PRELIMINARY PROXY
STATEMENTSUBJECT TO COMPLETION
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Amendment No. 2)
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
o
Check the appropriate box:
x
Preliminary
Proxy Statement
o
Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
o
Definitive
Proxy Statement
o
Definitive
Additional Materials
o
Soliciting
Material Pursuant to
§ 240.14a-12
Care Investment
Trust Inc.
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
o
No
fee required.
|
|
o
|
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:
|
|
|
x
|
Fee paid previously with preliminary materials.
|
|
o
|
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.:
|
REVISED PRELIMINARY PROXY
STATEMENT DATED JUNE 4, 2010 SUBJECT TO
COMPLETION
June
[ ], 2010
Dear Stockholder:
On behalf of the board of directors, I cordially invite you to
attend a special meeting of the stockholders of Care Investment
Trust Inc. to be held on [ ], July
[ ], 2010, at 10:00 a.m., local time, at
the CIT Global Headquarters, 505 Fifth Avenue,
7th Floor, Room C/D, New York, New York 10017.
At the special meeting, we will ask you to approve the issuance
of shares of our common stock, par value $0.001 per share, to be
issued in connection with the purchase and sale agreement, dated
March 16, 2010, in which Tiptree Financial Partners, L.P.
(Tiptree), a Delaware limited partnership, agreed to
purchase shares of our common stock
(proposal 1). The transaction is to be
completed through the issuance of a minimum of
4,445,000 shares of our common stock to Tiptree at a price
of $9.00 per share and is occurring in conjunction with a cash
tender offer by the company of $9.00 per share for up to all
publicly held registered shares of our company. Tiptree has the
option to purchase additional newly issued company shares if
less than 16,500,000 shares are tendered in the tender
offer in order to obtain ownership of up to 53.4% of the
company, and if more than 18,000,000 shares are tendered
(and not withdrawn) in the tender offer, then Tiptree must
purchase additional newly issued company shares equal to the
difference between 18,000,000 and the number of shares that are
tendered (and not withdrawn) in the tender offer.
The rules of the New York Stock Exchange require stockholder
approval prior to any issuance of common stock by a listed
company if the number of shares being issued is equal to or in
excess of 20% of the total number of shares of common stock
issued and outstanding before such issuance of common stock. The
rules of the New York Stock Exchange also require stockholder
approval prior to any issuance of common stock by any listed
company that will result in a change in control of such company.
In connection with proposal 1, we will ask you to approve
the abandonment of the plan of liquidation
(proposal 2), which was approved by our
stockholders on January 28, 2010, in favor of the Tiptree
transaction. Proposal 2 is conditioned on proposal 1
being approved. If our stockholders do not approve
proposal 1, or if the purchase and sale agreement is
terminated prior to the date of the special meeting, then we
would consider proposal 2 moot, and votes for
proposal 2 would not be counted. If our stockholders do not
approve proposal 1, we may pursue the previously approved
plan of liquidation or continue to pursue other strategic
alternatives.
You will also be asked to approve an amendment to our charter to
remove a provision designed to protect our status as a real
estate investment trust or REIT under the Internal
Revenue Code of 1986, as amended, which provision currently
prohibits an issuance of common stock by us that would cause the
company to be beneficially owned by less than 100 stockholders,
in order to facilitate the Tiptree transaction
(proposal 3) and to approve an amendment to our
charter to be effective on the 20th calendar day following
the consummation of the Tiptree transaction reinstating the REIT
protective provision removed by proposal 3
(proposal 4). Finally, you will be asked to
approve a proposal to adjourn the special meeting, if necessary,
to permit further solicitation of proxies if there are not
sufficient votes at the time of the special meeting to approve
proposals 1, 2, 3 or 4 (proposal 5).
Proposal 3 is conditioned on proposals 1 and 2 being
approved and proposal 4 is conditioned on proposals 1, 2 and 3
being approved. If our stockholders do not approve
proposal 1 or proposal 2, or if the purchase and sale
agreement is terminated prior to the date of the special
meeting,
then we would consider proposal 3 and proposal 4 to
be moot, and votes for proposal 3 and proposal 4 would
not be counted.
Once a quorum is present or represented by proxy at the special
meeting, the affirmative vote of at least a majority of the
outstanding shares of our common stock is required to approve
the Tiptree issuance, provided that the total vote cast for the
issuance represents over 50% in interest of all securities
entitled to vote on the proposal. The affirmative vote of at
least a majority of the outstanding shares of our common stock
present in person or by proxy at the special meeting and
entitled to vote thereon is required to approve
proposals 2, 3, 4 and 5, provided that a quorum is present.
CIT Group Inc., the parent of our external manager, CIT
Healthcare LLC, controls approximately 38% of our issued and
outstanding common stock and has indicated to us that it intends
to vote all of the 7,589,040 shares it owns in favor of the
Tiptree issuance, as well as proposals 2, 3, 4 and 5.
Our board of directors has unanimously approved the issuance
of shares of our common stock in connection with the transaction
with Tiptree and recommends that you vote FOR
proposal 1. Our board of directors also believes that it is
advisable and in the best interests of the company to abandon
the plan of liquidation in favor of proposal 1 and has
unanimously recommended the approval of proposal 2. Our
board also unanimously recommends that you vote FOR
proposal 3 to amend the charter to remove the REIT
protective provision to facilitate the Tiptree transaction,
FOR proposal 4 to amend the charter to
reinstate the REIT protective provision 20 calendar days
after the consummation of the Tiptree transaction and
FOR proposal 5 to adjourn the special meeting,
if necessary, to permit further solicitation of proxies if there
are not sufficient votes at the time of the special meeting to
approve proposals 1, 2, 3 or 4.
Your vote is important. Whether or not you plan to attend the
special meeting, we urge you to submit your proxy as soon as
possible. You may do this by completing, signing and dating the
enclosed proxy card and returning it to us in the accompanying
postage paid return envelope. You may also authorize a proxy to
vote your shares via the internet at www.proxyvote.com or by
telephone by dialing toll-free
1-800-690-6903.
Please follow the directions provided in this proxy statement.
This will not prevent you from voting in person at the special
meeting, but will assure that your vote will be counted if you
are unable to attend the special meeting.
THANK YOU FOR YOUR ATTENTION TO THIS MATTER AND FOR YOUR
CONTINUED SUPPORT OF AND INTEREST IN OUR COMPANY.
Sincerely,
Flint D. Besecker
Chairman of the Board of Directors
New York, New York
June [ ], 2010
CARE
INVESTMENT TRUST INC.
505 Fifth
Avenue
Sixth Floor
New York, NY 10017
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
to be held on July [ ], 2010
NOTICE IS HEREBY GIVEN that a special meeting of the
stockholders of Care Investment Trust Inc. will be held on
July [ ], 2010, at 10:00 a.m., local time,
at the CIT Global Headquarters, 505 Fifth Avenue, Seventh
Floor Room C/D, New York, NY 10017. The proxy solicitation
materials were mailed to stockholders on or about June
[ ], 2010. At the special meeting, stockholders
will vote upon the following proposals:
|
|
|
|
1.
|
To consider and vote upon a proposal to approve the issuance of
shares of our common stock, par value $0.001 per share, to be
issued in connection with the purchase and sale agreement, dated
March 16, 2010, in which Tiptree Financial Partners, L.P.
(Tiptree), a Delaware limited partnership, agreed to
purchase shares of our common stock. The transaction is to be
completed through the issuance of a minimum of
4,445,000 shares of our common stock to Tiptree at a price
of $9.00 per share and is occurring in conjunction with a cash
tender offer by us of $9.00 per share for up to all publicly
held registered shares of our company. Tiptree has the option to
purchase additional newly issued company shares if less than
16,500,000 shares are tendered in the tender offer in order
to obtain ownership of up to 53.4% of the company, and if more
than 18,000,000 shares are tendered (and not withdrawn) in
the tender offer, then Tiptree must purchase additional newly
issued company shares equal to the difference between 18,000,000
and the number of shares that are tendered (and not withdrawn)
in the tender offer. The rules of the New York Stock Exchange
require stockholder approval of the issuance of our common stock
in the proposed transaction with Tiptree as the number of shares
to be issued is 20% or more of the number of shares outstanding
prior to the issuance, and if Tiptree purchases shares
representing more than 50% of our outstanding common stock, the
issuance will result in a change in control of the company.
|
|
|
|
|
2.
|
To consider and vote on a proposal to abandon the plan of
liquidation that was approved by our stockholders on
January 28, 2010 in favor of proposal 1.
Proposal 2 is conditioned on proposal 1 being
approved. If our stockholders do not approve proposal 1, or
if the Tiptree purchase and sale agreement is terminated prior
to the date of the meeting, then we would consider
proposal 2 moot, and votes for proposal 2 would not be
counted. If our stockholders do not approve proposal 1, we
may pursue the plan of liquidation as approved by our
stockholders or continue to pursue other strategic alternatives.
|
|
|
3.
|
To approve an amendment to the companys amended and
restated articles of incorporation (the charter) to
remove section 7.2.1(a)(iii), which prohibits a Transfer
(as defined in the charter) that would cause the company to be
beneficially owned by less than 100 stockholders, in order to
facilitate the Tiptree transaction. Proposal 3 is
conditioned on proposals 1 and 2 being approved. If our
stockholders do not approve proposal 1 or proposal 2,
or if the purchase and sale agreement is terminated prior to the
date of the special meeting, then we would consider
proposal 3 to be moot, and votes for proposal 3 would
not be counted.
|
|
|
4.
|
To approve an amendment to the Companys charter to be
effective 20 calendar days after the consummation of the
Tiptree transaction reinstating section 7.2.1(a)(iii), which was
removed by proposal 3 to facilitate the Tiptree
transaction. Proposal 4 is conditioned on proposals 1, 2 and 3
being approved. If our stockholders do not approve proposal 1,
proposal 2 or proposal 3, or if the Tiptree purchase and sale
agreement is terminated prior to the date of the special
meeting, then we would consider proposal 4 to be moot, and votes
for proposal 4 would not be counted.
|
|
|
|
|
5.
|
To consider and vote on a proposal to permit the board of
directors to adjourn the special meeting, if necessary, to
permit further solicitation of proxies if there are not
sufficient votes at the time of the special meeting to approve
proposals 1, 2, 3 or 4 above.
|
Provided that a quorum consisting of a majority of the shares of
common stock entitled to vote is present, approval of
proposal 1 requires the affirmative vote of at least a
majority of the outstanding shares of our common stock in person
or by proxy at the special meeting, provided that the total vote
cast for the issuance represents over 50% in interest of all
securities entitled to vote on proposal 1. Approval of
proposals 2, 3, 4 and 5 requires the affirmative vote of a
majority of the shares of our common stock present in person or
by proxy at the special meeting and entitled to vote thereon,
provided that a quorum is present.
Any action may be taken on the foregoing matters at the special
meeting on the date specified above, or on any date or dates to
which, by original or later adjournment, the special meeting may
be adjourned, or to which the special meeting may be postponed.
Our board of directors has fixed the close of business on
June [], 2010, as the record date for determining the
stockholders entitled to notice of, and to vote at, the special
meeting, and at any adjournments or postponements thereof. Only
stockholders of record of our common stock at the close of
business on that date will be entitled to notice of, and to vote
at, the special meeting and at any adjournments or postponements
thereof. A list of stockholders entitled to vote at the special
meeting will be available at the special meeting and for ten
(10) calendar days prior to the special meeting, between
the hours of 9:00 a.m. and 4:00 p.m., local time, at
our corporate offices located at 505 Fifth Avenue,
6th Floor, New York, New York 10017. You may arrange to
review this list by contacting our Secretary and Chief
Compliance Officer, Paul F. Hughes.
Whether or not you plan to attend the special meeting, please
complete, sign, date and promptly return the enclosed proxy
card, which is being solicited by our board of directors, in the
postage-prepaid envelope provided. You may also authorize a
proxy to vote your shares electronically via the internet at
www.proxyvote.com or by telephone by dialing toll-free
1-800-690-6903.
For specific instructions on voting, please refer to the
instructions on the proxy card or the information forwarded by
your broker, bank or other holder of record. Any proxy may be
revoked by delivery of a later dated proxy. If you attend the
special meeting, you may vote in person if you wish, even if you
have previously signed and returned your proxy card. Please
note, however, that if your shares are held of record by a
broker, bank or other nominee and you wish to vote in person at
the meeting, you must obtain a proxy issued in your name from
such broker, bank or other nominee.
By Order of our Board of Directors,
Paul F. Hughes
Secretary and Chief Compliance Officer
New York, New York
June [ ], 2010
Table of
Contents
|
|
|
|
|
|
|
Page
|
|
|
|
|
iii
|
|
|
|
|
1
|
|
|
|
|
5
|
|
|
|
|
10
|
|
|
|
|
12
|
|
|
|
|
13
|
|
|
|
|
13
|
|
|
|
|
15
|
|
|
|
|
16
|
|
|
|
|
16
|
|
|
|
|
16
|
|
|
|
|
16
|
|
|
|
|
17
|
|
|
|
|
19
|
|
|
|
|
21
|
|
|
|
|
21
|
|
|
|
|
22
|
|
|
|
|
22
|
|
|
|
|
40
|
|
|
|
|
42
|
|
|
|
|
42
|
|
|
|
|
43
|
|
|
|
|
43
|
|
|
|
|
43
|
|
|
|
|
43
|
|
|
|
|
44
|
|
|
|
|
46
|
|
|
|
|
50
|
|
|
|
|
50
|
|
|
|
|
50
|
|
|
|
|
50
|
|
|
|
|
52
|
|
|
|
|
54
|
|
|
|
|
55
|
|
|
|
|
56
|
|
|
|
|
57
|
|
|
|
|
59
|
|
|
|
|
59
|
|
|
|
|
59
|
|
|
|
|
60
|
|
|
|
|
61
|
|
|
|
|
61
|
|
|
|
|
61
|
|
|
|
|
62
|
|
|
|
|
62
|
|
|
|
|
62
|
|
i
|
|
|
|
|
|
|
Page
|
|
|
|
|
62
|
|
|
|
|
63
|
|
|
|
|
65
|
|
|
|
|
66
|
|
|
|
|
67
|
|
|
|
|
68
|
|
|
|
|
69
|
|
|
|
|
69
|
|
|
|
|
69
|
|
|
|
|
70
|
|
EXHIBIT A-FORM OF FIRST CHARTER AMENDMENT
|
|
|
A-1
|
|
EXHIBIT B-FORM OF SECOND CHARTER AMENDMENT
|
|
|
B-1
|
|
ii
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING
The following questions and answers address briefly some
questions you may have regarding the special meeting, the
issuance of shares to Tiptree, the abandonment of the plan of
liquidation and the amendments to our charter. These questions
and answers may not address all questions that may be important
to you as a shareholder of Care Investment Trust Inc.
Please refer to the more detailed information contained
elsewhere in this proxy statement, the exhibit to this proxy
statement and the documents referred to or incorporated by
reference in this proxy statement. In this proxy statement, the
terms Care, company, we,
our, ours, and us refer to
Care Investment Trust Inc. and its subsidiaries.
|
|
|
Q:
|
|
What am I being asked to vote upon?
|
|
A:
|
|
At the special meeting, we will ask you to approve the issuance
of shares of our common stock, par value $0.001 per share, to be
issued in connection with the purchase and sale agreement, dated
March 16, 2010, in which Tiptree Financial Partners, L.P.
(Tiptree), a Delaware limited partnership, agreed to
purchase shares of our common stock. The transaction is to be
completed through the issuance of a minimum of
4,445,000 shares of our common stock to Tiptree at a price
of $9.00 per share and is occurring in conjunction with a cash
tender offer by the company of $9.00 per share for up to all
publicly held registered shares of our company. Tiptree has the
option to purchase additional newly issued company shares if
less than 16,500,000 shares are tendered in the tender
offer in order to obtain ownership of up to 53.4% of the
company, and if more than 18,000,000 shares are tendered
(and not withdrawn) in the tender offer, then Tiptree must
purchase additional newly issued company shares equal to the
difference between 18,000,000 and the number of shares that are
tendered (and not withdrawn) in the tender offer. The rules of
the New York Stock Exchange require stockholder approval of the
issuance of our common stock in the proposed transaction with
Tiptree as the number of shares to be issued is 20% or more of
the number of shares outstanding prior to the issuance, and if
Tiptree purchases shares representing more than 50% of our
common stock the issuance will result in a change in control of
the company. In connection with the Tiptree transaction, you
will also be asked to approve the abandonment of the plan of
liquidation that our stockholders approved on January 28,
2010. You will also be asked to approve a proposal to amend the
amended and restated articles of incorporation
(charter) of our company to remove
section 7.2.1(a)(iii), which prohibits a Transfer (as
defined in the charter) that would cause the company to be
beneficially owned by less than 100 stockholders, in order to
facilitate the Tiptree transaction as well as a proposal to
reinstate section 7.2.1(a)(iii) to our charter to be effective
20 calendar days after the consummation of the Tiptree
transaction. Lastly, you are being asked to approve a proposal
allowing our board of directors to adjourn the special meeting,
if necessary, to permit further solicitations of proxies if
there are not sufficient votes at the time of the special
meeting to approve the issuance of shares to Tiptree, the
abandonment of the plan of liquidation or the amendments to our
charter. The proposals to approve the abandonment of the plan of
liquidation and to approve the amendments to the charter are
conditioned upon the approval of the issuance of shares of our
common stock to Tiptree pursuant to the purchase and sale
agreement. If our stockholders do not approve the issuance of
our shares of common stock to Tiptree, or if the Tiptree
purchase and sale agreement is terminated prior to the special
meeting, then we will consider proposals 2, 3 and 4 to be
moot, and the votes cast for those proposals will not be counted.
|
|
Q:
|
|
What is our boards recommendation?
|
|
A:
|
|
Our board of directors, acting upon the recommendation of a
special committee of directors comprised of Flint D. Besecker,
Gerald E. Bisbee, Jr., PhD. and Karen P. Robards, unanimously
recommends that the stockholders approve the proposal to issue
shares to Tiptree pursuant to the purchase and sale agreement,
approve the abandonment of the plan of liquidation, approve the
first and second amendments to our charter and authorize our
board of directors and executive officers to take all actions
necessary and advisable to effect the share issuance to Tiptree
including the abandonment of the plan of liquidation and the
charter amendments. The special committee was formed to consider
strategic options available to the company and to make
recommendations to our board of directors in
|
iii
|
|
|
|
|
respect thereto. In addition, our board of directors recommends
that stockholders approve the proposal to adjourn the special
meeting, if necessary, to permit further solicitation of proxies.
|
|
Q:
|
|
Why are we asking you to approve the issuance of shares of
common stock?
|
|
A:
|
|
On March 16, 2010, we entered into a purchase and sale
agreement with Tiptree, under which we have agreed to sell a
minimum of 4,445,000 newly issued shares of our common stock to
Tiptree at a price of $9.00 per share. In conjunction with the
issuance, we will commence a tender offer for up to all publicly
held registered shares of our company for cash consideration of
$9.00 per share (the tender offer). Pursuant to the
purchase and sale agreement, Tiptree has the option to purchase
additional newly issued company shares if less than
16,500,000 shares are tendered in the tender offer to
obtain ownership of up to 53.4% of the company, and if more than
18,000,000 shares are tendered (and not withdrawn) in the
tender offer, then Tiptree must purchase additional newly issued
company shares equal to the difference between 18,000,000 and
the number of shares that are tendered (and not withdrawn) in
the tender offer (the issuance of the 4,445,000 shares
along with any other additional issuance of shares to Tiptree,
the issuance, and the issuance and tender offer
together, the transaction).
|
|
|
|
The New York Stock Exchange (the NYSE) rules require
stockholder approval of the issuance of our common stock in the
proposed transaction with Tiptree as the number of shares to be
issued is 20% or more of the number of shares outstanding prior
to the issuance, and if Tiptree purchases shares representing
over 50% of our outstanding common stock the issuance will
result in a change in control of the company.
|
|
|
|
You are not being asked to approve the proposed transaction
itself, although if Care stockholders do not approve the
issuance of shares, the abandonment of the plan of liquidation
or the first amendment to the charter, the proposed transaction
cannot occur.
|
|
|
|
In connection with the purchase and sale agreement, upon the
closing of the issuance, the registration rights agreement with
Tiptree will become effective, as further described in The
Registration Rights Agreement.
|
|
Q:
|
|
Why are we asking you to abandon the plan of liquidation?
|
|
A:
|
|
Our board of directors, upon the recommendation of the special
committee, is committed to maximizing the return of value to our
stockholders and believes that the Tiptree transaction will
provide greater value to our stockholders (and more quickly)
than pursuing the plan of liquidation.
|
|
Q:
|
|
What percentage of the company will Tiptree own upon
completion of the proposed issuance?
|
|
A:
|
|
We anticipate that there will be 20,260,152 shares of
common stock eligible to be tendered in the tender offer,
including up to 30,000 shares issuable to our chairman and
certain of our executive officers upon the settlement of company
performance share awards immediately prior to the closing of the
tender offer. Pursuant to the purchase and sale agreement,
Tiptree agreed to purchase a minimum of 4,445,000 shares of
our common stock. However, if more than 18,000,000 shares
are tendered (and not withdrawn) in the tender offer being
conducted in conjunction with the issuance, Tiptree must
purchase additional newly issued company shares equal to the
difference between 18,000,000 and the actual number of shares
tendered (and not withdrawn) in the tender offer in addition to
the 4,445,000 shares. If, instead, less than
16,500,000 shares of our common stock are tendered, Tiptree
has the option to purchase additional newly issued shares to
obtain ownership of up to 53.4% of the company. For example, if
14,000,000 shares are tendered, Tiptree is required to
purchase 4,445,000 shares and has the option to purchase an
additional 2,740,000 shares for a total of
7,185,000 shares of our common stock, resulting in Tiptree
owning 53.4% of the company after the consummation of the tender
offer. If, however, 19,000,000 shares of our common stock
are tendered (and not withdrawn), Tiptree must purchase a total
of 5,445,000 shares, resulting in Tiptree owning 81.2% of
the company after consummation of the tender offer. See
Proposal One: Issuance of Care Common Stock to
Tiptree Description of Transaction.
