-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RUI8c+09nssg85LsCPI6owdA+8WXG1J9N4tGkliXEc3f4yH0GoU9QR8f1Am/g9BW qhAWBJZ4NMCuqDDSs+haoQ== 0000902595-99-000225.txt : 19991019 0000902595-99-000225.hdr.sgml : 19991019 ACCESSION NUMBER: 0000902595-99-000225 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19991018 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: IMPAC COMMERCIAL HOLDINGS INC CENTRAL INDEX KEY: 0001036615 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 330745075 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-51447 FILM NUMBER: 99730145 BUSINESS ADDRESS: STREET 1: 1301 AVENUE OF AMERICAS STREET 2: 42ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2127986100 MAIL ADDRESS: STREET 1: 1301 AVENUE OF AMERICAS STREET 2: 42ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: IMH COMMERCIAL HOLDINGS INC DATE OF NAME CHANGE: 19970728 FORMER COMPANY: FORMER CONFORMED NAME: IMPERIAL CREDIT COMMERCIAL HOLDINGS INC DATE OF NAME CHANGE: 19970728 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: TCW GROUP INC CENTRAL INDEX KEY: 0000850401 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 865 SOUTH FIGUEROA ST CITY: LOS ANGELES STATE: CA ZIP: 90017 MAIL ADDRESS: STREET 2: 865 SOUTH FIGUEROA STREET CITY: LOS ANGELES STATE: CA ZIP: 90017 SC 13D/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 __________ SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) (Amendment No. 3) Impac Commercial Holdings, Inc. (Name of Issuer) Common Stock $0.01 par value (Title of Class of Securities) 44968J 10 6 (CUSIP Number) Daniel K. Osborne Executive Vice President, Chief Operating Officer and Chief Financial Officer Apex Mortgage Capital, Inc. 865 South Figueroa Street, Suite, 1800 Los Angeles, California 90017 (213) 244-0000 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) October 18, 1999 (Date of Event Which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [ ] Note. Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent. (Continued on following pages) (Page 1 of 7 Pages) CUSIP No. 44968J 10 6 13 D Page 2 of 7 Pages 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) Apex Mortgage Capital, Inc. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [x] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS WC 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) 6 CITIZENSHIP OR PLACE OF ORGANIZATION Maryland NUMBER OF 7 SOLE VOTING POWER 0 SHARES 8 SHARED VOTING POWER BENEFICIALLY 627,300 OWNED BY 9 SOLE DISPOSITIVE POWER 0 EACH REPORTING PERSON WITH 10 SHARED DISPOSITIVE POWER 627,300 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 627,300 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 7.5% 14 TYPE OF REPORTING PERSON CO CUSIP No. 44968J 10 6 13 D Page 3 of 7 Pages 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) The TCW Group, Inc. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [x] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS Not applicable 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) 6 CITIZENSHIP OR PLACE OF ORGANIZATION Nevada NUMBER OF 7 SOLE VOTING POWER 0 SHARES 8 SHARED VOTING POWER BENEFICIALLY 627,300 OWNED BY 9 SOLE DISPOSITIVE POWER 0 EACH REPORTING PERSON 10 SHARED DISPOSITIVE POWER WITH 627,300 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 627,300 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 7.5% 14 TYPE OF REPORTING PERSON HC, CO CUSIP No. 44968J 10 6 13D Page 4 of 7 Pages 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) Robert A. Day 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [x] 3 SEC USE ONLY 4 SOURCE OF FUNDS Not applicable 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) 6 CITIZENSHIP OR PLACE OF ORGANIZATION USA NUMBER OF 7 SOLE VOTING POWER 627,300 SHARES 8 SHARED VOTING POWER BENEFICIALLY 0 OWNED BY 9 SOLE DISPOSITIVE POWER 627,300 EACH REPORTING PERSON 10 SHARED DISPOSITIVE POWER WITH 0 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 627,300 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 7.5% 14 TYPE OF REPORTING PERSON IN, HC AMENDMENT NO. 3 TO SCHEDULE 13D Reference is made to the Schedule 13D originally filed on September 7, 1999, as amended by Amendment No. 1 thereto filed on September 8, 1999 and Amendment No. 2 thereto filed on September 23, 1999, by Apex Mortgage Capital, Inc., a Maryland corporation ("AXM"), The TCW Group, Inc., a Nevada corporation ("TCWG"), and Robert A. Day, an individual (collectively, the "Reporting Persons"), with respect to the Common Stock, $.01 par value per share ("Common Stock"), of Impac Commercial Holdings, Inc. (the "Issuer"). ITEM 4. PURPOSE OF TRANSACTIONS On August 5, 1999, the Issuer announced an agreement to merge with and into AMRESCO Capital Trust ("AMCT"), an externally managed Texas real estate investment trust. In such merger, shareholders of the Issuer would receive 0.661 of a share of AMCT for each share of Common Stock (the "Merger Consideration"). AXM continues to believe that the Merger Consideration considerably undervalues the Common Stock to the disadvantage