<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
- --------------------------------------------------------------------------------
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
(Name of Registrant as Specified In Its Charter)
Imperial Credit Industries, Inc.
--------------------------------
(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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
page 1
<PAGE>
[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 28, 1999, 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 LLP
as the independent accountants of the Company for the year ending December 31,
1999.
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 July 1,
1999, 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 prefer that the
proxyholders 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 1, 1999 For the Board of Directors,
/s/ H. Wayne Snavely
H. Wayne Snavely
Chairman
<PAGE>
[LOGO OF IMPERIAL CREDIT INDUSTRIES, INC.]
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
July 28, 1999, 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 6, 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 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.
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,
1998, 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 July 1, 1999
will be entitled to vote at the Meeting. There were 33,142,832 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.
<PAGE>
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 provide for a variable Board of Directors with a range of
between five and nine members, with the number currently set at seven. No
proxy may be voted for more than seven 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.
Recommendation of Board of Directors
The Board of Directors recommends a vote for the nominees for Director.
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..................... 58 Chairman of the Board, President and
Chief Executive Officer
Kevin E. Villani..................... 51 Executive Vice President, Finance, and a Director
Stephen J. Shugerman................. 52 Vice Chairman of Southern PacificBank ("SPB")
and a Director
James Clayburn LaForce, Jr. (1) (2).. 70 Director
Perry A. Lerner (1) (2).............. 56 Director
Robert S. Muehlenbeck (1)............ 51 Director
Joseph R. Tomkinson.................. 51 Director
</TABLE>
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* All of such persons may be reached at: Imperial Credit Industries, Inc.,
23550 Hawthorne Boulevard, Suite 110, Torrance, CA 90505
(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. Mr. Snavely
served as a director of Imperial Bank from 1975 to 1983 and from 1993 to
January 1998. From 1986 to February 1992, Mr. Snavely served as Executive Vice
President of Imperial Bancorp and Imperial Bank Mortgage, SPB, 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 is
Chairman of the Board of Franchise Mortgage Acceptance Company ("FMAC"), and
Imperial Credit Commercial Mortgage Investment Corp. ("ICCMIC").
2
<PAGE>
Kevin E. Villani has been the Executive Vice President, Finance, since July
1998 and was the Chief Financial Officer of the Company from September 1995 to
July 1998. He has been a Director since June 1997. Mr. Villani is Vice-
Chairman of the Board of ICCMIC. Mr. Villani joined the University of Southern
California as the Wells Fargo Visiting Professor of Finance in 1990 and
remained on the full-time faculty through 1997. From 1985 to 1990, he was the
Executive Vice President and Chief Financial Officer for Imperial Corporation
of America. From 1982 to 1985, Mr. Villani served in various capacities at the
Federal Home Loan Mortgage Corporation, including Chief Economist and Chief
Financial Officer. 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 1990 through 1995, Mr.
Villani also served as a full-time consulting economist at the World Bank and
International Finance Corporation.
Stephen J. Shugerman was President of SPB from June 1987 until December 1998
and has been a Director of the Company since December 1991. Mr. Shugerman has
been Vice Chairman of SPB since December 1998. 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 recently served as President of the California
Association of Thrift & Loan Companies.
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. He also is a director of
Rockwell International Corp., Jacobs Engineering Group, Inc., Timken Co.,
Motorcargo Industries, Blackrock Funds, Payden & Rygel Funds, and Provident
Investment Counsel.
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 to 1997,
having been a partner with the firm from 1984 to 1996. Mr. Lerner was an
Attorney-Advisor of the International Tax Counsel of the United States
Treasury Department from 1973 to 1976. Mr. Lerner is a Director of FMAC.
Robert S. Muehlenbeck has been a Director of the Company since December 1991.
Mr. Muehlenbeck retired in 1998 as an Executive Vice President of Imperial
Bank with responsibility for corporate finance and mergers and acquisitions.
He also served as President of Imperial Ventures, Inc., Imperial Bank's
venture capital small business investment company and President of Imperial
Capital Corp., an investment and mezzanine lending entity. 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 Chairman of the Board and Chief Executive Officer
of Impac Mortgage Holdings, Inc. ("IMH"), a residential REIT, since June 1998
and was IMH's Vice Chairman from August 1995 until June 1998. Mr. Tomkinson
served as President of the Company from January 1992 to February 1996. 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 1991. From
1984 to 1986, he was employed as Executive Vice President of Loan Production
for American Mortgage Network, a privately owned mortgage bank. Mr. Tomkinson
also served as the Chairman and Chief Executive Officer of Impac Commercial
Holdings, Inc. ("ICH"), a commercial REIT, from inception through May 1999,
and is a director of ICH and BNC Mortgage, Inc., a residential real estate
lending company.
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.
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<PAGE>
Directors who are not employees of the Company receive a fee of $20,000 per
year plus $500 per meeting attended. In addition, non-employee Directors
annually receive options (at the then current fair market value) to acquire
10,000 shares of the Company's Common Stock, which vest and become exercisable
after one year. 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.
No Directors were involved in any petitions under the Federal bankruptcy
laws during the past five years, except that Mr. Snavely was the Chairman and
Mr. Shugerman was a Director of Southern Pacific Funding Corporation.
