EXHIBIT 10.7
RIGHT OF FIRST REFUSAL AGREEMENT
This RIGHT OF FIRST REFUSAL AGREEMENT (THIS "AGREEMENT"), entered into
and made effective as of July ___, 1997, the closing date (THE "CLOSING DATE")
of the public offering of Common Stock, $.01 par value per share, on a Form S-11
Registration Statement (THE "REGISTRATION STATEMENT") of IMPERIAL CREDIT
COMMERCIAL HOLDINGS, INC., a Maryland corporation ("ICH"), by and among ICH, ICI
FUNDING CORPORATION, a California corporation ("ICIFC") IMPERIAL CREDIT MORTGAGE
HOLDINGS, INC., a Maryland corporation ("IMH"), IMPERIAL COMMERCIAL CAPITAL
CORPORATION, a California corporation ("ICCC") and REIT ADVISORS, INC., ("RAI").
BACKGROUND
A. Pursuant to that certain Contribution Agreement, effective as of
the Closing Date, between ICH and IMH, in exchange for (i) the transfer by IMH
to the Company of 100% of the non-voting Preferred Stock of Imperial Commercial
Capital Corporation ("ICCC") presently owned by IMH, and (ii) the execution of
that certain Non-Competition Agreement, effective as of the Closing Date,
between ICH and IMH, and this Agreement, the Company has agreed to issue to IMH
that number of shares of ICH Class A Common Stock equal to the product of 95% of
the estimated fair value of ICCC on the Closing Date divided by the Subscription
Price (as defined in the Registration Statement).
B. ICH is involved primarily in originating, purchasing,
securitizing and selling commercial mortgages and investing in Commercial
Mortgages and CMBSs (as defined below). ICCC is the conduit operations of ICH;
ICH owns all of the outstanding non-voting preferred stock of ICCC which
represents 95% of the economic interest in ICH. IMH's primary business is
purchasing, selling, securitizing and investing in residential mortgage loans
that do not qualify for purchase by government-sponsored agencies such as the
Federal National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC") ("NON-CONFORMING MORTGAGE LOANS") and such
mortgage loans and securities backed by Non-Conforming Mortgage Loans. ICIFC is
the conduit operations of IMH; IMH owns all of the outstanding non-voting
preferred stock of ICIFC which represents 99% of the economic interest in ICIFC.
On the date of this Agreement, RAI will be involved primarily in overseeing the
day-to-day operations of ICH, subject to supervision of ICH's board of
directors, including (i) asset-liability management - primarily the analysis and
oversight of the purchasing, financing and disposition of ICH assets, (ii)
capital management-the oversight of ICH's structuring, analysis, capital raising
and investor relations activities, and (iii) operations management-primarily the
oversight of ICH's operating subsidiaries, including ICCC.
C. Due to the nature of the specialty finance business and the
parties' past experience, it is likely that RAI will have opportunities to act
as the manager of other REITs, some of which may have been or will be affiliated
with ICH, ICIFC, IMH or ICCC (such REIT utilizing
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RAI as its manager and is a party to this Agreement, AN "AFFILIATED REIT"), and
will have opportunities to acquire and will acquire Commercial Mortgages and
CMBSs on behalf of said parties.
D. To enhance the business opportunities of each of ICH, IMH and any
Affiliated REIT, the parties have agreed it would be in their respective best
interests to utilize one another as sources to purchase Mortgage Loans (as
defined below). In that regard, RAI has agreed that any mortgage loan or
mortgage-backed security investment opportunity (AN "INVESTMENT OPPORTUNITY")
which is offered to it on behalf of either ICH, IMH or any Affiliated REIT (A
"REIT ENTITY") either directly for such REIT Entity or for such REIT Entity
through any of its operating subsidiaries, including its conduit operations or
that C corporation through which it conducts certain of its operations (each an
"OPERATING SUBSIDIARY"), will first be offered to that REIT Entity (THE
"PRINCIPAL PARTY") for exploitation either directly by such REIT Entity or
through any of its Operating Subsidiaries, whose initial primary business as
described in said Principal Party's initial public offering documentation (THE
"INITIAL PRIMARY BUSINESS") most closely aligns with such Investment
Opportunity.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter contained, the parties hereto agree as
follows:
1. Definitions.
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"AGENCY CERTIFICATES" means Pass-Through Certificates guaranteed by
the FNMA, FHLMC or the Government National Mortgage Association ("GNMA").