of the Issuer's shareholders. On September 7, 1999, by letter to the Board of Directors of the Issuer, AXM made a non-binding proposal for a tax-free merger of AXM and the Issuer in which 0.60328 shares of AXM's common stock would be exchanged for each share of Common Stock. On September 8, 1999, by Amendment No. 1 to the Schedule 13D originally filed on September 7, 1999, a copy of such letter was filed as Exhibit 2 to the Schedule 13D originally filed on September 7, 1999, and a copy of a press release disclosing the merger proposal and the letter was filed as Exhibit 3 to the Schedule 13D originally filed on September 7, 1999. AXM believes that the terms of its proposal are financially superior to those reflected in the proposed transaction with AMCT. Item 4 is amended to add the following: The Issuer and AXM have exchanged further correspondence. By letter from the Issuer to AXM dated September 30, 1999, a copy of which is filed herewith as Exhibit 7, the Issuer has advised AXM that the Board of Directors of the Issuer has engaged Bear Stearns & Co. Inc. to assist it in analyzing AXM's proposal. By letter from AXM to the Issuer dated October 13, 1999, a copy of which is filed herewith as Exhibit 8, AXM has reiterated its request that the Issuer form a special committee of independent directors to objectively examine AXM's proposal and has requested a meeting with such special committee to discuss a number of issues regarding certain transactions both completed and proposed involving the Issuer, Fortress Investment Group and their affiliates and regarding certain other matters. By letter from the Issuer to AXM dated October 14, 1999, a copy of which is filed herewith as Exhibit 9, the Issuer has denied AXM's request for a meeting with a special committee of independent directors and indicated that pursuant to the terms of the Agreement and Plan of Merger, dated as of August 4, 1999, by and between the Issuer and AMCT, the Issuer or any of its representatives are prohibited from participating in or encouraging any discussions or negotiations regarding AXM's proposal. By letter from AXM to the Issuer dated October 18, 1999, a copy of which is filed herewith as Exhibit 10, AXM has responded by raising a number of issues regarding certain transactions both completed and proposed involving the Issuer, Fortress Investment Group and Impac Mortgage Holdings, Inc. and regarding certain other matters. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Item 7 is amended to add the following additional Exhibits: Exhibit 7 Letter dated September 30, 1999 from the Issuer to AXM Exhibit 8 Letter dated October 13, 1999 from AXM to the Issuer Exhibit 9 Letter dated October 14, 1999 from the Issuer to AXM Exhibit 10 Letter dated October 18, 1999 from AXM to the Issuer SIGNATURES After reasonable inquiry and to the best of its knowledge and belief, each of the undersigned certifies that the information set forth in this Statement is true, complete and correct. October 18, 1999 APEX MORTGAGE CAPITAL, INC. By: __/s/___Daniel K. Osborne____ Name: Daniel K. Osborne Title: Executive Vice President, Chief Operating Officer and Chief Financial Officer THE TCW GROUP, INC. By: /s/___Michael E. Cahill_______ Name: Michael E. Cahill Title: Managing Director, General Counsel & Secretary ROBERT A. DAY By: ____/s/ Michael E. Cahill_____ Name: Michael E. Cahill Title: Authorized Signatory EX-7 2 LETTER DATED SEPTEMBER 30, 1999 FROM ISSUER TO AXM [Impac Commercial Holdings, Inc. letterhead] September 30, 1999 Via Facsimile 213/488-3366 Philip A. Barach President and Chief Executive Officer Apex Mortgage Capital, Inc. 865 South Figueroa Street, Suite 1800 Los Angeles, California 90017 Daniel K. Osborne Executive Vice President and Chief Operating Officer Apex Mortgage Capital, Inc. 865 South Figueroa Street, Suite 1800 Los Angeles, California 90017 Gentlemen: The Board of Directors of Impac Commercial Holdings, Inc. ("ICH") has received your letter of September 17, 1999 addressed to the "Special Committee of the Board of Directors of Impac Commercial Holdings, Inc.", with attachments, and your letter dated September 20, 1999 addressed to me, in each case in response to my letter to you dated September 10, 1999. As I mentioned in a previous telephone call to Mr. Osborne, the full Board of Directors of ICH, not a special committee thereof, is considering your proposal. The Board has engaged Bear, Stearns & Co. Inc. to assist it in analyzing your proposal. Bear Stearns has indicated that it expects to present its findings to the Board within the next two weeks and, accordingly, you should expect a response from the Board soon thereafter. Finally, we note that you have included our correspondence in your most recent Schedule 13D filing. Pending completion of the Board's review of your proposal, we do not intend to comment on your claims about "superior value", "superior track records" or "obvious conflicts of interest", among other things. We do, however, think it inappropriate for you to continue