manager may terminate the Management Agreement by a
majority vote of its Board of Directors.
The terms of the Management Agreement, including the management fees, were
determined by arms-length negotiations based upon what both the Manager and
the Company believe are terms comparable with other
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similar management and advisory relationships and the Management Agreement has
been approved by the Independent Directors of the Company. The Company's
Bylaws provide that the Independent 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.
Pursuant to the provisions of the Management Agreement, the Manager at all
times will be subject to the supervision of the Board of Directors and will
have only such functions and authority as the Company delegates to it. The
Manager will advise the Board of Directors as to the activities and operations
of the Company. The Manager will be responsible for the day-to-day operations
of the Company pursuant to the authority granted to it by the Board of
Directors under the Management Agreement, and the Manager will perform (or
cause to be performed) such services and activities relating to the assets and
operations of the Company as may be directed by the Board of Directors or as
the Manager otherwise considers appropriate, including:
(i) serving as the Company's consultant with respect to formulation of
investment criteria and preparation of policy guidelines setting forth the
general parameters for the Company's investments, borrowings and operations
(the "Guidelines") by the Board of Directors;
(ii) advising and representing the Company in connection with the
acquisition and commitment to acquire assets, the sale and commitment to
sell assets, and the maintenance and administration of its portfolio of
assets;
(iii) advising the Company regarding, and arranging for, (a) the issuance
of CMOs collateralized by the Company's Mortgage Loans, (b) reverse
repurchase agreements on the Company's MBS Interests, and (c) other
borrowings, as appropriate;
(iv) furnishing reports and statistical and economic research to the
Company regarding the Company's activities and the services performed for
the Company by the Manager;
(v) monitoring and providing to the Board of Directors on an ongoing
basis price information and other data obtained from dealers that maintain
markets in assets identified by the Board of Directors from time to time,
and providing data and advice to the Board of Directors in connection with
the identification of such dealers;
(vi) providing executive and administrative personnel, administering
office space and office services required in rendering services to the
Company; administering the day-to-day operations of the Company; and
performing and supervising the performance of such other administrative
functions necessary in the management of the Company, including the
collection of revenues and the payment of the Company's debts and
obligations and the maintenance of appropriate data processing and computer
services to perform such administrative functions;
(vii) communicating on behalf of the Company with the holders of any
equity or debt securities of the Company as required to satisfy the
reporting and other requirements of any governmental bodies or agencies or
trading markets and to maintain effective relations with such holders;
(viii) to the extent not otherwise subject to an agreement executed by
the Company, designating a servicer for mortgage loans sold to the Company
and arranging for the monitoring and administering of such servicers;
(ix) counseling the Company in connection with policy decisions to be
made by the Board of Directors;
(x) engaging in hedging activities on behalf of the Company which are
consistent with the Company's status as a real estate investment trust
("REIT") and with the Guidelines;
(xi) upon request by the Board of Directors and in accordance with the
Guidelines, investing or reinvesting any money of the Company;
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<PAGE>
(xii) counseling the Company regarding the maintenance of its exemption
from the Investment Company Act of 1940, as amended, and monitoring
compliance with the requirements for maintaining exemption from that Act;
(xiii) counseling the Company regarding the maintenance of its status as
a REIT and monitoring compliance with the various REIT qualification tests
and other rules set out in the Code and the income tax regulations
promulgated thereunder (the "Treasury Regulations"); and
(xiv) counseling the Company as to compliance with all applicable laws,
including those that would require the Company to qualify to do business in
particular jurisdictions.
MANAGEMENT FEES
The Manager will receive a base management fee calculated as a percentage of
the Average Invested Assets of the Company for each calendar quarter and equal
to 1% per annum of the first $1 billion of such Average Invested Assets, 0.75%
of the next $250 million of such Average Invested Assets, and 0.50% of Average
Invested Assets above $1.25 billion. The term "Average Invested Assets" for
any period means the average of the aggregate book value of the assets of the
Company, including the assets of all of its direct and indirect subsidiaries,
before reserves for depreciation or bad debts or other similar noncash
reserves, computed by taking the daily average of such values during such
period. The Board of Directors may adjust the base management fee in the
future if necessary to align the fee more closely with the costs of such
services. A base management fee of $939,722 was accrued for the year ended
December 31, 1997.
