<PAGE>
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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 COMMERICAL 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:
<PAGE>
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 18, 1999
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
June 18, 1999, 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
LLP as the independent accountants of the Company for the year ending
December 31, 1999; 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 15,
1999 (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: May 19, 1999
<PAGE>
[LOGO OF IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT CORP.]
----------------
PROXY STATEMENT
----------------
FOR ANNUAL MEETING TO BE HELD
JUNE 18, 1999, 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 1999
Annual Meeting of Stockholders to be held on June 18, 1999 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 May 19, 1999. 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
LLP as the Company's independent accountants for the year ending December 31,
1999. 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's Manager, Imperial Credit
Commercial Asset Management Corp., 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 15, 1999
will be entitled to vote at the Meeting and any adjournments thereof. There
were 28,500,000 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 Company's Amended and Restated
Articles of Incorporation and amendments thereto (the "Charter"). Abstentions
and broker non-votes will not be counted as votes cast and will have no effect
on the result of the vote for Proposals 1 and 2, 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 may be
properly 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.
<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 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 proxy holders 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)..... 57 Chairman of the Board of Directors
Kevin E. Villani(1)..... 51 Vice Chairman of the Board of Directors
Mark S. Karlan.......... 40 President and Chief Executive Officer, Director
Patric H.
Hendershott(2)......... 60 Independent Director
Joseph A. Jaconi,
Jr.(1)................. 54 Independent Director
Louis H. Masotti(1)..... 64 Independent Director
Kenneth A. Munkacy(2)... 44 Independent Director
</TABLE>
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(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. Mr. Snavely has been Chief Executive Officer
of Imperial Credit Industries, Inc. ("Imperial Credit", Nasdaq: ICII) since
December 1991 and President since February 1996. 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 until 1998. Mr. Snavely is Chairman of the Board
of Directors of Franchise Mortgage Acceptance Company (Nasdaq: FMAX).
KEVIN E. VILLANI has been Vice Chairman of the Board of Directors of the
Company since its inception in July 1997. Mr. Villani is currently the
Executive Vice President of Finance of Imperial Credit and President and CEO
of Imperial Credit Asset Management. He has been a director of Imperial Credit
since 1997. Mr. Villani served as CFO of Imperial Credit from 1995 until his
promotion to his current position in July of 1998. From 1993 to 1996, Mr.
Villani was the Associate Professor of Clinical Finance and Real Estate for
the University of Southern California. From 1985 to 1990, he was the Executive
Vice President and Chief Financial Officer for Imperial Corporation of
America. From 1982 to 1985, he served in various senior executive capacities
at the Federal Home Loan Mortgage Corporation. From 1975 to 1982, he served as
Financial Economist, the Director for the Division of Housing and Finance
Analysis, and the Deputy Assistant Secretary for the Office of Economic
2
<PAGE>
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. Mr. Villani has also served as a consultant to the World
Bank and USAID on banking, housing, finance and privatization.
MARK S. KARLAN has served as a member of the Board of Directors of the
Company and as its President and Chief Executive Officer since its inception
in July 1997. From March 1998 to April 1999, Mr. Karlan served as a Director
of On Stage Entertainment, Inc., a company to which the Company has made a
loan. 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, 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 the Cadillac Fairview, Inc. 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 been a Director 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 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 been a Director 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 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.
3
<PAGE>
LOUIS H. MASOTTI has been a Director of the Company since September 1997.
Dr. Masotti serves as President of Louis H. Masotti, Ltd., a management, real
estate and urban development consulting firm. Between 1992 and June 1998, Dr.
Masotti was Professor of Management and Urban Development in the Graduate
School of Management at the University of California, Irvine, where he also
served as the Director of the Program in Real Estate Management. 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 been a Director 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 until the next annual meeting of stockholders and until their
successors are duly elected and qualify. Replacements for vacancies occurring
among the Independent 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
Four regular quarterly meetings and five special meetings of the Board of
Directors were held in 1998. 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, except that one Director did not attend one of the
special meetings of the Board of Directors.
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 met twice in 1998.
4
<PAGE>
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 officers and the
granting of options under the 1997 Stock Option Plan. Dr. Hendershott is
Chairman of the Compensation Committee. The Compensation Committee met twice
during 1998.
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, with no additional fee for the first
four meetings of the Board of Directors. Each Independent Director also
receives a fee of $1,000 for each additional 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 December 14,
1998, each Independent Director other than Mr. Jaconi received a non-qualified
option to purchase 15,000 shares of Common Stock, and Mr. Jaconi received a
non-qualified option to purchase 45,000 shares of Common Stock, with the
Company obligated to repurchase for $30,000 a portion of Mr. Jaconi's option
covering 30,000 shares if he so requests on or before December 13, 1999. Each
option generally is first exercisable in three equal installments of 5,000
shares (except, in the case of Mr. Jaconi if he does not exercise his right to
have the Company repurchase a portion of his option as described above, 15,000
shares each) on December 14th of the years 1999, 2000 and 2001. The exercise
price of these options is $9.00 per share and they expire on December 14,
2008.
Each director who is also 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 but may receive options.