to publicly disseminate your self-serving letters. Sincerely, ___/s/ Wesley R. Edens______ Wesley R. Edens Chairman of the Board Chief Executive Officer EX-8 3 LETTER DATED OCTOBER 13, 1999 FROM AXM TO THE ISSUER October 13, 1999 Mr. Wesley R. Edens Chairman of the Board and Chief Executive Officer Impac Commercial Holdings, Inc. 1401 Dove Street Newport Beach, California 92660 Dear Mr. Edens: We received your letter dated September 30, 1999. While we were pleased to learn that the Impac Commercial Holdings, Inc. ("ICH") Board of Directors has retained a financial advisor to evaluate our offer, we are disappointed that a special committee of independent directors has not been formed in light of the obvious conflicts of interest between Fortress Investment Group and its affiliates ("Fortress") and ICH shareholders. Our offer presents ICH shareholders with the opportunity to receive a 28% premium over the existing proposal from Amresco Capital Trust ("AMCT") based on closing market prices on October 12, 1999. We urge all ICH Directors to consider their fiduciary responsibility in evaluating our offer and reiterate our request that ICH form a special committee of independent directors to objectively manage this process. In preparation for making our offer, we have performed a great deal of analysis on ICH from publicly available information. This review has raised questions regarding several transactions both completed and proposed involving ICH, Fortress, and their affiliates. We are in the process of developing a list of these questions that we intend to ask the ICH Board of Directors. We believe the best forum to ask these questions is in a face to face meeting. Therefore, we request a meeting with the special committee of independent directors to ask these questions and to present the merits of our offer. We also request a meeting with ICH's financial advisor prior to the issuance of their report on our offer. Prompt attention to these requests is extremely important given the delays already experienced since we made our offer on September 7, 1999. Therefore, we request written confirmation that (1) a special committee of independent directors has been formed to objectively evaluate our offer, (2) a meeting with ICH's financial advisor will be granted prior to the issuance of their report and (3) a face to face meeting with the special committee of independent directors will be granted prior to the final evaluation of our offer. If we do not receive written confirmation that grants these requests by the close of business on October 14, 1999, we will be forced to ask the questions referred to above by formal written correspondence. We wish to re-emphasize our conviction that the transaction that we have proposed offers demonstrably superior immediate value, as well as greater long-term value, to ICH's shareholders as compared to the AMCT offer. Furthermore, it is possible that the results of our due diligence review may afford us the opportunity to increase our offer (if an increase is justified by the information made available to us). We may also be willing to offer other forms of consideration to ICH's shareholders that include preferred stock in Apex Mortgage Capital, Inc. or cash. We urge you to help us realize for your shareholders the superior value we are offering. We continue to be excited by the prospect of moving forward with you on our proposed transaction. Very truly yours, Apex Mortgage Capital, Inc. By:__/s/ Philip A. Barach____ By: __/s/ Daniel K. Osborne_____ Philip A. Barach Daniel K. Osborne President and Executive Vice President and Chief Executive Officer Chief Operating Officer CC: Christopher W. Mahowald Frank P. Philips Joseph R. Tomkinson EX-9 4 LETTER DATED OCTOBER 14, 199 FROM ISSUER TO AXM [Impac Commercial Holdings, Inc. letterhead] October 14, 1999 Via Facsimile 213/488-3366 Philip A. Barach President and Chief Executive Officer Apex Mortgage Capital, Inc. 865 South Figueroa Street, Suite 1800 Los Angeles, California 90017 Daniel K. Osborne Executive Vice President and Chief Operating Officer Apex Mortgage Capital, Inc. 865 South Figueroa Street, Suite 1800 Los Angeles, California 90017 Gentlemen: We call your attention to Section 6.8 of the Agreement and Plan of Merger (the "Merger Agreement") dated as of August 4, 1999 by and between Impac Commercial Holdings, Inc. ("ICH") and AMRESCO Capital Trust, which prohibits ICH or any of its representatives from, among other things, participating in or encouraging any discussion or negotiations regarding an Acquisition Proposal prior to the time the ICH Board has concluded in good faith that such proposal constitutes a Superior Proposal. As we have previously advised you, the entire Board (a majority of which has no affiliation with Fortress) is considering your proposal and has retained Bear Stearns & Co. Inc. to assist it in evaluating your proposal. As we informed you by telephone, Bear Stearns has not yet completed its analysis of your proposal. To complete its findings, Bear Stearns is prepared