|
iv
|
|
|
Q:
|
|
Will Tiptree have adequate resources to complete the proposed
share issuance?
|
|
|
|
A:
|
|
Tiptree has sufficient unencumbered cash, net of short-term
accruals and liabilities, to complete the share issuance, which
requires it to deposit $60,430,932 in escrow. As of
March 31, 2010, Tiptrees most recent quarter end, it
had $99.9 million of unencumbered cash and
$4.4 million of short-term accruals and liabilities
recorded on its balance sheet. On June 1, 2010, its
financial position was even stronger. As of such date, Tiptree
had $100.5 million of unencumbered cash and
$1.5 million of short-term accruals and liabilities on its
balance sheet.
|
|
|
|
|
|
Based on Tiptrees anticipated business activities and
expenses through to the closing date of the share issuance,
Tiptree is expected to have a similar financial position as at
June 1, 2010, and will continue to have, from June 1,
2010 through the date immediately prior to closing date of the
share issuance, sufficient cash to enable it to fund its escrow
deposit in full.
|
|
|
|
Q:
|
|
Why is the Company seeking a stockholder vote in connection
with the issuance?
|
|
A:
|
|
The NYSE rules require stockholder approval of the issuance of
stock if the number of shares to be issued is 20% or more of the
number of shares outstanding prior to the issuance. In addition,
the NYSE rules require stockholder approval if an issuance will
result in a change of control of the company.
|
|
Q:
|
|
Why is the Company seeking a stockholder vote in connection
with abandoning the plan of liquidation?
|
|
A:
|
|
Maryland law requires that any corporation that receives
stockholder approval to dissolve or liquidate must obtain
additional stockholder approval to abandon any plan of
dissolution or liquidation.
|
|
Q:
|
|
Why is the Company seeking approval of the amendments to our
charter?
|
|
A:
|
|
Section 7.2.1(a)(iii) of our charter provides that any
Transfer (as defined in the charter, but which includes an
issuance of common stock by us) is void if such Transfer results
in our common stock being beneficially owned by less than 100
stockholders which provision is intended to protect our status
as a REIT. Depending upon the success of our tender offer, which
will result in a reduction in the number of our stockholders,
and which will be completed immediately prior to our issuance of
common stock to Tiptree, section 7.2.1(a)(iii) may have the
effect of invalidating the issuance of common stock to Tiptree
under our charter if the tender offer leaves us with fewer than
100 stockholders. Therefore, we propose to amend the charter to
facilitate the Tiptree transaction. We propose a second
amendment to the charter, to be effective 20 calendar days
following the consummation of the Tiptree transaction, which
will reinstate the REIT protective provision in order to ensure
that the companys REIT status is protected going forward.
|
|
Q:
|
|
Am I entitled to dissenters rights?
|
|
A:
|
|
No. You will have no right under Maryland law to
dissenters rights with respect to your shares of common
stock in connection with the issuance or the other transactions
contemplated herein.
|
|
Q:
|
|
Where and when is the special meeting?
|
|
|
|
A:
|
|
The special meeting will take place at the CIT Global
Headquarters, 505 Fifth Avenue, 7th Floor, Room C/D,
New York, New York 10017, on July [ ], 2010, at
10:00 a.m. local time.
|
|
|
|
Q:
|
|
What vote is required to approve the proposals?
|
|
A:
|
|
To approve the issuance to Tiptree, a majority of the votes cast
in person or by proxy at the special meeting must be voted
FOR the approval of the issuance, provided that the
total vote cast for the issuance represents over 50% in interest
of all securities entitled to vote on the proposal, or
10,150,000 shares of our outstanding common stock. Our
abandonment of the plan of liquidation proposal, amendments to
our charter proposals and adjournment proposal require a
majority of the votes cast in person or by proxy at the special
meeting to be voted FOR the respective proposal
provided that a quorum is present.
|
v
|
|
|
Q:
|
|
How does the Companys board of directors and special
committee recommend that I vote?
|
|
A:
|
|
Our board and special committee both unanimously recommend that
our stockholders vote FOR the approval of the
issuance to Tiptree, FOR the abandonment of the plan
of liquidation and FOR the amendments to our
charter. You should read Proposal One: Issuance of
Care Common Stock to Tiptree Reasons for the
Transaction for a discussion of the factors that our board
considered in deciding to recommend abandoning the plan of
liquidation in favor of the Tiptree transaction.
|
|
Q.
|
|
What will happen if our stockholders do not approve the
issuance to Tiptree or the abandonment of the plan of
liquidation?
|
|
A:
|
|
If our stockholders do not approve the issuance to Tiptree or
the proposal to abandon the plan of liquidation, the company
will not be able to move forward with the transaction with
Tiptree, and we may pursue the plan of liquidation previously
approved by our stockholders or, following termination of the
Tiptree purchase and sale agreement, entertain other proposals
from third parties to enter into an alternative transaction that
returns value to our stockholders, and, if required by
applicable law, we will seek stockholder approval for any such
alternative transaction.
|
|
Q:
|
|
Are there any interests in abandoning the plan of liquidation
in favor of the Tiptree transaction that differ from my own?
|
|
A:
|
|
Yes. Our directors and executive officers have interests in the
transaction that are different from your interests as a
stockholder, including the following:
|
|
|
|
|
|
Flint D. Besecker, the chairman of the board, holds a
performance share award that entitles him to receive 10,000
additional shares, which will represent $90,000 in value if the
tender offer is completed.
|
|
|
|
Salvatore (Torey) V. Riso, Jr., our chief executive officer,
holds a performance share award that entitles him to receive
10,000 additional shares, which will represent $90,000 in value
if the tender offer is completed.
|
|
|
|
Paul F. Hughes, our chief financial officer, holds a performance
share award that entitles him to receive 6,000 additional
shares, which will represent $54,000 in value if the tender
offer is completed.
|
|
|
|
|
|
In addition, our manager and largest stockholder, CIT Healthcare
LLC, has interests in the transaction that are different from
your interests as a stockholder. Our manager acquired a warrant,
dated September 30, 2008, to purchase 435,000 shares
of our common stock at an exercise price of $17.00 per
share. On March 16, 2010, our manager entered into a
warrant purchase agreement with Tiptree, pursuant to which our
manager will sell its warrant to purchase the
435,000 shares of our companys common stock in
exchange for $100,000 effective upon the closing of the
transaction with Tiptree.
|
|
|
|
Consequently, these individuals and our manager may be more
likely to support the Tiptree transaction than might otherwise
be the case if they did not expect to receive those payments.
Our board of directors and the special committee each was aware
of these interests and considered them in making their
recommendations. For further information regarding these and
other interests that differ from your interests please see the
section titled Proposal One: Issuance of Care Common
Stock to Tiptree Interests of Certain Persons in the
Tiptree Transaction.
|
|
Q.
|
|
When do you expect the transaction to be completed?
|
|
A.
|
|
The transaction includes a tender offer, which will commence at
or near the time this solicitation commences, and is scheduled
to expire (unless extended) on or about the date of the special
meeting. Stockholder approval of the issuance of common stock to
Tiptree, the abandonment of our plan of liquidation and the
first amendment to our charter are also conditions to the
closing of the
|
vi
|
|
|
|
|
Tiptree transaction. There are also additional conditions to the
closing of both the tender offer and the Tiptree issuance that
must be met or, if applicable, waived, in order for the
transaction to be completed. The tender offer is currently
anticipated to expire on [ ], subject to our
rights to extend the offer. Assuming the tender offer is
completed and the other conditions to the closing of the
issuance are met or, if applicable, waived, we anticipate
closing the issuance promptly after completion of the tender
offer. For a more complete discussion of the timing of the
offer, please see the section captioned Proposal One:
Issuance of Care Common Stock to Tiptree Timing of
the Transaction.
|
|
Q:
|
|
What other matters will be voted on at the special
meeting?
|
|
A:
|
|
In addition to asking you to vote on the abandonment of the plan
of liquidation proposal and the issuance to Tiptree proposal, we
are asking you to consider and vote on a proposal to permit our
board of directors to amend our charter to remove
section 7.2.1(a)(iii) in order to facilitate the Tiptree
transaction (the first amendment proposal). We are
also asking you to vote on an amendment to our charter to be
effective 20 calendar days following the consummation of the
Tiptree transaction to reinstate section 7.2.1(a)(iii) (the
second amendment proposal). Additionally, we are
asking you to vote to adjourn the special meeting, if necessary,
to permit further solicitation of proxies in the event that
there are not sufficient votes present at the time of that
meeting to approve the issuance of shares to Tiptree, the
abandonment of the plan of liquidation in favor of the Tiptree
transaction and the first and second charter amendments (the
adjournment proposal).
|
|
|
|
Other than the issuance to Tiptree proposal, the plan of
liquidation proposal, first amendment proposal, second amendment
proposal and the adjournment proposal, we do not expect to ask
you to vote on any other matters at the special meeting.
|
|
Q:
|
|
Who is entitled to vote at the meeting?
|
|
|
|
A:
|
|
If our records show that you were a holder of our common stock
at the close of business on June [ ], 2010
which is referred to in this proxy statement as the record
date, you are entitled to receive notice of the meeting
and to vote the shares of common stock that you held on the
record date.
|
|
|
|
Q:
|
|
How many shares can vote?
|
|
A:
|
|
As of the close of business on the record date,
20,230,152 shares of common stock of the company were
issued and outstanding and entitled to vote. There is no other
class of voting securities outstanding. You are entitled to one
(1) vote for each share of common stock you held as of the
close of business on the record date.
|
|
Q:
|
|
What constitutes a quorum?
|
|
A:
|
|
A quorum refers to the number of shares that must be in
attendance at a meeting to lawfully conduct business. The
presence in person or by proxy of stockholders entitled to cast
a majority of all of the votes entitled to be cast will
constitute a quorum for the transaction of business at the
meeting.
|
|
Q:
|
|
What effect will abstentions have on the vote approval for
the various proposals?
|
|
A:
|
|
Approval of the abandonment of the plan of liquidation proposal,
the first and second amendment proposals and the adjournment
proposal will each require the affirmative vote of a majority of
the shares of our common stock present in person or by proxy at
the special meeting and entitled to vote thereon, provided that
a quorum is present. As a result, an abstention will have the
same effect as a vote against such proposal. To approve the
issuance to Tiptree, a majority of the votes cast in person or
by proxy at the special meeting must be voted FOR
the approval of the issuance, provided that the total votes cast
for the issuance represents over 50% in interest of all
securities entitled to vote on the proposal. For purposes of the
vote on issuance to Tiptree proposal,
|
vii
|
|
|
|
|
abstentions will have the same effect as votes against the
proposal, unless holders of more than 50% in interest of all
securities entitled to vote on the proposal cast votes, in which
event abstentions and broker non-votes will not have any effect
on the result of the vote.
|
|
Q:
|
|
What effect will broker non-votes have on the vote approval
for the various proposals?
|
|
A:
|
|
A broker non-vote occurs when stockholders who hold their shares
of common stock in street name through brokers fail
to provide such brokers with specific instructions on how to
vote the shares, and the brokers do not have discretion to vote
the shares under applicable stock exchange rules. We believe
that brokers will not have discretion to vote uninstructed
shares on the issuance to Tiptree proposal, the abandonment of
the liquidation proposal and the first and second amendment
proposals under applicable stock exchange rules, so it is
possible that there may be broker non-votes in
respect to these proposals. For purposes of the abandonment of
the plan of liquidation proposal, the amendment proposals and
the adjournment proposal, a broker non-vote will have the same
effect as a vote against the proposals. For purposes of the vote
on the issuance to Tiptree proposal, broker non-votes will have
the same effect as votes against the proposal, unless holders of
more than 50% in interest of all securities entitled to vote on
the proposal cast votes, in which event broker non-votes will
not have any effect on the result of the vote.
|
|
Q:
|
|
What happens if I do not vote?
|
|
A:
|
|
If you do not vote, it will have the same effect as a vote
against the abandonment of the plan of liquidation proposal, the
issuance to Tiptree proposal and the first and second amendment
proposals but will have no effect on the adjournment proposal.
|
|
Q:
|
|
If my shares are held in street name by my
broker, will my broker vote my shares for me?
|
|
A:
|
|
No. Not unless you provide your broker with instructions on
how to vote. You should follow the procedures provided by your
broker regarding how to instruct them to vote your shares.
|
|
Q:
|
|
How do I vote?
|
|
A:
|
|
Whether or not you plan to attend the special meeting, please
complete, sign, date and promptly return the enclosed proxy
card, which is being solicited by our board of directors, in the
postage-prepaid envelope provided. You may also authorize a
proxy to vote your shares electronically via the internet at
www.proxyvote.com or by telephone by dialing toll-free
1-800-690-6903.
For specific instructions on voting, please refer to the
instructions on the proxy card or the information forwarded by
your broker, bank or other holder of record. Any proxy may be
revoked by delivery of a later dated proxy. If you attend the
special meeting, you may vote in person if you wish, even if you
have previously signed and returned your proxy card. Please
note, however, that if your shares are held of record by a
broker, bank or other nominee and you wish to vote in person at
the meeting, you must obtain a proxy issued in your name from
such broker, bank or other nominee.
|
|
Q:
|
|
What should I do now?
|
|
A:
|
|
You should complete, date and sign your proxy card and return it
promptly in the enclosed postage-paid envelope, or authorize a
proxy to vote your shares by internet at www.proxyvote.com or
telephone at
1-800-690-6903,
as soon as possible so that your shares may be represented at
the special meeting, even if you plan to attend the special
meeting in person.
|
|
Q:
|
|
Can I change my vote after I return my proxy card or after I
authorize a proxy to vote my shares by telephone or over the
internet?
|
|
A:
|
|
If you are a record holder, even after you have
submitted your proxy, you may change your vote at any time
before the proxy is exercised at the special meeting by
delivering to our secretary a written notice of revocation or a
properly signed proxy bearing a later date, or by attending the
special meeting and voting in person (although attendance at the
meeting will not cause your previously granted proxy to be
revoked unless you specifically so request). To revoke a proxy
previously submitted by telephone or over the internet, you may
simply authorize a proxy again at a later
|
viii
|
|
|
|
|
date, using the same procedures, in which case your shares will
be voted in accordance with the later submitted proxy and not
the earlier proxy.
|
|
|
|
If you hold shares of our common stock in street
name, you will need to contact the institution that holds
your shares and follow its instructions for revoking a proxy.
|
|
Q:
|
|
Do I have appraisal rights?
|
|
A:
|
|
No. Section 5.4 of our charter provides that our
stockholders shall not be entitled to exercise any rights of
appraisal or similar rights of an objecting stockholder unless
provided for by our board of directors. Our board of directors
has not provided such rights in connection with the issuance to
Tiptree.
|
|
Q:
|
|
Who will bear the costs of soliciting votes for the
meeting?
|
|
A:
|
|
We will bear the entire cost of the solicitation of proxies from
our stockholders. In addition to the mailing of these proxy
materials, the solicitation of proxies or votes may be made in
person, by telephone or by electronic communication by our
directors and officers and employees of our manager who will not
receive any additional compensation for such solicitation
activities. We will also reimburse brokerage houses and other
custodians, nominees and fiduciaries for their reasonable
out-of-pocket
expenses for forwarding proxy solicitation materials to our
stockholders.
|
|
Q:
|
|
Who can help answer my questions?
|
|
A:
|
|
If you have additional questions about the transaction with
Tiptree, or would like additional copies of this proxy
statement, you should contact Salvatore (Torey) V. Riso, Jr. at
212-771-0505
or in writing to Care Investment Trust Inc., 505 Fifth
Avenue, 6th Floor, New York, New York 10017, Attention:
Salvatore (Torey) V. Riso, Jr., Chief Executive Officer and
President.
|
ix
SUMMARY
This summary highlights selected information from this proxy
statement and may not contain all of the information that is
important to you. For additional information concerning the
issuance to Tiptree, the abandonment of the plan of liquidation
and the amendments to our charter, you should read this entire
proxy statement, including the exhibit, and the other documents
referenced in this proxy statement. A copy of the forms of the
charter amendments we intend to file with the Maryland
Department of Assessments and Taxation are included as
Exhibit A and B to this proxy statement. The following
summary should be read in conjunction with, and is qualified in
its entirety by, the more detailed information appearing
elsewhere in this proxy statement.
Our
Business
We are an externally managed real estate investment trust
(REIT) that was formed to invest in
healthcare-related real estate and mortgage debt. We were
incorporated in Maryland in March 2007, and we completed our
initial public offering on June 27, 2007. As a REIT, we are
generally not subject to income taxes. To maintain our REIT
status, we are required to distribute annually as dividends at
least 90% of our REIT taxable income, as defined by the Internal
Revenue Code of 1986, as amended (the Code), to our
stockholders, among other requirements. If we fail to qualify as
a REIT in any taxable year, we would be subject to
U.S. federal income tax on our taxable income at regular
corporate tax rates.
We were originally positioned to make mortgage investments in
healthcare-related properties, and to invest in
healthcare-related real estate, through utilizing the
origination platform of our external manager, CIT Healthcare LLC
(CIT Healthcare). We acquired our initial portfolio
of mortgage loan assets from our manager in exchange for cash
proceeds from our initial public offering and common stock. In
response to dislocations in the overall credit market, and in
particular the securitized financing markets, in late 2007, we
redirected our focus to place greater emphasis on
healthcare-related real estate investments. For more information
on our business see the section entitled Description of
Business on page 16 below.
The
Special Meeting
The special meeting will be held on [ ], July
[ ], 2010, at 10:00 a.m. local time, at
the CIT Global Headquarters, 505 Fifth Avenue, Seventh
Floor Room C/D, New York, NY 10017. For more information on
the special meeting, see the section entitled The Special
Meeting on page 13 below.
Vote
Required
To obtain approval of the abandonment of the plan of liquidation
and the first and second amendments to our charter, the
affirmative vote of the holders of not less than a majority of
the shares of common stock present in person or by proxy at the
special meeting and entitled to vote must be cast in favor of
the abandonment of the plan of liquidation proposal and the
first and second amendments to our charter proposals, provided
that a quorum is present. A stockholders failure to return
a proxy or give instructions to his or her broker or abstention
from voting will have the same effect as an affirmative vote
against these proposals and, consequently, the abandonment of
the plan of liquidation and the first and second amendments to
our charter. To obtain approval of the issuance to Tiptree, the
affirmative vote of the holders of not less than a majority of
the shares of common stock issued and outstanding and entitled
to vote must be cast in favor of the issuance proposal, provided
that the total vote cast for the issuance represents over 50% in
interest of all securities entitled to vote on the proposal. For
purposes of the vote on the issuance to Tiptree proposal, broker
non-votes will have the same effect as votes against the
proposal, unless holders of more than 50% in interest of all
securities entitled to vote on the proposal cast votes, in which
event broker non-votes will not have any effect on the result of
the vote. CIT Group Inc., the parent of our external manager,
CIT Healthcare, controls approximately 38% of our issued and
outstanding common stock and has indicated to us that
1
it intends to vote all of the 7,589,040 shares it owns in
favor of the issuance to Tiptree, abandonment of the plan of
liquidation and the first and second amendment proposals.
Record
Date for Voting
The close of business on June [ ], 2010 is the
record date for determining eligibility to vote at the special
meeting. Each holder of our common stock on the record date will
be entitled to one vote per share on all matters coming before
the special meeting. On the record date, there were
20,230,152 shares of our common stock outstanding and
entitled to vote at the special meeting.
The
Tiptree Transaction
Background
of the Transaction
Our operating strategy originally involved acquiring additional
mortgage assets on a leveraged basis through the use of
short-term borrowing facilities such as warehouse lines of
credit and longer-term funding through securitization structures
such as collateralized debt obligations or commercial
mortgage-backed securities. In late 2007, due to severe
dislocations in the credit markets, including the effective
closure of the securitized financing markets, we shifted our
operating strategy to place greater emphasis on acquiring high
quality healthcare-related real estate investments and away from
mortgage assets. As it became more difficult to raise additional
capital through the equity and debt markets to fund our
transactions, our board formed a special committee of Gerald E.
Bisbee, Jr., PhD., Kirk E. Gorman and Karen P. Robards,
each of whom was and is deemed an independent director under the
rules of the New York Stock Exchange and our own independence
definition. Flint D. Besecker was later appointed to the special
committee in October 2008, and Mr. Gorman resigned from the
special committee and our board of directors in October 2009,
due to time constraints resulting from his other business
commitments. The special committee was authorized and empowered
to, among other things, explore with any potentially interested
party the terms of any strategic transaction with the company
and make a recommendation to the board with respect to such
strategic transactions. We also engaged Credit Suisse Securities
(USA) LLC (Credit Suisse) an affiliate of Credit
Suisse AG, as our exclusive financial advisor to assist us in
evaluating potential strategic alternatives available to the
company. In October 2008, we began a formal sale process that
ultimately did not prove successful.
