<PAGE>
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
IMPERIAL CREDIT INDUSTRIES, INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] 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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[LOGO OF IMPERIAL CREDIT INDUSTRIES, INC.]
IMPERIAL CREDIT INDUSTRIES, INC.
23550 HAWTHORNE BOULEVARD
BUILDING 1, SUITE 110
TORRANCE, CALIFORNIA 90505
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of IMPERIAL CREDIT INDUSTRIES, INC., a
California corporation (the "Company"), will be held at the Marriott Hotel,
3635 Fashion Way, Torrance, California 90503, on July 30, 1997, at 10:00 a.m.
Pacific Time.
The Annual Meeting of Shareholders of the Company is being held for the
following purposes:
1. To elect a Board of Directors to serve for the ensuing year.
2. To 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, 1997.
3. To transact such other business as may properly come before the Meeting
or any adjournments thereof.
Only holders of Common Stock of record at the close of business on June 24,
1997, will be entitled to vote at the Meeting. A list of shareholders of
record will be available at the meeting and for ten days prior to the meeting
at the Company's address above.
Your proxy is enclosed. You are cordially invited to attend the Meeting, but
if you do not expect to attend, or if you plan to attend but desire the
proxyholders to vote your shares, please date and sign your proxy and return
it in the enclosed postage paid envelope. The giving of this proxy will not
affect your right to vote in person in the event you find it convenient to
attend. Please return the proxy promptly to avoid the expense of additional
proxy solicitation.
Dated: July 7, 1997
For the Board of Directors
/s/ Irwin L. Gubman
Irwin L. Gubman, Secretary
<PAGE>
[LOGO OF IMPERIAL CREDIT INDUSTRIES, INC.]
----------------
PROXY STATEMENT
----------------
FOR ANNUAL MEETING TO BE HELD
JULY 30, 1997, AT 10:00 A.M. PACIFIC TIME
Your proxy is solicited on behalf of the Board of Directors of Imperial
Credit Industries, Inc. (the "Company" or "ICII") for use at the Annual
Meeting of Shareholders to be held on the above date and time at the Marriott
Hotel, located at 3635 Fashion Way, Torrance, California 90503. The
approximate mailing date for this proxy statement and the enclosed proxy is
July 8, 1997. 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 will be voted for the election of the eight
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, 1997. Any proxy given may be revoked at any time prior to
its exercise by notifying the Secretary of the Company in writing of such
revocation, by giving another proxy bearing a later date, or by attending and
voting in person at the Meeting.
The cost of this solicitation of proxies will be borne by the Company.
Solicitations will be made by mail. In addition, the officers and regularly
engaged employees of the Company may, in a limited number of instances,
solicit proxies personally or by telephone. The Company will reimburse banks,
brokerage firms, other custodians, nominees and fiduciaries for reasonable
expenses incurred in sending proxy materials to beneficial owners of Common
Stock of the Company.
The Company's Annual Report on Form 10-K for the year ended December 31,
1996, as filed with the Securities and Exchange Commission (the "Commission")
and the Company's Annual Report to Shareholders are included with this
solicitation. Additional copies are available without charge to any
shareholder upon request.
Holders of Common Stock of record at the close of business on June 24, 1997
will be entitled to vote at the Meeting. There were 38,680,576 shares of
Common Stock outstanding at that date. Each share is entitled to one vote and
a majority of the shares of Common Stock outstanding is necessary to
constitute a quorum for the Meeting. Shareholders have cumulative voting
rights in the election of Directors. Under the cumulative voting method, a
shareholder may multiply the number of shares owned by the number of Directors
to be elected and cast this total number of votes for any one candidate or
distribute the total number of votes in any proportion among as many
candidates as the shareholder desires. A shareholder may not cumulate his or
her votes for a candidate unless such candidate's name has been placed in
nomination prior to the voting and unless a shareholder has given notice at
the Meeting prior to the voting of his or her intention to cumulate his or her
votes. If any shareholder gives such notice, then all shareholders may then
cumulate their votes.
1
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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 shareholders and thereafter until their successors are elected. The
Company's By-Laws currently provide for a variable Board of Directors with a
range of between five and nine members, with the number currently set at
eight. No proxy will be voted for more than eight nominees for Director.
Unless otherwise directed by shareholders, the proxyholders will vote all
shares represented by proxies held by them for the election of the maximum
number of the following nominees, all of whom are now members of and
constitute the Company's Board of Directors. The Company is advised that all
of the nominees have indicated their availability and willingness to serve if
elected. In the event that any nominee becomes unavailable or unable to serve
as a Director of the Company prior to the voting, the proxyholders will
refrain from voting for the unavailable nominee or will vote for a substitute
nominee in the exercise of their best judgment.
INFORMATION CONCERNING NOMINEES
Information concerning the nominees based on data furnished by them is set
forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
---- --- ---------------------
<S> <C> <C>
H. Wayne Snavely........................... 56 Chairman of the Board, President and Chief
Executive Officer
Stephen J. Shugerman....................... 50 President of Southern Pacific Thrift and
Loan Association ("SPTL") and a Director
Kevin E. Villani........................... 49 Executive Vice President, Chief Financial
Officer and a Director
G. Louis Graziadio, III(1)................. 47 Director
James Clayburn LaForce, Jr.(1)(2).......... 67 Director
Perry A. Lerner(1)(2)...................... 54 Director
Robert S. Muehlenbeck(1)................... 49 Director
Joseph R. Tomkinson........................ 49 Director
</TABLE>
- --------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
H. WAYNE SNAVELY has been Chairman of the Board and Chief Executive Officer
of the Company 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 with direct management responsibility for
the following bank subsidiaries and divisions: Imperial Bank Mortgage, SPTL,
Imperial Trust Company, Wm. Mason & Company, Imperial Ventures, Inc. and The
Lewis Horwitz Organization. From 1983 through 1986, Mr. Snavely was employed
as Chief Financial Officer of Imperial Bancorp and Imperial Bank. Mr. Snavely
served as a director of Imperial Bank from 1975 to 1983 and currently serves
as a director. Mr. Snavely is Chairman of the Board of Southern Pacific
Funding Corporation ("SPFC") and Imperial Credit Mortgage Holdings, Inc.
("IMH").
STEPHEN J. SHUGERMAN has been President of SPTL since June 1987 and has been
a Director of the Company since December 1991. From June 1985 to May 1987, Mr.
Shugerman was President of ATI Thrift & Loan Association, a privately owned
thrift and loan association, and, from 1979 to 1985, he was Senior Vice
President of Imperial Thrift and Loan Association, a former subsidiary of
Imperial Bank. Mr. Shugerman has recently served as President of the
California Association of Thrift & Loan Companies. Mr. Shugerman is a director
of SPFC.