Accordingly, Messrs. Snavely, Villani and Karlan do not receive directors'
fees for serving as Directors. On December 14, 1998, Mr. Snavely, the Chairman
of the Board, was granted an option to purchase 129,375 shares of the
Company's Common Stock, Mr. Villani, the Vice Chairman of the Board, was
granted an option to purchase 129,375 shares of Common Stock and Mr. Karlan
was granted an option to purchase 258,750 shares of Common Stock. Each option
generally is first exercisable in equal annual installments on December 14th
of the years 1999, 2000 and 2001. The exercise price of these options is $9.00
per share and they expire on December 14, 2008.
All Directors are reimbursed for their costs and expenses in attending all
meetings of the Board of Directors.
5
<PAGE>
EXECUTIVE COMPENSATION
The executive officers of the Company have been elected by the Company's
Board of Directors to fulfill the responsibilities set forth in the Company's
Bylaws. Such executive officers are also executive officers of the Manager.
The executive officers receive cash compensation and typical employee benefits
from the Manager and stock option compensation from the Company in the form of
Company stock options under the 1997 Stock Option Plan.
The Company does not otherwise pay a salary, bonus or other compensation to
its executive officers, nor does it 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. 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 "Certain
Relationships and Related Transactions--Management Agreement."
The following table sets forth information regarding compensation paid by
the Company to the Company's executive officers. None of the Company's
executive officers earned more than $100,000 in total annual salary and bonus
from the Company.
<TABLE>
<CAPTION>
Long-Term
Compensation
-----------------
Shares Underlying
Name and Principal Position Year Stock Options Other
--------------------------- ---- ----------------- -----
<S> <C> <C> <C>
Mark S. Karlan, President and Chief Executive
Officer(1), (2)................................. 1998 258,750 --
1997 517,500 --
Michael Meltzer, Chief Financial Officer and
Treasurer(1), (3)............................... 1998 74,500 --
1997 -- --
Norbert M. Seifert, General Counsel, Senior Vice
President and Secretary(1), (4)................. 1998 34,500 --
1997 69,000 --
Daniel J. Occelli, Former Senior Vice
President(5), (6)............................... 1998 34,500 --
1997 34,500 --
</TABLE>
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(1) Options granted on December 14, 1998 can be separated into two parts, (i)
an incentive stock option for 33,333 shares of Common Stock exercisable in
three equal installments of 11,111 shares on or after December 14 of the
years 1999, 2000 and 2001, and (ii) a non-qualified stock option for the
number of shares of Common Stock described in (2), (3) and (4) below,
exercisable on or after December 14 of the Years 1999, 2000 and 2001.
(2) Includes non-qualified stock options granted on December 14, 1998 for
225,417 shares of Common Stock exercisable in three equal installments of
75,139 shares. Includes a 1997 grant of (i) incentive stock options for
6,666 shares of Common Stock exercisable on or after October 16, 1998 and
(ii) non-qualified stock options for 510,834 shares (13,332 of which were
originally granted as incentive stock options) of Common Stock of which
165,834 shares are exercisable on or after October 16, 1998 and 172,500
shares each are exercisable on or after October 16, 1999 and 2000.
(3) Includes non-qualified stock options granted on December 14, 1998 for
1,167 shares of Common Stock exercisable in three equal installments of
389 shares. Includes non-qualified stock options granted on March 25, 1998
for 40,000 shares (19,998 of which were originally granted as incentive
stock options) of Common Stock exercisable in installments of 13,333
shares on or after March 25, 1999 and 2000 and 13,334 shares on or after
March 25, 2001.
(4) Includes non-qualified stock options granted on December 14, 1998 for
1,167 shares of Common Stock exercisable in three equal installments of
389 shares. Includes a 1997 grant of (i) incentive stock options for 6,666
shares of Common Stock exercisable on or after October 16, 1998 and (ii)
non-qualified stock options for 62,234 shares (13,332 of which were
originally granted as incentive stock options) of Common Stock of which
16,334 shares are exercisable on or after October 16, 1998 and 23,000
shares each are exercisable on or after October 16, 1999 and 2000.
(5) Includes non-qualified stock options granted on March 25, 1998 for 34,500
shares of Common Stock exercisable in three equal installments of 11,500
shares on or after March 25, 1999, 2000 and 2001. Includes a 1997 grant of
(i) incentive stock options for 19,998 shares of Common Stock exercisable
in three equal installments of 6,666 shares on or after October 16, 1998,
1999 and 2000, and (ii) non-qualified stock options for 14,502 shares of
Common Stock exercisable in three equal installments of 4,834 shares on or
after October 16, 1998, 1999 and 2000.
(6) Mr. Occelli is no longer affiliated with the Company. His employment with
the Manager ended on February 1, 1999.
6
<PAGE>
Stock Option Plan
The Company adopted on October 16, 1997, and its then sole stockholder
approved, the Imperial Credit Commercial Mortgage Investment Corp. 1997 Stock
Option Plan (as amended to date, the "Plan") under which the Compensation
Committee of the Board or 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 may be issued pursuant to the exercise
of Options granted during the term of the Plan is 7,500,000. As of December
31, 1998, the Company had granted Options for 3,024,250 shares of Common Stock
at a price of $15.00 per share and 849,000 shares of Common Stock at a price
of $9.00 per share. These grants include 1,691,250 shares to the Manager and
2,182,000 shares primarily to executive officers and Directors of the Company.
In general, one third of each of the options is exercisable on each of the
first three anniversaries of the date of grant, and any Options that have not
been exercised within 10 years of the date of grant will automatically expire.
In the event of a change-in-control of the Company or the Manager, as defined
in the Plan, all Options become fully exercisable.