to receive, without comment or discussion (that is, in accordance with the obligations of the Board under the Merger Agreement), any clarifications you may wish to make with respect to your proposal. As you well know, we are otherwise obligated, under the terms of the Merger Agreement, not to engage in discussions with you regarding your proposal. Accordingly, you should treat this as a denial at this time of your request for additional meetings. Finally, your letter indicates that you had "questions regarding several transactions both completed and proposed involving ICH, Fortress and their affiliates." As with any other inquiries, please feel free to raise these questions in writing addressed to the Board, taking into account any concern you may have for your own liability for unfounded allegations of impropriety. Sincerely, __/S/ Wesley R. Edens____ Wesley R. Edens Chairman of the Board and Chief Executive Officer EX-10 5 LETTER DATED OCTOBER 18, 1999 FROM AXM TO THE ISSUER October 18, 1999 Mr. Wesley R. Edens Chairman of the Board and Chief Executive Officer Impac Commercial Holdings, Inc. 1401 Dove Street Newport Beach, California 92660 Dear Mr. Edens: We received your letter dated September 30, 1999. While we were pleased to learn that the Impac Commercial Holdings, Inc. ("ICH") Board of Directors has retained a financial advisor to evaluate our offer, we are disappointed that a special committee of independent directors has not been formed in light of the obvious conflicts of interest between Fortress Investment Group and its affiliates ("Fortress") and ICH shareholders. Accordingly, we sent you a letter, dated October 13, 1999, that requested a meeting with the ICH Board of Directors, requested a meeting with your financial advisor and reiterated our request that a special committee of independent directors be formed. All of these requests were made in a good faith effort to move forward toward negotiating a transaction that is in the best interest of ICH shareholders. We then received your letter dated October 14, 1999 denying a meeting with the ICH Board of Directors and reiterating that ICH had not formed a special committee. In that letter, we acknowledge that we were given a chance to meet with your financial advisor. We accepted that invitation and held a conference call with your financial advisor, your legal counsel and the financial advisor's legal counsel on October 15, 1999. This meeting was not at all productive as the financial advisor refused to provide us with any information as to what they had been engaged to do, how our offer would be analyzed, what information had been provided to them regarding the Amresco Capital Trust ("AMCT") offer or any other information that would have leveled the playing field between the AMCT offer and our offer. Because of your refusal to form a special committee, the overall lack of cooperation and the delays experienced since we made our offer on September 7, 1999, we are concerned that the ICH Board of Directors has not considered our offer in good faith. Our offer presents ICH shareholders with the opportunity to receive a 22% premium over the existing AMCT proposal based on closing market prices on October 15, 1999. We urge all ICH Directors to consider their fiduciary responsibility in evaluating our offer and request that we be allowed to commence our due diligence review in a timely manner so that we may move forward with our proposal to deliver the highest value to ICH shareholders. In preparation for making our offer, we have performed a great deal of analysis on ICH from publicly available information. This review has raised questions regarding several transactions both completed and proposed involving ICH, Fortress, and Impac Mortgage Holdings, Inc. ("IMH"). As one of the largest holders of ICH stock, we would like answers to the following questions. Transactions Completed on May 5, 1999 We noted in the ICH Form 8-K dated May 5, 1999 that ICH issued Fortress shares of preferred stock convertible into common stock at a conversion price of $7.13. That conversion price was substantially below the $12.19 book value of ICH at the time of issuance. This transaction, including all related costs, diluted existing ICH shareholders by $7.5 million or $0.89 per common share. There was no fairness opinion issued despite the fact that Nationsbanc Montgomery Securities LLC, now doing business as Bank of America Securities LLC ("Bank of America Securities LLC"), was paid a $500,000 fee in connection with the transaction. - -- Why did the ICH Board of Directors approve a transaction that diluted existing shareholders by $7.5 million? - -- Why was there no fairness opinion issued by Bank of America Securities LLC? We noted in the ICH Form 8-K dated May 5, 1999 that Fortress purchased the management contract for ICH from RAI Advisors LLC ("RAI"). We noted in the proxy statement dated June 15, 1998 that the executive officers of ICH, who are also executive officers of Impac Mortgage Holdings, Inc. ("IMH"), owned RAI. We