KEVIN E. VILLANI has been the Executive Vice President and Chief Financial
Officer of the Company since September 1995 and a Director of the Company
since June 1997. 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.
2
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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 the
Financial Economist, The Director for the Division of Housing Finance Analysis
and The 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.
Mr. Villani has also served as a consultant to the World Bank and USAID on
banking, housing, finance, and privatization.
G. LOUIS GRAZIADIO, III has been a Director of the Company since February
1992. Mr. Graziadio has been Chairman of the Board and Chief Executive Officer
of Ginarra Holdings, Inc. (as well as predecessor and affiliated companies)
since 1979. Ginarra Holdings, Inc. is a privately held California corporation
engaged in a wide range of investment activities. Mr. Graziadio has been
actively involved, since 1972, in real estate development, construction and
home building. Mr. Graziadio is a Director of Imperial Bancorp and Imperial
Trust Company, an indirect subsidiary of Imperial Bancorp.
JAMES CLAYBURN LAFORCE, JR. has been a Director of the Company since May
1992. From July 1978 to July 1993, Mr. LaForce was the Dean of The Anderson
School, University of California at Los Angeles. In addition, Mr. LaForce was
appointed in January 1991 to the position of Acting Dean of the Hong Kong
University of Science and Technology, Hong Kong.
PERRY A. LERNER has been a Director of the Company since May 1992. He has
been a principal in the investment firm of Crown Capital Group, Inc. since
1996. Mr. Lerner was with the law firm of O'Melveny & Myers from 1982 through
1996, having been a partner with the firm from 1984 through 1996. Mr. Lerner
was an Attorney-Advisor of the International Tax Counsel of the United States
Treasury Department from 1973 to 1976.
ROBERT S. MUEHLENBECK has been a Director of the Company since December
1991. Mr. Muehlenbeck is also an Executive Vice President of Imperial Bank.
Mr. Muehlenbeck was formerly the President of Seaborg, Incorporated and has
been involved in commercial and residential real estate development and
finance activities.
JOSEPH R. TOMKINSON has been a Director of the Company since December 1991.
Mr. Tomkinson has been the Vice Chairman of the Board and Chief Executive
Officer of IMH since August 1995. Mr. Tomkinson served as President of the
Company from January 1992 to February 1996 and from 1986 to January 1992, he
was President of Imperial Bank Mortgage, a subsidiary of Imperial Bank, one of
the companies combined to become ICII in 1992. From 1984 to 1986, he was
employed as Executive Vice President of Loan Production for American Mortgage
Network, a privately owned mortgage bank.
Directors of the Company hold office until the next annual meeting of
shareholders and until their successors are elected and qualified, or until
their earlier resignation or removal. All officers are appointed by and serve
at the discretion of the Board of Directors, subject to employment agreements,
where applicable. There are no family relationships between any directors or
officers of the Company. George L. Graziadio, Jr., the President, Chief
Executive Officer and the Chairman of the board of directors of Imperial
Bancorp, is the father of G. Louis Graziadio, III. The Graziadio family and
related entities are significant shareholders of Imperial Bancorp.
Directors who are not employees of the Company receive a fee of $20,000 per
year plus $500 per meeting attended. Non-employee Directors who are members of
the Compensation and Audit Committees receive a fee of $500 for each committee
meeting attended, if such meeting is held on a date other than a Board meeting
date.
COMMITTEES AND ATTENDANCE AT BOARD MEETINGS
Eleven meetings of the Board of Directors were held in fiscal 1996. Each
Director attended at least 75% of the aggregate of 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, which meets with and reviews the scope of auditing
activities performed by the Company's internal auditors and independent
accountants, met seven times during 1996, and the Compensation Committee met
one time during 1996. The Board of Directors currently has no Nominating
Committee.
3
<PAGE>
EXECUTIVE COMPENSATION
The following table provides information concerning the cash and non-cash
compensation earned and received by the Company's Chief Executive Officer and
its most highly compensated executive officers (the "Named Executive
Officers") whose salary and bonus during the fiscal year ended December 31,
1996 exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------- ------------
NAME AND PRINCIPAL FISCAL OTHER ANNUAL OPTIONS
POSITION YEAR SALARY(1) BONUS(1) COMPENSATION GRANTED
------------------ ------ --------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C>
H. Wayne Snavely......... 1996 $300,000 $700,000 $28,564(2) 400,000(3)
President and Chief 1995 300,000 252,603 32,960(2) --
Executive Officer
1994 256,398 125,621 23,782(2) --
Kevin E. Villani......... 1996 200,000 200,000 12,986(4) 84,000(3)
Chief Financial Officer 1995 59,103 25,000 2,295(4) 66,000
1994 -- -- -- --
Paul B. Lasiter.......... 1996 87,500 50,000 6,886(5) 20,000(3)
Senior Vice President 1995 67,500 30,000 5,459(5) --
and Controller 1994 60,000 5,000 4,998(5) 16,500
Stephen J. Shugerman..... 1996 200,000 400,000 20,963(6) 100,000(3)
President of SPTL 1995 200,000 166,027 16,372(6) --
1994 166,500 81,531 16,702(6) --
</TABLE>
- --------
(1) The annual base salary to be paid to Messrs. Snavely, Villani and
Shugerman pursuant to employment agreements, and that which has been paid
to them since January 1997, is $450,000, $300,000 and $250,000,
respectively. The annual bonus pursuant to these agreements is not to
exceed approximately $1.050 million, $400,000 and $500,000, respectively.
(2) In 1996, 1995 and 1994, consists of (i) a car allowance paid by the
Company of $18,000, $18,000 and $18,000, respectively, and (ii) aggregate
contributions paid by the Company of $10,564, $14,960 and $5,782
respectively, under employee benefit plans.
(3) See "--Stock Option Plans" for details regarding the terms of such
options.
(4) In 1996, 1995 and 1994, consists of (i) a car allowance paid by the
Company of $6,000, $1,773 and $0, respectively, and (ii) aggregate
contributions paid by the Company of $6,986, $522 and $0, respectively,
under employee benefit plans.
(5) In 1996, 1995 and 1994, consists of $6,886, $5,459 and $4,998,
respectively, under employee benefit plans.
(6) In 1996, 1995 and 1994, consists of (i) a car allowance paid by SPTL of
$10,800, $10,800 and $10,800, respectively, and (ii) aggregate
contributions paid by SPTL of $10,163, $5,572 and $5,902, respectively,
under employee benefit plans.