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. Options granted pursuant to
the Plan are and may be either nonqualified stock options or incentive stock
options. Options granted pursuant to the 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 Plan to persons or entities
other than executive officers and Directors of the Company may result in a
charge against the Company's earnings for financial reporting purposes under
Generally Accepted Accounting Principles ("GAAP"). Any such charge to earnings
will be recognized in the appropriate period.
Exercise Price and Exercisability
The exercise price of all Options is and will be not less than 100% of the
fair market value of the Common Stock subject to the Options on the date of
grant. Options generally become exercisable not earlier than one year
following the date of award or as otherwise determined by the Committee at the
time of the award. 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, all of such Eligible Recipient's unexercised Options will terminate
immediately upon such termination. If an Eligible Recipient terminates his
affiliation with the Company voluntarily, all of such Eligible Recipient's
unexercised Options will terminate thirty days after the date of 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.
7
<PAGE>
Amendment and Termination
The Board generally may amend the 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 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 that materially increases benefits accruing to
the participants under the Plan. Shares of Common Stock subject 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 Plan. No
Option term may exceed ten years from the date of grant, and no Option grant
may be made under the Plan after the tenth anniversary of the date the Plan
was adopted by the Board. In 1998, the Board amended the Plan to provide for
accelerated exercisability in the event of a change-in-control of the Company
or the Manager and to make certain technical amendments.
Option Grants
The following table sets forth stock options granted during 1998 to the
executive officers receiving such grants under the Company's 1997 Stock Option
Plan. The Plan does not provide for stock appreciation rights.
Option Grants in Fiscal Year Ended December 31, 1998
<TABLE>
<CAPTION>
Individual Grants of Stock Options
----------------------------------------------------------------
Number of Percentage of
Shares Options Exercise Grant Date
Underlying Granted to Price Expiration Present Value
Name Options Granted Employees(1) ($/Share) Date ($)(2)
---- --------------- ------------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Mark S. Karlan.......... 258,750 45.7% $ 9.00 12/14/08 $188,888
Michael Meltzer......... 74,500 13.2% (3) (3) $ 73,585
Norbert M. Seifert...... 34,500 6.1% $ 9.00 12/14/08 $ 25,185
Daniel J. Occelli(4).... 34,500 6.1% $15.00 3/25/08 $ 41,745
</TABLE>
- --------
(1) The percentage reflected relates to all Options granted to employees of
the Manager who are either officers of the Company or whose time is
devoted substantially to the Company. There were a total of 914,500
Options granted during 1998, a total of 90,000 of which were granted to
Independent Directors and a total of 258,750 of which were granted to
Messrs. Snavely and Villani, each a Director but not an officer of the
Company.
(2) The value has been calculated using the Black-Scholes option pricing model
with the following assumptions: dividend yield of 13.30%, risk-free
interest rate of 4.70%, expected life of five years and expected
volatility of 33.00%. The derived fair value of the options granted during
1998 was approximately $0.73 per share for Options issued at $9.00 per
share and $1.21 per share for Options issued at $15.00 per share.
(3) An Option to purchase up to 40,000 shares of Common Stock at $15.00 per
share was granted to Mr. Meltzer on March 25, 1998 which expires on March
25, 2008 and an additional Option to purchase up to 34,500 shares of
Common Stock at $9.00 per share was granted to Mr. Meltzer on December 14,
1998 which expires on December 14, 2008.
(4) Mr. Occelli is no longer affiliated with the Company.
8
<PAGE>
Year-End Option Values
<TABLE>
<CAPTION>
Year-End Option Values
---------------------------------------------------
Number of Shares Value of Unexercised In-
Underlying Options at the-Money Options at
Name(2) December 31, 1998 (#) December 31, 1998(1)
------- ------------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mark S. Karlan.............. 172,500 603,750 -- $97,031
Michael Meltzer............. none 74,500 -- 12,938
Norbert M. Seifert.......... 23,000 80,500 -- 12,938
Daniel J. Occelli(3)........ 11,500 57,500 -- --
</TABLE>
- --------
(1) The value of unexercisable, in-the-money Options is the difference between
the exercise price of the Options ($9.00) and the closing price for the
Company's Common Stock as of December 31, 1998 ($9.375).
(2) None of the executive officers exercised Options during 1998.
(3) Mr. Occelli is no longer affiliated with the Company.
Compensation Committee Interlocks and Insider Participation
The Company's Compensation Committee consists of Messrs. Hendershott,
Munkacy and Snavely.
H. Wayne Snavely, Chairman of the Board of the Company, is also Chairman of
the Board, Chief Executive Officer and President of Imperial Credit
Industries, Inc., the company which owns 100% of the issued and outstanding
stock of the Manager. See "Certain Relationships and Related Transactions--
Other Relationships with Affiliates; Conflicts of Interest."
Report of the Compensation Committee
The Committee sets and administers the compensation policies underlying the
Company's grants of Options under the 1997 Stock Option Plan, as amended,
which is the Company's arrangement for executive officer compensation. The
Committee's overall executive compensation philosophy is to provide
performance-based variable compensation which allows total compensation to
fluctuate according to the Company's earnings and the value received by
stockholders. Targeted levels of executive compensation through Option awards,
as a percentage of shares outstanding, are set at percentages that the
Committee believes to be approximately consistent with the median practice of
others in the Company's industry for the chief executive officer and for the
executive officer group. The ultimate compensation to be realized from such
awards is contingent upon the Company's performance, as reflected in the
market price of the Company's Common Stock. The Committee's executive
compensation decisions are subject to review by the Company's Board of
Directors.