Committees and Attendance at Board Meetings
Eleven meetings of the Board of Directors were held in fiscal 1998. 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, except for Director Tomkinson who attended 73% of
such meetings.
The Audit Committee, which meets with and reviews the scope and findings of
audit activities performed by the Company's internal auditors and independent
accountants, met eight times during 1998, and the Compensation Committee,
which determines executive compensation, met four times during 1998. The Board
of Directors currently has no Nominating Committee.
Executive Compensation
The following table provides information concerning the cash and non-cash
compensation earned and received by ICII's Chief Executive Officer and its
four most highly compensated executive officers (the "Named Executive
Officers"), other than the Chief Executive Officer, whose salary and bonus
during the fiscal year ended December 31, 1998 exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------------ ------------
Fiscal Other Annual Options
Name and Principal Position Year Salary Bonus Compensation Granted
--------------------------- ------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
H. Wayne Snavely..................... 1998 $502,114 $ -- $78,640(1) --
President, Chief Executive 1997 450,000 700,000 29,082(1) --
Officer and Chairman 1996 300,000 700,000 28,564(1) 400,000(2)
Kevin E. Villani..................... 1998 $352,691 $150,000 71,110(3) 34,000(2)
Executive Vice President, Finance(4) 1997 300,000 266,666 17,082(3) 50,000(2)
1996 200,000 200,000 12,986(3) 84,000(2)
Stephen J. Shugerman................. 1998 $304,224 $ -- 71,325(5) --
Vice-Chairman of SPB(6) 1997 250,000 501,000 21,882(5) --
1996 200,000 400,000 20,963(5) 100,000(2)
Irwin L. Gubman...................... 1998 $201,532 $125,000 $18,557(7) 26,800(2)
General Counsel and 1997 200,000 200,000 16,852(7) 70,000(2)
Secretary 1996 50,000 30,000 750(7) 30,000(2)
Brad S. Plantiko..................... 1998 $ 77,403 $ 99,519 $55,815(8) 84,000(2)
Executive Vice President and
Chief Financial Officer
</TABLE>
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(1) In 1998, 1997 and 1996, consists of (1) a car allowance paid by the
Company of $18,000, $18,000 and $18,000, respectively, and (2) aggregate
contributions paid by the Company of $60,640, $11,082 and $10,564,
respectively, under employee benefit plans.
4
<PAGE>
(2) See "--Stock Option Plans" for details regarding the terms of such
options.
(3) In 1998, 1997 and 1996, consists of (1) a car allowance paid by the
Company of $10,615, $6,000 and $6,000, respectively, and (2) aggregate
contributions paid by the Company of $60,495, $11,082 and $6,986,
respectively, under employee benefit plans.
(4) Mr. Villani served as Chief Financial Officer until July 1998.
(5) In 1998, 1997 and 1996, consists of (1) a car allowance paid by the
Company of $10,800, $10,800 and $10,800, respectively, and (2) aggregate
contributions paid by the Company of $60,525, $11,082 and $10,163,
respectively, under employee benefit plans.
(6) Mr. Shugerman resigned as President of SPB effective December 1998. Mr.
Shugerman is the Vice-Chairman of SPB.
(7) In 1998, 1997 and 1996, consists of (1) a car allowance paid by the
Company of $8,307, $6,000 and $750, respectively, and (2) aggregate
contributions paid by the Company of $10,250, $10,852 and $0,
respectively, under employee benefit plans.
(8) In 1998 and 1997, consists of (1) a car allowance paid by the Company of
$3,980 and (2) aggregate contributions paid by the Company of $51,835
under employee benefit plans.
Option Grants, Exercises and Year End Values
<TABLE>
<CAPTION>
Potential Realized
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
1998 Percentage Option Term
Options of Total Exercise Price Expiration ------------------
Name Granted Grants per Option Date 5% 10%
- ---- ------- ---------- -------------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Kevin E. Villani........ 34,000 3.11% $10.00 12/01/03 $ 94,499 $208,819
Irwin L. Gubman......... 26,800 2.45% 10.00 12/01/03 74,488 164,598
Brad S. Plantiko........ 50,000 4.57% 18.50 08/11/03 255,560 564,722
Brad S. Plantiko........ 34,000 3.11% 10.00 12/01/03 93,936 207,573
</TABLE>
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
<TABLE>
<CAPTION>
Number of Number of
Unexercised Unexercised Senior
Options at FY- Management Options
Shares End Under the at FY-End Under Value of all Unexercised
Acquired Option Plan the Option Plan In-the-Money Options at
on Value Exercisable/ Exercisable/ December 31, 1998
Name Exercise Realized Unexercisable(1) Unexercisable(2) Exercisable/Unexercisable(3)
- ---- -------- -------- ---------------- ------------------ ----------------------------
<S> <C> <C> <C> <C> <C>
H. Wayne Snavely........ -- $-- 160,000/240,000 917,052 $6,632,693/$--
Kevin E. Villani........ -- -- 70,000/150,800 -- /-- 60,100/60,100
Stephen J. Shugerman.... -- -- 40,000/ 60,000 158,524/-- 1,105,681/--
Irwin L. Gubman......... -- -- 26,000/100,800 -- /-- -- /--
Brad S. Plantiko........ -- -- -- / 84,000 -- /-- -- /--
</TABLE>
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(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 $8.38, 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, 1998
5
<PAGE>
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. 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 SPB. 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: (1) with cause: base salary shall be paid through the
date on which termination occurs, or (2) 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, Lerner
and LaForce. Mr Lerner is the Manager of Corona Film Finance Fund (in which
ICII is an investor).