As incentive compensation, the Manager is entitled to receive for each
fiscal quarter, an amount equal to the product of (A) 25% of the dollar amount
by which (1)(a) Funds From Operations of the Company (before the incentive
fee) per share of Common Stock (based on the weighted average number of shares
outstanding) plus (b) gains (or minus losses) from debt restructuring and
sales of property per share of Common Stock (based on the weighted average
number of shares outstanding), exceed (2) an amount equal to (a) the weighted
average of the price per share at the initial offering and the prices per
share at any secondary offerings by the Company multiplied by (b) the Ten-Year
U.S. Treasury Rate plus four percent per annum multiplied by (B) the weighted
average number of shares of Common Stock outstanding during such quarter.
"Funds From Operations" as defined by the National Association of Real Estate
Investment Trusts, Inc. ("NAREIT") means net income (computed in accordance
with GAAP) excluding gains (or losses) from debt restructuring and sales of
property, plus depreciation and amortization on real estate assets, and after
adjustments for unconsolidated partnerships and joint ventures. Funds from
Operations does not represent cash generated from operating activities in
accordance with GAAP and should not be considered as an alternative to net
income as an indication of the Company's performance or to cash flows as a
measure of liquidity or ability to make distributions. As used in calculating
the Manager's compensation, the term "Ten Year U.S. Treasury Rate" means the
arithmetic average of the weekly average yield to maturity for actively traded
current coupon U.S. Treasury fixed interest rate securities (adjusted to
constant maturities of ten years) published by the Federal Reserve Board
during a quarter, or, if such rate is not published by the Federal Reserve
Board, any Federal Reserve Bank or agency or department of the federal
government selected by the Company. If the Company determines in good faith
that the Ten Year U.S. Treasury Rate cannot be calculated as provided above,
then the rate shall be the arithmetic average of the per annum average yields
to maturities, based upon closing asked prices on each business day during a
quarter, for each actively traded marketable U.S. Treasury fixed interest rate
security with a final maturity date not less than eight nor more than twelve
years from the date of the closing asked prices chosen and quoted for each
business day in each such quarter in New York City by at least three
recognized dealers in U.S. government securities selected by the Company. For
the year ended December 31, 1997, the Manager earned no incentive fee.
Pursuant to the terms of the Management Agreement, the Manager's base and
incentive fees are to be calculated by the Manager within 45 days after the
end of each calendar quarter, and such calculation is to be promptly delivered
to the Board of Directors of the Company. The Company is obligated to pay such
fees, costs and expenses within 60 days after the end of each calendar quarter
upon delivery of the aforementioned calculation.
8
<PAGE>
EXPENSES
The Company does not expect to employ full-time personnel. Instead it relies
on the facilities, personnel and resources of the Manager to conduct its
operations. The Company shall pay all of its expenses and shall reimburse the
Manager for documented expenses of the Manager incurred on its behalf. For the
year ended December 31, 1997, there were no monies paid to the Manager as
reimbursement of expenses.
STOCK OPTION PLAN
The Company has adopted the 1997 Stock Option Plan and the Manager and the
directors, officers and employees of the Manager have been granted certain
options or rights under the Stock Option Plan, and may in the future be
granted additional options or rights under the Stock Option Plan. As of
December 31, 1997, the Company granted Options for 3,045,000 shares of Common
Stock including 1,691,250 shares to the Manager and 1,353,750 shares
predominantly to executive officers and Directors of the Company. The Company
also has available 405,000 shares for Special Reserve Shares, as defined
below, for future grant. One third of all the options first will be
exercisable on each of the first three anniversaries of their grant and all of
those options that have not been exercised expire in ten years from date of
grant. Options vest on date of grant. The maximum aggregate number of shares
of Common Stock that may be issued pursuant to the exercise of Options granted
during the term of the Plan is 7,500,000. No option grant may be made under
the Stock Option Plan after the tenth anniversary of the date the plan was
adopted by the Board of Directors. See "Executive Compensation--Stock Option
Plan" and "Certain Relationships and Related Transactions."
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 and its officers, shareholders and employees are not liable to
the Company, any subsidiary of the Company, the Independent 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 recently 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 claims arising from any acts or omissions of the Manager
made in good faith in the performance of its duties under the Management
Agreement.