The Company's grants of Options link the compensation of the chief executive
officer and other executives of the Company with corporate performance,
aligning the financial interests of its executives with those of its
stockholders. This is designed to put the Company in a competitive position to
attract and retain key executives and motivate their performance.
In evaluating competitive industry practice to determine Option awards, the
Committee considers industry survey data and studies provided by an
independent compensation consultant, Towers Perrin. Data considered by the
Committee for its Option grants at the time of the Company's initial public
offering in 1997 included Towers Perrin's review of IPO-related stock option
grants, making comparisons to the option grants of ten REITs that had recently
conducted initial public offerings, and to eleven other mortgage-based REITs.
The Towers Perrin review concluded that the grants to executives were
consistent with industry practice; the grant to the chief executive officer
was near the median of industry practice, and the grants to the other four
executives of the Company and the Manager were at or slightly below median
industry practice.
9
<PAGE>
During 1998, as a result of competitive pressures in the hiring and
retention of key executives, the Committee recommended and the full Board
approved a new Option grant to twelve executives, and cancelled and re-issued
Options for five other executives (none of whom are the executive officers
included in the Executive Compensation tables) who had been hired after the
initial public offering. In making these awards, the Committee considered and
reviewed a newly prepared report of Towers Perrin, its independent
compensation consultant, which concluded that the 1998 awards were reasonable
and appropriate in light of the Company's current situation.
In considering the relevant factors as they bore on Company performance,
including the sudden and sustained erosion in stock value following the
initial public offering and fundamental and possibly long-term changes in
valuations within the mortgage REIT sector, the Committee approved a 1998
award of Options covering 258,750 shares for its chief executive officer, Mark
S. Karlan.
The Committee believes the 1998 awards are in line with the overall
compensation program and the objectives of the Committee and the Board of
Directors to put the Company's compensation of its executive officers 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 is performance-based. Regulations to
implement this limitation were finalized on December 20, 1995. Based upon a
review of the regulations, the Committee believes that the compensation paid
in 1998 to the Company's executive officers will be deductible. The Committee
considers the deductibility of the compensation paid or awarded as a factor in
its compensation programs and seeks guidance as necessary with respect thereto
so that the Company may continue to attract and retain key individuals while
preserving to the extent feasible the deductibility to the Company of amounts
paid as compensation.
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 provide an incentive for
optimal executive performance, in the interest of preserving and increasing
stockholder value.
COMPENSATION COMMITTEE
Patric H. Hendershott
Kenneth A. Munkacy
H. Wayne Snavely
10
<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 their respective assets invested in CMO securitizations and/or mortgage
loans. The BBG REIT Mortgage Index consists of American First Mortgage, Annaly
Mortgage Management, Inc., Anthracite Capital, Inc., Apex Mortgage Capital,
Inc., Capstead Mortgage Corporation, Chastain Capital Corporation, Clarion
Commercial Holdings, Inc., CRIIMI MAE Inc., Dynex Capital, Inc., Impac
Commercial Holdings, Inc., Impac Mortgage Holdings, Inc., Laser Mortgage
Management Inc., Redwood Trust, Inc., and Thornburg Mortgage Asset Corporation.
The Company is not included in the BBG REIT Mortgage Index but holds an assets
profile similar to the entities included in the BBG REIT Mortgage Index.
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.
[PERFORMANCE GRAPH APPEARS HERE]
INDEXED TOTAL SHAREHOLDER RETURN
<TABLE>
<CAPTION>
Base Quarters Ended
Period ----------------------------------
Company Name/Index Oct 97 Dec 97 Mar 98 Jun 98 Sep 98 Dec 98
- ------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ICCMIC................................ 100.00 97.50 100.87 89.29 68.32 68.15
BBG REIT Mortgage Index............... 100.00 81.81 83.60 88.18 72.68 66.51
NASDAQ Composite Index................ 100.00 91.80 107.42 110.99 99.33 128.70
</TABLE>
11
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Relationships with the Manager
General
The Manager was incorporated on August 12, 1997. Prior to October 22, 1997,
the Manager had no prior experience in managing or operating a REIT. The
executive officers of the Manager collectively had significant experience in
purchasing, financing, servicing and investing in mortgage loans, real estate
and mortgage securities; however, prior to joining the Company they had not
previously managed a REIT. The Manager is a wholly-owned subsidiary of
Imperial Credit.
The Company 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 well suited to (i) advise the Company
with respect to contract negotiations and asset acquisitions, (ii) perform
asset/liability modeling and management, (iii) obtain market information and
(iv) manage 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 substantial experience in these areas.
The address of the Manager and the Company is 11601 Wilshire Blvd., Suite
2080, Los Angeles, California 90025, telephone (310) 231-1280.
Directors and Executive Officers of the Manager
The executive officers and directors of the Manager are as follows:
<TABLE>
<CAPTION>
Name Age Company Position
---- --- ----------------
<S> <C> <C>
H. Wayne Snavely...... 57 Chairman of the Board of Directors
Kevin E. Villani...... 51 Vice Chairman of the Board of Directors
Mark S. Karlan........ 40 President and Chief Executive Officer, Director
Michael Meltzer....... 52 Chief Financial Officer and Treasurer
Norbert M. Seifert.... 43 General Counsel, Senior Vice President and Secretary
</TABLE>
Each of these persons also serves as a director and/or executive officer of
the Company.