Termination Protection Agreements
In January 1999, the Company entered into termination protection agreements
with Messrs. Snavely, Villani, Gubman and Plantiko. The agreements provide for
severance payments to those senior executives in the event of a change in
control of the Company and a subsequent termination of any one of these senior
executives within three years of a change in control for any reason. The
senior executives will receive a lump sum payment of three times their
respective base salaries and their highest bonus earned in any of the last
three fiscal years preceding the change in control and a percentage of their
respective bonuses for the year in which the change of control occurs.
In addition, ICII will continue to provide these senior executives with
medical, dental, life insurance, disability and accidental death and
dismemberment benefits until the third anniversary of the termination unless
the executive becomes employed by another employer, in which case these
coverages will be secondary to those provided by the new employer. All
deferred compensation in respect of each senior executive will also become
fully vested and ICII will pay such executive in cash all deferred
compensation and any unpaid portion of the executive's bonus. Any amounts
payable to an executive will include additional amounts to cover certain taxes
resulting from those payments.
A change in control for purposes of the termination protection agreements
includes the following events: (1) any person or persons become the beneficial
owner of at least 40% of ICII's outstanding Common Stock other than by the
acquisition of such Common Stock directly from the Company, or (2) any merger
or other business combination, liquidation or sale of substantially all of its
assets where ICII's shareholders and any trustee or fiduciary of ICII's
employee benefit plans own less than 60% of the surviving corporation, or (3)
within
6
<PAGE>
any 24 month period, the persons who were Directors immediately before the
beginning of such period cease to constitute at least a majority of the Board,
or the board of any successor corporation.
Senior Management Stock Options
Effective January 1992, members of senior management received ten year
options to purchase shares of the Company's Common Stock. Such options are not
covered by ICII's option plans described below. The exercise price of these
options is $0.89 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 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 ICII's Common Stock has been reserved for
issuance under the 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 868,813 options were outstanding at December 31, 1998.
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. ISOs 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 ICII'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
In 1996, ICII 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
7
<PAGE>
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
Common Stock is reserved for issuance under the 1996 Stock Option Plan and a
total of 1,937,220 options were outstanding at December 31, 1998.
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 ICII'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:
(1) in cash,
(2) by surrender of shares of the Company's Common Stock already owned by
the option holder having a market value equal to the aggregate exercise
price of all shares to be purchased including, in the case of the
exercise of NQSOs, restricted stock subject to an Award under the 1996
Stock Option Plan,
(3) by cancellation of indebtedness owed by the Company to the
optionholder, or
(4) by any combination of the foregoing.
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 the Company's industry. 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 annual 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 to help ensure corporate
performance, thereby enhancing 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
8
<PAGE>
to the Company's earnings as well as value received by shareholders. Targeted
levels of total 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 toward 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 in excess of $1,000,000 to any one of the
Chief Executive Officer and the four other most highly compensated executive
officers unless (i) such compensation was based upon attainment of pre-
established, objective performance goals, (ii) the Compensation Committee
consists only of "outside directors" as defined for purposes of Section
162(m), and (iii) such performance-based compensation has been approved by
shareholders. All of the members of the Compensation Committee qualify as
"outside directors." In 1998, shareholders approved the Company's Executive
Performance Compensation Plan. The Committee will continue to 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, Chairman
James Clayburn LaForce, Jr.
Perry A. Lerner
9
<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, the Specialty
Finance Lending Index and an index of companies engaged in the Company's
current business focus (the "Diversified Commercial Lending Index") for the
period from January 1, 1993 through December 31, 1998. The Specialty Finance
Lending Index includes: AMRESCO, Inc., ContiFinancial Corp., The Finova Group,
Inc., Green Tree Financial Corp., Imperial Credit Industries, Inc., and The
Money Store, Inc. The Diversified Commercial Lending Index includes: Allstate
Financial Corp., American Business Financial, AMRESCO, Inc., Capital Trust,
Inc., CIT Group, Inc., DVI, Inc., Financial Federal Corp., FINOVA Group, Inc.,
First Sierra Financial, Franchise Mortgage Acceptance Company, Healthcare
Financial Partners, Heller Financial, Inc., HPSC, Inc., Imperial Credit
Industries, Inc., KBK Capital Corp., Pioneer Commercial, PLM International,
Inc., Point West Capital, Prime Capital Corp., Resource America, Source
Capital Corp., Standard Funding, T&W Financial, UniCapital Corp., and WMF
Group, Ltd.
The graph assumes $100 invested on January 1, 1993 in the Company's Common
Stock, the S&P 500 Stock Index, the Specialty Finance Company Index, and the
Diversified Commercial Lending Index.