9
<PAGE>
OPTION GRANTS, EXERCISES AND YEAR-END VALUES
The following table sets forth stock options granted to the named executive
officers under the Company's 1997 Stock Option Plan as of December 31, 1997.
OPTION GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS OF STOCK OPTIONS
--------------------------------------------------------
NUMBER OF
SHARES PERCENTAGE OF
UNDERLYING OPTIONS EXERCISE GRANT DATE
OPTIONS GRANTED TO PRICE EXPIRATION PRESENT
NAME GRANTED EMPLOYEES (1) ($/SH) DATE VALUE($)(2)
- ---- ---------- ------------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Mark S. Karlan........ 517,500 72.25% $15.00 10/16/07 $776,250
Joseph R. Parise...... 86,250 12.04% $15.00 10/16/07 $129,375
Norbert M. Seifert.... 69,000 9.63% $15.00 10/16/07 $103,500
Daniel J. Occelli..... 34,500 4.82% $15.00 10/16/07 $ 51,750
Sebastian M. Hoppe(3). N/A N/A N/A N/A N/A
</TABLE>
- --------
(1) The percentage reflected relates to all options granted to employees of
the Manager who are officers of the Company or to employees of the Manager
whose time is devoted substantially to the Company (the "Employees").
There were a total of 3,045,000 options granted at the fiscal year end, of
that, an option for 1,691,250 was granted to the Manager, a total of
120,000 options were granted to Independent Directors and a total of
517,500 options were granted to Messrs. Snavely and Villani, each a
director. Therefore, a total of 716,250 option grants were made to such
Employees.
(2) The value has been calculated using the Black-Scholes option pricing model
with the following assumptions: dividend yield of 8.32%, risk-free
interest rate of 6.5%, expected life of ten years and expected volatility
of 22.15%.
(3) Sebastian M. Hoppe, formerly a Senior Vice President of the Company, is no
longer with the Company and the options originally granted to him have
been cancelled.
AGGREGATED OPTION EXERCISES IN 1997 AND YEAR-END VALUES
None of the named executive officers exercised stock options during 1997 and
none of the options was in-the-money at year-end.
STOCK OPTION PLAN
The Company has adopted the 1997 Stock Option Plan (the "Stock Option Plan")
under which the Compensation Committee of the Board (the "Committee") is
authorized to grant options to purchase shares of Common Stock ("Options").
The maximum aggregate number of shares of Common Stock that are reserved for
issuance pursuant to the exercise of Options granted during the term of the
Stock Option Plan is 7,500,000. The effective date of the Stock Option Plan
was October 16, 1997.
ELIGIBILITY AND AWARDS
All employees (including officers), directors and others providing services
to the Company, as well as the Manager and employees (including officers) and
directors of the Manager (collectively, the "Eligible Recipients"), are
eligible to receive Options at the discretion of the Committee. The Committee
is authorized to determine which Eligible Recipients shall receive Options,
and the terms and conditions on which Options shall be granted, but not less
than 30% of the total number of shares of Common Stock subject to Options
granted as of any date shall have been granted to employees of the Manager
(the "Manager Reserve"), and at least one-third of such Manager Reserve shall
have been granted to the President of the Manager. Up to one-third (1/3) of
the Manager Reserve on October 22, 1997, the date of completion of the initial
public offering (the "Pricing
10
<PAGE>
Date") (the "Special Reserve Shares") may be set aside and be not subject to
Options that are granted as of the Pricing Date. The Committee, or a special
committee consisting solely of the President of the Company if he is a member
of the Board, may grant Options for Special Reserve Shares to employees of the
Manager, including its President, within one year after the Pricing Date,
subject to certain limits described in the Stock Option Plan. The Company
intends that Options with respect to Special Reserve Shares be granted to new
employees hired by the Manager after the Company's initial public offering is
consummated. Special Reserve Shares that are not granted to such new employees
may be granted to existing employees of the Manager. Options granted pursuant
to the Option Plan may be either non-qualified stock options or incentive
stock options. Options granted pursuant to the Option Plan generally are not
transferable except that, to the extent permitted by the Committee, a grantee
may transfer Options to members of his immediate family (including spouse,
parents, children and siblings) and the Manager may transfer its Options to
any other Eligible Recipient. Grants of Options under the Option Plan for
Special Reserve Shares or to persons or entities other than employees and
directors of the Company may result in a charge against the Company's earnings
for financial reporting purposes under GAAP. Any such charge to earnings will
be recognized over the period during which such Options vest.