Management Agreement
The Company entered into a Management Agreement, effective on October 22,
1997, the closing date of the Company's initial public offering (the "Closing
Date"), with the Manager for an initial term expiring on the second
anniversary of the Closing Date. Thereafter, successive extensions, each for a
period of one year, may be made by agreement between the Company and the
Manager, subject to the affirmative vote of a majority of the Independent
Directors. The Company may terminate, or decline to renew, the Management
Agreement without cause at any time after the initial two year term upon 60
days written notice by a majority vote of the Independent Directors. In that
event, the Company is to pay the Manager a termination fee to be determined by
independent appraisal. Such appraisal is to be conducted by a nationally-
recognized appraisal firm mutually agreed upon by the Company and the Manager.
If the Company and the Manager are unable to agree upon an appraisal firm,
then each of the Company and the Manager is to choose an independent appraisal
firm to conduct an appraisal. In such event, (i) if the appraisals prepared by
the two appraisers so selected are the same or differ by an amount that does
not exceed 20% of the higher of the two appraisals, the termination fee is to
be deemed to be the average of the appraisals as prepared by each party's
chosen appraiser, and (ii) if these two appraisals differ by more than 20% of
such higher amount, the two appraisers together are to select a third
appraisal firm to conduct an appraisal. If the two appraisers are unable to
agree as to the identity of such third appraiser, either of the Manager or the
Company may request that the American Arbitration Association ("AAA") select
the third appraiser. The termination fee then is to be the amount determined
by such third appraiser, but in no event less than the lower of the two
initial appraisals or more than the higher of such two initial appraisals.
12
<PAGE>
In addition, the Company has the right at any time during the term of the
Management Agreement to terminate the Management Agreement without the payment
of any termination fee upon, among other things, a material breach by the
Manager of any provision contained in the Management Agreement that remains
uncured at the end of the applicable cure period (including the failure of the
Manager to use reasonable efforts to comply with the Guidelines, as defined
below).
The Management Agreement was negotiated in conjunction with the Company's
initial public offering among representatives of the underwriter, the Company
and Imperial Credit and their legal representatives, and was approved by the
Independent Directors. 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. The criteria used by the Independent Directors in
determining the reasonableness of the Management Agreement as well as the
annual compensation paid to the Manager include comparison of the terms of the
Management Agreement with other similar advisory relationships in the
marketplace and determination that the annual management fee is consistent
with the range of management fees paid by other externally managed mortgage
REITs.
Pursuant to the provisions of the Management Agreement, the Manager at all
times has been, is and will be subject to the supervision of the Board of
Directors and has and will have only such functions and authority as the
Company delegates to it. The Manager advises the Board of Directors as to the
activities and operations of the Company. The Manager is 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
performs (or causes to be performed) such services and activities relating to
the assets and operations of the Company as is 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, borrowing 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 CMBS 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;
13
<PAGE>
(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;
(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.
The Manager performs portfolio management services on behalf of the Company,
pursuant to the Management Agreement, with respect to the Company's
investments. Such services include, but are not limited to, consulting the
Company on purchase, sale and other opportunities, collection of information
and submission of reports pertaining to the Company's assets, interest rates,
and general economic conditions, periodic review and evaluation of the
performance of the Company's portfolio of assets, acting as liaison between
the Company and banking, mortgage banking, investment banking and other
parties with respect to the purchase, financing and disposition of assets, and
other customary functions related to portfolio management. The Manager may
enter into subcontracts with other parties, including Imperial Credit and its
affiliates, to provide any such services to the Company.
The Manager performs monitoring services on behalf of the Company pursuant
to the Management Agreement with respect to loan servicing activities provided
by third parties and with respect to the Company's special servicing rights.
Such monitoring services include, but are not limited to, the following
activities: negotiating special servicing agreements; acting as a liaison
between the servicers of the mortgage loans and the Company; review of
servicers' delinquency, foreclosures and other reports on mortgage loans;
supervising claims filed under any mortgage insurance policies; and enforcing
the obligation of any servicer to repurchase mortgage loans. The Manager may
enter into subcontracts with other parties, including its affiliates, to
provide any such services for the Manager.
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 are not liable to the Company, any subsidiary
of the Company, the Independent Directors, the Company's stockholders or any
subsidiary's stockholders for acts performed in accordance with and pursuant
to the Management Agreement, except by reason of acts constituting bad faith,
willful misconduct, gross negligence or reckless disregard of their duties
under the Management Agreement. The Company has agreed to indemnify the
14
<PAGE>
Manager, its directors and its officers with respect to all expenses, losses,
damages, liabilities, demands, charges and claims arising from acts of the
Manager not constituting bad faith, willful misconduct, gross negligence or
reckless disregard of duties, performed in good faith in accordance with and
pursuant to the Management Agreement.
The Management Agreement does not limit or restrict the right of the Manager
or any of its officers, directors, employees or Affiliates to engage in any
business or to render services of any kind to any other person, including the
purchase of, or rendering advice to others purchasing, assets that meet the
Company's policies and criteria, except that the Manager may not manage or
advise another REIT or other entity that invests or intends to invest
primarily in commercial and multifamily mortgage loans or subordinated CMBS
interests.