COMPARISON OF SIX-YEAR CUMULATIVE TOTAL RETURN
AMONG IMPERIAL CREDIT INDUSTRIES, SPECIALTY FINANCE
LENDING INDEX, DIVERSIFIED COMMERCIAL
LENDING INDEX AND S&P COMPOSITE
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period IMPERIAL SPECIALTY DIVERSIFIED
CREDIT FINANCE COMMERCIAL S&P
(Fiscal Year Covered) INDUSTRIES LENDING INDEX LENDING INDEX COMPOSITE
- ------------------- ---------- ------------- ------------- ---------
<S> <C> <C> <C> <C>
Measurement Pt-1993 $100.00 $100.00 $100.00 $100.00
FYE 1994 $ 69.39 $103.16 $103.55 $101.32
FYE 1995 $266.19 $188.44 $172.74 $139.40
FYE 1996 $565.47 $308.74 $267.56 $171.41
FYE 1997 $552.01 $334.62 $381.70 $228.59
FYE 1998 $225.52 $228.25 $340.32 $293.92
</TABLE>
10
<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, 1999, by (i) each Director of the Company, (ii) the Chief Executive
Officer and the four most highly compensated executive officers whose salary
exceeded $100,000 for the year ended December 31, 1998, (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 % of Total
Beneficial Owner(1) Beneficially Owned Outstanding(2)
- ------------------- ------------------ --------------
<S> <C> <C>
Wallace R. Weitz & Company(3)............... 8,889,500 25.4
Imperial Bank(4)............................ 5,254,570 15.0
Wellington Management Co.(3)................ 3,591,040 10.3
H. Wayne Snavely(5)......................... 1,654,640 4.7
Stephen J. Shugerman(6)..................... 324,029 *
Joseph R. Tomkinson(7)...................... 116,808 *
Perry A. Lerner(8).......................... 128,055 *
Robert S. Muehlenbeck(9).................... 115,145 *
J. Clayburn LaForce(10)..................... 94,847 *
Kevin E. Villani(11)........................ 111,356 *
Paul B. Lasiter (12)........................ 66,057 *
Irwin L. Gubman(13)......................... 46,908 *
Brad S. Plantiko............................ 35,459 *
All Directors and Officers as a Group (13
persons)(14) .............................. 2,696,902 7.71%
</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) 791-8020.
(2) Percentage ownership is based on 34,978,074 shares of Common Stock
outstanding as May 31, 1999.
(3) Based upon Schedule 13G filings with the Company reflecting beneficial
ownership as of March 31, 1999. The shares are owned by various
investment advisory clients of Wallace R. Weitz & Co. and Wellington
Management Company (or of Wellington Trust Company, National
Association, WMC's wholly-owned subsidiary), which is deemed a
beneficial owner 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. Wallace
R. Weitz & Company is located at One Pacific Place, Suite 600, 1125
South 103 Street, Omaha, NB 68124-6008 and Wellington Management
Company, LLP is located at 75 State Street, Boston, MA 02109.
(4) 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.
(5) Includes 1,157,052 shares subject to stock options exercisable within 60
days of May 31, 1999.
(6) Includes 218,524 shares subject to stock options exercisable within 60
days of May 31, 1999.
(7) Includes 50,000 shares subject to stock options exercisable within 60
days of May 31, 1999.
(8) Includes 116,422 shares subject to stock options exercisable within 60
days of May 31, 1999.
(9) Includes 80,022 shares subject to stock options exercisable within 60
days of May 31, 1999.
(10) Includes 88,422 shares subject to stock options exercisable within 60
days of May 31, 1999.
(11) Includes 86,800 shares subject to stock options exercisable within 60
days of May 31, 1999.
(12) Includes 12,000 shares subject to stock options exercisable within 60
days of May 31, 1999.
(13) Includes 26,000 shares subject to stock options exercisable within 60
days of May 31, 1999.
(14) Includes 1,835,242 shares subject to stock options exercisable within 60
days of May 31, 1999.
11
<PAGE>
Section 16(A) Beneficial Ownership Reporting Compliance
Officers, Directors and persons owning more than 10% of the Company's equity
securities are required, under Section 16(a) of the Securities Exchange Act of
1934, to file reports of and changes in such ownership with the SEC and to
furnish the Company with copies of all forms they file. Based on the Company's
review of the copies of such forms it has received and review of other
available data, the Company believes that, during 1998, its officers and
Directors complied with Section 16(a) filing requirements, except for
transactions reportable on Form 4 for Mr. Lerner, who filed one late report
concerning two transactions.
Certain Relationships And Related Transactions
Sale of Holdings by Principal Shareholder
At December 31, 1998, Imperial Bank owned 8,941,106 shares of Common Stock,
or 24.3% of the Company. Imperial Bancorp ("Bancorp") is the owner of all of
the outstanding capital stock of Imperial Bank.
The Federal Reserve Board has advised Bancorp that it considers the
retention by the Bank of its shares of ICII stock to be in violation of the
Bank Holding Company Act. This position is apparently the consequence of the
Federal Reserve Board's view that ICII is engaged in activities which are not
determined by regulation to be a closely related activity and that Bancorp did
not file a notice or obtain approval to engage in such activities in
accordance with Federal Reserve Regulation Y.
On March 29, 1999, Bancorp announced that it intends to engage an investment
banker to dispose of its investment in ICII. On May 17, 1999, the Company
repurchased and retired 3,682,536 shares of its Common Stock directly from
Imperial Bank at $8 per share for a cost of $29,460,288. As of such date,
Imperial Bank owned 15.9% of ICII's outstanding Common Stock.