noted in your letter dated September 10, 1999 that Fortress paid $6 million for the management contract. Based on this information, it appears the executive officers of ICH and IMH, not the ICH shareholders, received the benefit of the $6 million payment for the contract. - -- How was the $6 million value for the management contract calculated? - -- Why wasn't this payment publicly disclosed? - -- Was there an independent appraisal of the transaction? - -- How did the ICH Board of Directors address the conflict of interest between the executive officers of ICH who were receiving the benefit of the payment and the interests of ICH shareholders? - -- Was the $6 million paid by Fortress for the management contract related to the $7.5 million dilution suffered by ICH common shareholders in connection with Fortress's preferred stock investment? We noted in the ICH Form 8-K dated May 5, 1999 and in other ICH and IMH SEC filings that there have been numerous related party transactions between ICH, IMH, its affiliates and employees including loans, asset sales, stock repurchases and other transactions. - -- How did the ICH Board of Directors address the conflicts of interests inherent in these related party transactions? - -- Were all transactions between ICH, IMH and their affiliates on arms' length terms? - -- Were loans to related parties and employees adequately collateralized? - -- Have all related party transactions been adequately disclosed to the public? Proposed AMCT/ICH Transaction We noted in the Preliminary Proxy Statement filed on September 10, 1999 ("AMCT/ICH Proxy") that an acquisition of ICH by AMCT will value each ICH share at $6.07 based on closing market prices on October 15, 1999. Based on the information in the ICH Form 10-Q for the quarter ended June 30, 1999, the acquisition of ICH by AMCT will result in ICH shareholders receiving $44.7 million or $5.31 per share less than the company's reported book value. - -- Do the financial statements as presented by ICH management overstate the value of the company's assets? - -- If so, how long and to what extent have the ICH financial statements overstated asset values? - -- If not, why should ICH shareholders accept a price that is $44.7 million (or 39%) less than the value indicated by the company's own financial statements? We noted in the AMCT/ICH Proxy that ICH is required to have $75 million in cash and agreed upon assets as a condition of the acquisition agreement. This indicates a value of at least $75 million or $7.42 per diluted share, which is $13.7 million or $1.35 per share more than what is being offered in the AMCT/ICH acquisition. - -- Why should ICH shareholders accept a price that is $13.7 million (or 18%) less than the minimum current value of ICH's assets as indicated in the AMCT/ICH Proxy? We noted in the AMCT/ICH Proxy a specific disclosure indicating that the directors, officers and affiliates of ICH may have interests in the merger that are different from or in addition to the interests of other ICH shareholders. We also noted in that document the same disclosure regarding a conflict of interest between the AMCT trust managers, officers and their affiliates. However, AMCT appears to have addressed many of these conflicts of interest by evaluating all of the strategic alternatives for AMCT shareholders and forming a special committee of independent trust managers, together with its own financial advisor, to evaluate the offer that was finally accepted. This included a complete auction process with six preliminary candidates, four of which expressed an indication of interest and a detailed discussion of the objective process followed to obtain the best value for AMCT shareholders. The procedures performed by AMCT stand in contrast to the vastly limited procedures performed by ICH. The AMCT/ICH Proxy disclosed that Bank of America Securities LLC, ICH's financial advisor, was not allowed to solicit other offers for ICH. Further, there is no mention in the fairness opinion issued to the ICH Board of Directors of a liquidation analysis to determine if that would have provided ICH shareholders with the greatest value for their investment. - -- How has the ICH Board of Directors addressed the conflicts of interest that were acknowledged in the AMCT/ICH Proxy? - -- Why were no other bidders allowed to submit proposals to acquire ICH? - -- Why wasn't liquidation considered as one of the alternatives? - -- Is the current value of the proposed transaction with AMCT lower than the liquidation value of ICH's assets? - -- Why didn't the ICH Board of Directors form a special committee of independent directors? - -- Why wasn't an investment banking firm engaged to represent such a committee? - -- What objective procedures did the ICH Board of Directors follow to ensure that shareholders received the highest value for their investment? We noted in the AMCT/ICH Proxy that the combined company will engage Fortress pursuant to a new management contract. - -- How were the fees to be paid to Fortress under the