Management Fees
The Manager is entitled to 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 Average Invested
Assets, 0.75% of the next $250 million of 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 Manager did not receive any management fee for the period
prior to the initial public offering of the Company's Common Stock. The base
management fee is intended to compensate the Manager, among other things, for
its costs in providing management services to the Company. 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.
The Manager is entitled to receive incentive compensation for each fiscal
quarter in 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") and as used in the calculation of the
compensation that the Company is to pay to the Manager 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 earnings, 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 as 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.
15
<PAGE>
The ability of the Company to generate Funds from Operations in excess of
the Ten Year U.S. Treasury Rate, and of the Manager to earn the incentive
compensation described in the preceding paragraph, is dependent upon the level
and volatility of interest rates, the Company's ability to react to changes in
interest rates and to utilize successfully the operating strategies described
herein, and other factors, many of which are not within the Company's or the
Manager's control.
The Manager is expected to use the proceeds from its base management fee and
incentive compensation in part to pay compensation to its officers and
employees who, notwithstanding that certain of them also are officers of the
Company, will receive no cash compensation directly from the Company.
Costs and Expenses
The Company does not now employ, and does not expect to employ, full-time
salaried personnel. Instead it relies on the facilities, personnel and
resources of the Manager to conduct its operations. The Manager is reimbursed
for (or charges the Company directly for) the Manager's costs and expenses in
employing third-parties to perform due diligence tasks on assets purchased or
considered for purchase by the Company. Expense reimbursement is made
quarterly.
The management fees are payable in arrears. The Manager's base and incentive
fees and reimbursable costs and expenses are calculated by the Manager within
45 days after the end of each quarter, and such calculation is promptly
delivered to the Company. The Company is obligated to pay such fees, costs and
expenses within 60 days after the end of each fiscal quarter upon the
Manager's delivery of the calculation of its fee. A base management fee of
$940,000 and expenses and initial public offering costs of $989,000 were
accrued and/or paid for the period ended December 31, 1997. A base management
fee of $6,319,000 was accrued and/or paid for the year ended December 31,
1998. No incentive fees have been earned to date. The following table
illustrates the management fees accrued and or paid for the year ended
December 31, 1998 and the period ended December 31, 1997:
<TABLE>
<CAPTION>
Base fee Incentive fee Total fee
---------- ------------- ----------
<S> <C> <C> <C>
Period ended December 31, 1997 ..... $ 940,000 $ -- $ 940,000
Year ended December 31, 1998........ 6,319,000 -- 6,319,000
</TABLE>
Other Relationships with Affiliates; Conflicts of Interest
Imperial Credit and its affiliates, including its wholly-owned subsidiary,
Southern Pacific Bank ("SPB"), expect to continue to originate mortgage loans
and interests in commercial mortgage-backed securities ("CMBS interests"). SPB
has entered into an agreement granting to the Company, as long as the
Management Agreement is in effect, a right of first offer to purchase 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 continue to consider purchasing mortgage loans
offered to it pursuant to the foregoing right of first offer, subject to
compliance with the Guidelines and underwriting criteria as established and
modified from time to time by the Company's Independent Directors.
The Company has maintained a relationship with Imperial Credit and SPB in
which the Company has been a ready, willing and able purchaser of not only
mortgage loans, but other assets that may be sold from time to time by
Imperial Credit and SPB. Although no binding commitment exists on the part of
Imperial Credit, SPB or the Company regarding the sale and purchase of such
assets, the Company may be able to purchase such assets from Imperial Credit
and SPB at prices and on terms meeting the Company's investment criteria.
Imperial Credit and SPB may offer to sell assets to the Company on terms and
at prices that, in the aggregate, will be fair to both parties, subject to
compliance with the Guidelines, but there can be no assurances that Imperial
Credit and SPB will offer to sell assets to the Company on such terms and for
such prices. In deciding whether to acquire any such asset, the Manager may
consider, among other factors, whether acquisition of the asset will enhance
the Company's ability to achieve or exceed the Company's risk adjusted target
rate of return established
16
<PAGE>
for that period by the Company's Board of Directors, whether the asset
otherwise is well-suited for the Company and whether the Company is
financially able to take advantage of the investment opportunity. If an asset
that otherwise meets all of the Company's criteria for asset acquisition is
being offered to the Company at a price that is greater, or on terms that are
less favorable, than would be required by third parties for similar assets in
bona fide arm's length transactions, the Manager would be expected to
recommend that the Company decline to acquire that asset at the quoted price
and terms, notwithstanding the relationship among the Company, Imperial Credit
and SPB.
The Company, on the one hand, and Imperial Credit and its affiliates, on the
other, may enter into transactions, some of which may give rise to conflicts
of interest. Moreover, three of the members of the Board and all of the
Company's officers also are employed by the Manager or its affiliates. The
transactions between the Company, on the one hand, and Imperial Credit and its
affiliates, on the other, are and will continue to be governed by the
Guidelines that have been approved by a majority of the Independent Directors.
The Guidelines establish general parameters for the Company's investments,
borrowings and operations, including quantitative and qualitative limitations
on the Company's assets that may be acquired. The Guidelines assist and
instruct the Manager generally, and establish restrictions applicable to
transactions with Imperial Credit and its affiliates. The Independent
Directors unanimously approved the acquisition of the investments acquired by
the Company from Imperial Credit and SPB at the time of the Company's initial
public offering. Subsequent to the acquisition of those investments, the
Manager has entered into transactions on behalf of the Company with Imperial
Credit and its affiliates based upon the Guidelines approved by the
Independent Directors. Such transactions are reviewed on a quarterly basis to
insure compliance with the Guidelines.