Borrowing Arrangements
Imperial Bank has extended a $30 million commitment to SPB for the issuance
of letters of credit for customers of SPB's Coast Business Credit Division.
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.
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 Bancorp, the Company believes that, in the event of an insolvency,
bankruptcy or receivership proceeding involving Imperial Bank or 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 of these entities.
Relationships with IMH
At May 31, 1999, ICII owned 647,700 shares of IMH common stock. These shares
are subject to a registration rights agreement, pursuant to which IMH has
agreed to file one or more registration statements under the Securities Act in
the future subject to certain conditions and will use its reasonable efforts
to cause such registration statements to be kept continuously effective for
the public sale from time to time of the shares. Mr. Tomkinson is the Chairman
of the Board and Chief Executive Officer of IMH.
12
<PAGE>
Relationships with FMAC
At December 31, 1998, ICII owned 11,023,492 shares of FMAC or 38.4% of
FMAC's outstanding common stock. In addition, Mr. Snavely is the Chairman of
FMC's board of directors, and Mr. Plantiko is a Director of FMAC. ICII entered
into certain agreements with FMAC in connection with FMAC's initial public
offering. These agreements were 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 FMAC
and ICII that such agreements and the transactions provided for therein, taken
as a whole, are fair to both parties, while continuing certain mutually
beneficial arrangements. However, there can be no assurance that each of such
agreements, or the transactions provided for therein, have been effected on
terms at least as favorable to FMAC as could have been obtained from
unaffiliated parties. Additional or modified arrangements and transactions may
be entered into by FMAC, ICII, and their respective subsidiaries. Any such
future arrangements and transactions will be determined through negotiation
between FMAC and ICII, and it is possible that conflicts of interest will be
involved. All transactions by and between FMAC and ICII must be approved by a
majority of the disinterested directors of FMAC.
FMAC Services Agreement
FMAC and ICII entered into a services agreement effective as of November 18,
1997 (the "FMAC Services Agreement") under which ICII has provided limited
human resource administration and certain accounting functions to FMAC. ICII
charges fees for each of the services provided under the FMAC Services
Agreement based upon usage. The FMAC Services Agreement had an initial term
that ended November 24, 1998. FMAC may terminate the FMAC Services Agreement,
in whole or in part, upon one month's written notice. ICII will provide FMAC
with insurance coverage and self insurance programs, including health
insurance, under the FMAC Services Agreement. ICII charges FMAC for coverage
based upon a pro rata portion of costs of the various policies. ICII believes
that the terms of the FMAC Services Agreement are as favorable to FMAC as
could be obtained from independent third parties.
ICII Registration Rights Agreement
FMAC entered into a registration rights agreement (the "ICII Registration
Rights Agreement") pursuant to which FMAC has agreed to file one or more
registration statements under the Securities Act in the future for shares of
FMAC held by ICII, subject to certain conditions. Pursuant to the ICII
Registration Rights Agreement, FMAC will use its reasonable efforts to cause
such registration statements to be kept continuously effective for the public
sale from time to time of the shares of FMAC held by ICII.
Transactions Involving SPB
FMAC has a master purchase and sale agreement with SPB to originate loans
for SPB under mutual agreement, and subject to SPB underwriting each such loan
prior to sale of such loans. Under this agreement, FMAC also has the ability
to repurchase loans, under mutual agreement with SPB. There is no specified
commitment by either party, and each individual sale is negotiated separately
as to pricing. This agreement has no expiration date. FMAC does not expect to
originate a significant volume of loans for SPB under this arrangement in the
future.
Borrowings and Guarantees
In consideration of ICII's guarantee of FMAC's warehouse lines of credit and
repurchase facilities, FMAC pays to ICII monthly a fee equal to 15 basis
points on FMAC's committed warehouse lines covered by such guarantee. For the
year ended December 31, 1998, the amount of such guarantee fees was $428,000.
ICII will not guarantee any of FMAC's future warehouse lines of credit and
repurchase facilities.
ICII and FLRT, Inc. agreed to indemnify FMAC against any and all liability
that FMAC and its stockholders (other than ICII and FLRT, Inc.) may incur as a
result of the lawsuit of DeWald et al. vs. Knyal, et al.
13
<PAGE>
Proposed Merger of FMAC
On March 11, 1999, FMAC and Bay View Capital Corporation announced that they
have executed a definitive merger agreement providing for the merger of FMAC
with Bay View Capital Corporation (the "Definitive Agreement").
In accordance with the terms of the Definitive Agreement, Bay View will
acquire all of the common stock of FMAC for consideration currently valued at
approximately $309.0 million. Each share of FMAC common stock will be entitled
to receive, at the election of the holder, either $10.25 in cash, or .5125
shares of Bay View's common stock. FMAC shareholder elections are subject to
the aggregate number of shares of FMAC common stock to be exchanged for Bay
View's common stock being equal to 60% of the number of shares of FMAC common
stock outstanding immediately prior to closing the transaction and no FMAC
shareholder owning more than 9.9% of Bay View's common stock, on a pro forma
basis. The transaction is expected to close during the third quarter of 1999,
subject to approval by both Bay View's and FMAC's shareholders and subject to
necessary regulatory approvals.