On December 10, 2009, our special committee recommended and
our board of directors approved the adoption of a plan of
liquidation which estimated the total liquidation value range
for our assets at between $8.05 and $8.90 per share. Our
stockholders approved the plan of liquidation on
January 28, 2010.
On January 21, 2010, we received a proposal from Tiptree
Financial Partners, L.P., a Delaware limited partnership, which
had approached us twice before in 2009 with written proposals to
acquire the company or a controlling stake in the company. After
extensive negotiations, on March 15, 2010, the special
committee and our board approved a purchase and sale agreement
with Tiptree which provides that Care will sell to Tiptree for a
purchase price of $9.00 per share, a minimum of
4,445,000 shares of the companys newly issued common
stock, and potentially additional shares depending on the number
of shares tendered in an issuer tender that we are contractually
obligated to make for up to all of our outstanding common stock
at the same $9.00 per share price. The purchase and sale
agreement also contains a condition to closing that at least
three of our five directors shall resign effective as of the
closing of the transaction, and the remaining Care directors
shall fill the resulting vacancies on our board with candidates
provided by Tiptree. In connection with the Tiptree transaction,
we expect to terminate our management agreement with CIT
Healthcare LLC. We expect that, after the closing of the
transaction, subject to a
60-day
transition period, Care will be advised by TREIT Management, an
affiliate of Tiptree Capital Management, LLC, which is the
manager of Tiptree. Prior to June 1, 2010, Tiptree was
externally managed by Tricadia Capital Management LLC.
2
In approving the Tiptree transaction, our board of directors and
our special committee consulted with our management and our
financial and legal advisors and considered the following
factors:
|
|
|
|
|
the extensive sale process for the company undertaken over a
period of more than one year, led by Credit Suisse, wherein the
company received, evaluated and negotiated numerous strategic
alternatives, including many offers to acquire all of the issued
and outstanding common stock of the company through a merger,
tender offer or similar business combination, none of which was
successful;
|
|
|
|
our stockholders approval, at a special meeting held on
January 28, 2010, of our plan of liquidation, which
involved a complete liquidation of Cares assets over time
at an estimated total liquidation value range of $8.05-$8.90 per
share, compared to the price that Tiptree will pay ($9.00 per
share) and the price offered to the companys stockholders
($9.00 per share) in the tender offer;
|
|
|
|
|
|
none of the individual asset bids received by Care exceeded the
components of value ranges developed by Care in
connection with the plan of liquidation;
|
|
|
|
|
|
the tender offer is for up to 100% of our outstanding common
stock and thus presents an opportunity for all of our
stockholders to receive, on a current basis, $9.00 in cash for
each share of common stock that they own, rather than having to
wait for assets to be disposed of and cash proceeds distributed
pursuant to the plan of liquidation;
|
|
|
|
the price offered to our stockholders in the tender offer of
$9.00 per share is the same price that Tiptree, an unaffiliated
third party, agreed to pay for our common stock pursuant to the
purchase and sale agreement;
|
|
|
|
the purchase price of $9.00 per share payable to the company by
Tiptree and payable to the companys stockholders in the
tender offer represents a 7.7% premium over the closing price of
the companys common stock on the NYSE on Monday,
March 15, 2010 ($8.36), the last trading day prior to the
public announcement of the execution of the purchase and sale
agreement, and a 6.4% premium over the highest closing price
($8.46) of the companys common stock during the
52-week
period preceding such date;
|
|
|
|
|
|
Tiptree has agreed to assume certain closing-related risks
pertaining to our pending litigation with Cambridge Holdings,
which other interested parties were not willing to do;
|
|
|
|
|
|
stockholders seeking to monetize their investment may do so by
tendering shares, and stockholders who wish to remain
stockholders may do so by not tendering shares; and
|
|
|
|
the execution risks associated with the proposed plan of
liquidation are likely greater than the execution risks of the
Tiptree transaction.
|
Our special committee and board of directors believed that each
of the above factors generally supported its determination and
recommendation. Our special committee and board of directors
also considered and reviewed with management a number of
potentially negative factors concerning the transaction with
Tiptree, including those listed below:
|
|
|
|
|
there is no assurance that we will be successful in our tender
offer and have the minimum number of shares tendered for the
transaction to close;
|
|
|
|
the fact that Cambridge Holdings has asserted a right to approve
any sale or disposition of our direct or indirect interests in
the Cambridge portfolio, including a change in control of the
company;
|
|
|
|
the actual or potential conflicts of interest which certain of
our executive officers and our directors have in connection with
the transaction with Tiptree, including those specified under
the heading Risk Factors and Interests of
Certain Persons in the Tiptree Transaction;
|
3
|
|
|
|
|
the costs to be incurred by our company in connection with
execution of the transaction and the tender offer, including
significant accounting, financial advisory and legal
fees; and
|
|
|
|
the possibility that stockholders may, depending on their tax
basis in their stock, recognize taxable gains (ordinary
and/or
capital gains) in connection with the completion of the
transaction.
|
For more information on the background of the Tiptree
transaction and the reasons for the Tiptree transaction see the
section entitled Proposal One: Issuance of Care
Common Stock to Tiptree on page 21 below.
Recommendation
of Our Board of Directors and the Special Committee
Our special committee and our board of directors recommend that
you vote FOR the issuance to Tiptree, the
abandonment of the plan of liquidation, the first and second
amendments to our charter and the proposal to adjourn the
special meeting if necessary.
Interests
in the Transaction That Differ from Your Interests
The Tiptree transaction involves an issuer tender offer. Our
directors and executive officers have interests in the Tiptree
transaction that are different from your interests as a
stockholder, including the following:
|
|
|
|
|
Flint D. Besecker, the chairman of the board, holds a
performance share award that entitles him to receive 10,000
additional shares, which will represent $90,000 in value if the
tender offer is completed.
|
|
|
|
Salvatore (Torey) V. Riso, Jr., our chief executive
officer, holds a performance share award that entitles him to
receive 10,000 additional shares, which will represent $90,000
in value if the tender offer is completed.
|
|
|
|
Paul F. Hughes, our chief financial officer, holds a performance
share award that entitles him to receive 6,000 additional
shares, which will represent $54,000 in value if the tender
offer is completed.
|
In addition, our manager, CIT Healthcare LLC, has interests in
the transaction that are different from your interests as a
stockholder. Our manager acquired a warrant, dated
September 30, 2008, to purchase 435,000 shares of our
common stock at an exercise price of $17.00 per share. On
March 16, 2010, our manager entered into a warrant purchase
agreement with Tiptree, pursuant to which our manager will sell
its warrant to purchase the 435,000 shares of our
companys common stock in exchange for $100,000 effective
upon the closing of the transaction with Tiptree.
Consequently, these individuals and our manager may be more
likely to support the transaction with Tiptree than might
otherwise be the case if they did not expect to receive those
payments. Our board of directors and the special committee each
was aware of these interests and considered them in making their
recommendations. For further information regarding these and
other interests that differ from your interests please see the
section titled Proposal One: Issuance of Care Common
Stock to Tiptree Interests of Certain Persons in the
Tiptree Transaction on page 42.
Risk
Factors
For more information on the risks associated with the
transaction and the issuance to Tiptree, see the section
entitled Risk Factors on page 5 below.
4
RISK
FACTORS
There are many risks associated with our business, the plan
of liquidation, the transaction with Tiptree, the conflicts of
interests that arise out of our relationship with our external
manager, CIT Healthcare LLC, the healthcare industry in general,
our healthcare-related investments in particular and our tax
status as a REIT. These risks are described in the Risk
Factors section of our annual report on
Form 10-K
for the year ended December 31, 2009, which accompanies
this proxy statement and is incorporated herein by reference. In
addition to these risks, you should consider the following
additional risks associated with the proposed transaction with
Tiptree and the issuance of shares to Tiptree when deciding how
to vote on that proposal, the abandonment of the plan of
liquidation proposal and the proposals to amend our charter.
Risks
Related to the Tiptree Transaction
The
Tiptree issuance is subject to conditions, and there can be no
assurance that these conditions will be satisfied.
Pursuant to the purchase and sale agreement, Tiptrees
obligation to purchase common stock is subject to the
satisfaction of the following conditions, among others:
(i) the representations and warranties of the company in
the purchase and sale agreement being true and correct;
(ii) the company performing all covenants and obligations
required to be performed under the purchase and sale agreement,
(iii) the registration rights agreement remaining in full
force and effect, (iv) the receipt of certain consents and
approvals, (v) the absence of a Company Material Adverse
Effect (as defined in the purchase and sale agreement),
(vi) the resignation of at least three of our current
directors and the appointment by Cares board of directors
of candidates acceptable to Tiptree to fill the resulting
vacancies, (vii) the receipt of an opinion of counsel
regarding the validity of the shares issued to Tiptree,
(viii) the absence of any restraining orders or injunctions
relating to the contemplated transactions, (ix) the receipt
by Tiptree of a certificate from the company certifying as to
the foregoing conditions, and (x) certain conditions to the
companys obligations with respect to the tender offer. If
any one or more of these conditions is not satisfied, or waived,
then the Tiptree issuance will not be completed and the tender
offer will not be consummated. See The Purchase and Sale
Agreement section below for further information.
The
tender offer is subject to conditions, and there can be no
assurance that these conditions will be satisfied.
Pursuant to the purchase and sale agreement, our obligation to
accept for payment shares validly tendered and not withdrawn on
the expiration date of the tender offer is subject to the
satisfaction of the following conditions: (i) there being
validly tendered and not withdrawn prior to the expiration date
a minimum of 10,300,000 shares of our common stock,
(ii) Tiptree having deposited in escrow the maximum amount
of funds required to be deposited pursuant to the purchase and
sale agreement (which Tiptree is only required to do if the
conditions to closing of the issuance, including stockholder
approval, have been satisfied), (iii) approval by our
stockholders of proposal 1, proposal 2 and
proposal 3, (iv) any waiting period applicable to the
contemplated transactions having expired or been terminated
under the
Hart-Scott-Rodino
Antitrusts Improvements Act of 1976, as amended, (v) the
representations and warranties of Tiptree in the purchase and
sale agreement being true and accurate, (vi) the
performance by Tiptree of the covenants and obligations required
under the purchase and sale agreement, (vii) the escrow
agreement being in full force and effect, (viii) the
receipt of certain consents, (ix) the absence of any
temporary restraining order, injunction or court order
preventing the consummation of the contemplated transactions, or
any statute, rule, regulation, or order preventing or
prohibiting the consummation of the contemplated transactions
and (x) the absence of any Purchaser Material Adverse
Effect (as defined herein). If any one or more of these
conditions is not satisfied or, subject to the requirements of
the purchase and sale agreement waived, then we will have the
right, under certain circumstances, to terminate the tender
offer. If we do so, the Tiptree issuance will not be
consummated. See The Purchase and Sale Agreement
section below for further information.
5
Even
if the conditions to completion of the Tiptree transaction and
the associated tender offer are satisfied, there can be no
assurance that these transactions will be completed in a timely
manner, under the same terms, or at all.
There can be no assurance that the Tiptree transaction and the
associated tender offer will be completed in a timely manner,
under the same terms, or at all. If the Tiptree transaction is
terminated for any reason, then the tender offer will also be
terminated, and you will not receive the $9.00 purchase price
for your common stock in the tender offer.
Our
stock may be delisted from the New York Stock
Exchange.
Under the rules of the New York Stock Exchange, the exchange may
commence delisting proceedings against us if (i) the
average closing price of our common stock falls below $1.00 per
share over a
30-day
consecutive trading period, (ii) our average market
capitalization falls below $15 million over a
30-day
consecutive trading period, (iii) we fall below
400 stockholders or (iv) we lose our REIT
qualification. Notwithstanding the fact that Tiptree has
covenanted to us in the purchase and sale agreement to use
commercially reasonable efforts to maintain our NYSE listing for
one year following the closing of the transaction, if the tender
offer being conducted in connection with the transaction reduces
the number of our total stockholders below 400 holders or
we fail to continue to meet any of the other requirements for
continued listing, the exchange may commence delisting
proceedings against us if we are not able to cure the deficiency
in a timely manner. If our common stock is delisted, our
stockholders may have difficulty trading our common stock on the
secondary market, which could adversely affect both its price
and liquidity.
Our
stock may have substantially less trading volume and liquidity
following the Tiptree transaction.
Stockholders who choose not to tender their shares in the
Tiptree transaction may experience significantly reduced trading
volume and liquidity in our common stock. Following completion
of the tender offer, the company may have substantially reduced
public float (the number of shares owned by
non-affiliate stockholders and available for trading in the
securities markets) and will likely have fewer stockholders.
Additionally, as a result of the Tiptree transaction, Tiptree
will likely acquire a controlling interest in the company. These
factors may reduce the volume of trading in our shares and make
it more difficult to buy or sell significant amounts of our
shares without materially affecting the market price.
We may
fail to qualify as a REIT if we have less than 100 beneficial
owners of our common stock.
The Code requires that all REITs have a minimum of 100
beneficial owners of common stock for at least 335 days out
of any tax year. If the tender offer being conducted in
connection with the transaction results in us having fewer than
100 beneficial owners, and we are not able to cure this
deficiency in a timely manner, we may fail to qualify as a REIT
for our tax year ending December 31, 2010, including the
portion of such year preceding the closing of the tender offer,
or a subsequent year. In this respect, proposal 3 would
remove from our charter the REIT protective provision that
prohibits any transfer of capital stock that would cause the
company to be beneficially owned by less than 100 stockholders.
Proposal 4 would reinstate the REIT protective charter provision
20 calendar days after the consummation of the Tiptree
transaction in order to protect our REIT status going forward.
Loss
of our status as a REIT would have significant adverse
consequences to us and the value of our common
stock.
If we lose our status as a REIT, we will face serious tax
consequences that may substantially reduce the funds available
for satisfying our obligations and for distribution to our
stockholders for each of the years involved because:
|
|
|
|
|
We would be subject to federal income tax as a regular
corporation and could face substantial tax liability;
|
6
|
|
|
|
|
We would not be allowed a deduction for dividends paid to
stockholders in computing our taxable income and would be
subject to federal income tax at regular corporate rates;
|
|
|
|
We also could be subject to the federal alternative minimum tax
and possibly increased state and local taxes;
|
|
|
|
Corporate subsidiaries could be treated as separate taxable
corporations for U.S. federal income tax purposes;
|
|
|
|
Any resulting corporate tax liability could be substantial and
could reduce the amount of cash available for distribution to
our stockholders, which in turn could have an adverse impact on
the value of, and trading prices for, our common stock; and
|
|
|
|
Unless we are entitled to relief under statutory provisions, we
will not be able to elect REIT status for four taxable years
following the year during which we were disqualified.
|
In addition, if we fail to qualify as a REIT, all distributions
to stockholders would continue to be treated as dividends to the
extent of our current and accumulated earning and profits,
although corporate stockholders may be eligible for the
dividends received deduction and individual stockholders may be
eligible for taxation at the rates generally applicable to
long-term capital gains through 2010 (currently at a maximum
rate of 15%) with respect to dividend distributions. We would no
longer be required to pay dividends to maintain REIT status.
We may
be limited in our ability to use our losses and credits against
future income and gain as a result of the issuance of our shares
to Tiptree and the redemption of our shares pursuant to the
tender offer.
The Code limits the amount of losses and credits generated
before a 50% change in ownership of a corporation that can be
used to offset post-change income and gain. In general, the
annual limitation is equal to the value of the corporation
immediately prior to the ownership change multiplied by the
long-term tax-exempt rate, as published in the Federal Register
(currently 4.03%). We anticipate that the issuance of our shares
to Tiptree, combined with the reduction in our outstanding
shares as a result of the tender offer, will result in such an
ownership change. Accordingly, the amount of post-change income
and gain that may be offset by our pre-change tax assets may be
lower than if no change in ownership had occurred.
We
intend to terminate our relationship with CIT Healthcare LLC
(CIT Healthcare), our existing manager, in
connection with the transaction with Tiptree and it is intended
that we will thereafter be managed by an affiliate of Tiptree.
There is no guarantee that the new manager will be successful in
operating the Company or will operate our business consistent
with past practice.
If the Tiptree transaction is consummated, the company intends
to terminate its existing management agreement with CIT
Healthcare, hire certain employees and enter into a management
agreement with TREIT Management, LLC (TREIT
Management), an affiliate of Tiptree Capital Management,
LLC (Tiptree Capital), which is the manager of
Tiptree. We expect to provide CIT Healthcare with a notice of
termination of the management agreement, and TREIT Management
will transition into the role of manager over an approximately
60-day
transition period. Notwithstanding the asset management,
credit-related and other relevant experience of Tiptrees
affiliates and their personnel, TREIT Management has not
previously managed our existing assets and therefore has limited
familiarity and experience with those assets. Accordingly, TREIT
Management may not be as successful in managing our assets or
business generally as a manager or persons with more familiarity
and experience with those assets or our business. Furthermore,
TREIT Management and its affiliates may not be successful in
hiring or retaining qualified employees to manage our business.
If TREIT Management is unable to successfully manage our
business, it could materially adversely affect our business,
financial condition and results of operations, which could
adversely affect the price of our common stock.
7
Our
new management agreement with TREIT Management will be with an
affiliate and will therefore not have the benefit of arms length
negotiations.
The new management agreement with TREIT Management will be
negotiated between related parties, given the ownership of our
company by Tiptree following the consummation of the Tiptree
transaction, although it is expected that our independent
directors will be required to approve the agreement. As a
result, the company will not have the benefit of arms-length
negotiations of the type normally conducted with an unaffiliated
third party and the terms, including fees payable, may not be as
favorable as if we did engage in negotiations with an
unaffiliated third party. In addition, we may choose not to
enforce, or to enforce less vigorously, our rights under a
management agreement with TREIT Management because of our desire
to maintain our ongoing relationship with our manager.
We may
encounter conflicts of interest in connection with our being
managed by TREIT Management.
We anticipate that the management services to be provided by
TREIT Management under its management agreement with us will not
be exclusive to the company. TREIT Management
and/or
its
affiliates engage in a broad spectrum of activities, including
investment advisory activities, and have extensive investment
and other business activities that are independent from, and may
from time to time conflict with, our business activities and
strategies. Certain affiliates of TREIT Management may advise,
sponsor, act as manager to or own other investment vehicles and
other persons or entities that have investment
and/or
business objectives that overlap with our business plan and that
may, therefore, compete with us for asset acquisition,
disposition and other business opportunities. Other vehicles
currently managed by affiliates of TREIT Management have
investment objectives which may overlap, in part, with our
business plan, and future vehicles
and/or
businesses owned or managed by affiliates of TREIT Management
may present similar overlap. We could therefore face a number of
conflicts of interest with TREIT Management, Tiptree
and/or
their
other affiliates with respect to the allocation of business
opportunities. We could make co-purchases or co-sales alongside
funds managed by TREIT Management or its affiliates or otherwise
participate in asset acquisitions or dispositions in which such
funds have an interest, which could also result in conflicts of
interest.
Furthermore, following consummation of the Tiptree transaction,
one or more of our directors
and/or
our
officers also are expected to serve as officers or directors of
Tiptree, TREIT Management
and/or
one
or more of their existing or future affiliates. These
individuals could therefore have obligations to the investors in
such entities which may, in particular circumstances, conflict
with our interests or those of stockholders. While our board is
expected to have at least two independent directors who are
unaffiliated with Tiptree, TREIT Management
and/or
their
affiliates to address potential conflicts of interest, we may be
adversely impacted as a result of such conflicts of interest.
Our
officers and directors and our manager may have conflicts of
interest that may influence their support of the Tiptree
transaction.
Our directors and executive officers have interests in the
Tiptree transaction that are different from your interests as a
stockholder, including the following:
|
|
|
|
|
Flint D. Besecker, the chairman of the board, holds a
performance share award that entitles him to receive 10,000
additional shares, which will represent $90,000 in value if the
tender offer is completed.
|
|
|
|
Salvatore (Torey) V. Riso, Jr., our chief executive
officer, holds a performance share award that entitles him to
receive 10,000 additional shares, which will represent $90,000
in value if the tender offer is completed.
|
|
|
|
Paul F. Hughes, our chief financial officer, holds a performance
share award that entitles him to receive 6,000 additional
shares, which will represent $54,000 in value if the tender
offer is completed.
|
8
In addition, our manager, CIT Healthcare LLC, has interests in
the Tiptree transaction that are different from your interests
as a stockholder. Our manager acquired a warrant, dated
September 30, 2008, to purchase 435,000 shares of our
common stock at an exercise price of $17.00 per share. On
March 16, 2010, our manager entered into a warrant purchase
agreement with Tiptree, pursuant to which our manager will sell
its warrant to purchase the 435,000 shares of our
companys common stock in exchange for $100,000 effective
upon the closing of the transaction with Tiptree.
Consequently, these individuals and our manager may be more
likely to support the transaction with Tiptree than might
otherwise be the case if they did not expect to receive those
payments. Our board of directors and the special committee each
was aware of these interests and considered them in making their
recommendations. For further information regarding these and
other interests that differ from your interests please see the
section titled Proposal One: Issuance of Care Common
Stock to Tiptree Interests of Certain Persons in the
Tiptree Transaction on page 41.
Cambridge
Holdings may seek to delay or prevent the transaction with
Tiptree.