"BUSINESS DAY" means any day, other than Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions are authorized
or required by law, regulation or executive order to close.
"CMBSS" means (1) Pass-Through Certificates and (2) REMICs.
"CMO" means an adjustable or fixed-rate debt obligation (bond) that is
collateralized by mortgage loans or mortgage certificates and issued by private
institutions.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMERCIAL MORTGAGES" means commercial mortgage assets including
condo-conversion, multi-family property and cooperative apartment mortgage loans
on commercial real property such as industrial and warehouse properties, office
buildings, retail space and shopping malls, hotels and motels, nursing homes,
hospitals, congregate care facilities and senior living centers.
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"CONFORMING MORTGAGE LOANS" mean mortgage loans that qualify for
purchase by FNMA and FHLMC.
"MORTGAGE LOANS" means Conforming Mortgage Loans, Non-Conforming
Mortgage Loans, Commercial Mortgages and any financing offered by any Affiliated
REIT.
"NOTICE OF FIRST REFUSAL" means a written notice to be delivered by or
for RAI to ICH, IMH or any Affiliated REIT or by or for ICH, IMH or any
Affiliated REIT to RAI, as applicable, setting forth the option to enter into an
Investment Opportunity, provided in Section 2 hereof, which notice shall specify
in reasonable detail the price, terms and conditions of the Investment
Opportunity.
"PARTICIPANT" means any of ICH, IMH or any Affiliated REIT which is
not a Principal Party with respect to an Investment Opportunity.
"PASS-THROUGH CERTIFICATES" means securities (or interests therein)
which are Qualified REIT Assets evidencing undivided ownership interests in a
pool of Mortgage Loans, the holders of which receive a "pass-through" of the
principal and interest paid in connection with the underlying mortgage loans in
accordance with the holders' respective, undivided interests in the pool. Pass-
Through Certificates evidence interests in loans secured by multi-family or
commercial real estate properties.
"PURCHASE PRICE" means the price to be paid for loans specified in a
Notice of First Refusal.
"QUALIFIED REIT ASSETS" means Pass-Through Certificates, Mortgage
Loans, Agency Certificates and other assets of the type described in Code
Section 856(c)(6)(B).
"REMICS" means serially maturing debt securities secured by a pool of
Mortgage Loans, the payments on which bear a relationship to the debt
securities, and the issuer of which qualifies as a Real Estate Mortgage
Investment Conduit under Section 860D of the Code.
"RESPONSE" means a written letter of acceptance or rejection of a
Notice of First Refusal by either ICH, IMH or any Affiliated REIT, as
applicable, as set forth in Section 2.2 hereof.
"THIRD PARTY" means any individual, corporation, partnership,
association, limited liability company, trust or any unincorporated organization
other than ICH, IMH, RAI or any Affiliated REIT or their Operating Subsidiaries.
2. RAI Offer of Investment Opportunities to ICH, IMH and any
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Affiliated REITs.
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2.1 If RAI is offered an Investment Opportunity on behalf of any of
ICH, IMH or an Affiliated REIT, for exploitation either directly by such REIT
Entity or by such REIT Entity through any of its Operating Subsidiaries, RAI
agrees to first offer such Investment Opportunity to the Principal Party, for
exploitation either directly by the Principal Party or through any of its
Operating Subsidiaries whose Initial Primary Business most closely aligns with
such Investment Opportunity on terms and conditions no less favorable than as
first presented to RAI and deliver to the Principal Party a Notice of First
Refusal within [2] days of its receipt of the Investment Opportunity.