Other Arrangements and Transactions With FMAC
In the ordinary course of business, FMAC has conducted transactions with
certain of its officers and directors and with affiliated companies and
entities. All such transactions are conducted at "arm's length" in accordance
with FMAC's policies.
Relationships with ICCMIC
ICCMIC Management Agreement
On October 20, 1997, ICCMIC entered into a management agreement (the "ICCMIC
Management Agreement") with Imperial Credit Commercial Asset Management
Corporation ("ICCAMC"), a wholly-owned subsidiary of ICII, for an initial term
expiring on October 20, 1999. Thereafter, successive extensions, each for a
period not to exceed two years, may be made by agreement between ICCMIC and
ICCAMC, subject to the affirmative vote of a majority of ICCMIC's independent
directors. Mr. Snavely is the Chairman of ICCMIC's board of directors and Mr.
Villani is a director of ICCMIC.
ICCMIC may terminate, or decline to renew the term of, the ICCMIC Management
Agreement without cause at any time after the first two years upon 60 days
written notice by a majority vote of the independent directors; provided that
a termination fee will be due. In addition, ICCMIC has the right to terminate
the ICCMIC Management Agreement upon the occurrence of certain specified
events, including a material breach by ICCAMC of any provision contained in
the ICCMIC Management Agreement that remains uncured at the end of the
applicable cure period, without the payment of any termination fee.
Pursuant to the provisions of the ICCMIC Management Agreement, ICCAMC is at
all times subject to the supervision of ICCMIC's board of directors and has
only such functions and authority as ICCMIC delegates to it. ICCAMC advises
the board of directors as to the activities and operations of ICCMIC. ICCAMC
is responsible for the day-to-day operations of ICCMIC pursuant to the
authority granted to it by ICCMIC's board of directors under the ICCMIC
Management Agreement, and ICCAMC performs (or causes to be performed) such
services and activities relating to the assets and operations of ICCMIC as may
be directed by ICCMIC's board of directors or as ICCAMC otherwise considers
appropriate. ICCAMC will be reimbursed for (or charge ICCMIC directly for)
ICCAMC's costs and expenses in employing third-parties to perform due
diligence tasks on assets purchased or considered for purchase by ICCMIC.
Fees under the ICCMIC Management Agreement are payable in arrears. ICCAMC's
base and incentive fees and reimbursable costs and expenses are calculated by
ICCAMC within 45 days after the end of each quarter, and such calculation is
promptly delivered to ICCMIC. ICCMIC is obligated to pay such fees, costs and
expenses within 60 days after the end of each fiscal quarter. ICCMIC paid
ICCAMC $6.3 million in fees related to the ICCMIC Management Agreement during
the year ended December 31, 1998.
14
<PAGE>
Right of First Offer
Pursuant to the ICCMIC Management Agreement, ICCAMC will not assume any
responsibility other than to render the services called for thereunder and
will not be responsible for any action of ICCMIC's board of directors in
following or declining to follow its advice or recommendations. ICCAMC, its
directors and its officers will not be liable to ICCMIC, any subsidiary of
ICCMIC, the independent directors, ICCMIC's stockholders or any subsidiary's
stockholders for acts performed in accordance with and pursuant to the ICCMIC
Management Agreement, except by reason of acts constituting bad faith, willful
misconduct, gross negligence or reckless disregard of their duties under the
ICCMIC Management Agreement. ICCMIC has agreed to indemnify ICCAMC, its
directors and its officers with respect to all expenses, losses, damages,
liabilities, demands, charges and claims arising from acts of ICCAMC not
constituting bad faith, willful misconduct, gross negligence or reckless
disregard of duties, performed in good faith in accordance with and pursuant
to the ICCMIC Management Agreement.
The ICCMIC Management Agreement does not limit or restrict the right of
ICCAMC 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
ICCMIC's policies and criteria, except that ICCAMC 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 commercial or
multifamily interests in mortgage backed securities. Moreover, the directors
and certain of the executive officers of ICCAMC executed non-compete
agreements that preclude them from leaving ICCAMC and, under certain
circumstances, forming or joining another REIT that invests or intends to
invest primarily in commercial and multifamily mortgage loans or subordinated
interests in commercial mortgage backed securities.
ICII and its affiliates, including SPB, expect to continue to originate
mortgage loans and interests in mortgage backed securities. SPB has entered
into an agreement granting ICCMIC, as long as the ICCMIC Management Agreement
is in effect, a right of first offer to purchase, in addition to the initial
investments made by ICCMIC, 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, ICCMIC has purchased 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 ICCMIC's independent directors. ICCMIC purchased $190.0
million of mortgage loans from SPB in the year ended December 31, 1998.
ICCMIC expects to maintain a relationship with ICII and SPB in which ICCMIC
will be a ready, willing and able purchaser of interests in mortgage backed
securities that may be sold from time to time by SPB. Although no binding
commitment will exist on the part of ICII, SPB or ICCMIC regarding the sale
and purchase of interests in mortgage backed securities, ICCMIC expects to be
able to purchase interests in mortgage backed securities from SPB at prices
and on terms meeting ICCMIC's investment criteria.