Cambridge Holdings, our partner in the Cambridge medical office
building portfolio, has asserted that it possesses the
contractual right to approve any transfer, either directly or
indirectly, of our interests in the portfolio, including a
transfer of control of our company to Tiptree through the
issuance of a controlling equity stake in our company and a
related issuer tender offer. We disagree with Cambridge
Holdings assertion and strongly believe that the
transactions contemplated hereby do not require the approval of
Cambridge Holdings. We contend that Cambridge Holdings does not
have the
indirect
right to control the activities of our
company or any of our subsidiaries other than the entity through
which we made our direct investment in the portfolio, and
therefore Cambridge Holdings does not have the right to approve
(or disapprove) of the transactions contemplated hereby. On
November 25, 2009, we filed a complaint in federal district
court in Texas against Cambridge Holdings and its affiliates
seeking, among other things, a declaratory judgment to that
effect. On January 27, 2010, Cambridge Holdings answered
our complaint, and simultaneously filed counterclaims and a
third-party complaint that, among other things, asserts that
Cambridge Holdings does have the right to control a business
combination and other activities of the parent entities of the
entity through which we made our direct investment in the
portfolio. On March 22, 2010, a representative of Cambridge
Holdings sent a letter to the company asserting that the Tiptree
transaction was in violation of the limited partnership
agreements of the Cambridge Holdings assets. Cambridge
Holdings may therefore seek to delay or prevent the transaction
with Tiptree, and if Cambridge Holdings is successful, the
related tender offer may similarly be delayed or prevented. See
Legal Proceedings on page 19 for more
information on the litigation.
9
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement contains or incorporates by reference
forward-looking statements. Forward-looking statements are those
that predict or describe future events or trends and that do not
relate solely to historical matters. You can generally identify
forward-looking statements as statements containing the words
believe, expect, might,
anticipate, intend,
estimate, project, assume or
other similar expressions.
Among many other examples, the following statements are examples
of the forward-looking statements in this document:
|
|
|
|
|
all predictions of the timing of the Tiptree transaction or the
timing of the tender offer;
|
|
|
|
all statements regarding our ability to continue to qualify as a
REIT; and
|
|
|
|
all statements regarding future cash flows, future business
activities or prospects, future revenues, future working
capital, the amount of expenses expected to be incurred, the
amount or existence of future contingent liabilities, future
actions that may be taken in connection with any litigation, the
amount of cash reserves to be established in the future, future
liquidity, future capital needs, future interest costs, future
income or the effects of the transaction with Tiptree and the
related transactions.
|
You should not place undue reliance on our forward-looking
statements because the matters they describe are subject to
known (and unknown) risks, uncertainties and other unpredictable
factors, many of which are beyond our control.
Many relevant
risks are described under the caption Risk Factors
on page 5 as well as throughout this proxy statement and in
the Risk Factors sections included in the documents
incorporated by reference (see Where You Can Find More
Available Information on page 69), and you should
consider these important cautionary factors as you read this
document.
Our actual results, performance or achievements may differ
materially from the anticipated results, performance or
achievements that are expressed or implied by our
forward-looking statements. Among the factors that could cause
such a difference are:
|
|
|
|
|
uncertainties in closing the Tiptree transaction;
|
|
|
|
uncertainties regarding completing the tender offer;
|
|
|
|
uncertainties regarding our ability to continue to qualify as a
REIT;
|
|
|
|
availability of qualified personnel;
|
|
|
|
increased rates of default
and/or
decreased recovery rates on our investments;
|
|
|
|
uncertainties relating to our asset portfolio;
|
|
|
|
uncertainties relating to our operations;
|
|
|
|
uncertainties relating to litigation;
|
|
|
|
uncertainties relating to our stock trading volume;
|
|
|
|
uncertainties relating to our contemplated new manager;
|
10
|
|
|
|
|
uncertainties relating to domestic and international economic
and political conditions;
|
|
|
|
uncertainties regarding the impact of regulations, changes in
government policy and industry competition; and
|
|
|
|
other risks detailed from time to time in our reports filed with
the SEC.
|
The cautionary statements contained or incorporated by reference
into in this proxy statement should be considered in connection
with any subsequent written or oral forward-looking statements
that may be issued by us or persons acting on our behalf. Except
for our ongoing obligations to disclose certain information as
required by the federal securities laws, we undertake no
obligation to release publicly any revisions to any
forward-looking statements to reflect events or circumstances
after the date of this proxy statement or to reflect the
occurrence of unanticipated events.
11
CAUTIONARY
STATEMENT CONCERNING REPRESENTATIONS AND WARRANTIES
CONTAINED IN THE PURCHASE AND SALE AGREEMENT OR IN
THE ANCILLARY AGREEMENTS
You should not rely upon the representations and warranties in
the purchase and sale agreement or in any of the ancillary
agreements or the descriptions of such representations and
warranties in this proxy statement as statements of factual
information about us or Tiptree. These representations and
warranties were made only for purposes of the purchase and sale
agreement and the ancillary agreements, and were made solely to
us or to the other parties to the purchase and sale agreement or
the ancillary agreements as of the dates indicated therein. The
representations and warranties are reproduced and summarized in
this proxy statement solely to provide information regarding the
terms of such agreements and not to provide you with any other
information regarding us or Tiptree. Information about us can be
found elsewhere in this proxy statement and in other public
filings we make with the SEC. Information about Tiptree can also
be found elsewhere in this proxy statement.
12
THE
SPECIAL MEETING
The enclosed proxy is solicited by our board of directors for
use in voting at the special meeting of stockholders to be held
on [ ], July [ ], 2010, at
10:00 a.m. local time, at the CIT Global Headquarters,
505 Fifth Avenue, Seventh Floor Room C/D, New York, NY
10017, and at any adjournment or postponement thereof, for the
purposes set forth in the attached notice.
If sufficient proxies are not returned in response to this
solicitation, supplementary solicitations may be made by mail or
by telephone or personal interview by certain of our directors,
officers and the employees of our manager, none of whom will
receive additional compensation for these services. We will bear
the cost of solicitation of proxies. If the adjournment proposal
has been approved and the special meeting is adjourned or
postponed, we may solicit additional proxies during the
adjournment period.
Voting
and Revocability of Proxies
When proxies are properly dated, executed and returned, the
shares they represent will be voted at the special meeting in
accordance with the instructions of the stockholder. If no
specific instructions are given, the shares will be voted
FOR
approval of the issuance to Tiptree
proposal,
FOR
approval of the abandonment of
the plan of liquidation proposal,
FOR
approval of the first amendment to our charter proposal,
FOR
approval of the second amendment to our
charter proposal and
FOR
approval of the
adjournment proposal. In addition, if other matters come before
the special meeting, the persons named in the accompanying proxy
will vote in accordance with their discretion with respect to
such matters. A stockholder giving a proxy has the power to
revoke it at any time prior to its exercise by voting in person
at the special meeting, by giving written notice to the
secretary of the company prior to the special meeting or by
delivering a later dated, properly executed proxy (including an
electronically or telephonically authorized proxy).
Each share of common stock outstanding at the close of business
on June [ ], 2010, the record date, is entitled
to one vote on all matters coming before the special meeting. If
a share is represented for any purpose at the special meeting it
is deemed to be present for quorum purposes and for all other
matters as well. A stockholder may abstain with respect to each
item, including the issuance to Tiptree proposal, the
abandonment of the plan of liquidation proposal, the first
amendment to the charter proposal, the second amendment to the
charter proposal and the adjournment proposal, submitted for
stockholder approval. Abstentions will be counted for purposes
of determining the existence of a quorum. Abstentions will not
be counted as voting in favor of an item. The effect of
abstentions on the result of the vote with respect to a proposal
depends upon whether the vote required for that proposal is
based upon a proportion of the votes cast (no effect) or a
proportion of the votes entitled to be cast (effect of a vote
against). To obtain approval of the abandonment of the plan of
liquidation proposal, the first amendment to our charter
proposal, the second amendment to our charter proposal and the
adjournment proposal, the affirmative vote of the holders of not
less than a majority of the shares of common stock present in
person or by proxy at the special meeting and entitled to vote
must be cast in favor of the proposals. An abstention from the
vote on the abandonment of the plan of liquidation proposal, the
first amendment to our charter proposal, the second amendment to
the charter proposal and the adjournment proposal would have the
same effect as a vote against such proposal. To obtain approval
of the issuance to Tiptree, the affirmative vote of at least a
majority of the outstanding shares of our common stock is
required to approve the issuance, provided that the total vote
cast for the issuance represents over 50% in interest of all
securities entitled to vote on the proposal. An abstention from
the vote on the issuance to Tiptree proposal would have the same
effect as a vote against the proposal, unless holders of more
than 50% in interest of all securities entitled to vote on the
proposal cast votes, in which event abstentions will not have
any effect on the result of the vote.
Except for certain items for which brokers are prohibited from
exercising their discretion, a broker who holds shares in
street name has the authority to vote on routine
items when it has not received instructions from the beneficial
owner. Where brokers do not have or do not exercise such
discretion, the inability or failure to vote is referred to as a
broker non-vote. If the broker returns a properly
13
executed proxy, the shares are counted as present for quorum
purposes. If the broker crosses out, does not vote with respect
to, or is prohibited from exercising its discretion, resulting
in a broker non-vote, the effect of the broker non-vote on the
result of the vote depends upon whether the vote required for
that proposal is based upon a proportion of the votes cast (no
effect) or a proportion of the votes entitled to be cast (effect
of a vote against). If the broker returns a properly executed
proxy, but does not vote or abstain with respect to a proposal
and does not cross out the proposal, the proxy will be voted
FOR
all of the proposals and in the proxy
holders discretion with respect to any other matter that
may come before the meeting or any adjournments or postponements
thereof. Approval of the issuance to Tiptree, the abandonment of
the plan of liquidation and the first and second amendments to
our charter are all matters for which brokers are prohibited
from exercising their discretion. Therefore, stockholders will
need to provide brokers with specific instructions on whether to
vote in the affirmative for or against the issuance to Tiptree
proposal, the abandonment of the plan of liquidation proposal,
the first amendment to our charter proposal and the second
amendment to our charter proposal. For purposes of the
abandonment of the plan of liquidation proposal, the first and
second amendments to our charter proposals and the adjournment
proposal, a broker non-vote will have the same effect as a vote
against the proposals. For purposes of the vote on the issuance
to Tiptree proposal, broker non-votes will have the same effect
as votes against the proposal, unless holders of more than 50%
in interest of all securities entitled to vote on the proposal
cast votes, in which event broker non-votes will not have any
effect on the result of the vote.
To obtain approval of the abandonment of the plan of liquidation
and the first and second amendments to our charter proposals,
the affirmative vote of the holders of not less than a majority
of the shares of common stock present in person or by proxy at
the special meeting and entitled to vote must be cast in favor
of such proposal, provided that a quorum is present. A
stockholders failure to return the enclosed proxy card or
give instructions to his or her broker or an abstention from
voting will have the same effect as an affirmative vote against
such proposal and, consequently, the abandonment of the plan of
liquidation proposal and the first and second amendments to our
charter proposals. To obtain approval of the issuance to
Tiptree, the affirmative vote of at least a majority of the
outstanding shares of our common stock is required to approve
the issuance, provided that the total vote cast for the issuance
represents over 50% in interest of all securities entitled to
vote on the proposal. A stockholders failure to return the
enclosed proxy card or give instructions to his or her broker or
an abstention from voting will have the same effect as votes
against the proposal, unless holders of more than 50% in
interest of all securities entitled to vote on the proposal cast
votes, in which event abstentions and broker non-votes will not
have any effect on the result of the vote.
Approval of the abandonment of the plan of liquidation proposal
is conditioned on the issuance to Tiptree proposal being
approved by our stockholders. If our stockholders do not approve
the issuance to Tiptree, or if the purchase and sale agreement
is terminated prior to the date of the meeting, then we would
consider the abandonment of the plan of liquidation proposal
moot, and votes for that proposal would not be counted. Approval
of each of the first and second amendments to our charter
proposals is conditioned on the issuance to Tiptree proposal and
the abandonment of the plan of liquidation proposals being
approved. If our stockholders do not approve the issuance and
the abandonment of the plan of liquidation proposals, or if the
purchase and sale agreement is terminated prior to the date of
the meeting, then we would consider the amendment to our charter
proposal to be moot, and votes for that would not be counted. If
our stockholders do not approve the issuance to Tiptree, we may
pursue the previously approved plan of liquidation or, upon
termination of the purchase and sale agreement continue to
pursue other strategic alternatives.
If a quorum is present, a majority of the votes of common
stockholders cast at the special meeting is required to approve
the adjournment proposal. A vote for any of the issuance to
Tiptree, abandonment of the plan of liquidation, first amendment
to our charter or second amendment to charter proposals does not
count as a vote for the adjournment proposal, nor vice versa.
Approval of the adjournment proposal is not a condition to the
issuance to Tiptree proposal, abandonment of the plan of
liquidation proposal nor the first and second amendments to our
charter proposals. Approval of the adjournment
14
proposal will permit the adjournment of the special meeting to
solicit additional proxies in the event that there are not
sufficient votes at the time of the special meeting to approve
the other four proposals.
Assuming a quorum is present, a majority of the votes of common
stockholders cast at the special meeting is sufficient to take
or authorize action upon any other matter that may properly come
before the special meeting, unless our charter, our bylaws or
Maryland law requires a greater number for matters of that type.
Your vote is important. Please return your marked proxy card
promptly so your shares can be represented, even if you plan to
attend the special meeting in person.
Voting by Mail
stockholders may authorize a
proxy by completing the attached proxy card and mailing it to us
in the enclosed self-addressed postage-paid return envelope.
Voting by Telephone
stockholders may
authorize a proxy by telephone by dialing toll-free
1-800-690-6903
until 11:59 p.m. Eastern Standard Time on July
[ ], 2010. The touch-tone telephone proxy
authorization procedures are designed to authenticate the
stockholders identity and to allow stockholders to
authorize a proxy and confirm that their instructions have been
properly recorded. Stockholders should have their proxy card
available when authorizing a proxy by telephone.
Voting by Internet
stockholders may authorize
a proxy electronically using the internet at www.proxyvote.com
until 11:59 p.m. Eastern Standard Time on July
[ ], 2010. The internet proxy authorization
procedures are designed to authenticate the stockholders
identity and to allow stockholders to authorize a proxy and
confirm that their instructions have been properly recorded.
Stockholders should have their proxy card available when
authorizing a proxy by the internet.
Record
Date and Number of Shares Outstanding
Only stockholders of record at the close of business on June
[ ], 2010 will be entitled to vote at the
special meeting. As of the record date, we had
20,230,152 shares of common stock issued and outstanding
and entitled to vote.
15
DESCRIPTION
OF BUSINESS
Our
Company
We are an externally managed REIT that was formed to invest in
healthcare-related real estate and mortgage debt. We were
incorporated in Maryland in March 2007, and we completed our
initial public offering on June 27, 2007. As a REIT, we are
generally not subject to income taxes. To maintain our REIT
status, we are required to distribute annually as dividends at
least 90% of our REIT taxable income, as defined by the Code, to
our stockholders, among other requirements. If we fail to
qualify as a REIT in any taxable year, we would be subject to
federal income tax on our taxable income at regular corporate
tax rates. See Risk Factors Risks Related to
the Tiptree Transaction.
The company was originally positioned to make mortgage
investments in healthcare-related properties, and to invest in
healthcare-related real estate through utilizing the origination
platform of its external manager, CIT Healthcare. The company
acquired its initial portfolio of mortgage loan assets from its
manager in exchange for cash proceeds from our initial public
offering and common stock. In response to dislocations in the
overall credit market, and in particular the securitized
financing markets, in late 2007, the company redirected its
focus to place greater emphasis on healthcare-related real
estate investments.
We have made investments in three owned healthcare real-estate
portfolios since our initial public offering. We have an 85%
ownership interest in a real-estate portfolio managed by
Cambridge Holdings, which is comprised of nine Class A
medical buildings located in the Texas and Louisiana regions.
The company also has a 10% ownership interest and a 100%
preferred interest in a joint venture with Senior Management
Concepts, LLC (SMC), which is comprised of four
independent living and assisted living facilities in Utah. We
also wholly own 14 facilities through sale lease-back
transactions with Bickford Senior Living Group, LLC
(Bickford), that includes assisted living,
independent living and Alzheimer facilities in several
mid-western states.
Our healthcare-related mortgage portfolio, with an outstanding
principal balance of $13.8 million as of March 31,
2010, is comprised of a participation interest in a loan secured
primarily by healthcare-related real estate.
Our principal executive offices are located at 505 Fifth
Avenue, 6th Floor, New York, New York 10017 and our
telephone number is
212-771-0505.
Our
Manager
Our manager is a wholly-owned subsidiary of CIT Group.
Management services are provided to the company pursuant to an
amended and restated management agreement (management
agreement) which expires on December 31, 2011, unless
earlier terminated. The management agreement can be terminated
by the company with or without cause. In connection with the
transactions contemplated hereby, we intend to terminate our
relationship with our existing manager, and an affiliate of
Tiptree will become our manager.
Our
Mortgage Investments
The company has a participation interest in a healthcare-related
first mortgage loan held at the lower of cost or market with an
outstanding principal balance of $13.8 million as of
March 31, 2010. The loan is variable rate and at
March 31, 2010, had a weighted average spread of 4.30% over
one month LIBOR, and a maturity of approximately 0.8 year.
The table below provides information with respect to our
mortgage investment as of March 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location
|
|
|
|
Principal
|
|
Interest
|
|
Maturity
|
Property
Type
(a)
|
|
City
|
|
State
|
|
Outstanding (000s).
|
|
Rate
|
|
Date
|
|
SNF/Sr. Appts/ALF
|
|
Various
|
|
Texas / Louisiana
|
|
|
13,809
|
|
|
|
L+4.30
|
%
|
|
|
2/1/2011
|
|
|
|
|
(a)
|
|
SNF refers to skilled nursing
facilities, ALF refers to assisted living facilities and Sr.
Appts refers to senior living apartments.
|
16
Our
Equity Investments in Real Estate
Cambridge
Medical Office Building Portfolio
We own an 85% equity interest in eight limited liability
entities that own nine Class A medical office buildings
developed and managed by Cambridge Holdings totaling
approximately 767,000 square feet located in Texas
(8) and Louisiana (1). These facilities are situated on
medical center campuses or adjacent to acute care hospitals or
ambulatory surgery centers, and are affiliated with or tenanted
by hospital systems and doctor groups. Cambridge Holdings owns
the remaining 15% interest in the facilities and operates them
under long-term management contracts. Under the terms of the
management agreements, Cambridge Holdings acts as the manager
and leasing agent of each medical office building, subject to
certain removal rights held by us. The medical office building
properties were 92% leased at December 31, 2009.
The table below provides information with respect to the
Cambridge portfolio as of December 31, 2009:
|
|
|
|
|
Weighted average rent per square foot
|
|
$
|
24.97
|
|
Average square foot per tenant
|
|
|
5,607
|
|
Weighted average remaining lease term
|
|
|
6.40
|
years
|
Largest tenant as percentage of total rental square feet
|
|
|
9.59
|
%
|
Lease Maturity Cycle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
% of Rental
|
Year
|
|
Tenants
|
|
Square Ft
|
|
Annual Rent
|
|
Sq Ft
|
|
2010
|
|
|
20
|
|
|
|
40,911
|
|
|
$
|
945,438
|
|
|
|
5.79
|
%
|
2011
|
|
|
23
|
|
|
|
68,152
|
|
|
|
1,373,879
|
|
|
|
9.65
|
%
|
2012
|
|
|
17
|
|
|
|
63,119
|
|
|
|
1,413,491
|
|
|
|
8.94
|
%
|
2013
|
|
|
22
|
|
|
|
93,652
|
|
|
|
2,015,079
|
|
|
|
13.26
|
%
|
2014
|
|
|
11
|
|
|
|
55,340
|
|
|
|
1,119,007
|
|
|
|
7.83
|
%
|
2015
|
|
|
12
|
|
|
|
95,672
|
|
|
|
1,942,418
|
|
|
|
13.54
|
%
|
2016
|
|
|
11
|
|
|
|
58,659
|
|
|
|
1,266,502
|
|
|
|
8.30
|
%
|
2017
|
|
|
3
|
|
|
|
28,814
|
|
|
|
1,122,080
|
|
|
|
4.08
|
%
|
2018
|
|
|
3
|
|
|
|
55,444
|
|
|
|
1,498,062
|
|
|
|
7.85
|
%
|
2019
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thereafter
|
|
|
4
|
|
|
|
146,660
|
|
|
|
4,945,036
|
|
|
|
20.76
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We invested $72.4 million in cash and equity for our
interests in the Cambridge portfolio, which consisted of
$61.9 million of cash as well as commitments to issue
700,000 operating partnership units to Cambridge Holdings,
subject to the underlying properties achieving certain
performance hurdles, with a stated value of $10.5 million
($15.00 per unit), which were deemed to have a fair value of
$2.9 million at December 31, 2007. The operating
partnership units are held in escrow and, subject to our right
to cancel units under certain circumstances, will be released to
Cambridge Holdings upon termination of the escrow agreement on
December 31, 2014 or upon the achievement of certain
performance measures. Under the terms of our investment, we
receive an initial preferred minimum return of 8.0% on capital
invested with 2.0% per annum escalations until the earlier of
December 31, 2014 or when the entities have generated
sufficient cash to provide the preferred return without reliance
on the credit support for four of six consecutive quarters, with
total cash generated from the portfolio for the six quarters
sufficient to cover the preferred return over that period.
Thereafter, our preferred return converts to a pari-passu return
with cash flow distributed 85% to us and 15% to Cambridge
Holdings.