4
<PAGE>
OPTION GRANTS AND EXERCISES
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
1996 PERCENTAGE EXERCISE OPTION TERM
OPTIONS OF TOTAL PRICE PER EXPIRATION -----------------------
NAME GRANTED GRANTS OPTION DATE 5% 10%
---- ------- ---------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
H. Wayne Snavely........ 400,000 24.86% $13.6875 7/24/01 $1,512,642 $3,342,542
Kevin E. Villani........ 84,000 5.22% 10.5625 4/1/01 245,131 541,675
Paul B. Lasiter......... 20,000 1.24% 10.5625 4/1/01 58,364 128,970
Stephen J. Shugerman.... 100,000 6.21% 13.6875 7/24/01 378,160 835,636
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF UNEXERCISED VALUE OF ALL
UNEXERCISED SENIOR UNEXERCISED
OPTIONS AT FY- MANAGEMENT IN-THE-MONEY
SHARES END UNDER THE OPTIONS AT OPTIONS AT
ACQUIRED OPTION PLAN FY-END FY-END
ON VALUE EXERCISABLE/ EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE(1) UNEXERCISABLE(2) UNEXERCISABLE(3)
---- -------- --------- ---------------- ---------------- --------------------
<S> <C> <C> <C> <C> <C>
H. Wayne Snavely........ 61,137 1,408,885 --/415,285 917,052/-- 18,210,475/3,838,983
Kevin E. Villani........ 13,200 183,500 --/136,800 --/-- --/1,557,299
Stephen J. Shugerman.... 300,000 4,305,651 61,137/115,285 158,524/-- 4,262,921/1,020,233
Paul B. Lasiter......... 14,190 170,463 3,300/37,160 --/-- 60,800/521,610
</TABLE>
- --------
(1) For a description of the terms of such options, see "--Stock Option
Plans--1992 Stock Option Plan."
(2) For a description of the terms of such options, see "--Senior Management
Stock Options."
(3) Based on a price per share of $21.00, which was the price of a share of
Common Stock as quoted on the Nasdaq National Market at the close of
business on December 31, 1996.
SENIOR MANAGEMENT STOCK OPTIONS
Effective January 1992, members of senior management of the Company received
ten year options to purchase shares of the Company's common stock (the "Common
Stock"). Such options are not covered by the Company's option plans described
below. The exercise price of these options is $0.88 per share for one-half of
the options, with the other half exercisable at $1.40 per share. These options
are currently exercisable. H. Wayne Snavely, Joseph R. Tomkinson, and Stephen
J. Shugerman were granted 917,053, 917,053 and 458,526 of such options,
respectively.
In April 1996, Mr. Tomkinson sold 750,000 shares of Common Stock he acquired
under the option agreement described above. In November 1996, Mr. Shugerman
sold 300,000 shares of Common Stock he acquired under the option agreement
described above.
The Company recognizes compensation expense with respect to the senior
management stock options because they were granted at less than the estimated
market value of the Company's Common Stock. The total compensation expense was
$2.2 million, all of which was recognized as of December 31, 1996.
STOCK OPTION PLANS
1992 STOCK OPTION PLAN
A total of 2,292,632 shares of the Company's Common Stock has been reserved
for issuance under the Company's 1992 Incentive Stock Option and Nonstatutory
Stock Option Plan (the "1992 Stock Option Plan"), which expires by its own
terms in 2002. A total of 1,550,673 options were outstanding at December 31,
1996.
5
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The 1992 Stock Option Plan provides for the grant of "incentive stock
options" ("ISOs") within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), and nonqualified stock options
("NQSOs") to employees, officers, directors and consultants of the Company.
Incentive stock options may be granted only to employees. The 1992 Stock
Option Plan is administered by the Board of Directors or a committee appointed
by the Board, which determines the terms of options granted, including the
exercise price, the number of shares subject to the option, and the option's
exercisability.
The exercise price of all options granted under the 1992 Stock Option Plan
must be at least equal to the fair market value of such shares on the date of
grant. The maximum term of options granted under the 1992 Stock Option Plan is
10 years. With respect to any participant who owns stock representing more
than 10% of the voting rights of the Company's outstanding capital stock, the
exercise price of any option must be at least equal to 110% of the fair market
value on the date of grant.
1996 STOCK OPTION PLAN
The Company has adopted the 1996 Stock Option, Deferred Stock and Restricted
Stock Plan (the "1996 Stock Option Plan"), which provides for the grant of
ISOs that meet the requirements of Section 422 of the Code, NQSOs and awards
consisting of deferred stock, restricted stock, stock appreciation rights and
limited stock appreciation rights ("Awards"). The 1996 Stock Option Plan is
administered by a committee of directors appointed by the Board of Directors
(the "Committee"). ISOs may be granted to the officers and key employees of
the Company or any of its subsidiaries. The exercise price for any option
granted under the 1996 Stock Option Plan may not be less than 100% (110% in
the case of ISOs granted to an employee who is deemed to own in excess of 10%
of the outstanding Common Stock) of the fair market value of the shares of
Common Stock at the time the option is granted. The purpose of the 1996 Stock
Option Plan is to provide a means of performance-based compensation in order
to attract and retain qualified personnel and to provide an incentive to those
whose job performance affects the Company. The effective date of the 1996
Stock Option Plan was June 21, 1996. A total of 3,000,000 shares of the
Company's Common Stock has been reserved for issuance under the 1996 Stock
Option Plan and a total of 1,038,200 options were outstanding at December 31,
1996.
If an option granted under the 1996 Stock Option Plan expires or terminates,
or an Award is forfeited, the shares subject to any unexercised portion of
such option or Award will again become available for the issuance of further
options or Awards under the 1996 Stock Option Plan.
Unless previously terminated by the Board of Directors, no options or Awards
may be granted under the 1996 Stock Option Plan after June 21, 2006.
Options granted under the 1996 Stock Option Plan will become exercisable
upon the terms of the grant made by the Committee. Awards will be subject to
the terms and restrictions of the Award made by the Committee. The Committee
has discretionary authority to select participants from among eligible persons
and to determine at the time an option or Award is granted and in the case of
options, whether it is intended to be an ISO or a NQSO.
Under current law, ISOs may not be granted to any individual who is not also
an officer or employee of the Company or any subsidiary.
Each option must terminate no more than 10 years from the date it is granted
(or five years in the case of ISOs granted to an employee who is deemed to own
in excess of 10% of the combined voting power of the Company's outstanding
Common Stock). Options may be granted on terms providing for exercise in whole
or in part at any time or times during their respective terms, or only in
specified percentages at stated time periods or intervals during the term of
the option, as determined by the Committee.
The exercise price of any option granted under the 1996 Stock Option Plan is
payable in full (i) in cash, (ii) by surrender of shares of the Company's
Common Stock already owned by the option holder having a market
6
<PAGE>
value equal to the aggregate exercise price of all shares to be purchased
including, in the case of the exercise of NQSOs, restricted stock subject to
an Award under the 1996 Stock Option Plan, (iii) by cancellation of
indebtedness owed by the Company to the optionholder, or (iv) by any
combination of the foregoing.