ICCMIC expects that ICII and SPB will continue to offer to sell assets to
ICCMIC on terms and at prices that, in the aggregate, will be fair to both
parties, subject to compliance with the guidelines. In deciding whether to
acquire any such asset, ICCAMC may consider, among other factors, whether
acquisition of the asset will enhance ICCMIC's ability to achieve or exceed
ICCMIC's risk adjusted target rate of return established for that period by
ICCMIC's board of directors, whether the asset otherwise is well-suited for
ICCMIC and whether ICCMIC is financially able to take advantage of the
investment opportunity. If an asset that otherwise meets all of ICCMIC's
criteria for asset acquisition is being offered to ICCMIC 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 arms' length transactions, ICCAMC
would be expected to recommend that ICCMIC decline to acquire that asset at
the quoted price and terms, notwithstanding the relationship among ICCMIC,
ICII and SPB.
15
<PAGE>
Other Transactions
From time to time, SPB may act as the servicer for ICCMIC's loans. SPB
receives fees for such services pursuant to applicable pooling and servicing
agreements. SPB received loan servicing fees pursuant to applicable pooling
and servicing agreements from ICCMIC during the year ended December 31, 1998.
ICCMIC, on the one hand, and ICII and its affiliates, on the other, will
enter into a number of relationships other than those governed by the ICCMIC
Management Agreement, some of which may give rise to conflicts of interest.
Moreover, three of the members of the board of directors of ICCMIC and all of
its officers are also employed by ICCAMC or its affiliates.
The relationships between ICCMIC, on the one hand, and ICII and its
affiliates, on the other, are governed by policy guidelines approved by a
majority of ICCMIC's independent directors. The guidelines establish certain
parameters for the operations of ICCMIC, including quantitative and
qualitative limitations on ICCMIC's assets that may be acquired. The
guidelines are to assist and instruct ICCAMC and to establish restrictions
applicable to transactions with ICII and its affiliates. A majority of the
independent directors approved the acquisition of the initial investments by
ICCMIC from ICII and SPB. However, subsequent to the acquisition of the
initial investments, ICCAMC may enter into transactions on behalf of ICCMIC
with ICII and its affiliates based upon the guidelines approved by the
independent directors. Such transactions will be reviewed on a quarterly basis
to insure compliance with the guidelines.
Mortgage Loan and Other Asset Purchases
In 1998, ICCMIC purchased a pool of multifamily and commercial mortgage
loans from SPB and from the Company for an aggregate purchase price of
approximately $190.0 million plus interest.
ICCMIC may acquire additional assets from ICII and its affiliates in the
future. Any such acquisitions will be in accordance with the guidelines
approved by a majority of ICCMIC's independent directors. The terms of a
particular transaction, however, will not be approved in advance by ICCMIC's
independent directors in all cases. The independent directors will review any
such transactions quarterly to insure compliance with the guidelines, but in
doing so they, by necessity, will rely primarily on information and analysis
provided to them by ICCAMC.
Equity Investment
As of May 31, 1999, ICII owns 10.8% of the outstanding common stock of
ICCMIC. ICCMIC is managed by ICCAMC, ICII's wholly owned subsidiary. ICCMIC
invests primarily in performing multifamily and commercial loans and in
mortgage backed securities. ICCAMC also has received stock options pursuant to
the ICCMIC Option Plan. ICII has agreed to retain its shares of ICCMIC at
least until October 20, 1999, but may dispose of its shares any time
thereafter. Notwithstanding the foregoing, if ICCMIC terminates the ICCMIC
Management Agreement, ICII may dispose of its shares at that time.
The market in which ICCMIC acquires assets is characterized by rapid
evolution of products and services and, thus, there may in the future be
relationships between ICCMIC, ICCAMC, and affiliates of ICCAMC in addition to
those described herein. Recently, ICII has offered to acquire all of the
common stock of ICCMIC for $11.50 per share. Discussions with ICCMIC's Board
of Directors are pending.
Other Matters
In October 1997, the Company loaned H. Wayne Snavely, Chairman and Chief
Executive Officer, and Kevin E. Villani, Executive Vice President, Finance,
$1,999,998 and $999,992, respectively, for the purposes of assisting each of
them to purchase ICCMIC common stock. The loans are each evidenced by a
promissory note maturing June 14, 2002, secured by a deed of trust and stock
of ICCMIC held by such individuals. The notes bear interest at an annual rate
of 10.4% and are payable in semi-annual installments commencing June 15, 1998.
At May 31, 1999, the remaining balances are $241,246 and $83,295 for Messrs.
Snavely and Villani, respectively. These loans were made in the ordinary
course of business, on substantially the same terms,
16
<PAGE>
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons, and did not involve more than
normal risk of collectibility or present other unfavorable features.
Legal Proceedings
The Company and its Chairman, among others, are defendants in Judy L.
Resnick v. Imperial Credit Industries, Inc., et al originally filed on January
14, 1998, in Los Angeles Superior Court, ordered removed to arbitration. The
complaint alleges conspiracies by the defendants to defraud, interfere with
advantageous business relationships, defame, and breach their fiduciary duty
as well as actual fraud, defamation, and breach of the implied covenant of
good faith and fair dealing arising out of the acquisition by the Company's
subsidiary, Imperial Capital Group, LLC of substantially all of the assets of
Dabney/Resnick/Imperial, LLC. The plaintiff is seeking damages in a sum of not
less than $6 million. The arbitration is pending before a panel of arbitrators
appointed by the National Association of Securities Dealers, Inc.