17
Under the terms of our investment, Cambridge Holdings was
provided the contractual right to put its 15% interest in the
properties to us at an agreed upon market or appraised value in
the event we were to enter into a change in control transaction
or we were to attempt to sell our interest in the real-estate
portfolio to a third party. As provided under the terms of the
documents relating to the investment in the Cambridge portfolio,
we provided notice to Cambridge Holdings in May 2009 in
connection with a change in control transaction being negotiated
at that time with a third party. Cambridge Holdings did not
exercise its right to put its 15% interest to us at that time,
and, as a result, we believe that Cambridge Holdings
contractual put right has now expired.
On November 25, 2009, we filed a lawsuit in the
U.S. District Court for the Northern District of Texas
against Saada Parties, seeking declaratory judgments that
(i) we have the right to engage in a business combination
transaction involving our company or a sale of our wholly owned
subsidiary that serves as the general partner of the partnership
that holds the direct investment in the portfolio without the
approval of the Saada Parties, (ii) the contractual right
of the Saada Parties to put their interests in the Cambridge
medical office building portfolio has expired and (iii) the
operating partnership units held by the Saada Parties do not
entitle them to receive any special cash distributions made to
our stockholders. We also brought affirmative claims for
tortious interference by the Saada Parties with a prospective
contract and for their breach of the implied covenant of good
faith and fair dealing.
On January 27, 2010, the Saada Parties answered our
complaint, and simultaneously filed Counterclaims that named our
subsidiaries ERC Sub LLC and ERC Sub, L.P., external manager CIT
Healthcare LLC, and board chairman Flint D. Besecker, as
additional third-party defendants. The Counterclaims seek four
declaratory judgments construing certain contracts among the
parties that are largely the mirror image of our declaratory
judgment claims. In addition, the Counterclaims also seek
monetary damages for purported breaches of fiduciary duty and
the duty of good faith and fair dealing, as well as fraudulent
inducement, against us and the third-party defendants jointly
and severally.
See Risk Factors Risks Related to the Tiptree
Transaction, and Risk Factors Legal
Proceedings for more detail.
Senior
Management Concepts Senior Living Portfolio
We own interests in four independent and assisted living
facilities located in Utah and operated by SMC, a privately held
operator of senior housing facilities. The four facilities
contain approximately 243 independent living units and 165
assisted living units, and each facility is 100% private pay.
Affiliates of SMC have entered into
15-year
leases on the facilities that expire in 2022. These facilities
are 89% occupied as of December 31, 2009.
We paid $6.8 million in exchange for 100% of the preferred
equity interests and 10% of the common equity interests in the
joint venture. We receive a preferred return of 15.0% on our
invested capital and an additional common equity return payable
for up to ten years equal to 10.0% of projected free cash flow
after payment of debt service and the preferred return. Subject
to certain conditions being met, our preferred equity interest
is subject to redemption at par beginning on January 1,
2010, and we retain an option to put our preferred equity
interest to our partner at par any time beginning on
January 1, 2016. If our preferred equity interest is
redeemed, we have the right to put our common equity interests
to our partner within thirty days after notice at fair market
value as determined by a third-party appraiser.
Bickford
Senior Living Portfolio
We acquired 14 assisted living, independent living and Alzheimer
facilities from Eby Realty Group, LLC, an affiliate of Bickford
(Eby), a privately owned operator of senior housing
facilities, in two sale-leaseback transactions in June 2008 and
September 2008. We have leased back the twelve facilities we
acquired in June 2008 and the two facilities we acquired in
September 2008 to Eby through a master lease agreement for
15 years and 14.75 years, respectively, with four
10-year
extension options. The portfolio,
18
developed and managed by Bickford, contains 643 units and
is located in Illinois (5), Indiana (1), Iowa (6) and
Nebraska (2). The portfolio, which is 100% private pay, was 89%
occupied as of December 31, 2009.
Under the terms of the master lease, the current minimum rent
due on the 14 Bickford properties is $9.4 million, or a
base lease rate of 8.46%. Base rent during the initial
15 year lease term increases at the rate of three percent
per year. We also receive additional base rent of 0.26% per
year, increasing at the rate of three percent per year during
the initial term of the master lease. The additional base rent
accrues during the first three years of the lease term and shall
be paid out in years four and five of the initial lease term.
The master lease is a triple net lease, and, as
such, the master lessee is responsible for all taxes, insurance,
utilities, maintenance and capital costs relating to the
facilities. The obligations of the master lessee under the
master lease are also secured by all assets of the master lessee
and the subtenant facility operators, and, pending achievement
of certain lease coverage ratios, by a second mortgage on
another Eby project and a pledge of minority interests in six
unrelated Eby projects.
The purchase price for these acquisitions was
$111.0 million, and Eby has the opportunity under an earn
out agreement to receive an additional $7.2 million based
on the performance of the properties and under certain other
conditions, which have not been met as of March 31, 2010.
Legal
Proceedings
On September 18, 2007, a class action complaint for
violations of federal securities laws was filed in the United
States District Court, Southern District of New York alleging
that the Registration Statement relating to the initial public
offering of shares of our common stock, filed on June 21,
2007, failed to disclose that certain of the assets in the
contributed portfolio were materially impaired and overvalued
and that we were experiencing increasing difficulty in securing
our warehouse financing lines. On January 18, 2008, the
court entered an order appointing co-lead plaintiffs and co-lead
counsel. On February 19, 2008, the co-lead plaintiffs filed
an amended complaint citing additional evidentiary support for
the allegations in the complaint. We believe the complaint and
allegations are without merit and intend to defend against the
complaint and allegations vigorously. We filed a motion to
dismiss the complaint on April 22, 2008. The plaintiffs
filed an opposition to our motion to dismiss on July 9,
2008, to which we filed our reply on September 10, 2008. On
March 4, 2009, the court denied our motion to dismiss. Care
filed its answer on April 15, 2009. At a conference held on
May 15, 2009, the Court ordered the parties to make a joint
submission (the Joint Statement) setting forth:
(i) the specific statements that Plaintiffs claim are false
and misleading; (ii) the facts on which Plaintiffs rely as
showing each alleged misstatement was false and misleading; and
(iii) the facts on which Defendants rely as showing those
statements were true. The parties filed the Joint Statement on
June 3, 2009. On July 31, 2009, the parties entered
into a stipulation that narrowed the scope of the proceeding to
the single issue of the warehouse financing disclosure in the
Registration Statement. Fact discovery closed on April 23,
2010. The Court has ordered the parties to file an abbreviated
joint pre-trial statement on June 9, 2010, and scheduled a
pre-trial conference for June 11, 2010, at which the Court
will determine based on the joint pre-trial statement whether to
permit us and the other defendants to file a summary judgment
motion.
The Counterclaims further request indemnification by ERC Sub,
L.P., pursuant to a contract between the parties, and the
imposition of a constructive trust on our current
assets to be disposed as part of any future liquidation of Care,
including all proceeds from those assets. Although the
Counterclaims do not itemize their asserted damages, they assign
these damages a value of $100 million or more.
In addition, the Saada Parties filed a motion to dismiss our
tortious interference and breach of the implied covenant of good
faith and fair dealing claims on January 27, 2010. In
response to the Counterclaims, we filed on March 5, 2010,
an omnibus motion to dismiss all of the Counterclaims.
On March 22, 2010, we received a letter from Cambridge
Holdings, which asserted that the transactions with Tiptree were
in violation of our agreements with the Saada Parties.
The Saada Parties filed their opposition to our omnibus motion
to dismiss on March 26, 2010, and we filed our response on
April 9, 2010.
19
On April 14, 2010, the Saada Parties motion to
dismiss was denied and our motion to dismiss was also denied.
On April 27, 2010, we filed an answer to the Saada
Parties third-party complaint. We continue to believe that
the arguments advanced by Cambridge Holdings lack merit. See
Risk Factors Risks Related to the Tiptree
Transaction.
On May 28, 2010, Cambridge Holdings filed a motion for
leave to amend its previously-asserted counterclaims and
third-party complaint to include a new claim for breach of
contract against Care. This proposed new claim asserts that
Cambridge Holdings and Care agreed, in October 2009, upon a sale
of ERC Sub, L.P.s 85% limited partnership interest in the
Cambridge properties back to Cambridge Holdings for
$20 million in cash plus certain other arrangements
involving the cancellation of partnership units and existing
escrow accounts. The proposed new claim further asserts that
Care reneged on this purported agreement after having previously
agreed to all of its material terms, thus breaching
the agreement. Further, the proposed new claim seeks specific
performance of the purported contract. Care denies that any
agreement of the sort alleged by Cambridge Holdings was ever
reached, and Care also believes that the proposed new claim
suffers from several deficiencies. Accordingly, Care intends to
file a brief in opposition to Cambridge Holdings motion
for leave to amend. Cares current deadline to do so is
June 18, 2010.
We are not presently involved in any other material litigation
nor, to our knowledge, is any material litigation threatened
against us or our investments, other than routine litigation
arising in the ordinary course of business. Unless judgments are
rendered against the company in connection with the litigation
described above, management believes the costs, if any, incurred
by us related to litigation will not materially affect our
financial position, operating results or liquidity.
20
PROPOSAL ONE:
ISSUANCE OF CARE COMMON STOCK TO TIPTREE
The issuance of shares to Tiptree is contemplated under the
purchase and sale agreement, dated March 16, 2010, by and
between the company and Tiptree. This summary does not purport
to be complete and is qualified in its entirety by reference to
(i) the purchase and sale agreement and (iii) the
registration rights agreement, dated March 16, 2010, by and
between Care and Tiptree, which were filed as Exhibits 10.1
and 10.2, respectively, to our
Form 8-K
filed on March 16, 2010.
Description
of Transaction
At the special meeting, our stockholders will be asked to
consider and vote upon a proposal to approve the issuance of
shares to Tiptree in connection with the transaction. On
March 16, 2010, we entered into a purchase and sale
agreement with Tiptree providing for a combination of an equity
investment by Tiptree in newly issued common stock at $9.00 per
share and a cash tender offer by us for up to all of our issued
and outstanding shares of common stock at the same price, as
long as at least 10,300,000 shares are validly tendered
(and not withdrawn) prior to the expiration date of the tender
offer and the other conditions to the issuance and tender offer
are satisfied or waived. The Tiptree equity investment and the
associated tender offer are together referred to as the
transaction. In connection with the transaction, we
intend to terminate our existing management agreement with CIT
Healthcare LLC, and it is anticipated that the resulting company
will be advised by an affiliate of Tiptree after a
60-day
transition period.
Under the purchase and sale agreement, we agreed to sell shares
to Tiptree upon completion of the tender offer. The number of
shares to be sold to Tiptree will be a minimum of
4,445,000 shares of our common stock at a price of $9.00
per share and is occurring in conjunction with a cash tender
offer by us of $9.00 per share for up to all publicly held
shares of our company. Tiptree has the option to purchase
additional newly issued company shares if less than
16,500,000 shares are tendered in the tender offer to
obtain ownership of up to 53.4% of the company, and if more than
18,000,000 shares are tendered (and not withdrawn) in the
tender offer, then Tiptree must purchase additional newly issued
company shares equal to the difference between 18,000,000 and
the number of shares that are tendered (and not withdrawn) in
the tender offer.
The following table illustrates the relationship of
Tiptrees expected ownership in the company pursuant to the
terms of the purchase and sale agreement and that of existing
stockholders following the consummation of the Tiptree
transaction under various tender offer outcomes. The table is
for illustration purposes only and should not be relied upon for
any prediction of the outcome of the tender offer.
Tiptree and
Existing Stockholder Pro-forma Ownership under Assumed Tender
Offer Scenarios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Tendered by Existing Stockholders*, **
|
|
|
10,300,000
|
|
|
|
14,000,000
|
|
|
|
15,000,000
|
|
|
|
16,500,000
|
|
|
|
17,000,000
|
|
|
|
18,000,000
|
|
|
|
19,000,000
|
|
Shares Purchased by Tiptree
|
|
|
11,425,000
|
|
|
|
7,185,000
|
|
|
|
6,038,000
|
|
|
|
4,445,000
|
|
|
|
4,445,000
|
|
|
|
4,445,000
|
|
|
|
5,445,000
|
|
Existing Stockholder Pro-forma Ownership
|
|
|
46.6
|
%
|
|
|
46.6
|
%
|
|
|
46.6
|
%
|
|
|
45.9
|
%
|
|
|
42.4
|
%
|
|
|
33.8
|
%
|
|
|
18.8
|
%
|
Tiptree Pro-forma Ownership
|
|
|
53.4
|
%
|
|
|
53.4
|
%
|
|
|
53.4
|
%
|
|
|
54.1
|
%
|
|
|
57.6
|
%
|
|
|
66.2
|
%
|
|
|
81.2
|
%
|
|
|
|
*
|
|
If less than
16,500,000 shares are tendered, Tiptree is required to
purchase 4,445,000 shares and has the option to increase
its share purchase in order to acquire an aggregate of up to
53.4% ownership interest in the company on a fully diluted
basis.
|
|
**
|
|
If more than
18,000,000 shares are tendered (and not withdrawn) in the
tender offer, Tiptree is required to purchase
4,445,000 shares and must purchase the number of shares
equal to the difference between the actual number of shares
tendered (and not withdrawn) in the tender offer and 18,000,000
in order to fund the purchase of shares by the company in the
tender offer.
|
21
In addition, we entered into a registration rights agreement
with Tiptree on March 16, 2010, which provides Tiptree with
certain rights to cause us to register the shares of common
stock to be issued to Tiptree in connection with the
transaction, subject to the closing of the transaction.
About
Tiptree
Formed in 2007, Tiptree is a diversified financial services
holding company that primarily focuses on the acquisition of
majority control equity interests in financial businesses.
Tiptrees objective is to acquire financial services firms
with strong business models and predictable economics that have
capital needs or whose shareholders would benefit from a
strategic partner and liquidity. Tiptrees business plan is
to be a well-capitalized, stable, majority owner and strategic
partner for a diversified, independently managed group of
financial services firms for which Tiptrees access to
capital and financial expertise can facilitate creating a
stronger business. Tiptrees primary focus is on five
sectors of financial services: insurance, tax exempt finance,
real estate, corporate loans and banking and specialty finance.
Tiptrees subsidiaries include a structured corporate loan
portfolio and Muni Funding Company of America, LLC, a municipal
finance company. In January 2010, Tiptree signed a definitive
agreement to purchase PFG Holdings, Inc., which develops and
administers private placement insurance and annuities for
ultra-high net worth and institutional clients. Tiptree is owned
by a small group of investors, consisting primarily of major
financial institutions. Tiptree is externally managed by Tiptree
Capital, and we will be advised at least in part by TREIT
Management, an affiliate of Tiptree Capital, following the
consummation of the Tiptree Share Purchase and the tender offer,
and after a
60-day
transition period. We also intend to internalize certain
functions by hiring employees to provide accounting, financial,
investment or other services.
TREIT Management and Tiptree Capital are wholly-owned
subsidiaries of Tricadia Holdings, L.P., an asset management
firm founded in 2003 by Michael Barnes and Arif Inayatullah.
Tricadia Holdings, L.P. is based in New York, New York and has
approximately $5 billion in assets under management and
employs approximately 50 professionals.
Background
of the Transaction
We were formed in June 2007 to make mortgage investments in
healthcare-related properties, and to make opportunistic
investments in healthcare-related properties, through the
origination platform of our manager, CIT Healthcare LLC. We
acquired from our manager our initial portfolio of 15 mortgage
loans secured by healthcare facilities in exchange for a portion
of the cash proceeds from our initial public offering and common
stock. Our operating strategy originally involved acquiring
additional mortgage assets on a leveraged basis through the use
of short-term borrowing facilities such as warehouse lines of
credit and longer-term funding through securitization structures
such as collateralized debt obligations or commercial
mortgage-backed securities.
In late 2007, due to severe dislocations in the credit markets,
including the effective closure of the securitized financing
markets, we shifted our operating strategy to place greater
emphasis on acquiring high quality healthcare-related real
estate investments and away from mortgage assets. Around this
time period, our board instructed our management to begin a
dialogue with CIT Healthcare regarding the fee structure under
the management agreement with a view to possibly amending such
fee structure in such a way that was more appropriate for an
equity REIT, as opposed to a mortgage REIT.
At the February 12, 2008 meeting of our board of directors,
our management discussed the possibility of exploring certain
strategic alternatives, including a sale of the company for
cash, pursuing a merger of equals with another public healthcare
REIT or a reverse merger with a private healthcare REIT.
Following a discussion of the strategic alternatives, our board
asked our management to prepare additional information with
respect to each alternative and report back to the board at a
future meeting.
In March 2008, Mr. Besecker, our then vice chairman of the
board, announced that he would be resigning his position as
president of our manager, CIT Healthcare, effective May 1,
2008.
22
At a board meeting held on April 4, 2008, Mr. Besecker
reported that two of the companys then largest
stockholders had contacted management to voice their opinion
that the board should consider seeking a sale of the company.
The board again discussed the strategic direction of the
company, including continuing to pursue the then current
operating strategy of seeking high quality healthcare-related
real estate equity investments, seeking additional equity
financing from the capital markets to grow the company, or
pursuing a possible sale, merger or joint venture. In connection
with a possible sale, merger or joint venture, the board
discussed possible strategic partners and financial
considerations. The board also discussed with management the
qualifications and experience of various investment banking
firms with whom management had engaged in exploratory
discussions.
At a board meeting held on April 15, 2008,
Mr. Besecker reported on discussions that he had engaged in
with various potential financial advisors and potential
financing sources regarding our prospects and opportunities for
future growth, our current operating strategy, the possibility
of seeking additional equity financing from the capital markets
to grow our portfolio, pursuing a possible sale, merger or joint
venture, or some combination of the foregoing. At the invitation
of our board, representatives from Credit Suisse discussed their
credentials to act as the companys financial advisor in
connection with the companys consideration of strategic
alternatives. Following an executive session during which the
board discussed Credit Suisses qualifications and
experience, the board determined that it should remain open to
all available options and strategic alternatives, including
continuing to pursue the then current operating strategy, and
authorized management to negotiate an engagement letter with
Credit Suisse to act as the companys exclusive financial
advisor in connection with the boards exploration and
review of the companys strategic alternatives. At this
meeting, the board also received a presentation from the
companys external legal counsel, McDermott
Will & Emery LLP (McDermott), on the
duties of directors in connection with the exploration of
strategic alternatives. McDermott reviewed the board
members general fiduciary duties of care and loyalty, the
specific application of such duties in the context of exploring
strategic alternatives, including a possible sale of the
company, and the unique issues presented by our externally
managed structure.
At the same meeting, the board appointed Mr. Walter J.
Owens, then president of CIT Corporate Finance, to the board of
directors.
At a board meeting held on May 12, 2008, our board, with
the assistance of Credit Suisse, reviewed our current operating
strategy and acquisition and liquidity prospects, as well as the
possibility of a follow-on equity offering at the end of 2008.
As a result of such discussion, our board believed that the
success of such an offering would depend in part on our ability
to execute on our strategy of acquiring equity interests in
attractive healthcare-related properties. Our board, with the
assistance of Credit Suisse, also reviewed various strategic
alternatives that might be available to the company, including
the possible sale of our company, and discussed a number of
potential partners that might be interested in a strategic
transaction with us, if the company chose to pursue such an
alternative and the process and timeline involved in a formal
sale process.
At that same meeting, Mr. Kellman, our then chief executive
officer, reported that discussions were ongoing with
representatives from CIT Healthcare regarding a possible change
in the management fee structure in light of our transition away
from a mortgage REIT to an equity REIT.
On May 19, 2008, GoldenTree Asset Management L.P.
(GoldenTree), one of our then largest stockholders,
sent a letter to our board of directors to express its concern
regarding our strategic direction and the costs associated with
our annual management fee payable to CIT Healthcare. GoldenTree
encouraged us to promptly engage an investment banking firm to
seek a sale of our company. GoldenTree filed a Schedule 13D
with the Securities and Exchange Commission and attached its
letter to our board to the Schedule 13D filing.
On May 21, 2008, our board met to discuss the letter
received from GoldenTree and to receive an update on the status
of CIT Healthcares consideration of our request to modify
the economic terms of the management agreement.
23
On May 27, 2008, we executed an engagement letter with
Credit Suisse to act as our exclusive financial advisor in
connection with our exploration of strategic alternatives.
Prior to a meeting of the board of directors held in New York
City on June 3, 2008, our board of directors, management
and representatives of Credit Suisse met with representatives of
Cambridge Holdings, our partner and operator of the portfolio of
medical office buildings in Texas and Louisiana in which we
acquired an 85% interest in December 2007, about a possible
business combination between Cambridge Holdings and our company.
The parties discussed the ways in which such a transaction might
be structured and the potential advantages of such a
transaction, but no specific terms were discussed.
At the June 3, 2008 board meeting, representatives from
Credit Suisse provided the board with an update on discussions
with parties who had contacted the company regarding a potential
strategic transaction and were referred to Credit Suisse for
follow-up.
The board also received an update from management on efforts to
secure additional sources of liquidity through amendments to the
companys warehouse facility, prepayments of one or more
mortgage loans and sales of mortgage loans, as well as potential
equity investment opportunities that management was pursuing.
While the board authorized management to continue to pursue
attractive equity investment opportunities, the board emphasized
that it was in the process of evaluating all available options
to enhance stockholder value and that any such investment
opportunities needed to be evaluated in the context of the
larger analysis of the companys strategic direction.
On June 16, 2008, we received a business combination
proposal from Party A, a private healthcare investment and
development company. The proposal contemplated a reverse
acquisition wherein we would acquire Party A in a
stock-for-stock exchange which would result in our stockholders
holding approximately 44% of the equity in the combined company,
which would remain as a public vehicle. The proposal further
contemplated raising additional funds via the debt and public
equity markets with proceeds to be used to acquire pipeline
assets of Party A and the company.