2.2 Upon receipt of a Notice of First Refusal from RAI, ICH, IMH or
any Affiliated REIT, as the case may be, shall have five (5) Business Days to
either accept or reject the Notice of First Refusal by delivering a Response to
RAI. Upon acceptance by ICH, IMH or any Affiliated REIT, as the case may be,
through a Response, the Notice of First Refusal shall constitute the binding
agreement of RAI to pursue with commercially reasonable efforts such Investment
Opportunity on the terms and subject to the conditions set forth therein, either
directly by such party or through any of its Operating Subsidiaries. Each
applicable, Operating Subsidiary agrees to take all action necessary to
effectuate all action necessary to effectuate the pursuit of such Investment
Opportunity. If RAI does not receive a Response from ICH, IMH or any Affiliated
REIT, as the case may be, or the Principal Party declines the Investment
Opportunity within five (5) Business Days, RAI will make an independent
evaluation of which Participant's business is more greatly enhanced by such
opportunity. A similar Notice of First Refusal shall be forwarded by RAI to
such Participant and said Participant shall have five (5) Business Days in which
to respond to its Notice of First Refusal. Should such Participant decline to
pursue the Investment Opportunity, RAI, in its discretion, shall (a) make
another independent evaluation of which remaining Participant's business is more
greatly enhanced by such opportunity and (b) deliver a Notice of First Refusal
to such Participant. Such Participant shall have five (5) Business Days to
accept or reject the Notice of First Refusal by delivering a Response to RAI.
Should all Participants decline to pursue the Investment Opportunity, then RAI
shall have the right to present such Investment Opportunity to a Third Party.
The five (5) Business Day periods specified in this Subsection 2.2 may be
extended upon mutual written agreement of the parties.
2.3 RAI may only present an Investment Opportunity contained in a
Notice of First Refusal to IMH, ICH, any Affiliated REIT or Third Party on terms
no less favorable than as first presented to RAI and then as set forth to ICH,
IMH or any Affiliated REIT, as the case may be, in said Notice of First Refusal.
3. IMH, ICH and Any Affiliated REIT Right of First Refusal.
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3.1 Should either of IMH, ICH or any Affiliated REIT, or any of their
Operating Subsidiaries, be offered an Investment Opportunity which falls outside
the scope of the Initial Primary Business of IMH, ICH or any Affiliated REIT or
the Initial Primary Business of the REIT Entity associated with the applicable
Operating Subsidiary, as the case may be, it will first be offered
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to the Principal Party whose Initial Primary Business most closely aligns with
such Investment Opportunity on terms and conditions no less favorable as first
presented to IMH, ICH or any Affiliated REIT or any of their Operating
Subsidiaries, as the case may be, and a Notice of First Refusal shall be
delivered to the Principal Party with [2] days of the receipt of such Investment
Opportunity.
3.2 Upon receipt of a Notice of First Refusal from either of IMH, ICH
or any Affiliated REIT, as the case may be, the Principal Party shall have five
(5) Business Days to either accept or reject the Notice of First Refusal by
delivering a Response to IMH, ICH or any Affiliated REIT, as the case may be.
Upon acceptance by the Principal Party through a Response, the Notice of First
Refusal shall constitute the binding agreement of IMH, ICH or any Affiliated
REIT as the case may be, to pursue with commercially responsible efforts such
Investment Opportunity in the terms and conditions set forth therein either
directly by such party or through any of its Operating Subsidiaries. Each
applicable Operating Subsidiary agrees to take all action necessary to
effectuate the pursuit of such Investment Opportunity. If IMH, ICH or any
Affiliated REIT does not receive a Response from the Principal Party, within
five (5) Business Days, or such Principal Party declines such Notice of First
Refusal, IMH, ICH or any Affiliated REIT, as the case may be shall have the
right to pursue such Investment Opportunity, either directly or through any of
their respective Operating Subsidiaries. The five (5) Business Day period
specified in this subsection 3.2 may be extended upon mutual written agreement
of the parties.
3.3 IMH, ICH or any Affiliated REIT may only pursue an Investment
Opportunity contained in a Notice of First Refusal to the Principal Party on
terms no less favorable than as presented to IMH, ICH or any Affiliated REIT, or
any of their Operating Subsidiaries, and then as set forth to the Principal
Party on said Notice of First Refusal.