Following the October 1, 1998 filing for protection under Chapter 11 of the
U.S. Bankruptcy Code by Southern Pacific Funding Corporation, lawsuits were
filed in the U.S. District Courts for the District of Oregon, the Eastern
District of New York, the Eastern District of Wisconsin, and the Central
District of California setting forth purported class-action complaints
relating to alleged violations of the Federal securities laws in connection
with securities filings and public statements made by Southern Pacific Funding
Corporation with respect to its business during various periods specified in
the respective complaints that range from October 9, 1997 to October 1, 1998.
The initial suits claimed to have been filed on behalf of shareholders,
noteholders and bondholders of Southern Pacific Funding Corporation, and name,
among the other defendants, the Company, Director Shugerman and the Chairman
who also served as chairman of Southern Pacific Funding Corporation during the
period referred to in the lawsuits. The lawsuits generally alleged, among
other things, that the market prices of Southern Pacific Funding Corporation's
securities were artificially inflated due to the failure to mark down the
value of its residual securities, unduly positive statements in Southern
Pacific Funding Corporation's filings with the Securities and Exchange
Commission and in its press releases, failure to properly reflect increased
levels of prepayments on Southern Pacific Funding Corporation loans and actual
prepayment and default rates on its loans.
On January 29, 1999, plaintiffs, after dismissing each of the above
complaints, filed a consolidated complaint, In re Southern Pacific Funding
Corporation Securities Litigation in the U.S. District Court for the District
of Oregon. The consolidated class action complaint alleges, on behalf of all
plaintiffs that had previously filed actions against the defendants, that the
defendants deceived the investing public regarding the business, financial
condition and performance of Southern Pacific Funding Corporation,
artificially inflated and maintained the market price of that company's notes
and common stock and caused plaintiffs and members of the class to purchase
the securities at artificially inflated prices. Plaintiffs allege that, to
further the unlawful scheme, defendants issued or caused to be issued a series
of false and misleading public statements which operated as a fraud and deceit
upon the market for the securities. Defendants' motion to dismiss the
complaint has been granted in part.
Between November and December 1998, four alleged class action complaints
were filed in the U.S. District Court for the Central District of California
alleging a common course of conduct by defendants Imperial Credit Industries,
Inc., its officers H. Wayne Snavely, Kevin E. Villani and Brad S. Plantiko,
among others, and Director Lerner in violation of Sections 10(b) and 20(a) of
the Securities and Exchange Act of 1934 and related Rule 10b-5 during the
class period of January 29, 1998 to September 14, 1998. The actions allege
that defendants made false and misleading statements and omitted to reveal the
truth concerning the value of Imperial Credit Industries, Inc.'s investment in
Southern Pacific Funding Corporation, resulting in an artificial inflation of
Imperial Credit Industries, Inc.'s stock price. These alleged class actions
are: Mortensen v. Snavely, et al; Prentice Securities v. ICII, et al; Steward
v. Snavely, et al; and Rosenstein, et al v. Snavely, et al. Motions to
consolidate all of these alleged class action lawsuits in the U.S. District
Court for the Central District of California along with a motion to appoint
lead counsel was granted on February 22, 1999. Defendants recently filed
motions to dismiss all of these complaints.
17
<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 shareholders for review and ratification on an
annual basis.
KPMG LLP has examined the financial statements of the Company since 1991.
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.
Shareholders' Proposals
Shareholders' proposals intended to be presented at the Company's next
Annual Meeting of Shareholders to be held in 2000 must be received at the
Company's principal executive offices no later than February 29, 2000, in
order to be considered for inclusion in the proxy statement and form of proxy
relating to that meeting.
Other Business
The Board of Directors knows of no other matter to be acted upon at the
Meeting. However, if any other matter shall properly come before the Meeting,
the proxyholders named in the proxy accompanying this Proxy Statement will
have discretionary authority to vote all proxies in accordance with their best
judgment.
Dated: July 1, 1999 By Order of the Board of Directors,
Torrance, California
/s/ Irwin L. Gubman
Irwin L. Gubman, Secretary
18
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IMPERIAL CREDIT INDUSTRIES, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS ON JULY 28, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints H. Wayne Snavely, Kevin E. Villani and Irwin
L. Gubman, or any of them, each with full power of substitution, as proxies of
the undersigned to vote all of the undersigned's shares of Imperial Credit
Industries, Inc. common stock at the Annual Meeting of Shareholders of Imperial
Credit Industries, Inc., at the Marriott Hotel, located at 3635 Fashion Way,
Torrance, California 90503, on July 28, 1999, at 10:00 a.m. Pacific Time.
1. Election of Directors:[_] FOR all nominees listed below[_] WITHHOLD
AUTHORITY
H. Wayne Snavely . Kevin E. Villani . Stephen J. Shugerman . James Clayburn La
Force, Jr.
Perry A. Lerner . Robert S. Muehlenbeck . Joseph R. Tomkinson
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
-----------------------------------------------------------------------
2. To ratify the appointment of KPMG LLP as independent accountants for the
year ending December 31, 1999.
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 SEVEN 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:_________________, 1999
-----------------------------
Signature
-----------------------------
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.