EXERCISE PRICE AND EXERCISABILITY
Under current law, ISOs may not be granted to any individual who is not also
an officer or employee of the Company. The exercise price of all Options
(other than Options for Special Reserve Shares) shall 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 valued of
the Common Stock subject to the Options on the date of grant. All Options for
Special Reserve Shares have an exercise price equal to $15.00, the price at
which the Common Stock first was offered to the public. All Options will
become exercisable not earlier than one year following the date of the award
or as otherwise determined by the Committee at the time of the award. Options
granted on the Pricing Date first are (and Options for Special Reserve Shares
generally first will be) exercisable in equal installments on each of the
first three (3) anniversaries of the date on which they are granted. The
exercise price of an Option may be paid by any one or more of the following:
(i) cash or its equivalent, (ii) shares of Common Stock, (iii) cancellation of
any indebtedness owed by the Company, (iv) a full-recourse promissory note, if
approved by the Committee, (v) a "cashless" exercise pursuant to a sale
through a broker of all or a portion of the shares covered by the Option or
(vi) by making payment with shares of Common Stock simultaneously acquired on
exercise of the Option pursuant to procedures approved by the Committee.
TERMINATION OF EMPLOYMENT
If an Eligible Recipient's affiliation with the Company is terminated for
cause or if such Eligible Recipient terminates his affiliation voluntarily,
all of such Eligible Recipient's unexercised Options will terminate
immediately upon such termination. Except as otherwise determined by the
Committee, if an Eligible Recipient has a termination of affiliation because
of death or permanent disability or for any other reason (other than a
voluntary termination or a termination for cause), all of such Eligible
Recipient's unexercised Options may be exercised by the eligible Recipient or
his beneficiary or legal representative to the extent such Options are or
become exercisable in accordance with their terms for up to one year after the
later of (i) the date of such eligible Recipient's termination of affiliation
or (ii) the date the Options first become exercisable, but in no event later
than the expiration of the Option term.
AMENDMENT AND TERMINATION
The Board generally may amend the Stock Option Plan at any time, except that
approval by the Company's stockholders will be required for any amendment that
increases the aggregate number of shares of Common Stock that may be issued
pursuant to the Stock Option Plan, that materially changes the class of
persons eligible to receive such Options, that extends the maximum Option
term, that decreases the exercise price of any Option to less than the fair
market value of the Common Stock on the date of grant (or, in the case of
Options for Special Reserve Shares, to less than the price at which the Common
Stock first was offered to the public, $15.00) or that materially increases
benefits accruing to the participants under the Option Plan. Shares of Common
Stock subject
11
<PAGE>
to Options that expire, are terminated or otherwise are surrendered to the
Company will be available for issuance in connection with future awards under
the Option Plan. No Option term may exceed ten years from the date of grant,
and no Option grant may be made under the Option Plan after the tenth (10th)
anniversary of the date the Option Plan was adopted by the Board.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Messrs. Hendershott,
Munkacy and Snavely. The Company's Audit Committee consists of Messrs. Jaconi,
Masotti and Villani.
H. Wayne Snavely, Chairman of the Board of the Company, is also Chairman of
the Board, Chief Executive Officer and President of Imperial Credit, the owner
of 100% of the issued and outstanding stock of the Manager. See "Certain
Relationships and Related Transactions--Relationships with Affiliates--
Arrangements and Transactions with Imperial Credit."
REPORT OF THE COMPENSATION COMMITTEE
The Committee sets and administers the policies governing the Company's
grants of stock options under the 1997 Stock Option Plan. The Company
participates in studies and surveys of comparable compensation practices. The
Committee considers these studies and surveys in determining 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 grants of stock options 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-term
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 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 contingent upon the Company's level of annual and long-term
performance.
In line with the overall compensation program and the annual objectives set
by the Board of Directors, the Company's executive officers have their total
compensation paid by the Company, at risk, dependent upon the Company's
financial performance.