4. Term. The term of this Agreement shall be ten (10) years from
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the date hereof.
5. Affiliated REITs to be Parties. The parties hereto agree to use
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all reasonable efforts to cause each Affiliated REIT, if any, to become parties
to this Agreement.
6. Injunctive Relief. Each of RAI, ICH, IMH and any Affiliated
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REIT hereby acknowledges and agrees that it would be difficult to fully
compensate each other for damages resulting from the breach or threatened breach
of Sections 2 and 3, as they apply to each party herein and, accordingly, that
each of RAI, ICH, IMH and any Affiliated REIT shall be entitled to temporary
and injunctive relief, including temporary restraining orders, preliminary
injunctions and permanent injunctions, to enforce such Sections without the
necessity of proving actual damages therewith. This provision with respect to
injunctive relief shall not, however, diminish each of RAI's, ICH's, IMH's and
any Affiliated REIT's right to claim and recover damages or enforce any other of
its legal and/or equitable rights or defenses.
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7. Severable Provisions. The provisions of this Agreement are
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severable and if any one or more provisions may be determined to be illegal or
otherwise unenforceable, in whole or in part, the remaining provisions, and any
partially unenforceable provisions to the extent enforceable, shall nevertheless
be binding and enforceable.
8. Binding Agreement. This Agreement shall inure to the benefit of
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and shall be binding upon the parties hereto and their successors and assigns.
9. Captions. The Section captions are inserted only as a matter of
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convenience and reference and in no way define, limit or describe the scope of
this Agreement or the intent of any provisions hereof.
10. Entire Agreement. This Agreement contains the entire agreement
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of the parties relating to the subject matter hereof, and the parties hereto
have made no agreements, representations or warranties relating to the subject
matter of this Agreement that are not set forth otherwise herein. This
Agreement supersedes any and all prior agreements, written or oral, between the
parties hereto.
11. Amendments. This Agreement shall not be amended, changed,
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modified, terminated or discharged in whole or in part except by an instrument
in writing signed by all parties hereto, or their respective successors or
assigns, or otherwise as provided herein. The parties hereto agree that in no
event shall an oral modification of this Agreement be enforceable or valid.
12. Governing Law. This Agreement shall be governed and construed in
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accordance with the laws of the State of California applicable to contracts made
and performed in said state, without regard to conflicts of laws principles.
13. Notices.
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13.1 All notices and other communications under this Agreement, other
than Notices of First Refusal and Responses (which shall be governed by
subsection 13.2 below), shall be in writing (including, without limitation,
telegraphic, telex, telecopy or cable communication) and mailed, telegraphed,
telexed, telecopied, cabled or delivered by hand or by a nationally recognized
courier service guaranteeing overnight delivery to a party at the following
address (or to such other address as such party may have specified by notice
given to the other party pursuant to this provision):
If to ICH or ICCC, to:
c/o Imperial Credit Commercial Holdings, Inc.
00000 Xxxxxx Xxxxxx
Xxxxx Xxx Xxxxxxx, Xxxxxxxxxx 00000
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Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx
Chief Executive Officer
If to IMH or ICIFC, to:
c/o Imperial Credit Mortgage Holdings, Inc.
00000 Xxxxxx Xxxxxx
Xxxxx Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
President
If to RAI, to:
REIT Advisors, Inc.
00000 Xxxxxx Xxxxxx
Xxxxx Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
Chief Financial Officer
All such notices and communications shall, when mailed, telegraphed, telexed,
telecopied, cabled or delivered, be effective three days after deposit in the
mails, delivered to the telegraph company, confirmed by telex answerback,
telecopied with confirmation of receipt, delivered to the cable company,
delivered by hand to the addressee or one day after delivery to the courier
service.
13.2 Each Notice of First Refusal and Response under this Agreement
shall be in writing and telecopied or delivered by hand during normal business
hours (i.e., 9:00 a.m. - 5:00 p.m. California time) to an officer of the party
to whom it is addressed at the address specified in subsection 13.1 above (or to
such other address as such party may have specified by notice given to the other
party pursuant to subsection 13.1), or in the case of any Affiliated REIT, to an
address specified by such Affiliated REIT. Each such Notice of First Refusal
and Response shall be effective immediately when telecopied with confirmation of
receipt or delivered by hand to the addressee.