On June 27, 2008, we received a preliminary proposal from
Cambridge Holdings for a business combination between Cambridge
Holdings and the company resulting in an internally managed,
predominantly equity-focused healthcare REIT in which the
company would be the surviving entity. Pursuant to the terms of
the proposal, Cambridge Holdings would contribute its
(i) healthcare real estate platform that includes its
management and operations, (ii) its 15% stake in the
real-estate portfolio between Cambridge and the company that
owns nine medical office buildings, (iii) the six medical
office building option properties and (iv) its development
pipeline. In exchange for Cambridge Holdings contributed
assets, Cambridge Holdings would receive a combination of common
shares and operating partnership units that would give it an
approximately 45% equity ownership stake in the pro forma
combined company. The proposal indicated that in order to
proceed, Cambridge Holdings would require exclusivity and a
breakup fee. Both the exclusivity period and the breakup fee
were unspecified.
At a board meeting held on July 8, 2008, the board
discussed the terms of the proposed business combination with
Cambridge Holdings and instructed Credit Suisse and management
to engage in discussions with Cambridge and its advisors to
clarify certain aspects of the proposal and report back to the
board at its August board meeting.
On July 14, 2008, the board formed a special Committee of
Mr. Bisbee, Mr. Gorman and Ms. Robards, each of
whom was and is considered an independent director under the
rules of the NYSE and the companys own independence
definition. The special committee was authorized and empowered
to (i) pursue, review, evaluate, consider and negotiate
with representatives of the manager the terms of any amendments
to the management agreement, (ii) pursue, review, evaluate,
consider and negotiate with Cambridge Holdings the terms of its
business combination proposal and make recommendations to the
board with respect to such proposal and (iii) pursue,
review, evaluate, consider and negotiate with any other
potentially interested parties the terms of any alternative
strategic
24
transaction with the company and make a recommendation to the
board with respect to such alternative strategic transactions.
On July 15, 2008, at the direction of the special
committee, representatives of Credit Suisse and members of
management met with representatives of Cambridge Holdings and
its financial advisors at Cambridge Holdings offices to
discuss selected Cambridge Holdings financial information as
well as a tour of certain of Cambridge Holdings properties
which are contained within the companys real-estate
portfolio with Cambridge Holdings.
At a board meeting held on August 11, 2008, the board
discussed the terms of Party As proposal and determined
that the terms of the proposal were not sufficiently attractive
to warrant considering it outside of a formal sale process. Also
at the meeting our board, with the assistance of Credit Suisse,
reviewed and discussed the nature and terms of the proposal
previously received from Cambridge Holdings. The board reviewed
a presentation developed by Credit Suisse which discussed
Cambridge Holdings portfolio and pipeline of investments,
a preliminary financial summary of Cambridge Holdings
operations, a preliminary relative valuation of the two
businesses on a self-funding basis, a preliminary hypothetical
future stock price analysis based upon various assumptions, a
preliminary discounted cash flow analysis based on various
assumptions and a preliminary relative contribution analysis.
Based on Credit Suisses due diligence, it was determined
that Cambridge Holdings had improperly valued its management
company and that Care would be relinquishing majority control
for partial ownership in assets which did not have sufficient
value. The board also discussed the fact that the consideration
which Cares stockholders would be receiving was non-cash
and would provide no liquidity to the stockholders, as well as
the substantial execution risks involved in such a transaction.
The special committee and the board questioned whether a
business combination with Cambridge Holdings on the terms
proposed was in the best interests of the companys
stockholders given the relative valuation, dilution and
governance issues presented by the proposal. The special
committee and the board authorized management and Credit Suisse
to continue discussions with Cambridge Holdings with a view to
addressing the special committees and the boards
concerns.
At its August 11, 2008 board meeting, the board also
discussed negotiations with CIT Healthcare regarding a proposed
reduction in its annual base management fee and removal of the
incentive fee provisions from the management agreement.
Subsequent to the August 11, 2008 board meeting,
representatives of Credit Suisse met on several occasions with
Cambridge Holdings financial advisors to discuss the
Cambridge Holdings proposal.
On August 12, 2008, the special committee recommended and
our board of directors approved an amendment to our management
agreement with CIT Healthcare wherein CIT Healthcare agreed to
reduce the monthly base management fee payable by us from an
amount equal to 1/12 of 1.75% of our stockholders equity
to an amount equal to 1/12 of 0.875% of our stockholders
equity and to eliminate the incentive fee, in exchange for our
agreement to pay CIT Healthcare a minimum termination fee of
$15.4 million in the event we elect not to renew the
management agreement or terminate the management agreement other
than for cause. In connection with, and as additional
consideration for, the amendment to the management agreement, we
granted CIT Healthcare warrants to purchase 435,000 shares
of our common stock at $17.00 per share, which warrants were
immediately exercisable and expire on September 30, 2018.
In addition, in order to provide additional liquidity options
for the company, on August 12, 2008, the special committee
recommended and our board of directors approved a mortgage
purchase agreement with CIT Healthcare which provided us with
the right, but not the obligation, to cause CIT Healthcare to
purchase one or more of our senior mortgage loan assets at their
fair market value, as determined by a third party appraiser, as
long as such fair market value did not exceed 105% of the
outstanding principal balance of the loan proposed to be sold
and subject to a maximum aggregate sales price of
$125 million.
25
On September 24, 2008, members of management, with the
assistance of representatives of Credit Suisse, met with a
representative of Party B, a publicly traded healthcare REIT,
regarding a potential business combination between our company
and Party B. The parties discussed the ways in which such a
transaction might be structured and the potential advantages of
such a transaction, but no specific terms were discussed.
On October 3, 2008, Mr. Owens resigned from our board
of directors, coincident with his resignation as president of
CIT Corporate Finance.
In early October 2008, Mr. Kellman, our then chief
executive officer, and Mr. Warden, the president and
co-head of CIT Healthcare LLC, met with representatives of Party
C, a private healthcare REIT, regarding the possibility of a
business combination between our company and Party C. The
parties discussed the ways in which such a transaction might be
structured and the potential advantages of such a transaction,
but no specific terms were discussed.
On October 7, 2008, the special committee met to discuss
the preliminary proposals from Cambridge Holdings as well as to
receive an update on discussions with Party B and Party C. After
the discussion, the special committee authorized management and
Credit Suisse to continue discussions with Cambridge Holdings,
Party B and Party C regarding their respective proposals.
At a meeting held on October 15, 2008, representatives from
Credit Suisse updated the special committee on the status of
discussions with Cambridge Holdings and Party B. The special
committee authorized management and Credit Suisse to continue
discussions with Cambridge Holdings, Party B and Party C
regarding their respective proposals. The special committee also
authorized a stock repurchase program to permit the company to
repurchase, from time to time, up to two million shares of our
common stock in the open market, through a broker or through
privately negotiated transactions, subject to market conditions
and applicable legal requirements. At that same meeting, the
special committee instructed Credit Suisse to prepare a formal
sale process to actively solicit proposals from third parties
regarding a potential strategic transaction with the company and
report back to the special committee on the outlines of such a
process.
On October 20, 2008, the board appointed Mr. Warden to
our board of directors to fill the vacancy created by the
resignation of Mr. Owens.
On October 22, 2008, the board appointed Mr. Besecker
to the special committee. In appointing Mr. Besecker to the
special committee, the board acknowledged
Mr. Beseckers qualifications and his lack of
disqualifying relationships or interests with or in CIT Group,
Cambridge Holdings, or any other party potentially interested in
a strategic transaction with the company.
At a meeting held on November 5, 2008, representatives from
Credit Suisse informed the special committee that discussions
with Cambridge Holdings had reached an impasse due to
Cambridges insistence on valuation terms and governance
provisions unacceptable to the company. The members of the
special committee, with the assistance of Credit Suisse, then
discussed the formal sale process. The special committee, with
the assistance of Credit Suisse, discussed how a sale process
would be conducted and a possible timetable for the process that
included the preparation and distribution of a confidential
information memorandum to parties identified by the special
committee and management in consultation with Credit Suisse as
the most likely parties to be interested in a strategic
transaction. They also discussed providing access to a data room
and other due diligence information to interested parties who
entered into an appropriate confidentiality agreement and the
solicitation of specific proposals from any such interested
parties within timeframes to be established by the special
committee in consultation with Credit Suisse.
In November 2008, Mr. Kellman, our then chief executive
officer, and representatives of Credit Suisse met with
representatives of Party D, a publicly traded commercial lender,
to discuss the possibility of a strategic combination between
the company and Party Ds healthcare net lease business
segment. General terms of a transaction were discussed, but no
specific proposals were made at that meeting. Party D was
informed that the company was considering launching a formal
sale process to solicit proposals regarding a strategic
transaction and that our company would prefer for Party D to
26
participate in that process. Party D indicated that it was not
interested in participating in a process at that time.
On November 17, 2008, we received a preliminary proposal
from Party B regarding a possible business combination between
the company and Party B. Pursuant to the terms of the proposal,
the companys stockholders would receive 0.35 shares
of Party Bs common stock as consideration for every share
of the companys common stock that they owned. Party B
would be the surviving entity. Party B required 20 days of
exclusivity, completion of business, financial, legal and
accounting diligence, execution of customary definitive
agreements, receipt of
Hart-Scott-Rodino
clearance and customary and necessary approvals from the
parties respective board of directors and stockholders.
During the second half of November 2008, the stock prices of
many REITs dropped due to a revaluation of REIT equities
resulting from difficult market conditions.
On November 18, 2008, pursuant to the mortgage purchase
agreement, we sold one mortgage loan to CIT Healthcare for
proceeds of approximately $22.4 million.
On November 20, 2008, Party B withdrew its proposal citing
that it would like to reevaluate its alternatives given the
performance of its stock and the performance of healthcare REIT
stocks in general.
On November 25, 2008, we repurchased one million shares of
common stock from GoldenTree at $8.33 per share.
On December 4, 2008, representatives of management and
Credit Suisse met with representatives of Cambridge Holdings and
its legal and financial advisors at Cambridge Holdings
offices to further discuss the Cambridge Holdings proposal.
During December 2008, the special committee, in consultation
with management and Credit Suisse, reviewed, discussed and
revised a list of potential parties to contact regarding a
potential strategic transaction. On December 18, 2008, at
the direction of the special committee, Credit Suisse started
contacting potentially interested parties, approved by the
special committee and the board, and informed each potentially
interested party of the need to execute a confidentiality
agreement in order to receive a copy of the companys
confidential information memorandum. Potentially interested
parties were informed that, pursuant to the process approved by
the special committee and the board, the company expected to
receive non-binding indications of interest by January 29,
2009.
In early January 2009, Mr. Kellman, our then chief
executive officer, informed Mr. Gorman, our then chairman
of the board, that he would like to explore the possibility of
participating in a bid for the company and having a role in the
management of the company in the event the potential
bidders bid was successful and a transaction was
consummated. Mr. Gorman, responded that he would consult
with the special committee and the companys advisors and
respond.
Consistent with the rules established by the board, Cambridge
Holdings was informed that in order to be part of the strategic
process, it needed to execute a confidentiality agreement to
gain access to certain non-public information about the company.
Cambridge Holdings refused to execute the form of agreement
executed by the other bidders. On January 9, 2009,
Cambridge Holdings submitted an unsolicited non-binding proposal
to the companys board. The proposal indicated a stated
value of approximately $9.50 per Care share and consisted of the
following components: (a) approximately $5.00 per share in
cash from the sale of the companys existing mortgage
investments through the exercise of its existing put right with
CIT Healthcare; (b) approximately $3.50 per share in cash
from the sale of the companys non-medical office building
equity investments and any mortgage investments not sold
pursuant to the put with CIT Healthcare; and
(c) approximately $1.00 per share, of which 80% would be
paid in cash and 20% would be reflective of the value Cambridge
Holdings attributed to the stake that our then existing
stockholders would hold in the combined entity. Care would be
the surviving entity, however, the proposal indicated that
Cambridge Holdings and its affiliates would own approximately
80% of the surviving entity. The proposal indicated that it was
not
27
subject to financing and required the termination of CIT
Healthcare as the external manager with a Cambridge Holdings
affiliate appointed as the new external manager. Any costs
associated with termination of the management agreement would be
the responsibility of the company. Additionally, Cambridge
Holdings required 30 to 45 days of exclusivity.
On January 14, 2009, the special committee met to discuss
the status of the sale process. At this meeting, the special
committee discussed the possibility that Mr. Kellman, our
then chief executive officer, might participate in a potential
bid for the company. The special committee agreed that
Mr. Kellman should be permitted to participate in a third
party bid subject to certain procedures being put in place to
avoid any conflicts of interest and safeguard the special
committees process of exploring strategic alternatives
that would result in the highest and best return for our
stockholders. The company and CIT Healthcare prepared a letter
for Mr. Kellman, dated as of January 20, 2009,
acknowledging these procedures and his duty to maintain the
confidentiality of any and all information regarding the company
and the special committees exploration of strategic
alternatives, which Mr. Kellman executed and returned to
the special committee.
On February 2, 2009, the special committee and its advisors
met to review the results of the strategic process. Credit
Suisse informed the special committee that pursuant to the
special committees instructions it had contacted ten
potentially interested parties, received signed confidentiality
agreements from five of such parties and provided to those five
parties a confidential information memorandum regarding the
company. In addition, Credit Suisse was contacted by Tiptree.
After discussing and receiving approval from the special
committee to proceed with discussions with Tiptree, a
confidentiality agreement was signed and access to the
confidential information memorandum was granted to Tiptree.
Credit Suisse informed the special committee that only two of
the five parties who had signed confidentiality agreements had
submitted non-binding indications of interest. The special
committee, with the assistance of Credit Suisse and the
companys legal advisors, reviewed the terms of the two
non-binding indications of interest received.
The first proposal, received on January 30, 2009, was a
non-binding indication of interest from Party E, a privately
held diversified real estate investment trust. Its proposal
contemplated a stock acquisition of Care at $10.00 per share in
cash that was not subject to a financing condition. Party
Es non-binding indication of interest assumed that, prior
to completion of the transaction, Care would have sold all of
its mortgage loans to CIT Healthcare through the mortgage
purchase agreement
and/or
through portfolio sales to third parties. Party Es
proposal also assumed that the management agreement with CIT
Healthcare would be terminated prior to closing, but did not
specify what impact the payment of the termination fee to CIT
Healthcare would have on the price per share it was offering.
The second proposal was a non-binding indication of interest
from Party D received on January 29, 2009. Party Ds
proposal outlined the terms of a multi-step transaction wherein
we would (i) sell a portion of our mortgage loan assets to
Party D for a purchase price not to exceed approximately
$81 million, (ii) sell the remainder of our mortgage
loan assets to CIT Healthcare pursuant to the mortgage purchase
agreement, capped at approximately $90 million and
(iii) acquire Party Ds healthcare net lease business
in a reverse acquisition transaction for
consideration consisting of (a) the issuance of
approximately 30 million shares of our common stock valued
at approximately $245 million based on our stock price at
that time, (b) the assumption by us of existing debt of
approximately $355 million, (c) the issuance of a
promissory note in an amount of $110 million that would
mature upon receipt of HUD financing with respect to certain of
Party Ds properties and (d) $170 million in
cash. The proposal contemplated that our management agreement
with CIT Healthcare would be terminated prior to the closing of
the reverse acquisition transaction, but did not indicate the
impact the termination fee would have on the terms of its
proposal. The proposal was not subject to a financing condition,
but was conditioned on Party Ds completion of due
diligence. After the review of the two proposals, the special
committee instructed management and Credit Suisse to continue
discussions with both Party D and Party E with a view to
soliciting improvements to their respective proposals.
28
On February 3, 2009, pursuant to the mortgage purchase
agreement, we sold one mortgage loan to CIT Healthcare for
proceeds of approximately $22.5 million.
On March 2, 2009, we received an unsolicited non-binding
preliminary proposal from Tiptree regarding a tender offer for
51% of our outstanding common stock at an unspecified price per
share. The proposal contemplated that the management agreement
with CIT Healthcare would be terminated and Tiptree would enter
into an external management or advisory agreement with the
company. The proposal did not specify what impact the payment of
the termination fee to CIT Healthcare would have on the price
per share Tiptree was offering. Tiptree had previously
communicated its interest in only acquiring shares from CIT
Healthcare and one or two other stockholders in order to acquire
control of the company and was informed that the board was not
willing to consider that type of transaction. As such, Tiptree
had declined to provide a solicited preliminary indication of
interest by the January 29 deadline.
On March 6, 2009, the special committee met to discuss the
status of the sale process. At this meeting, the special
committee also reviewed an analysis prepared by management of
the estimated values of the companys assets, and the
special committee began considering an orderly liquidation of
the companys assets as a possible strategic alternative in
the event that the company was not able to successfully conclude
a sale of the company.
On March 9, 2009, Party E informed us that it was no longer
interested in pursuing a strategic transaction with us due to,
among other reasons, the complexities of our real-estate
portfolio structures, and dropped out of the process.
On March 13, 2009, we received a new unsolicited
non-binding preliminary proposal (the Potential Cambridge
Tender Offer) from Cambridge Holdings regarding a
potential tender offer by Cambridge Holdings for 51% of our
outstanding common stock at $6.00 per share. Cambridge Holdings
communicated that its tender offer would not be subject to
financing. While the tender offer would be conditioned on our
terminating our management agreement with CIT Healthcare, the
proposal did not address the impact of the termination fee on
the proposed tender offer price, and did not provide any
evidence of Cambridge Holdings ability to finance such a
tender offer. Cambridge Holdings had not executed a
confidentiality agreement with us and thus did not have access
to our online data room prior to submitting its proposal.
On March 13, 2009, the special committee and its advisors
met to discuss the potential transaction with Party D and the
Potential Cambridge Tender Offer. The special committee
instructed Credit Suisse to continue to seek improvements to
Party Ds proposal, to assist the company in reviewing
financial and other information with respect to Party Ds
proposal and to request that Party D submit a definitive bid by
March 27, 2009. With respect to the Potential Cambridge
Tender Offer, the special committee noted that the proposal did
not indicate what impact the payment of the CIT termination fee
would have on the proposed tender offer price, and the special
committee instructed management and Credit Suisse to
follow-up
with Cambridge Holdings to clarify the terms of its proposal as
well as to obtain additional information from Cambridge Holdings
regarding its ability to finance such a tender offer.
On March 20, 2009, we received an unsolicited non-binding
preliminary proposal from Party F, a private equity firm, for a
stock acquisition of Care at between $5.43 and $6.52 per share.
The proposal did not address the CIT Healthcare management
agreement. Party F had not executed a confidentiality agreement
with us and thus did not have access to our online data room
prior to submitting its proposal.
On March 27, 2009, we received a revised non-binding
expression of interest from Party D that (i) decreased the
number of mortgage loan assets that Party D was willing to
purchase from us to certain specified loans with an aggregate
purchase price of no more than approximately $76 million,
(ii) decreased the number of mortgage loan assets that
Party D would require us to sell to CIT Healthcare pursuant to
our mortgage purchase agreement to certain specified loans with
an aggregate
29
purchase price capped at approximately $62 million,
(iii) decreased the amount of cash consideration payable to
Party D in the proposed reverse acquisition
transaction to approximately $39 million,
(iv) increased the amount of debt assumed by us in the
reverse acquisition transaction to approximately
$413 million, (v) increased the amount of the
promissory note that we would issue in the reverse
acquisition transaction to approximately $125 million
and (vi) increased the amount of common stock that we would
issue to Party D in the reverse acquisition
transaction to an amount that would result in Party D owning
approximately 88% of our common stock post-closing. The revised
proposal also contemplated our existing stockholders would
receive a cash dividend of $5.00 per share in connection with
the transaction. Party Ds revised proposal also required
that our management agreement with CIT Healthcare be terminated
prior to closing. The revised proposal was not subject to a
financing condition, but was conditioned on Party Ds
completion of due diligence.
On April 1, 2009, the special committee and its advisors
met to review the results of the sale process and to consider
the status of the proposals received by the company. The special
committee was advised that from the date Credit Suisse had
started contacting potentially interested parties, the company
had received seven unsolicited inquiries. They further
summarized that, of the combined seventeen solicited and
unsolicited inquiries, six parties had signed a confidentiality
agreement and received access to the online data room. They
further noted that two of the solicited parties, Party D and
Party E, provided preliminary non-binding proposals, but that
Party D was the only solicited bidder that had submitted a
second round proposal. Finally, they noted that three
unsolicited non-binding indicative proposals had been received,
although two of the unsolicited proposals contemplated tender
offers for less than all of the companys outstanding stock
and not an acquisition of the entire company.
The special committee discussed Party Ds proposal at
length, including the terms of the proposal, the transaction
mechanics, the sources and uses of capital and the pro forma
capitalization and ownership of the company post-closing.
Management reported to the special committee on the preliminary
results of their due diligence of Party D and its healthcare net
lease portfolio, including portfolio mix, concentration, gross
asset value, lease and debt maturities, coverages and yields,
occupancy statistics and other operating characteristics. The
special committee, with the assistance of Credit Suisse, also
discussed certain pro forma financial consequences of the
proposed Party D transactions. At that time, the consensus of
the special committee members was that Party Ds proposal
was not sufficiently attractive to the companys
stockholders, and the special committee instructed management
and Credit Suisse to communicate to Party D that it should
attempt to improve its bid and respond by no later than
April 27, 2009.