Section 162(m) was added to the Internal Revenue Code as part of the Omnibus
Budget Reconciliation Act of 1993. Section 162(m) limits the deduction for
compensation paid to the Chief Executive Officer and the other 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 1997 to the Company's 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 and the Manager of amounts paid as compensation.
12
<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
Patric H. Hendershott
Kenneth A. Munkacy
H. Wayne Snavely
13
<PAGE>
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The following performance graph compares total stockholders' return on the
Common Stock since October 17, 1997, the date of commencement of trading in
the Company's Common Stock, with the NASDAQ Composite Index and an index of
mortgage REITs prepared by Bloomberg ("BBG REIT Mortgage Index", Symbol:
BBREMTG). The BBG REIT Mortgage Index is comprised of infinite life mortgage
REITs having a market capitalization of $15 million or greater and 75% or more
of assets invested in securitizations or mortgage loans. The BBG REIT Mortgage
Index consists of American Residential Investment Trust Inc., Asset Investors
Corporation, Capstead Mortgage Corporation, Commercial Assets, Inc., CRIIMI
MAE Inc., Impac Commercial Holdings, Inc., Laser Mortgage Management Inc.,
Ocwen Asset Investment Corporation, Redwood Trust, Inc., Thornburg Mortgage
Asset Corporation and the Company.
The graph assumes that the shares of the Company's Common Stock were bought
at the initial public offering price of $15.00 per share and that the value of
the investment in each of the Company's Common Stock and the indices was $100
at the beginning of the period. The graph further assumes the reinvestment of
dividends.
Please note that the stock price performance shown on the graph below is not
necessarily indicative of future price performance.
<TABLE>
<CAPTION>
OCTOBER DECEMBER
1997 1997
------- --------
<S> <C> <C>
ICCMIC...................................................... $100.00 $97.50
NASDAQ Composite Index...................................... $100.00 $91.80
BBG REIT Mortgage Index..................................... $100.00 $81.81
</TABLE>
14
<PAGE>
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, 1997, all Section 16(a) filing requirements applicable to its officers,
Directors and greater than ten percent beneficial owners were satisfied by
such persons.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH THE MANAGER
General
The Manager commenced operations as of October 22, 1997. Prior to that date,
the Manager had no prior experience in managing or operating a REIT. Each of
the executive officers of the Manager has significant experience in
purchasing, financing, servicing and investing in mortgage loans, real estate
and mortgage securities; however, they have not previously managed a REIT. The
Manager is a wholly-owned subsidiary of Imperial Credit.
The Company has selected an outside advisor and in particular an advisor
associated with Imperial Credit in order to efficiently and economically
coordinate, assist and manage the duties and responsibilities of the Company.
The Company believes that the Manager 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 the Manager is better equipped than the Company to manage human
resources and facilities because the Manager and Imperial Credit together have
experienced teams in these areas. The Company believes that the Manager, as an
affiliate of Imperial Credit, is particularly appropriate to act as the
Company's advisor because of Imperial Credit's familiarity with such
businesses. For a summary of the provisions of the Management Agreement (see
"Executive Compensation.")
The address of the Manager and the Company is 11601 Wilshire Blvd., Suite
2080, Los Angeles, California 90025, telephone (310) 231-1280.
GRANT OF STOCK OPTION TO THE MANAGER
On October 16, 1997 the Company granted a non-qualified option for 1,691,250
shares of Common Stock to the Manager pursuant to the 1997 Stock Option Plan.
The option is immediately vested but is exercisable in consecutive equal
annual installments of 563,750 on October 16, 1998, October 16, 1999 and
October 16, 2000.