The Board of Directors may from time to time revise or amend the 1996 Stock
Option Plan, and may suspend or discontinue it at any time. However, no such
revision or amendment may impair the rights of any participant under any
outstanding options or Award without such participant's consent or may,
without shareholder approval, increase the number of shares subject to the
1996 Stock Option Plan or decrease the exercise price of a stock option to
less than 100% of fair market value on the date of grant (with the exception
of adjustments resulting from changes in capitalization), materially modify
the class of participants eligible to receive options or Awards under the 1996
Stock Option Plan, materially increase the benefits accruing to participants
under the 1996 Stock Option Plan or extend the maximum option term under the
1996 Stock Option Plan.
EMPLOYMENT AGREEMENTS
As of January 1, 1997, Mr. Snavely entered into a five-year employment
agreement at an annual base salary of $450,000, subject to adjustment, plus an
annual bonus based on attainment of performance objectives, including the
Company's return on equity, earnings per share and increase in the price of
the Company's Common Stock. Mr. Snavely's total cash compensation may not
exceed $1.5 million annually.
As of January 1, 1997, Mr. Villani entered into a five-year employment
agreement at an annual base salary of $300,000, subject to adjustment, plus an
annual bonus based on attainment of performance objectives identical to the
objectives established for Mr. Snavely. Mr. Villani's total cash compensation
may not exceed $700,000 annually.
As of January 1, 1997, Mr. Shugerman entered into a five-year employment
agreement at an annual base salary of $250,000, subject to adjustment, plus an
annual bonus based on attainment of performance objectives, including the
Company's earnings per share and certain qualitative objectives with respect
to the performance of Southern Pacific Thrift and Loan Association. Mr.
Shugerman's total cash compensation may not exceed $750,000 annually.
Pursuant to the employment agreements with Messrs. Snavely, Villani and
Shugerman, they are each entitled to receive compensation following their
termination, as follows: (i) with cause: base salary shall be paid through the
date on which termination occurs, or (ii) without cause (or for "good reason"
as defined in the employment agreement), base salary shall be paid through the
date of termination together with the pro-rata portion of any cash bonus award
the employee would be entitled to receive at year end and a severance amount
equal to base salary reduced by the employee's projected primary social
security benefit. The severance amount shall be further reduced if the
executive becomes employed by another company or becomes an independent
contractor of another company and shall be eliminated entirely if such other
company is determined by the Board of Directors to compete with the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Messrs. Muehlenbeck,
Graziadio, Lerner and LaForce. Mr. Muehlenbeck is an Executive Vice President
of Imperial Bank. Mr. Graziadio is a Director of Imperial Bancorp and Imperial
Trust Company.
7
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee sets and administers the policies governing the
Company's compensation program, including incentive and stock option plans.
The Company participates in studies and surveys of compensation practices for
comparable companies in similar industries. The Committee considers these
studies and surveys in determining base salary, bonus and long-term stock-
based compensation. The Committee discusses and considers executive
compensation matters and makes its decisions, subject to review by the
Company's Board of Directors.
The Company's compensation policies are structured to link the compensation
of the Chief Executive Officer, Chief Financial Officer and other executives
of the Company and its subsidiaries with corporate performance. Through the
establishment of short- and long-term compensation programs, the Company has
aligned the financial interests of its executives with the results of the
Company's performance, which is designed to put the Company in a competitive
position regarding executive compensation and also to ensure corporate
performance, which will enhance shareholder value.
The Company's executive compensation philosophy is to set base salary at a
conservative market rate and then to provide performance-based variable
compensation which allows total compensation to fluctuate according to the
Company's earnings as well as value received by shareholders. Targeted levels
of executive compensation are set at levels that the Committee believes to be
consistent with others in the Company's industry, with such compensation
increasingly weighted towards programs contingent upon the Company's level of
annual and long-term performance. As a result, the Named Executive Officers'
actual compensation levels in any particular year may be above or below those
of the Company's competitors, depending upon the Company's performance.
Section 162(m) of the Internal Revenue Code limits the Company's tax
deduction for compensation paid to any one of the five most highly compensated
executive officers in excess of $1,000,000, unless such compensation was based
upon attainment of pre-established, objective performance goals, the
Compensation Committee consists only of "outside directors" as defined for
purposes of Section 162(m), and such performance-based compensation has been
approved by shareholders. All of the members of the Compensation Committee
qualify as "outside directors." The Committee will review the Company's
existing compensation program to determine the deductibility of future
compensation paid or awarded pursuant thereto and will seek guidance with
respect to changes to the Company's existing compensation program that will
enable the Company to continue to attract and retain key individuals while
optimizing the deductibility to the Company of amounts paid as compensation.
The Committee believes that its overall executive compensation program has
been 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 shareholder
value.
COMPENSATION COMMITTEE
Robert S. Muehlenbeck
G. Louis Graziadio, III
Perry A. Lerner
James Clayburn LaForce, Jr.
8
<PAGE>
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a graph comparing the cumulative total shareholder
returns on the Company's Common Stock, the S&P 500 Stock Index, and two
comparative company indexes, (1) an index of companies engaged in the
Company's prior business focus (the Mortgage Banking Business) and (2) an
index of companies engaged in the Company's current business focus (Specialty
Finance Lending) for the period from January 1, 1992 through December 31,
1996.
The Mortgage Banking Business Index includes: Aames Financial Corp.,
Advanced Financial Inc., America First Apartment Investors, LP, American First
Prep Fund 2 LP, American First Tax-Exempt Mortgage Fund LP, American Insured
Mortgage 84 LP, American Insured Mortgage 85 LP, American Insured Mortgage
Investor Series 86 LP, American Insured Mortgage Investor Series 88 LP,
Countrywide Credit Industries, Inc., Delta Financial Corporation, Federal
National Mortgage Assoc., Federal Home Loan Mortgage Corp., First Financial
Caribbean Corp., Fund America Enterprises, Green Tree Financial Corp.,
Harbourton Financial Services, IMC Mortgage Company, Imperial Credit
Industries, Inc., Krug International Corp., Litchfield Financial Corp., Matrix
Capital Corp., Mego Mortgage Corp., The Money Store, Inc., North American
Mortgage Co., Omega Healthcare Investors, Inc., Pacificamerica Money Center,
Inc., Pilgrim America Capital Corporation, Pioneer Commercial Funding
Corporation, and Summit Tax Exempt Bond Fund LP.
The Specialty Finance Lending Index includes: AMRESCO, Inc., The Finova
Group, Inc., Green Tree Financial Corp., Imperial Credit Industries, Inc., and
The Money Store, Inc.