The special committee then considered other available options
for the company, including further exploring the Cambridge
Tender Offer, the tender offer proposal from Tiptree and the
stock acquisition proposal from Party F. The special committee
also considered other alternatives such as the sale of all of
our mortgage loan assets followed by cash dividends to our
stockholders or a full liquidation of our company. The special
committee instructed McDermott to prepare a memorandum that
compared the legal considerations applicable to the proposed
transaction with Party D to an orderly liquidation of our
company.
On April 16, 2009, our special committee met to discuss the
status of various strategic alternatives being explored,
including the status of negotiations with Party D, and the
attractiveness of the terms of the most recent proposal from
Party D relative to other strategic options available to the
company such as (i) terminating the management agreement
with CIT Healthcare, internalizing management and operating the
company on a standalone basis while continuing the transition to
an equity REIT by selling off its mortgage loan assets and
redeploying the proceeds therefrom in attractive
healthcare-related equity investments, or (ii) liquidating
the company. Mr. McDugall, the companys then chief
investment officer, provided an overview for the special
committee of the possible approaches that could be taken to
liquidating the companys mortgage loan portfolio to
maximize the proceeds therefrom, including soliciting early
pre-payments from borrowers, portfolio sales to third parties or
selling the mortgage loans to CIT Healthcare pursuant to the
mortgage purchase agreement.
30
On April 17, 2009, we received a new non-binding
preliminary proposal from Tiptree regarding a potential cash
merger of a subsidiary of Tiptree with and into us, with our
stockholders receiving an indicated value of approximately $7.36
per share and continuing to hold, on a pro-forma basis,
approximately
15-20%
of
the post-closing combined company. Tiptree indicated that it
placed a value of $0.64 on each post-closing share of common
stock (the Tiptree Merger Proposal). Tiptree had
previously proposed a tender offer for 51% of our outstanding
common stock. The preliminary Tiptree Merger Proposal was
subject to our terminating our management agreement with CIT
Healthcare at closing, CIT Healthcare waiving its termination
fee and the new company entering into a new advisory agreement
with Tiptrees affiliate, Tricadia Capital. In addition,
the Tiptree Merger Proposal was subject to Tiptree obtaining
$40 $70 million in financing. The Tiptree
Merger Proposal also contemplated that Mr. Kellman, our
then chief executive officer, would remain on the management
team of the combined company. In order to move forward, Tiptree
requested a
75-day
exclusivity period with liquidated damages for breach of such
exclusivity arrangement in the amount of $500,000.
On April 20, 2009, the special committee and its advisors
met to discuss the Tiptree Merger Proposal. The special
committee, with the assistance of our management (excluding our
then chief executive officer Mr. Kellman, who the special
committee understood was participating with Tiptree in its bid)
and representatives from Credit Suisse discussed the terms of
the proposal and considered, among other things, the potential
adverse impact of the transaction on our pro forma leverage and
public float, the lack of clarity with respect to the treatment
of the termination fee to CIT Healthcare, the lack of clarity
regarding Tiptrees valuation of the stub equity resulting
from the transaction, the need for new financing and the need to
conduct due diligence on Tiptree. The special committee
instructed management and Credit Suisse to follow up with
Tiptree to obtain additional information about Tiptree and the
Tiptree Merger Proposal.
On April 27, 2009, we received an unsolicited non-binding
preliminary proposal from Party G, a family owned holding
company with investments in the real estate and financial
services sectors, to acquire our outstanding common stock for a
price in cash stated to be in excess of $8 per
share. The proposal was conditioned on the completion of
due diligence by Party G, Party G entering into employment
agreements with certain key managers of our company, including
our then chief executive officer, Mr. Kellman, and an
unspecified exclusivity period.
On April 30, 2009, we received an updated non-binding
preliminary proposal from Tiptree which increased the per share
cash consideration to our stockholders to approximately $8.00
per share, but was further conditioned on Tiptree obtaining
financing and CIT Healthcare agreeing to accept its termination
fee in the form of a promissory note. The revised proposal was
also subject to Tiptree completing due diligence on the company
and its assets. The updated preliminary proposal from Tiptree
continued to insist on a
75-day
exclusivity period, with liquidated damages for breach of such
exclusivity arrangement in the amount of $500,000, in order to
move forward.
On April 30, 2009, we also received a revised non-binding
expression of interest from Party D that (i) increased the
number of mortgage loans that Party D was willing to purchase
from us to certain specified mortgage loans with an aggregate
purchase of no more than $98 million, (ii) decreased
the number of mortgage loans that Party D would require us to
sell to CIT Healthcare pursuant to the mortgage purchase
agreement to certain specified mortgage loans with an aggregate
purchase price not to exceed approximately $13 million,
(iii) decreased the amount of cash consideration payable to
Party D in the reverse acquisition transaction to
$10 million and (iv) decreased the amount of common
stock that we would issue to Party D in the reverse
acquisition transaction to an amount equal to
approximately 85% of the company post-closing, which had the
effect of increasing the amount of stub equity our stockholders
would hold in the company post-closing. Party Ds revised
proposal continued to contemplate that we would declare a cash
dividend to our stockholders in connection with the transaction
in an aggregate amount equal to our outstanding cash balance
immediately prior to closing of the transaction after taking
into account the $10.0 million cash payment due to Party D
upon closing of the transaction and the prior payment and
satisfaction of all of our transaction expenses, including
31
the termination fee due to CIT Healthcare. The revised proposal
from Party D remained conditioned on Party D completing its due
diligence on the company and its assets.
During April 2009, at the special committees instruction,
Credit Suisse contacted Party F communicating that Party
Fs proposal would need to be improved upon. Party F did
not indicate a willingness to continue in the process.
On May 1, 2009, the special committee and its advisors met
to discuss the revised proposal received from Party D, the Party
E Merger Proposal and the proposal from Party G.
Mr. Kellman, our then chief executive officer was not
present at this meeting. The special committee, with the
assistance of Credit Suisse, reviewed the Tiptree Merger
Proposal and the Party G proposal and, following discussion of
the proposals, determined that the proposed terms of the Tiptree
Merger Proposal and the Party G proposal were not sufficiently
certain or potentially attractive, both generally and in
relation to the Party D proposal, to warrant entering into an
exclusivity arrangement with either party. Ultimately, the
Tiptree Merger Proposal, in which Mr. Kellman indicated an
interest in participating with Tiptree, was rejected by the
special committee. Mr. Kellman and Tiptree never reached
any agreement to participate together in a transaction involving
the company. However, the Special Committee instructed
management and Credit Suisse to attempt to continue discussions
with both Tiptree and Party G on a non-exclusive basis if such
parties were willing to do so.
With respect to the revised Party D proposal, the special
committee discussed at length the revised terms, the relative
value of the proposal
vis-a-vis
other proposals received during the sale process and the risks
of non-consummation associated with the proposed Party D
transaction, both generally and in relation to the other
proposals received. After discussion, the special committee
instructed management to work with Party D to prepare a mutually
acceptable non-binding term sheet outlining the material terms
of their proposal prior to reaching any conclusion on Party
Ds request for a
30-day
exclusivity period.
On May 7, 2009, the special committee recommended and the
board approved the entry into a non-binding term sheet with
Party D that reflected the terms of Party Ds
April 27, 2009 revised proposal (the Party D Term
Sheet). At the same meeting, the special committee
recommended and the board approved the execution of an
exclusivity agreement with Party D that required us to negotiate
exclusively with Party D until June 7, 2009. During this
period, both parties continued due diligence of each
others assets.
Pursuant to the terms of our agreement with Cambridge Holdings,
we provided notice to Cambridge Holdings on May 7, 2009
that we had entered into a term sheet with Party D for a
transaction that would result in a change in control of Care.
Pursuant to the terms of a put agreement entered into in
connection with our investment in the Cambridge portfolio, such
notice provided Cambridge Holdings a contractual right to
put its interests in the portfolio to us at a price
equal to the then fair market value of such interests, as
mutually agreed by the parties, or, lacking such mutual
agreement, at a price determined through qualified third party
appraisals.
On May 12, 2009, Cambridge Holdings filed suit in a state
court in Texas requesting a declaratory judgment that the
agreements relating to our investment in the Cambridge portfolio
required us to obtain the consent of Cambridge Holdings prior to
entering into a transaction with Party D, or prior to entering
into any transaction that would involve any direct or indirect
change in the ownership of our investment in the Cambridge
portfolio. Cambridge Holdings withdrew its lawsuit without
prejudice on May 19, 2009 after receiving a letter from our
counsel explaining that the Cambridge portfolio agreements do
not provide Cambridge Holdings with a right to approve any sale
of control of Care. Despite withdrawal of its lawsuit, Cambridge
Holdings has continued to insist that the Cambridge portfolio
agreements provide it with a right to approve any attempted sale
by us of Care or of our subsidiary that holds our Cambridge
portfolio interest.
Cambridge Holdings did not exercise its right to put its 15%
interest to us in connection with our entry into the Party D
Term Sheet. Instead, it took the position in a letter to us
dated May 26, 2009
32
that our put notice with respect to the Party D Term Sheet was
null, void and of no force and effect because the transaction
with Party D could not be consummated without the approval of
Cambridge Holdings.
On June 9, 2009, the special committee and its advisors met
to discuss the status of negotiations with Party D and the
objections to the Party D transaction raised by Cambridge
Holdings. Management and representatives from Credit Suisse
updated the special committee on the status of negotiations and
diligence being performed with Party D. In light of the progress
made to date, the special committee authorized management to
extend the exclusivity period with Party D through June 30,
2009.
At the June 9, 2009 meeting, Mr. Gorman, our then
chairman of the board, and Mr. Kellman, our then chief
executive officer, reported that they had preliminary
conversations with a representative of Cambridge Holdings, the
chairman of the board and chief executive officer of Cambridge
Holdings, regarding the possibility of us either purchasing
Cambridges 15% interest in the Cambridge portfolio or
selling to Cambridge Holdings our 85% interest in the Cambridge
portfolio, prior to or in connection with the Party D
transaction. They reported that the representative of Cambridge
Holdings responded that he was not willing to sell his interest,
but he might be willing to purchase our 85% interest in the
portfolio. On a preliminary basis, the representative of
Cambridge Holdings indicated a willingness to purchase our 85%
interest in the Cambridge portfolio for $20.0 million,
consisting of $5.0 million in cash and a $15 million
personal promissory note, the terms of which were not specified.
After discussion of the preliminary terms proposed by Cambridge
Holdings, the special committee instructed management to
continue discussions with Cambridge Holdings with a view to
improving the terms of a proposed sale of our 85% interest in
the Cambridge portfolio in connection with the closing of a
strategic transaction with Party D.
On June 30, 2009, the special committee authorized
management to extend the exclusivity period with Party D through
July 14, 2009 to allow for further negotiations with a view
to improving the proposed terms of the transaction.
On July 15, 2009, the special committee, with the
assistance of our management and its advisors, met to discuss
and review the proposed transaction with Party D and the
progress of negotiations with Cambridge Holdings to sell to
Cambridge Holdings our 85% interest in the Cambridge portfolio
in connection with the closing of a strategic transaction with
Party D. The special committee, management and its advisors also
reviewed and discussed the process, risks, timing and estimated
costs of a strategic transaction with Party D compared to the
process, costs, risks, timing and estimated costs associated
with an orderly liquidation of the company. At the meeting, the
special committee authorized management to extend the
exclusivity agreement with Party D through August 15, 2009
to allow for further negotiations with a view to improving the
proposed terms of the transaction. Also at this meeting, the
special committee authorized management to pursue the sale of
the companys mortgage loan assets, through the exercise of
the mortgage purchase agreement with CIT Healthcare, the
marketing of the loans to unaffiliated third party buyers
and/or
through the sale of loans to Party D pursuant to the Party D
Term Sheet. The special committee acknowledged that such a
monetization strategy was appropriate given market conditions at
that time and the possible use of the proceeds from such sales
to increase the amount of any cash dividend payable to the
companys stockholders in connection with either a
strategic transaction or a decision to liquidate.
Due to press reports that suggested that CIT Group Inc. might be
forced to file for bankruptcy protection, on July 17, 2009,
the special committee met to review and discuss the potential
impact on Care of a potential bankruptcy filing by CIT Group
Inc. Among other things, the special committee discussed the
potential impact on the management agreement and the mortgage
purchase agreement.
On July 24, 2009, the special committee met to discuss the
status of negotiations with Party D as well as to discuss other
potential strategic alternatives. Management provided to the
special committee an analysis of the companys business
plan assuming it terminated its management agreement with CIT
Healthcare and continued to operate its business and complete
its transition to an equity REIT on a
33
standalone basis (the Standalone Business Plan).
Management also provided a preliminary projection of the values
that could be realized if the company pursued a plan of
liquidation. Included in this report was an analysis of the cost
savings from delisting the companys stock, deregistering
as a public company and ceasing public company reporting and
compliance. The special committee instructed management to
continue to explore all strategic alternatives, including
negotiations with Party D, but to also continue to actively
market for sale the companys mortgage loan assets.
On August 5, 2009, the special committee met to discuss the
status of negotiations with Party D and to review a revised
Standalone Business Plan and a revised liquidation analysis. The
special committee and its advisors evaluated the various
strategic options available to the company, and, after
considering the process, timing, costs and risks associated with
each of the various options, considered which of the options was
likely to result in the highest overall return of value to the
stockholders.
On August 10, 2009, we received a non-binding indication of
interest from Cambridge Holdings to acquire all of our
outstanding common stock at $9.00 per share, less a deduction
for the value of the operating partnership units then held by
Cambridge Holdings (the Cambridge Merger Proposal).
The Cambridge Merger Proposal was subject to the condition that
our management agreement with CIT Healthcare be terminated
without the payment of any termination fee and to the
satisfactory completion of due diligence. The proposal also
requested a
30-day
exclusivity period. At the time, the company was bound to
negotiate exclusively with Party D pursuant to an exclusivity
agreement.
On August 13, 2009, the special committee met to discuss
the status of negotiations with Party D and to review a further
revised Standalone Business Plan and a further revised
liquidation analysis. The special committee and its advisors
evaluated the various strategic options available to the
company, and, after considering the process, timing, costs and
risks associated with each of the various options, further
considered which of the options was likely to result in the
highest overall return of value to the stockholders.
On August 19, 2009, pursuant to the mortgage purchase
agreement, we agreed to sell two mortgage loans to CIT
Healthcare for proceeds of approximately $2.3 million.
On August 21, 2009, the Cambridge Merger Proposal expired.
Negotiations with Party D continued throughout July, August and
September. In addition, negotiations to sell back to Cambridge
Holdings the companys 85% interest in the Cambridge
portfolio continued in earnest, as it became apparent that the
reverse acquisition transaction with Party D could only be
concluded if and when the dispute with Cambridge Holdings could
be resolved.
In July 2009, Party D informed us that it would be willing to
complete its acquisition of certain of our mortgage loan assets
in advance of, and independent of, reaching agreement on the
terms of a reverse acquisition transaction. During July and
August 2009, we negotiated the terms of a loan purchase
agreement with Party D relating to certain of our mortgage loans
and simultaneously continued to market our mortgage loan assets
to third parties with a view to optimizing the proceeds from any
sales.
On September 15, 2009, we sold to Party D four of our
mortgage loan assets for proceeds of approximately
$24.8 million. The loan purchase agreement governing the
sale also provided for the later sale of an additional mortgage
loan asset, subject to satisfaction of certain conditions to
closing, and granted us the option to sell to Party D two
additional mortgage loan assets, assuming we were able to meet
certain closing conditions by no later than September 30,
2009. We did not sell the additional mortgage loan or the two
option mortgage loans to Party D, but later (on October 6,
2009 and November 12, 2009, respectively) sold the two
option loans to unaffiliated third parties, as discussed further
below. We were not able to meet the conditions to closing on the
sale of the additional mortgage loan to Party D by
September 30, 2009.
We continued to negotiate the terms of the Party D reverse
acquisition proposal during September and most of October and
continued to extend our exclusivity agreement with Party D to
allow such
34
negotiations to continue with a view to improving the terms of
the proposed transaction. We also continued to pursue the sale
of our remaining mortgage loan assets, either to CIT Healthcare
pursuant to our mortgage purchase agreement or to third parties.
We also continued to negotiate a sale of our 85% interest in the
Cambridge portfolio back to Cambridge Holdings.
On September 16, 2009, pursuant to the mortgage purchase
agreement, we agreed to sell to CIT Healthcare our participation
interest in a mortgage loan for proceeds of approximately
$17.4 million.
On September 18, 2009, Party D sent a letter to the board
requesting that we commit to executing a definitive agreement
within the next 10 business days.
At a meeting held on September 25, 2009, the special
committee and its advisors reviewed and discussed the status of
negotiations with Party D, the status of managements
efforts to monetize our mortgage loan portfolio and a further
revised liquidation analysis prepared by management. The special
committee also reviewed and discussed a further revised
Standalone Business Plan. The special committee and its advisors
evaluated the various strategic options available to the
company, and, after considering and comparing the process,
timing, costs and risks associated with each of the various
options, further considered which of the options was likely to
result in the highest overall return of value to the
stockholders. The special committee and its advisors also
discussed the issues surrounding CIT Groups distressed
financial situation and possible bankruptcy filing and any
impact that such circumstances might have on the various
alternatives.
Prior to the expiration of our mortgage purchase agreement with
CIT Healthcare on September 30, 2009, we provided notice of
our intent to sell three additional loans to CIT Healthcare with
an aggregate principal balance of approximately
$35 million, subject to our ability to meet the terms and
conditions of the mortgage purchase agreement.
At a meeting held on October 5, 2009, the special committee
and its advisors discussed the status of negotiations with Party
D regarding the reverse acquisition transaction and the status
of negotiations with Cambridge Holdings regarding its proposed
acquisition of our 85% interest in the Cambridge portfolio. The
special committee continued its discussion and evaluation of the
companys various options, including continued operation or
liquidation. The special committee and its advisors also
discussed the issues surrounding CIT Groups distressed
financial situation and possible bankruptcy filing and any
impact that such circumstances might have on the various
alternatives.
On October 6, 2009, we sold our interest in a mortgage loan
to an unaffiliated third party for approximately
$8.5 million.
Over a period of several weeks in October, representatives from
the company, management and the companys advisors met in
person and telephonically with Party D and its advisors to
continue negotiations of contract documents relating to the
Party D reverse acquisition proposal. The parties had identified
several key issues with respect to which they were in
disagreement, including the terms of the promissory note
proposed to be issued by us in connection with the transaction
and certain other terms such as the nature and extent of certain
deal protection and post-closing recourse provisions. In
addition, the parties continued to discuss the complexities
caused by Cambridge Holdings threats to object to the
reverse acquisition transaction and its refusal to negotiate an
acceptable price for Cares 85% interest in the Cambridge
portfolio.
During the same time period, Mr. Gorman, our then chairman,
engaged in a number of conversations with Cambridge Holdings in
an attempt to improve the terms of the proposed acquisition by
Cambridge Holdings of our 85% interest in the Cambridge
portfolio. During the course of such discussions, the
representative of Cambridge Holdings indicated on one or more
occasions, on an unsolicited basis, that Cambridge Holdings was
prepared to purchase all of our outstanding common stock for
$60 million, less the value of the operating partnership
units then held by Cambridge Holdings. The Cambridge Holdings
proposal assumed that we would monetize the remainder of our
mortgage loan assets and distribute all of our cash to our
stockholders prior to consummation of the transaction.
35
On October 19, 2009, Mr. Gorman resigned as our
chairman of the board due to time constraints resulting from his
other business commitments, and the remaining board members
appointed Mr. Besecker, our then vice chairman of the
board, to the position of chairman of our board of directors.
Our exclusivity agreement with Party D expired on
October 23, 2009.
On October 24, 2009, our new chairman of the board of
directors, Mr. Besecker, spoke with a representative of
Cambridge Holdings to discuss the terms of Cambridge
Holdings unsolicited oral offer to purchase all of our
outstanding common stock for $60 million, less a deduction
of $10 million for the value of the operating partnership
units then held by Cambridge Holdings.
During the week of October 25, 2009, Party D elected not to
further pursue a reverse acquisition transaction with us, based
in substantial part on the complications and delays caused by
the threatened objections made by Cambridge Holdings and our
inability to resolve those objections by selling our 85%
interest back to Cambridge Holdings.
On November 1, 2009, CIT Group announced that it filed a
prepackaged plan of reorganization for CIT Group, Inc. and CIT
Group Funding Company of Delaware LLC under the
U.S. Bankruptcy Code. None of CIT Groups operating
subsidiaries, including CIT Healthcare, were included in the
filings made November 1, 2009.
On November 5, 2009, our special committee met to discuss
Cambridge Holdings oral offer to purchase the common stock
of the company. The special committee also discussed a possible
liquidation of the company and considered a timeline for
approval of a plan of liquidation and an outline of the process
for delisting and deregistering the companys common stock
to decrease compliance costs during a liquidation.
On November 9, 2009, we publicly announced that we were
nearing completion of our review of strategic alternatives for
the company and that such alternatives included a sale or merger
of the entire company and an orderly liquidation of our assets,
accompanied by one or more special cash distributions to our
stockholders.
On November 11, 2009, we received a revised proposal from
Cambridge Holdings that valued 80% 85% of our
outstanding common stock at $60 million, less a deduction
of $10 million for the operating partnership units then
held by Cambridge, and contemplated the termination of the
management agreement with CIT Healthcare. The Cambridge Holdings
proposal assumed that we would monetize all but two of our
remaining mortgage loan assets and distribute all of our cash to
our stockholders prior to consummation of the transaction. The
proposal provided for the company to retain its status as a
publicly traded REIT and for the companys existing
stockholders to retain a 15% 20% ongoing ownership
interest in the company.