15
<PAGE>
EXECUTIVE OFFICERS AND DIRECTORS OF THE MANAGER
Each of the executive officers and directors of the Manager serves as an
executive officer and/or director of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
H. Wayne Snavely........ 56 Chairman of the Board of Directors
Kevin E. Villani........ 49 Vice Chairman of the Board of Directors
Mark S. Karlan.......... 39 President and Chief Executive Officer, Director
Joseph R. Parise........ 39 Managing Director and Senior Vice President
Norbert M. Seifert...... 42 Senior Vice President, General Counsel and Secretary
Daniel J. Occelli....... 41 Senior Vice President
Michael Meltzer......... 51 Chief Financial Officer
</TABLE>
RELATIONSHIPS WITH AFFILIATES
Imperial Credit is a publicly traded company whose shares of common stock
are listed on the Nasdaq Stock Market ("ICII"). The Manager, a wholly-owned
subsidiary of Imperial Credit, provides advisory services to the Company in
accordance with the terms of the Management Agreement. As previously
described, the Company utilizes the management expertise and resources of
Imperial Credit and the Manager in conducting its business. At March 1, 1998,
Imperial Credit owned in the aggregate 3,070,000 shares of the Common Stock of
the Company. In addition, Messrs. Snavely, Villani and Parise also serve as
Directors and/or officers of Imperial Credit and received stock option grants
for 258,750, 258,750 and 86,250 respectively from the Company. (For details of
their stock options see "Compensation of Directors" and "Executive
Compensation.") The Company currently utilizes Imperial Credit as a resource
for technology, human resources services and management information services.
Imperial Credit owns 100% of Southern Pacific Bank ("SPB"). SPB and the
Company have entered into an agreement granting the Company for so long as the
Management Agreement with the Manager is in effect, a right of first offer to
purchase, in addition to the Initial Investments, not less than $150 million
annually of multifamily and commercial mortgage loans typical of those
originated by SPB. Although not contractually committed to do so, the Company
intends to purchase Mortgage Loans offered to it pursuant to the foregoing
right of first offer, subject to compliance with the Company's Guidelines and
underwriting criteria as established and modified from time to time by the
Company's Independent Directors.
The Manager will determine fair transfer prices for the Company's
acquisitions of assets from Imperial Credit and its affiliates including SPB
based on the Guidelines approved by the Independent Directors. The Independent
Directors will review those transactions on a quarterly basis to insure
compliance with the Guidelines.
In deciding whether to approve an acquisition of any assets, including
acquisitions of mortgage loans, various classes of mortgage-backed securities
("MBS Interests") and other assets from Imperial Credit or its affiliates, the
Manager may consider such information as it deems appropriate to determine
whether the acquisition is consistent with the Guidelines, such as whether the
price is fair and the investment otherwise is suitable and in the best
interests of the Company. In addition, the Manager may consider, among other
factors, whether the acquisition of that asset will enhance the Company's
ability to achieve or exceed the Company's risk adjusted target rate of
return, if any, established for the relevant time period by the Board, whether
the asset otherwise is well-suited for the Company and whether the Company
financially is able to take advantage of the investment opportunity presented
thereby.
16
<PAGE>
When possible, the price that the Company will pay for Mortgage Loans, MBS
Interests and other assets acquired from Imperial Credit or its affiliates
will be determined by reference to the prices most recently paid to Imperial
Credit or its affiliates for similar assets, adjusted for differences in the
terms of such transactions and for changes in market conditions between the
dates of the relevant transactions. If no previous sales of similar assets
have occurred, the Company will attempt to determine a market price for the
asset by an alternative method, such as obtaining a broker's price opinion or
an appraisal, if it can do so at a reasonable cost. Investors should
understand, however, that such determinations are estimates and are not bona
fide third party offers to buy or sell.
It is the intention of the Company that the agreements and transactions,
including the sale of pools of mortgage loans, MBS Interests and real
property, between the Company on the one hand and Imperial Credit, SPB and
their affiliates on the other hand are fair to both parties. However, there
can be no assurance that each of such agreements and transactions will be on
terms at least as favorable to the Company as it could have obtained from
unaffiliated third parties. Certain activities of Imperial Credit and its
affiliates may adversely affect the Company's operations.
OTHER TRANSACTIONS
Arrangements and Transactions With Imperial Credit
The Company and Imperial Credit have entered into agreements for the purpose
of defining their ongoing relationships. These agreements were developed in
the context of a parent/subsidiary relationship and therefore were not the
result of arms length negotiations between independent parties. It is the
intention of the Company and Imperial Credit 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.