new contract determined? - -- Was there an independent valuation of the terms of the contract to ensure fairness to the shareholders? - -- Who is representing the shareholders in all management contract issues? We noted in the AMCT/ICH Proxy that if either AMCT or ICH terminate the merger agreement, the terminating party would be obligated to pay the other party break up fees and expenses totaling $5.25 million. This amount represents approximately 9% of the transaction value at current market prices. Similar merger agreements usually contain break up fees and expenses of 2% to 4% of the proposed transaction value. Based on these percentages, one could argue that the break up fees and expenses proposed in the AMCT/ICH merger exceed customary amounts by $3 million to $4 million. We also noted in the AMCT/ICH Proxy that Fortress has agreed to become the manager of AMCT in connection with this transaction and is already the manager of ICH. Based on this information, it appears that Fortress will likely benefit from an AMCT/ICH merger regardless of the consideration paid to ICH shareholders as they stand to receive the management fees proposed for the new combined company. - -- How were the breakup fees and expenses calculated? - -- Have the break up fees and expenses been set above customary levels to deter other competing offers that may provide greater shareholder value? - -- If not, for what other reason? - -- How did the ICH Board of Directors address the conflict between Fortress' interest in receiving higher management fees on a larger combined company and the interest of ICH shareholders in receiving a higher competing offer when approving the break up fees and expenses? We noted in the AMCT/ICH Proxy that Bank of America Securities LLC was engaged to advise the ICH Board of Directors. We also noted that Bank of America Securities LLC disclosed in their fairness opinion that they hold an equity interest in and have made loans to Fortress. - -- How can Bank of America Securities LLC effectively represent ICH shareholders when they hold an interest in Fortress? - -- Was this relationship publicly disclosed when Bank of America Securities LLC provided services to ICH in connection with the buyout of the management contract and the issuance of preferred to stock to Fortress on May 5, 1999? - -- How was this conflict of interest addressed when engaging Bank of America Securities LLC to advise ICH? - -- Are there any other financial relationships between Fortress and Bank of America Securities LLC, its directors, executive officers and affiliates? Stock Transactions in Violation of ICH's Charter and Shareholder Rights Plan We noted in a Form 13G filing on September 16, 1999 that an individual investor had acquired a 10.7% interest in ICH. This is in violation of ICH's charter that restricts ownership of any party to 9.8% without prior consent from the Board of Directors. This ownership level should also have triggered the ICH Shareholders Rights Plan as it is in excess of the 10% threshold defined in the plan. - -- Did the Board of Directors provide this investor with a waiver of the 9.8% limitation? - -- Was the Shareholder Rights Plan triggered by this investor's ownership position? - -- When were the shares acquired in relation to the announcement of the AMCT/ICH merger agreement? - -- Are there any financial relationships, other relationships or understandings between this investor and ICH or Fortress or their directors, executive officers and affiliates? We look forward to receiving answers to these questions. We wish to re-emphasize our conviction that the transaction that we have proposed offers demonstrably superior immediate value, as well as greater long-term value, to ICH's shareholders as compared to the AMCT offer. Furthermore, it is possible that the results of our due diligence review may afford us the opportunity to increase our offer (if an increase is justified by the information made available to us). We may also be willing to offer other forms of consideration to ICH's shareholders that include preferred stock in Apex Mortgage Capital, Inc. or cash. We urge you to help us realize for your shareholders the superior value we are offering. We are filing all of our material correspondence regarding ICH with the Securities and Exchange Commission as amendments to our filing on Form 13D in order to fulfill our disclosure obligations under applicable law. We do not understand your desire to keep this information secret from your shareholders. We continue to be excited by the prospect of moving forward with you on our proposed transaction. Please contact one of us as soon as possible so that we may begin the process in earnest. Very truly yours, Apex Mortgage Capital, Inc. By:__/s/ Philip A. Barach____ y: __/s/ Daniel K. Osborne____ Philip A. Barach Daniel K. Osborne President and Executive Vice President and Chief Executive Officer Chief Operating Officer CC: Christopher W. Mahowald Frank P. Philips Joseph R. Tomkinson -----END PRIVACY-ENHANCED MESSAGE-----