The graph assumes $100 invested on January 1, 1992 in the Company's Common
Stock, the S&P 500 Stock Index, the Mortgage Banking Business Index, and the
Specialty Finance Company Index.
COMPARISON OF CUMULATIVE TOTAL RETURN
OF IMPERIAL CREDIT IND INC, MORTGAGE BANKING BUSINESS INDEX,
BROAD MARKET, SPECIALTY FINANCE LENDING INDEX
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
MORTGAGE SPECIALTY
IMPERIAL BANKING FINANCE
Measurement Period CREDIT BUSINESS BROAD LENDING
(Fiscal Year Covered) IND INC INDEX MARKET INDEX
- --------------------- -------- -------- ------ ---------
<S> <C> <C> <C> <C>
Measurement Pt- 01/01/1992 $100 $100 $100 $100
FYE January 1, 1992 $206.85 $119.18 $106.75 $125.35
FYE January 1, 1993 $174.23 $127.46 $117.52 $204.06
FYE January 1, 1994 $120.89 $125.17 $119.07 $244.15
FYE January 1, 1995 $463.78 $214.32 $163.82 $455.38
FYE January 1, 1996 $985.22 $278.89 $201.43 $699.23
</TABLE>
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company with
respect to the beneficial ownership of the Company's Common Stock as of May
31, 1997, by (i) each director of the Company, (ii) each executive officer
whose salary exceeded $100,000 for the year ended December 31, 1996, (iii)
each person who is known to the Company to own beneficially more than 5% of
the Common Stock, and (iv) all directors and executive officers of the Company
as a group. Unless otherwise indicated, the Company believes that the
beneficial owners of the Common Stock listed below have sole investment and
voting power with respect to such shares, subject to community property laws
where applicable.
<TABLE>
<CAPTION>
NUMBER
OF SHARES
BENEFICIALLY % OF TOTAL
BENEFICIAL OWNER(1) OWNED OUTSTANDING(2)
------------------- ------------ --------------
<S> <C> <C>
Imperial Bank(3)............................. 9,261,106 23.0%
Wellington Management Co.(4)................. 3,009,182 7.5
Nicholas-Applegate Capital Management(4)..... 1,956,180 4.9
H. Wayne Snavely(5).......................... 1,357,901 3.4
Joseph R. Tomkinson(6)....................... 154,422 *
Stephen J. Shugerman(7)...................... 258,768 *
G. Louis Graziadio, III(8)................... 133,518 *
Robert S. Muehlenbeck(9)..................... 77,792 *
Perry A. Lerner(10).......................... 89,722 *
J. Clayburn LaForce(10)...................... 86,422 *
Paul Lasiter(11)............................. 26,176 *
Kevin E. Villani(12)......................... 16,800 *
All Directors and Officers as a Group (10
persons)(13)................................ 2,201,521 5.5
</TABLE>
- --------
* Less than 1%.
(1) Each of such persons may be reached through the Company at 23550
Hawthorne Boulevard, Building One, Suite 110, Torrance, California 90505,
telephone (310) 373-1704.
(2) Beneficial ownership is based on 40,288,738 shares of Common Stock as of
May 31, 1997.
(3) Imperial Bank, headquartered in Los Angeles, California, is a California
chartered bank whose deposits are insured by the FDIC. The address of
Imperial Bank is 9920 La Cienega Boulevard, Inglewood, California 90301.
In February 1997, the board of directors of Imperial Bancorp approved a
plan to spin off a portion of its specialty lending and finance business,
including Imperial Bank's common stock interest in ICII, to a recently
created subsidiary of Imperial Bank formed to hold various business
assets of Imperial Bancorp and its subsidiaries.
(4) Based upon a Schedule 13G filed with the Company reflecting beneficial
ownership as of March 31, 1997. The shares are owned by various
investment advisory clients of Wellington Management Company (or of
Wellington Trust Company, National Association, WMC's wholly-owned
subsidiary) and Nicholas-Applegate Capital Management, which are deemed
beneficial owners of the shares only by virtue of the direct or indirect
investment and/or voting discretion they possess pursuant to the
provisions of investment advisory agreements with such clients.
(5) Includes 1,012,337 shares subject to stock options exercisable within 60
days of May 31, 1997.
(6) Includes 153,474 shares subject to stock options exercisable within 60
days of May 31, 1997. Mr. Tomkinson resigned as an officer of the Company
in February 1996 but remains a Director.
(7) Includes 254,946 shares subject to stock options exercisable within 60
days of May 31, 1997.
(8) Includes 119,422 shares subject to stock options exercisable within 60
days of May 31, 1997.
(9) Includes 70,022 shares subject to stock options exercisable within 60
days of May 31, 1997.
(10) Includes 86,422 shares subject to stock options exercisable within 60
days of May 31, 1997.
(11) Includes 10,930 shares subject to stock options exercisable within 60
days of May 31, 1997.
(12) Includes 16,800 shares subject to stock options exercisable within 60
days of May 31, 1997.
(13) Includes 1,810,775 shares subject to stock options exercisable within 60
days of May 31, 1997.
10
<PAGE>
CERTAIN TRANSACTIONS
PRINCIPAL SHAREHOLDER; LIMITATIONS ON INVESTMENT; CONFLICTS OF INTEREST
At May 31, 1997, Imperial Bank owned 9,261,106 shares of Common Stock, or
24.1% of the Company. Imperial Bancorp is the owner of all of the outstanding
capital stock of Imperial Bank.
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
restricts the ability of state chartered banks, such as Imperial Bank, to hold
equity securities and requires impermissible investments to be disposed of
before December 19, 1996. Imperial Bank acquired its interest in the Company
at its formation, which interest has been reduced by the Company's sale of
Common Stock to third parties, as well as through a sale of stock by Imperial
Bank subsequent to the initial public offering of the Company. The 9.3 million
shares of the Company's Common Stock held by Imperial Bank may be subject to
divestiture under FDICIA. Imperial Bank has requested approval from the FDIC
to retain its investment in the Company and the FDIC has extended the FDICIA-
imposed deadline pending a decision on Imperial Bank's application. The
regional office of the FDIC has acknowledged the request and requested and
received additional information on the Company, and has recommended to its
Washington, D.C. headquarters that Imperial Bank be allowed to retain its
stock ownership in the Company subject to certain conditions. The Federal
Reserve Bank of San Francisco has requested that Imperial Bancorp make an
application under Section 4 of the Bank Holding Company Act for approval for
Imperial Bank to retain the Company's stock. Imperial Bancorp has deferred any
application pending the results of the FDIC application. In February 1997, the
board of directors of Imperial Bancorp approved a plan to spin off a portion
of its specialty lending and finance business, including Imperial Bank's
common stock interest in ICII, to Imperial Financial Group, Inc. ("IFG"), a
recently created subsidiary of Imperial Bancorp formed to hold various
business assets of Imperial Bancorp.