Mortgage Loans and Mortgage Backed Security Purchases
On October 22, 1997, the date of completion of the Company's initial public
offering, the Company purchased initial investments for an aggregate cash
price equal to $163 million of multifamily and commercial mortgage loans and
certain MBS Interests from Imperial Credit and SPB. The mortgage loans have an
aggregate principal balance of approximately $104 million and have original
terms to maturity of not more than 360 months. Each initial mortgage loan is
secured by a first lien mortgage or deed of trust on multifamily, retail,
office, industrial, mobile home, mixed use (including mixed commercial uses
and mixed commercial and residential uses) or other commercial real property.
The initial mortgage loans were originated primarily by SPB. SPB will retain
and perform the primary servicing of the initial mortgage loans on behalf and
at the direction of the Company. The MBS Interests are interests in commercial
MBS backed by term loans originated or acquired by SPB. These MBS Interests
include various classes issued pursuant to the J.P. Morgan Commercial Mortgage
Finance Corp., Commercial Mortgage Pass-Through Certificates, Series 1997-
SPTL-C1 transaction, which closed on June 27, 1997, and the Southern Pacific
Thrift & Loan Association, Commercial Mortgage Pass-Through Certificates,
Series 1996-C1 transaction, which closed on September 30, 1996.
In December 1997, among other investments, the Company purchased a pool of
multifamily and commercial mortgage loans from SPB for approximately $93
million and approximately $6 million of loans originated by Franchise Mortgage
Acceptance Corporation, an affiliate of Imperial Credit.
17
<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 March 1,
1998 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>
NUMBER OF PERCENTAGE
SHARES OF SHARES
BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED OWNED
------------------------ ------------ ------------
<S> <C> <C>
Imperial Credit Industries, Inc.(2)................ 3,070,000 8.90%
The Capital Group, Inc.(3)......................... 2,023,000 5.86%
H. Wayne Snavely(4)................................ 143,369 *
Kevin E. Villani(5)................................ 71,684 *
Mark S. Karlan(6).................................. 25,000 *
Patric H. Hendershott(7)........................... 4,000 *
Joseph A. Jaconi, Jr.(8)........................... 12,000 *
Louis H. Masotti(9)................................ 1,000 *
Kenneth A. Munkacy(10)............................. 3,600 *
Norbert M. Seifert(11)............................. 47,000 *
Daniel J. Occelli(12).............................. 1,000 *
Joseph R. Parise(13)............................... 15,000 *
Sebastian M. Hoppe(14)............................. 10,000 *
All directors and executive officers
as a group (11 persons)........................... 333,653 *
</TABLE>
- --------
* less than 1%
(1) Based on 34,500,000 shares of Common Stock issued and outstanding, as of
the date of this Proxy Statement.
(2) Imperial Credit Industries, Inc.'s address is 23550 Hawthorne Blvd.,
Bldg. #1, Suite 240, Torrance, CA 90505.
(3) The information set forth is based solely on a Schedule 13G filed by The
Capital Group Companies, Inc. with the SEC on February 11, 1998. The
Capital Group Companies, Inc. claims sole voting power with respect to
1,123,000 shares and sole dispositive power with respect to 2,023,000
shares. The Capital Group Companies, Inc. is the parent holding company
of a group of investment management companies that hold investment power
and, in some cases, voting power over the securities reported in its
Schedule 13G. The investment management companies, which include a "bank"
as defined in Section 3(a)6 of the Securities Exchange Act of 1934 (the
"Act") and several investment advisers registered under Section 203 of
the Investment Advisers Act of 1940, provide investment advisory and
management services for their respective clients which include registered
investment companies and institutional accounts. The Capital Group
Companies, Inc. disclaims investment power or voting power over any of
the securities referenced above; however it may be deemed to
"beneficially own" such securities by virtue of Rule 13d-3 under the Act.
The Capital Group Companies, Inc.'s address is 333 South Hope Street, Los
Angeles, CA 90071.
(4) Does not include 258,750 shares of Common Stock subject to options issued
to Mr. Snavely pursuant to the 1997 Stock Option Plan which are not
exercisable within 60 days of March 1, 1998.
(5) Does not include 258,750 shares of Common Stock subject to options issued
to Mr. Villani pursuant to the 1997 Stock Option Plan which are not
exercisable within 60 days of March 1, 1998.
18
<PAGE>
(6) Does not include 517,500 shares of Common Stock subject to options issued
to Mr. Karlan pursuant to the 1997 Stock Option Plan which are not
exercisable within 60 days of March 1, 1998.