14. Arbitration.
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(a) Each controversy, dispute or claim between the parties arising
out of or relating to this Agreement, which controversy, dispute or claim is not
settled in writing within thirty (30) days after the "Claim Date" (defined as
the date on which a party subject to this Agreement gives written notice to the
other that a controversy, dispute or claim exists), will be
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settled by binding arbitration in Orange County, California in accordance with
the provisions of the Judicial Arbitration and Mediation Services, which shall
constitute the exclusive remedy for the settlement of any controversy, dispute
or claim, and the parties waive their rights to initiate any legal proceedings
against each other in any court or jurisdiction other than the Superior Court of
Orange County (THE "COURT"). Any decision rendered by the arbitrator and such
arbitration will be final, binding and conclusive and judgment shall be entered
pursuant to the California Code of Civil Procedure Section 644 in any court in
the State of California having jurisdiction.
(b) Except as expressly set forth in this Agreement, the arbitrator
shall determine the manner in which the proceeding is conducted, including the
time and place of all hearings, the order of presentation of evidence, and all
other questions that arise with respect to the course of the proceeding. All
proceedings and hearings conducted before the arbitrator, except for trial,
shall be conducted without a court reporter, except that when any party so
requests, a court reporter will be used at any hearing conducted before the
arbitrator. The party making such a request shall have the obligation to
arrange for any pay for the court reporter. The costs of the court reporter
shall be borne equally by the parties.
(c) The arbitrator shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the state
of California will be applicable to the proceeding. The arbitrator shall be
empowered to enter equitable as well as legal relief, to provide all temporary
and/or provisional remedies and to enter equitable orders that will be binding
upon the parties. The arbitrator shall issue a single judgment at the close of
the proceeding which shall dispose of all of the claims of the parties that are
the subject of the proceeding. The parties hereto expressly reserve the right to
contest or appeal from the final judgment or any appealable order or appealable
judgment entered by the arbitrator. The parties hereto expressly reserve the
right to findings of fact, conclusions of law, a written statement of decision,
and the right to move for a new trial or a different judgment, which new trial,
if granted, is also to be a proceeding governed under this provision.
15. Attorneys' Fees. In the event that any party shall bring an
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action or proceeding in connection with the performance, breach or
interpretation hereof, then the prevailing party in such action as determined by
the court or other body having jurisdiction shall be entitled to recover from
the losing party in such action, as determined by the court or other body having
jurisdiction, all reasonable costs and expense of litigation or arbitration,
including reasonable attorneys', fees, court costs, costs of investigation and
other costs reasonably related to such proceeding.
16. Waiver. Any forbearance by a party to this Agreement in
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exercising any right or remedy under this Agreement or otherwise afforded by
applicable law shall not be a waiver of or preclude the exercise of that or any
other right or remedy.
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17. Counterparts. This Agreement may be executed in any number of
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counterparts, each of which when so executed shall be deemed to be an original,
and all of which when taken together shall constitute one and the same
agreement.
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IN WITNESS WHEREOF, this Agreement is made as of the day and year
first above written.
IMPERIAL CREDIT COMMERCIAL HOLDINGS, INC.,
a Maryland corporation
By:_______________________________
Name: Xxxxxx X. Xxxxxxxxx
Title: Chief Executive Officer
IMPERIAL COMMERCIAL CAPITAL CORPORATION
a California corporation
By:_______________________________
Name: Xxxxxx X. Xxxxxxxxx
Title: Chief Executive Officer
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.,
a Maryland corporation
By:_______________________________
Name: Xxxxxxx X. Xxxxxxx
Title: President
ICI FUNDING CORPORATION,
a California corporation
By:_______________________________
Name: Xxxxxxx X. Xxxxxxx
Title: President
REIT ADVISORS, INC.,
a California company
By:_______________________________
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Financial Officer
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