Although the Independent Directors review the Guidelines periodically and
monitor compliance with those Guidelines, in conducting this review the
Independent Directors rely and likely will continue to rely primarily on
information provided to them by the Manager. The Manager has obtained and may
obtain in the future the prices paid by unrelated third parties for similar
mortgage loans and CMBS interests in arm's length purchases and sales (if
available) or brokers' opinions as to the market price for mortgage loans and
CMBS interests (if the prices paid by bona fide third parties are not
available and such price opinions are available), and appraisals for
distressed real properties purchased from Imperial Credit or its affiliates,
but the Independent Directors have relied and are likely to continue to rely
substantially on information and analysis provided by the Manager to evaluate
the Company's Guidelines, compliance therewith and other matters relating to
the Company's investments. Moreover, broker price opinions and appraisals are
not always reliable indicators of the value of assets. In particular, broker
price opinions may be obtained from the underwriter or placement agent of the
CMBS, who may have an incentive to overstate the value of the CMBS. Moreover,
the market for unregistered CMBS is illiquid, and therefore accurate prices
are difficult to estimate.
The Company has acquired assets from Imperial Credit and its affiliates, and
may continue to do so in the future. Any such acquisitions will be in
accordance with the Guidelines. The terms of a particular transaction,
however, will not be approved in advance by the Company's Independent
Directors in all cases. The Independent Directors review any such transactions
quarterly to insure compliance with the Guidelines, but in doing so they, by
necessity, rely and likely will continue to rely primarily on information and
analysis provided to them by the Manager. While it is envisioned that the
Independent Directors will review such transactions after the fact, it is
possible that the Manager might request approval in advance if a particular
transaction is perceived as exceptionally significant to the Company or as
presenting unusual risks. Management believes that the terms on which assets
have been acquired by the Company from Imperial Credit and its affiliates are
as favorable as could have been obtained from unrelated third parties.
If the Independent Directors determine in their periodic review of
transactions that a particular transaction does not comply with the
Guidelines, then the Independent Directors will consider what corrective
action, if any, can be taken. If the transaction is one with Imperial Credit
or an affiliate, and if the Independent Directors so direct, the Manager shall
use its best reasonable efforts to cause Imperial Credit or the relevant
affiliate to repurchase the asset at the purchase price paid by the Company.
Moreover, if transactions are consummated that materially deviate from the
Guidelines, then the Independent Directors have the option, under the terms of
the Management Agreement, to terminate the Manager.
17
<PAGE>
The Management Agreement prohibits the Manager from managing or advising any
REIT or other entity that invests or intends to invest primarily in commercial
and multifamily mortgage loans or subordinated CMBS interests, but it does not
limit or restrict the right of the Manager to engage in any business or
rendering services to REITs that compete in certain respects with the Company.
While the Manager has not provided, and is unlikely in the near future to
provide, any services to other REITs, the types of services that could be
provided would include the rendering of advice in connection with the
acquisition or commitment to acquire or sell real property, consultation
regarding formulation of investment criteria, the furnishing of reports and
research regarding such REIT's activities and other advisory services similar
to those provided to the Company.
Imperial Credit purchased 2,970,000 shares of Common Stock on the Closing
Date at a price equal to the initial public offering price, net of any
underwriting discounts or commissions. On December 11, 1997, Imperial Credit
purchased an additional 100,000 shares of Common Stock in an open market
transaction. These purchases and the Company's subsequent repurchase of
6,000,000 shares of its Common Stock have resulted in Imperial Credit's
ownership of 10.8% of the total shares of Common Stock of the Company. The
Manager also has received stock options pursuant to the Company's Stock Option
Plan as explained below. Imperial Credit has advised the Company that Imperial
Credit is obligated to retain its shares of Common Stock of the Company for at
least two years after the Company's initial public offering as a result of a
lock-up agreement entered into by Imperial Credit and Friedman, Billings,
Ramsey & Co., Inc., the lead underwriter, but may dispose of its shares any
time thereafter. Notwithstanding the foregoing, if the Company terminates the
Management Agreement, Imperial Credit may dispose of its shares at that time.
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 generally is first
exercisable in equal installments of 563,750 on October 16, 1998, October 16,
1999 and October 16, 2000. The Option has an exercise price of $15.00 per
share and expires on October 16, 2007.
The market in which the Company acquires assets has been characterized by
rapid evolution of products and services and, thus, there may in the future be
relationships between the Company, the Manager, and affiliates of the Manager
in addition to those described herein.
Mortgage Loans and Asset-Backed Security Purchases
During 1998, the Company purchased 480 multifamily and commercial mortgage
loans from SPB for a price of approximately $194 million. The mortgage loans
acquired had an aggregate principal balance of approximately $190 million and
have original terms to maturity of not more than 360 months. Each 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. SPB performs the primary servicing of these and other SPB originated
mortgage loans on behalf of and at the direction of the Company.