(7) Does not include 30,000 shares of Common Stock subject to options issued
to Mr. Hendershott pursuant to the 1997 Stock Option Plan which are not
exercisable within 60 days of March 1, 1998.
(8) Does not include 30,000 shares of Common Stock subject to options issued
to Mr. Jaconi pursuant to the 1997 Stock Option Plan which are not
exercisable within 60 days of March 1, 1998.
(9) Does not include 30,000 shares of Common Stock subject to options issued
to Mr. Masotti pursuant to the 1997 Stock Option Plan which are not
exercisable within 60 days of March 1, 1998.
(10) Does not include 30,000 shares of Common Stock subject to options issued
to Mr. Munkacy pursuant to the 1997 Stock Option Plan which are not
exercisable within 60 days of March 1, 1998.
(11) Represents 43,000 shares held jointly by Mr. Seifert and his wife, 2,800
shares held in the name of their children, but both parents share voting
and investment power thereto, and 1,200 held by Mr. Seifert,
individually. Does not include 69,000 shares of Common Stock subject to
options issued to Mr. Seifert pursuant to the 1997 Stock Option Plan
which are not exercisable within 60 days of March 1, 1998.
(12) Does not include 34,500 shares of Common Stock subject to options issued
to Mr. Occelli pursuant to the 1997 Stock Option Plan which are not
exercisable within 60 days of March 1, 1998.
(13) Does not include 86,250 shares of Common Stock subject to options issued
to Mr. Parise pursuant to the 1997 Stock Option Plan which are not
exercisable within 60 days of March 1, 1998.
(14) Mr. Hoppe is no longer with the Company.
PROPOSAL NO. 2
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, 1998. 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 audited the financial statements of the Company
since its inception. Management is satisfied with its 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 1997 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 1999 must be received at the
Company's principal executive offices no later than December 17, 1998, 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/ Norbert M. Seifert
NORBERT M. SEIFERT
Secretary
Dated: April 15, 1998
Los Angeles, California
20
<PAGE>
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT CORP.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON JUNE 4, 1998
11601 Wilshire Boulevard, Suite 2080, Los Angeles, CA 90025
The undersigned hereby appoints Mark S. Karlan and Norbert M. Seifert 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
Commercial Mortgage Investment Corp. at the Marriott Hotel, located at 3635
Fashion Way, Torrance, California 90503, on Thursday, the 4th day of June,
1998, at 10:00 A.M. Pacific Daylight 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 matters set forth herein.
This proxy, when properly executed, shall be voted in accordance with such
instructions as may be given on this proxy card. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED IN PROPOSAL 1, FOR
THE RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR THE YEAR ENDING DECEMBER 31, 1998 IN PROPOSAL 2 AND
IN THE DISCRETION OF THE PROXY HOLDERS IN PROPOSAL 3.
[X] Please mark votes as in this example.
The Board of Directors recommends a vote FOR each of the nominees and FOR
the other proposals.
1. Election of Directors
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY to vote for all
nominees listed below [_] * EXCEPTIONS
<TABLE>
<S> <C>
NOMINEES: Patric H. Hendershott Joseph A. Jaconi, Jr. Mark S. Karlan
Louis H. Masotti Kenneth A. Munkacy H. Wayne Snavely Kevin E. Villani
</TABLE>
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "EXCEPTIONS" box and write the nominee's name in the space
provided below.)
* EXCEPTIONS ___________________________________________________________________
Continued and to be signed on reverse side
2. To ratify the appointment of KPMG Peat Marwick LLP as independent
accountants for the year ending December 31, 1998.
[_] FOR [_] AGAINST [_] ABSTAIN
3. In their discretion, upon all other matters as may properly come before
the meeting.
________________________________________________________________________________
MARK HERE [_] IF YOU PLAN TO ATTEND MEETING MARK HERE [_] FOR ADDRESS CHANGE
AND NOTE AT LEFT
Note: Please sign
exactly as name
appears. Joint owners,
Trustees, executors,
etc. should indicate
capacity in which they
are signing.
Date: _________________
_______________________
Signature
Date: _________________
_______________________
Signature
PLEASE MARK, SIGN,
DATE AND RETURN THE
PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.