Because Imperial Bank owns less than 50% of the outstanding shares of the
Company and the Company is operated as a company independent of Imperial Bank
and Imperial Bancorp, the Company believes that, in the event of an
insolvency, bankruptcy or receivership proceeding involving Imperial Bank or
Imperial Bancorp, a court, exercising reasonable judgment after full
consideration of all relevant factors, would not order the substantive
consolidation of the assets and liabilities of the Company with either
Imperial Bank or Imperial Bancorp.
Two directors of the Company also serve on the Board of Directors of
Imperial Bank, IFG or their parent, Imperial Bancorp. See "Management."
PAYMENT AND TERMINATION AGREEMENT
On January 1, 1992, Mr. Tomkinson entered into a five-year employment
agreement at an annual salary of $200,000, subject to adjustment for
inflation, plus an annual bonus to be paid out of a "bonus pool" in an amount
determined by the Board of Directors, but in no event to exceed his base
salary. Effective July 1, 1994, Mr. Tomkinson's employment agreement was
amended to reflect an annual salary of $300,000, plus a bonus based on 1.0% of
the Company's pre-tax profits in excess of $10.0 million and the attainment of
defined Company goals. Mr. Tomkinson's total compensation did not exceed
$750,000 annually. Mr. Tomkinson resigned as an officer of the Company in
February 1996.
In February 1996, the Company entered into a Payment and Termination
Agreement with Mr. Tomkinson. Under the terms of this agreement, Mr. Tomkinson
received, as settlement for termination of Mr. Tomkinson's employment with the
Company on November 20, 1995 (the "Termination Date"), the following: (i) the
amount by which (A) the aggregate of all compensation Mr. Tomkinson would have
been entitled to receive under his employment agreement with the Company from
the Termination Date through the original termination date of the employment
agreement on December 31, 1996, exceeds (B) the aggregate Mr. Tomkinson was
entitled to receive from IMH under his employment agreement with IMH during
such period, (ii) all accrued but unpaid compensation due Mr. Tomkinson under
his employment agreement with the Company through the Termination Date and
(iii) the full and immediate vesting of all stock options held by
Mr. Tomkinson covering shares of the capital stock of the Company. Mr.
Tomkinson received $28,650 under this agreement.
11
<PAGE>
BANK DEPOSITS
The Company had deposits (including escrow balances) with SPTL which were
approximately $48.4 million, $4.5 million and $36.0 million at March 31, 1997,
December 31, 1996 and 1995, respectively.
BORROWING ARRANGEMENTS
In October 1995, Imperial Bank extended ICII a $10.0 million revolving line
of credit bearing interest at the prime rate (8.50% at December 31, 1995). All
amounts outstanding under this line were repaid in May 1996.
Additional or modified arrangements and transactions may be entered into by
the Company, Imperial Bank, and their respective subsidiaries, after the date
hereof. Any such future arrangements and transactions will be determined
through negotiation between the Company and Imperial Bank, and it is possible
that conflicts of interest will be involved. The Audit Committee of the Board
of Directors of the Company, consisting of directors independent of both
management and Imperial Bank, must independently approve all transactions by
and between the Company and Imperial Bank.
RELATIONSHIPS WITH IMH
THE CONTRIBUTION TRANSACTION
On November 20, 1995, the effective date of IMH's initial public stock
offering (the "Effective Date"), the Company contributed to ICI Funding
Corporation ("ICIFC") certain of the operating assets and certain customer
lists of the Company's mortgage conduit operations including all of ICII's
mortgage conduit operations' commitments to purchase mortgage loans subject to
rate locks from correspondents (having a principal balance of $44.3 million at
November 20, 1995), in exchange for shares representing 100% of the common
stock and 100% of the outstanding non-voting preferred stock of ICIFC.
Simultaneously, on the Effective Date, in exchange for 500,000 shares of IMH
common stock, the Company (i) contributed to IMH all of the outstanding non-
voting preferred stock of ICIFC, which represents 99% of the economic interest
in ICIFC, (ii) caused SPTL to contribute to IMH certain of the operating
assets and certain customer lists of SPTL's warehouse lending division and
(iii) executed a non-compete agreement (the "Non-Compete Agreement") and a
right of first refusal agreement (the "Right of First Refusal Agreement"),
each having a term of two years from the Effective Date. Of the 500,000 shares
issued pursuant to the contribution, 450,000 shares were issued to ICII and
50,000 shares were issued to SPTL. All of the outstanding shares of common
stock of ICIFC were retained by ICII. The Company and SPTL retained all other
assets and liabilities related to the contributed operations which at November
20, 1995 consisted mostly of $11.7 million of purchased mortgage servicing
rights, $22.4 million of finance receivables and $26.6 million in advances
made by the Company and SPTL to fund mortgage conduit loan acquisitions and to
fund finance receivables, respectively.
Pursuant to the Non-Compete Agreement, the Company, except as set forth
below, and any 25% entity may not compete with IMH's Warehouse Lending
Operations and may not establish a network of third party correspondent loan
originators or another end-investor in non-conforming mortgage loans. The
Company has also agreed that (i) in addition to any other remedy that may be
available to IMH, it will sell all of the outstanding shares of common stock
of ICIFC to be retained by the Company pursuant to the contribution to any
third party reasonably acceptable to IMH in the event that ICII or a 25%
entity establishes a network of third party correspondent loan originators
during the term of the Non-Compete Agreement and (ii) any sale by ICIFC of
shares of its capital stock or sale or transfer by the Company of any shares
of the common stock of ICIFC which the Company owns may only be made to a
party reasonably acceptable to IMH. Pursuant to the Non-Compete Agreement,
SPTL may continue to act as an end-investor in non-conforming mortgage loans
and SPFC may continue its business, which is primarily to act as a wholesale
originator and bulk purchaser of non-conforming mortgage loans. Pursuant to
the Right of First Refusal Agreement, the Company will grant ICIFC a right of
first
12
<PAGE>
refusal to purchase all non-conforming mortgage loans that ICII or any 25%
entity originates or acquires and subsequently offers for sale and ICIFC will
grant the Company, or any 25% entity designated by the Company, a right of
first refusal to purchase all conforming mortgage loans that ICIFC acquires
and subsequently offers for sale.
OTHER ARRANGEMENTS AND TRANSACTIONS WITH IMH
The Company and IMH have entered into agreements for the purpose of defining
their ongoing relationships. These agreements have been developed in the
context of a parent/subsidiary relationship and therefore are not the result
of arm's-length negotiations between independent parties. It is the intention
of the Company and IMH that such agreements and the transactions provided for
therein, taken as a whole, are fair to both parties, while continuing certain
mutually beneficial arrangements.