Also during 1998, the Company purchased from Imperial Credit's affiliate,
Franchise Mortgage Acceptance Company ("FMAC"), 95 mortgage loans (which FMAC
had originated) substantially at par for approximately $95 million. During
1998, FMAC reacquired from the Company 42 of these mortgage loans with a
remaining principal balance of approximately $46 million pursuant to a
contractual call right created at the time of purchase and resulting in a gain
to the Company of $818,000. The Company also acquired during 1998 from FMAC
certain asset-backed securities for approximately $6 million. These securities
are backed by mortgage loans originated or acquired by FMAC.
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 April 1,
1999 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
Shares
Number of Shares Beneficially
Name of Beneficial Owner Beneficially Owned Owned(1)
------------------------ ------------------ -------------
<S> <C> <C>
Imperial Credit Industries, Inc.(2)......... 3,633,750 12.50%
Merrill Lynch Asset Management(3)........... 3,265,897 11.46%
H. Wayne Snavely(4)......................... 229,619 *
Kevin E. Villani(4)......................... 162,934 *
Mark S. Karlan(5)........................... 202,500 *
Patric H. Hendershott(6).................... 10,000 *
Joseph A. Jaconi, Jr.(6).................... 25,000 *
Louis H. Masotti(6)......................... 11,000 *
Kenneth A. Munkacy(6)....................... 13,600 *
Michael Meltzer(7).......................... 15,783 *
Norbert M. Seifert(8)....................... 80,000 *
Daniel J. Occelli(9)........................ 13,000 *
All directors and executive officers as
a group (10 persons)....................... 763,436 2.64%
</TABLE>
- --------
*less than 1%
(1) Based on 28,500,000 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. Includes 563,750 shares that may be
acquired by the Manager, a wholly-owned subsidiary of Imperial Credit,
upon exercise of stock options currently exercisable.
(3) According to a Schedule 13G, dated February 4, 1999, Merrill Lynch & Co.,
Inc. ("ML"), on behalf of Merrill Lynch Asset Management Group ("MLAM"),
has shared voting and dispositive power over such shares but disclaims
beneficial ownership pursuant to Section 13d-4 of the Exchange Act of
1934. Merrill Lynch Global Allocation Fund, Inc. ("MLG") has shared voting
and dispositive power and beneficial ownership with respect to 3,042,500
of such shares. The address of ML on behalf of MLAM is World Financial
Center, North Tower, 250 Vesey Street, New York, NY, 10381. The address of
MLG is 800 Scudders Mill Road, Plainsboro, NJ 08536.
(4) Includes 86,250 shares that may be acquired upon exercise of stock options
currently exercisable.
(5) Includes 172,500 shares that may be acquired upon exercise of stock
options currently exercisable.
(6) Includes 10,000 shares that may be acquired upon exercise of stock options
currently exercisable.
(7) Includes 850 shares held by Mr. Meltzer's spouse for which he disclaims
beneficial ownership. Includes 13,333 shares that may be acquired upon
exercise of stock options currently exercisable.
(8) Includes 43,000 shares held jointly by Mr. Seifert and his spouse, 5,800
shares held in the name of their children, for which the parents have
voting and investment power, and 8,200 held by Mr. Seifert individually.
Includes 23,000 shares that may be acquired upon exercise of stock options
currently exercisable.
(9) Includes 11,500 shares that may be acquired upon exercise of stock options
currently exercisable. Mr. Occelli is no longer affiliated with the
Company.
19
<PAGE>
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected and appointed KPMG LLP to
act as the Company's independent accountants for the year ending December 31,
1999. 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 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 1999 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 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.
STOCKHOLDERS' PROPOSALS
Stockholders' proposals intended to be presented at the Company's next
Annual Meeting of Stockholders to be held in 2000 must be received at the
Company's principal executive offices no later than January 20, 2000, in order
to be considered for inclusion in the proxy statement and form of proxy
relating to that meeting. In the case of stockholder proposals that are not
included in the Company's proxy material, the Company may generally exercise
discretionary voting authority, conferred by proxies, at its 2000 Annual
Meeting with respect to any such proposal that is not timely submitted (i.e.,
of which the Company did not receive notice during the period from March 20,
2000 through April 19, 2000, specified by the Company's Bylaws for notice to
the Company of such proposals).
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: May 19, 1999
Los Angeles, California
20
<PAGE>
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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 18, 1999
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 Friday, the 18th day of June, 1999,
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 and
FOR the ratification of the appointment of KPMG LLP as the Company's
independent accountants for the year ending December 31, 1999 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> <C> <C>
NOMINEES: Patric H. Hendershott Joseph A. Jaconi, Jr. Mark S. Karlan
</TABLE>
Louis H. Masotti Kenneth A. Munkacy H. Wayne Snavely Kevin E. Villani
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "EXCEPTIONS" box and write that nominee's name in the space
provided below.)
* EXCEPTIONS ___________________________________________________________________
Continued and to be signed on reverse side
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. To ratify the appointment of KPMG LLP as independent accountants for the
year ending December 31, 1999.
[_] 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. When shares
are held by joint
owners both should
sign. Trustees,
executors, etc.
should indicate
capacity in which
they are signing. If
a corporation, please
sign in full
corporate name by
president or other
authorized officer.
If a partnership,
please sign in
partnership name by
an authorized person.
Date: ________________
______________________
Signature
Date: ________________
______________________
Signature
PLEASE MARK, SIGN,
DATE AND RETURN THE
PROXY PROMPTLY USING
THE ENCLOSED
ENVELOPE.
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