IMH has entered into a sublease with the Company to lease a portion of its
facilities as IMH's executive offices and administrative facilities at an
aggregate monthly rental of approximately $33,936. The sublease expires in
1999.
The following is a summary of certain arrangements and transactions between
and the Company and IMH.
Tax Agreement
IMH has entered into an agreement (the "IMH Tax Agreement") effective as of
the Effective Date with the Company for the purposes of (i) providing for
filing certain tax returns, (ii) allocating certain tax liability and (iii)
establishing procedures for certain audits and contests of tax liability.
Under the IMH Tax Agreement, the Company has agreed to indemnify and hold
IMH harmless from any tax liability attributable to periods ending on or
before November 20, 1995 in excess of such taxes as IMH has already paid or
provided for. For periods ending after the November 20, 1995, IMH will pay its
tax liability directly to the appropriate taxing authorities. To the extent
(i) there are audit adjustments that result in a tax detriment to IMH or (ii)
IMH incurs losses that are carried back to an earlier year and any such
adjustment described in (i) or loss described in (ii) results in a tax benefit
to ICII or its affiliates, then the Company will pay to IMH an amount equal to
the tax benefit as that benefit is realized. ICII will also agree to indemnify
IMH for any liability associated with the contribution of the preferred stock
of ICIFC and certain operational assets of SPTL's warehouse lending division
or any liability arising out of the filing of a federal consolidated return by
the Company or any return filed with any state or local taxing authority. To
the extent there are audit adjustments that result in any tax detriment to the
Company or any of its affiliates with respect to any period ending on or
before November 20, 1995, and, as a result thereof, IMH for any taxable period
after the Effective Date realizes a tax benefit, then IMH shall pay to the
Company the amount of such benefit at such time or times as IMH actually
realizes such benefit.
ICII generally controls audits and administrative and judicial proceedings
with respect to periods ending on or before the November 20, 1995, although
ICII cannot compromise or settle any issue that increases IMH's liability
without first obtaining the consent of IMH. IMH generally controls all other
audits and administrative and judicial proceedings.
Services Agreement
Prior to March 31, 1997, ICIFC was allocated expenses of various
administrative services provided by ICII. The costs of such services were not
directly attributable to a specific division or subsidiary and primarily
included general corporate overhead, such as data processing, accounting and
cash management services, human resources and other administrative functions.
These expenses were calculated as a pro rata share of certain administrative
costs based on relative assets and liabilities of the division or subsidiary,
which management believed was a reasonable method of allocation. In connection
with IMH's initial public offering in November 1995, IMH and
13
<PAGE>
ICII entered into a services agreement (the "IMH Services Agreement") under
which ICII provided similar general corporate overhead services to IMH and its
affiliates. The Company charged fees for each of the services which it
provides under the IMH Services Agreement based upon usage. The IMH Services
Agreement expired on December 31, 1996. The allocation of expenses and amounts
paid to ICII under the IMH Services Agreement for the three months ended March
31, 1997 and for the years ended December 31, 1996, and 1995 aggregated $0,
$518,000, and $269,000, respectively.
OTHER TRANSACTIONS
General
Imperial Credit Advisors, Inc. ("ICAI"), a wholly-owned subsidiary of the
Company, oversees the day-to-day operations of IMH, subject to the supervision
of IMH's Board of Directors, pursuant to a management agreement (the
"Management Agreement") effective as of November 20, 1995, for an initial term
that expired on January 31, 1997. ICAI and IMH have concluded a five-year
extension to the Management Agreement whereby amounts payable thereunder would
be subordinated to a specified rate of return payable to IMH stockholders.
ICAI is entitled to receive a per annum base management fee payable monthly
in arrears of an amount equal to 75% of (i) 3/8 of 1% of gross mortgage assets
of IMH composed of other than agency certificates, conforming mortgage loans
or mortgage-backed securities secured by or representing interests in
conforming mortgage loans, plus (ii) 1/8 of 1% of the remainder of gross
mortgage assets of IMH plus (iii) 1/5 of 1% of the average daily asset balance
of the outstanding amounts under warehouse lending facilities. The term "gross
mortgage assets" means for any month the weighted average book value of IMH's
Mortgage Assets (as defined in the Management Agreement), before reserves for
depreciation or bad debts or other similar noncash reserves, computed at the
end of such month. During the three months ended March 31, 1997 and the years
ended December 31, 1996 and 1995, ICAI earned $929,000, $2.0 million and
$37,888 in management fees, respectively.
ICAI is entitled to receive as incentive compensation for each fiscal
quarter, an amount equal to 75% of 25% of the net income of IMH, before
deduction of such incentive compensation, in excess of the amount that would
produce an annualized Return on Equity (as defined in the Management
Agreement) equal to the ten-year United States Treasury rate plus 2%. Return
on Equity is calculated for any quarter by dividing IMH's net income for the
quarter by its average net worth for the quarter. For such calculations, the
"net income" of IMH means the income of IMH determined in accordance with GAAP
before ICAI's incentive compensation, the deduction for dividends paid and any
net operating loss deductions arising from losses in prior periods.
A deduction for all of IMH's interest expenses for borrowed money is also
taken in calculating net income. "Average net worth" for any period means the
arithmetic average of the sum of the gross proceeds from any offering of its
equity securities by IMH, before deducting any underwriting discounts and
commissions and other expenses and costs relating to such offering, plus IMH's
retained earnings (without taking into account any losses incurred in prior
periods) computed by taking the daily average of such values during such
period. The definition Return on Equity is only for purposes of calculating
the incentive compensation payable, and is not related to the actual
distributions received by IMH's stockholders. The incentive payment to ICAI is
calculated quarterly in arrears before any income distributions are made to
stockholders for the corresponding period. During the three months ended March
31, 1997 and the years ended December 31, 1996 and 1995, ICAI earned $649,000,
$1.3 million and $0, respectively, for ICAI's incentive payment. The remaining
25% of the base management fee and of the incentive compensation fee are
payable to participants in IMH's executive bonus pool as determined by the
chief executive officer of IMH.
Pursuant to the Management Agreement, IMH also pays all operating expenses
except those specifically required to be borne by ICAI under the Management
Agreement. The operating expenses generally required to be borne by ICAI
include the compensation and other employment costs of ICAI's officers in
their capacities as such and the cost of office space and out-of-pocket costs,
equipment and other personnel required for oversight
14
<PAGE>
of IMH's operations. The expenses that are paid by IMH include issuance and
transaction costs incident to the acquisition, disposition and financing of
investments, regular legal and auditing fees and expenses of IMH, the fees and
expenses of IMH's directors, premiums for directors' and officers' liability
insurance, premiums for fidelity and errors and omissions insurance, servicing
and subservicing expenses, the costs of printing and mailing proxies and
reports to stockholders, and the fees and expenses of IMH's custodian and
transfer agent, if any. In addition, ICAI provides various administrative
services to IMH such as human resource and management information services.
ICAI has subcontracted with ICII and certain of its affiliates to provide
certain of such administrative services required under the Management
Agreement. Reimbursements of expenses incurred by ICAI which are the
responsibility of IMH are made monthly. During the three months ended March
31, 1997 and the years ended December 31, 1996 and 1995, there were no monies
paid to ICAI as reimbursement of expenses.
Purchase of Residual Interests
Effective December 31, 1996, ICII sold $46.9 million of residual interests
to ICIFC. In connection therewith, ICII lent ICIFC 100% of the purchase price.
This loan bore interest at a rate of 12% per annum, and was secured by the
residual interests. On March 31, 1997, ICIFC renegotiated the loan, paying it
down by $9.5 million and setting a term of ten years.
Bulk Mortgage Loan Purchases
In December 1995, ICIFC entered into a number of agreements with the Company
and SPTL to purchase bulk mortgage loan packages. All mortgage loan purchase
agreements were entered into under the following terms.
On December 5, 1995 and December 13, 1995, ICIFC purchased from the Company
bulk mortgage loan packages of 30-year fully amortized six-month adjustable
LIBOR and one-year adjustable United States Treasury Bill rate loans and 30-
and 15-year fixed rate second trust deed mortgages with servicing rights on
all mortgage loans released to ICIFC. The principal balances of the mortgages
at the time of purchase was $106.7 million and $66.2 million, respectively,
with a premium paid of $2.1 million and $1.6 million, respectively.
On December 29, 1995, ICIFC purchased from SPTL two bulk mortgage loan
packages of 30-year fully amortized six-month adjustable LIBOR and one-year
adjustable United States Treasury Bill rate loans. The principal balances of
the loans in the servicing released and servicing retained bulk package at the
time of purchase was $300.0 million and $28.5 million with premiums paid of
$3.4 million and $142,395, respectively.
Purchase of Mortgage-Backed Securities
On December 29, 1995, IMH purchased, from SPTL, DLJ Mortgage Acceptance
Corp. Pass-Through Certificates Series 1995-4, Class B-1 and Class B-2 issued
August 29, 1995. These certificates consist primarily of a pool of certain
conventional, 11th District Cost of Funds adjustable rate, one-to-four family,
first lien mortgage loans, with terms to maturity of not more than 30 years.
The mortgage loans underlying the certificates were originated or acquired by
ICII. All of the mortgage loans are serviced by ICII in its capacity as master
servicer. IMH purchased Class B-1 certificates having an initial certificate
principal balance of $4.8 million and the Class B-2 certificates having an
initial certificate principal balance of $2.2 million for a price of 78.54 or
$4.8 million and for a price of 70.01 or $2.3 million, respectively, equating
to a discount of $1.0 million and $0.7 million, respectively. The Class B-1
certificates are single "B" rated mortgage securities and the Class B-2 are
double "BB" rated mortgage securities. There was no gain or loss recorded by
either party as a result of this transaction.
15
<PAGE>
Purchase of Subordinated Lease Receivables
On December 29, 1995, IMH purchased a subordinated interest in a lease
receivable securitization from Imperial Business Credit, Inc. ("IBC"). The
lease receivables underlying the security were originated by IBC. IMH
purchased the subordinated lease receivable based on the present value of
estimated cash flows using a discount rate of 12% which resulted in a purchase
price of $8.4 million. As a result of the purchase, IBC recorded a gain of
$1.6 million. The purchase price was based upon a market discount rate as
confirmed by an independent third party. In March 1996, IBC repurchased the
subordinated interest from IMH, and holds the subordinated interest as an
investment vehicle.
Transfer of ICIFC Stock
To conclude the deconsolidation of ICIFC, in the first quarter of 1997 ICII,
as sole common shareholder, contributed the common shares of ICIFC to four
individuals in approximately equal number of shares, with an approximate value
of $25,000 each. ICII no longer has any equity interest in ICIFC.
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, 1997. 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 shareholders for
review and ratification on an annual basis.
KPMG Peat Marwick LLP has examined the financial statements of the Company
since 1991. Management is satisfied with their performance to date.
The affirmative vote of a majority of the shares voting on this proposal is
required for its adoption. In view of the difficulty and the expense involved
in changing independent accountants on short notice, if the proposal is not
approved, it is contemplated that the appointment for 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.
SHAREHOLDERS' PROPOSALS
Shareholders' proposals intended to be presented at the Company's next
Annual Meeting of Shareholders to be held in 1998 must be received at the
Company's principal executive offices no later than February 26, 1998, in
order to be considered for inclusion in the proxy statement and form of proxy
relating to that Meeting.
16
<PAGE>
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/ Irwin L. Gubman
Irwin L. Gubman, Secretary
Dated July 7, 1997
Torrance, California
17
<PAGE>
IMPERIAL CREDIT INDUSTRIES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON JULY 30, 1997.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Kevin E. Villani, Irwin L. Gubman and H.
Wayne Snavely, or any of them, each with full power of substitution, as proxies
of the undersigned to attend the Annual Meeting of Shareholders of Imperial
Credit Industries, Inc., at the Marriott Hotel, located at 3635 Fashion Way,
Torrance, California 90503, on July 30, 1997, at 10:00 a.m. Pacific Time.
<TABLE>
<S> <C> <C>
1. Election of Directors [_] FOR all nominees listed below [_] WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees listed below
contrary below)
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H. Wayne Snavely . Stephen J. Shugerman . Kevin E. Villani .
Joseph R. Tomkinson . Robert S. Muehlenbeck
G. Louis Graziadio, III . Perry A. Lerner . James Clayburn La Force, Jr.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
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2. To ratify the appointment of KPMG Peat Marwick LLP as independent
accountants for the year ending December 31, 1997.
The Board of Directors recommends a vote FOR.
FOR [_] AGAINST [_] ABSTAIN [_]
3. In their discretion, upon any and all such other matters as may properly
come before the meeting or any adjournment or postponement thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED, OR, IF NO CHOICE IS SPECIFIED, WILL BE
VOTED FOR THE EIGHT NOMINEES FOR ELECTION AND FOR PROPOSALS 2 AND 3. (Please
sign exactly as name appears. When shares are held by joint tenants, both
should sign. When signing as attorney, as executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.)
Dated:________________ , 1997
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Signature
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Signature, if held jointly
SHAREHOLDERS ARE URGED TO MARK, DATE, SIGN AND RETURN THIS PROXY IN THE
ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