On November 12, 2009, we sold our interests in two mortgage
loans to an unaffiliated third party for approximately
$22.4 million.
On November 17, 2009, Party D announced that it had reached
an agreement to sell its healthcare net lease business to a
publicly traded healthcare REIT.
On November 23, 2009, our special committee met to review a
preliminary plan of liquidation and compared the values
reflected in such plan of liquidation against managements
revised Standalone Business Plan.
On November 25, 2009, we filed a lawsuit against Cambridge
Holdings and its affiliates, including its chairman and chief
executive officer, seeking declaratory judgments that
(i) we have the right, without the approval of Cambridge
Holdings, to engage in a business combination transaction
involving our company or a sale of our wholly owned subsidiary
that serves as the general partner of the partnership that holds
the direct investment in the portfolio, (ii) Cambridge
Holdings contractual right to put its own interests in the
Cambridge medical office building portfolio has expired and
(iii) the
36
operating partnership units held by Cambridge Holdings do not
entitle Cambridge Holdings to receive any special cash
distributions made to our stockholders, including any
liquidating distributions declared pursuant to our plan of
liquidation. We also brought affirmative claims for tortious
interference by Cambridge Holdings with our prospective contract
with Party D and for breach by Cambridge Holdings of the implied
covenant of good faith and fair dealing.
On December 4, 2009, the special committee and its advisors
and the board of directors reviewed and considered a draft plan
of liquidation prepared by management. In connection therewith,
the special committee reviewed and considered managements
estimates of the values of our assets, the confirmatory
valuations provided on our three remaining mortgage loan assets
and our Bickford and SMC interests received from separate
outside valuation experts, our current and contingent
liabilities and obligations, the costs associated with
liquidation and the estimated general and administrative costs
required to operate the company. The special committee and the
board of directors also reviewed a draft proxy statement to the
companys stockholders soliciting approval of the plan of
liquidation. The special committee and the board also received
an update from management and Credit Suisse on parties who had
recently expressed an interest in a transaction with the
company. Since the company had announced on November 9,
2009, that it was completing its review of strategic
alternatives, eleven new potentially interested parties had
contacted management or Credit Suisse to express an interest in
a range of different transactions involving all or only some of
the companys assets. Seven of these parties entered into
confidentiality agreements and were granted access to the
companys online data room. No definitive terms of a
transaction had been discussed at that time. The special
committee and the board also discussed the terms of a potential
performance share award to Mr. Besecker and several members
of the companys senior management which would incentivize
these individuals to maximize the proceeds of a liquidation or
sale of the company and expedite the return of capital to the
companys stockholders.
Also on December 4, 2009, our then chief executive officer,
Mr. Kellman, resigned from our company, effective
immediately. Our board appointed Salvatore (Torey) V.
Riso, Jr., then our chief compliance officer and secretary,
as our new chief executive officer.
On December 10, 2009, our special committee and our board
of directors reviewed a final plan of liquidation of the company
and a revised draft of the proxy statement soliciting our
stockholders approval of the plan of liquidation. The special
committee determined that the plan of liquidation was advisable
and in the best interests of the company and our stockholders
and resolved to recommend to the full board of directors that
such plan of liquidation be adopted and presented to the
stockholders for approval. On the same date, our board of
directors determined, based on the recommendation of the special
committee, that the plan of liquidation was advisable and in the
best interests of the company and our stockholders and
recommended that our stockholders approve the plan of
liquidation. On the same date, our board of directors approved
the grant of a performance share award for 5,000 shares of
the companys common stock to each of Mr. Besecker and
Mr. Riso, the grant of a performance share award for
3,000 shares of the companys common stock to
Mr. Hughes, the companys chief financial officer,
treasurer, chief compliance officer and secretary and the grant
of a performance share award for 1,000 shares of common
stock to Mr. McDugall, the companys then chief
investment officer. See Proposal One: Issuance of
Care Common Stock to Tiptree Interests of Certain
Persons in the Tiptree Transaction on page 41 for
additional details on the these performance share awards.
Recent
Events
On January 15, 2010, we entered into an amended and
restated management agreement with our manager, CIT Healthcare,
which reduced the monthly base management fee and the fee
payable to CIT Healthcare upon termination of the management
agreement.
On January 21, 2010, Credit Suisse received a letter from
Mr. Geoffrey Kauffman, President and Chief Operating
Officer of Tiptree, proposing a tender offer for up to 100% of
the shares of our
37
company for a price of $8.50 per share and that the current
management agreement with CIT Healthcare be replaced with a
combination of internal management and an advisory agreement
with Tiptrees management company. Tiptrees proposal
provided that the source for the cash tender offer would be
(i) the companys cash on hand net of short term
payables and announced dividends and (ii) Tiptrees
cash on hand. Tiptrees proposal did not contemplate the
participation of Mr. Kellman, and Mr. Kellman did not
participate in any way in the negotiations between management
and the special committee, on the one hand, and Tiptree, on the
other hand, with respect to the proposed tender offer or any
other transaction involving the company and Tiptree.
On that same day, Mr. Besecker directed Credit Suisse to
let Tiptree know that we would contact them shortly after the
special meeting of shareholders and board meeting that was to
take place on January 28, 2010.
On January 27, 2010, Mr. Besecker met with Party H who
proposed to buy assets of Care for $2 $4 per share to be
refined after additional due diligence.
On January 28, 2010, at a special meeting of the
stockholders of the company, the plan of liquidation was
approved.
On or about February 1 and 2, 2010, we sent out letters to
interested parties requesting bids for one or more assets of the
company with a bid deadline of February 16, 2010.
On February 2, 2010, Mr. Riso, along with employees of
our manager, Mr. Kauffman, and Luke Scheuer of Tiptree had
a telephonic meeting to discuss Tiptrees proposal and
obtain an overview of Tiptree.
On February 4, 2010, Tiptree executed a new confidentiality
agreement.
On February 8, 2010, Mr. Riso, along with employees of
our manager, met with Mr. Kauffman and Mr. Scheuer at
CITs offices in New York City to discuss a revised
proposal by Tiptree to acquire a controlling interest in the
company. Tiptree proposed to make an equity investment in our
common stock at a price of $8.78 per share and a minimum of
approximately 5,125,000 shares of our common stock,
conditioned upon our company conducting a self tender for up to
100% of our common stock from our stockholders at the same $8.78
per share price. Tiptree proposed that if more than
17,200,000 shares of our companys common stock were
tendered in the tender offer, Tiptree would increase its
purchase of shares by the amount of the excess over 17,200,000
to preserve working capital. If less than 15,200,000 shares
were tendered, Tiptree would have the option to increase its
equity investment by the amount of the shortfall in order to
preserve at least a 50.1% ownership stake in our company. If
between 15,200,000 and 17,200,000 shares were tendered in
the tender offer, Tiptree would purchase 5,125,000 shares
of common stock. The proposal was conditioned upon (i) a
minimum of 10,250,000 shares tendered in the tender offer,
(ii) no material adverse changes to our company,
(iii) Tricadia Capital being named to replace CIT
Healthcare as the external manager of our company, and
(iv) CIT Healthcare agreeing to enter into a transition
services agreement with our company to transition management
services to Tricadia Capital after the closing.
On February 9, 2010, Mr. Riso received a proposal from
Party H to purchase all of the companys common stock for
$3.00 per share net of the companys cash on hand and not
including the purchase of our then existing loan portfolio. The
proposal provided for 28-day due diligence period following
board approval.
On February 10, 2010, Mr. Riso and representatives
from McDermott met telephonically with representatives of
Tiptree and Schulte Roth & Zabel LLP (Schulte
Roth), counsel to Tiptree, to discuss legal issues
relating to the transaction structure proposed by Tiptree.
On February 12, 2010, Mr. Kauffman, Mr. James
McKee and Mr. Scheuer, met telephonically with members of
Schulte Roth and members of McDermott to discuss Cambridge
litigation due diligence.
38
On February 19, 2010, a loan from the companys
mortgage portfolio matured and we received proceeds of
approximately $10 million.
On February 23, 2010, our board of directors approved an
amendment and restatement of the performance share award
agreements granted to Flint D. Besecker, Salvatore (Torey) V.
Riso, Jr., Paul F. Hughes and Michael P. McDugall on
December 10, 2009. The performance share awards were
amended and restated such that the awards are now triggered upon
the consummation, during 2010, of one or more of the following
transactions that results in a return of value to our
stockholders within the parameters expressed in the agreement:
(i) a merger or other business combination resulting in the
disposition of all of the issued and outstanding equity
securities of our company, (ii) a tender offer made
directly to our stockholders either by us or a third party for
at least a majority of our issued and outstanding common stock,
or (iii) the declaration of aggregate distributions by our
board equal to or exceeding $8.00 per share.
At the special committee meeting held on February 23, 2010,
our management reported on the status of the Cambridge Holdings
litigation, the status of the bid process for the assets of the
company, the general terms of the asset bids that the company
had received thus far, the status of the Tiptree discussions,
the offer from Party H and the decision by management not to
pursue it due to the execution risk of the offer and the fact
that Party H did not appear to be willing to assume full
litigation risk associated with the Cambridge Holdings dispute.
The special committee authorized management to pursue a sale of
one of our mortgage loans and to continue to pursue the Tiptree
transaction.
On February 24, 2010, Mr. Kauffman, Mr. Scheuer,
Mr. McKee and members of Schulte Roth met telephonically
with Mr. Riso and representatives of Credit Suisse and
McDermott to discuss the structure of the potential transaction
with Tiptree as well other material open terms, such as
conditions to closing and deal protection provisions.
On February 26, 2010, we received a revised proposal from
Tiptree providing for a price of $8.82 per share as well as
revised share purchase numbers. On that same day,
Mr. Kauffman, Mr. Scheuer, Mr. McKee, Mr. Michael
Littenberg and Mr. Riso had a telephonic meeting with
representatives of Credit Suisse and McDermott to discuss the
structure and revised share price.
On March 1, 2010, the special committee met to receive an
update on the discussions with Tiptree and to consider
Tiptrees request for exclusivity. Our special committee
authorized management to enter into exclusive negotiations with
Tiptree for a two-week period provided that Tiptree would agree
to a price of $9.00 per share.
On that same day, Mr. Riso had a telephonic meeting with
Mr. Kauffman during which Tiptree agreed to a price of
$9.00 per share. As a result, we entered into an exclusivity
agreement with Tiptree that would expire at 5:00 p.m. on
March 12, 2010.
On March 2, 2010, we received a letter from Cambridge
Holdings reiterating its proposal to acquire the companys
interest in Cambridge Holdings, Bickford and SMC for
$60 million.
On the same day, we sold our interest in a mortgage loan to an
unaffiliated third party for net proceeds of approximately
$5.9 million.
On March 8, 2010, Mr. Riso met telephonically with
Mr. Littenberg, Mr. Kauffman, Mr. McKee and
representatives of McDermott to discuss class action litigation
due diligence.
On March 11, 2010, our special committee and board of
directors met to receive an update on the status of the Tiptree
discussions, a summary of the draft purchase agreement and an
update on the asset disposition discussions. Mr. Besecker
reported that Tiptree had agreed to raise their bid to $9.00 per
share and had agreed to conditions which would minimize
execution risk for closing a potential transaction which no
other buyers were willing to agree to. Mr. Riso then
discussed the structure and specific terms of the transaction
with Tiptree, including the deal protection provisions and other
mechanisms the company had successfully negotiated to minimize
execution risk, the status of the
39
purchase and sale agreement and related documents, and the
handful of open issues that remained between the two parties.
The special committee also discussed the letter from Cambridge
Holdings and managements proposed response; the
March 2 letter concerned Cambridge Holdings proposal
to acquire the companys interest in Cambridge Holdings,
Bickford and SMC for $60 million. In addition,
representatives from McDermott gave a presentation on the
standards for approval of the Tiptree transaction and related
fiduciary duties of the special committee and the board.
On March 12, 2010, we extended the exclusivity agreement
with Tiptree that was to expire on March 12 to 5:00 p.m. on
March 16, 2010.
On March 15, 2010, our special committee and our board
approved the proposed issuance of our common stock to Tiptree,
determined that the tender offer was fair to Cares
stockholders, including Cares unaffiliated stockholders,
from a financial point of view, approved the tender offer and
recommended that the stockholders approve the issuance of shares
to Tiptree in accordance with the purchase and sale agreement
and the abandonment of the plan of liquidation in favor of the
Tiptree share purchase. Our special committee and our board
relied upon Tiptrees reputation and financial strength and
the absence of a financing contingency in approving the issuance
of shares to Tiptree and made such inquiries as they deemed
appropriate to satisfy themselves that financing for the tender
offer is assured. Prior to executing the purchase and sale
agreement, our special committee and our board required Tiptree
to provide evidence of Tiptrees financial ability to fund
the issuance of shares, including a copy of its balance sheet
for the year ended December 31, 2009, which evidenced
sufficient cash on hand to fund the issuance of the shares in
full.
On March 16, 2010, Care and Tiptree entered into the
purchase and sale agreement which provides that the company will
issue, and Tiptree will purchase, for a purchase price of $9.00
per share, a minimum of 4,445,000 shares of the
companys common stock, and that Tiptree may purchase
additional newly issued shares depending on the number of shares
tendered (and not withdrawn) in the tender offer. We agreed to
use the proceeds from the issuance of common stock to Tiptree,
combined with cash on hand, to effect the tender offer for up to
all of our outstanding common stock at a fixed price of $9.00
per share. On March 15, 2010, the last trading day prior to
the public announcement of the execution of the purchase
agreement with Tiptree, the closing price of the companys
common stock as reported by NYSE was $8.36 per share.
On March 18, 2010, we provided notice to Cambridge Holdings
that we had entered into the purchase and sale agreement with
Tiptree for a transaction that may result in the change of
control of the company. We provided this notice in accordance
with the terms of a put agreement entered into in connection
with our investment in the Cambridge portfolio. By its terms,
the notice provided Cambridge Holdings with the option to
put its interests in the portfolio to us at a price
equal to the then-fair market value of such interests - as
mutually agreed by the parties - or, lacking such mutual
agreement, at a price determined through qualified third party
appraisal. In our notice, we also reserved and reiterated our
position, taken in the litigation, that the put
option expired when Cambridge Holdings declined to exercise it
in response to a prior notice from us regarding a contemplated
(but unconsummated) change of control transaction in April 2009.
On March 22, 2010, a representative of Cambridge Holdings
sent a letter to Mr. Riso stating that Cambridge Holdings
declined to exercise its put right, if any, under the put
agreement, and that they believed that the Tiptree transaction
was in violation of the limited partnership agreements of the
Cambridge Holdings assets.
Reasons
for the Transaction
In approving the transaction with Tiptree and recommending that
our stockholders approve the issuance of shares to Tiptree and
abandon the plan of liquidation, our board of directors and our
40
special committee consulted with our management and our
financial and legal advisors and considered the following
factors:
|
|
|
|
|
the extensive sale process for the company undertaken over a
period of more than one year, led by Credit Suisse, wherein the
company received, evaluated and negotiated numerous strategic
alternatives, including many offers to acquire all of the issued
and outstanding common stock of the company through a merger,
tender offer or similar business combination, none of which was
successful;
|
|
|
|
our stockholders approval, at a special meeting held on
January 28, 2010, of our plan of liquidation, which
involved a complete liquidation of Cares assets over time
at an estimated total liquidation value range of $8.05-$8.90 per
share, compared to the price that Tiptree will pay ($9.00 per
share) and the price offered to the companys stockholders
($9.00 per share) in the tender offer which is superior;
|
|
|
|
none of the individual asset bids received by the company
exceeded the components of value ranges developed by
the company in connection with the plan of liquidation;
|
|
|
|
the tender offer is for up to 100% of our outstanding common
stock and thus presents an opportunity for all of our
stockholders to receive, on a current basis, $9.00 in cash for
each share of common stock that they own, rather than having to
wait for assets to be disposed of and cash proceeds distributed
pursuant to the plan of liquidation;
|
|
|
|
the price offered to our stockholders in the tender offer of
$9.00 per share is the same price that Tiptree, an unaffiliated
third party, agreed to pay for our common stock pursuant to the
purchase and sale agreement;
|
|
|
|
|
|
the purchase price of $9.00 per share payable to the company by
Tiptree and payable to the companys stockholders in the
tender offer represents a 7.7% premium over the closing price of
the companys common stock on the NYSE on Monday,
March 15, 2010 ($8.36), the last trading day prior to the
public announcement of the execution of the purchase and sale
agreement, and a 6.4% premium over the highest closing price
($8.46) of the companys common stock during the 52-week
period preceding such date;
|
|
|
|
|
|
Tiptree has agreed to assume certain closing-related risks
pertaining to our pending litigation with Cambridge Holdings,
which other interested parties were not willing to do;
|
|
|
|
stockholders seeking to monetize their investment may do so by
tendering shares, and stockholders who wish to remain
stockholders may do so by not tendering shares; and
|
|
|
|
the execution risks associated with the proposed plan of
liquidation were considered higher than the execution risks of
the Tiptree transaction.
|
Our special committee and board of directors believed that each
of the above factors generally supported its approval,
determination and recommendation. Our special committee and
board of directors also considered and reviewed with management
a number of potentially negative factors, including those listed
below:
|
|
|
|
|
there is no assurance that we will be successful in our tender
offer and have the minimum number of shares tendered for the
transaction to close;
|
|
|
|
the fact that Cambridge Holdings has asserted a right to approve
any sale or disposition of our direct or indirect interests in
the Cambridge portfolio, including a change in control of the
company;
|
41
|
|
|
|
|
the actual or potential conflicts of interest which certain of
our executive officers and our directors have in connection with
the transaction with Tiptree, including those specified under
the heading Risk Factors and Interests of
Certain Persons in the Tiptree Transaction;
|
|
|
|
the costs to be incurred by our company in connection with
execution of the transaction and the tender offer, including
significant accounting, financial advisory and legal
fees; and
|
|
|
|
the possibility that stockholders may, depending on their tax
basis in their stock, recognize taxable gains (ordinary
and/or
capital gains) in connection with the completion of the
transaction.
|
The above discussion concerning the information and factors
considered by our special committee and board of directors is
not intended to be exhaustive, but includes the material factors
considered by our special committee and board of directors in
making their determinations. In view of the variety of factors
considered in connection with their evaluation of the
transaction, our special committee and board of directors did
not quantify or otherwise attempt to assign relative weights to
the specific factors they considered. In addition, individual
members of our special committee and board of directors may have
given different weight to different factors and, therefore, may
have viewed certain factors more positively or negatively than
others.
Recommendations
of Our Board of Directors and the Special Committee
OUR SPECIAL COMMITTEE AND OUR BOARD OF DIRECTORS RECOMMEND
THAT YOU VOTE FOR THE ISSUANCE TO TIPTREE.
Interests
of Certain Persons in the Tiptree Transaction
In considering the recommendation of our board of directors to
approve the issuance of shares to Tiptree in connection with the
transaction, our stockholders should consider that, as described
below, the approval of the issuance by our stockholders and the
closing of the transaction may have certain effects upon our
officers and directors that differ from, or are in addition to
(and therefore may conflict with), the interests of our
stockholders. Our board of directors is aware of these interests
and considered them in approving the transaction and
recommending the issuance. A majority of the members of our
board of directors qualify as independent under the rules of the
New York Stock Exchange. In addition, two of the three members
of our special committee, which recommended that our board of
directors approve the transaction, qualify as independent under
the rules of the New York Stock Exchange.
|
|
|
|
|
Flint D. Besecker, the chairman of the board, holds a
performance share award that entitles him to receive 10,000
additional shares, which will represent $90,000 in value if the
tender offer is completed.
|
|
|
|
Salvatore (Torey) V. Riso, Jr., our chief executive
officer, holds a performance share award that entitles him to
receive 10,000 additional shares, which will represent $90,000
in value if the tender offer is completed.
|
|
|
|
Paul F. Hughes, our chief financial officer, holds a performance
share award that entitles him to receive 6,000 additional
shares, which will represent $54,000 in value if the tender
offer is completed.
|
In addition, our manager, CIT Healthcare LLC, has interests in
the transaction that are different from your interests as a
stockholder. Our manager acquired a warrant, dated
September 30, 2008, to purchase 435,000 shares of our
common stock with an exercise price of $17.00 per share. On
March 16, 2010, our manager entered into a warrant purchase
agreement with Tiptree, pursuant to which our manager will sell
its warrant to purchase the 435,000 shares of our
companys common stock in exchange for $100,000 effective
upon the closing of the transaction with Tiptree.
42
Consequently, these individuals and our manager may be more
likely to support the Tiptree transaction than might otherwise
be the case if they did not expect to receive those payments.
Our board of directors and the special committee each was aware
of these interests and considered them in making their
recommendations.
Timing of
the Transaction
In addition to the special meeting of stockholders to be held on
July [ ], 2010, the Tiptree transaction
includes a tender offer, which will commence at or near the time
this solicitation commences, and is scheduled to expire (unless
extended) on or about the date of the special meeting.
Stockholder approval of the issuance of common stock to Tiptree,
the abandonment of our plan of liquidation and the first
amendment to our charter are also conditions to the closing of
the Tiptree transaction. There are also additional conditions to
the closing of both the tender offer and the Tiptree issuance
that must be satisfied or, if applicable, waived, in order for
the transaction to be completed (see the section entitled
The Purchase and Sale Agreement for further
information on the conditions to the closing). The tender offer
is currently anticipated to expire on [ ],
subject to our rights to extend the offer. Assuming the tender
offer is completed and the other conditions to the closing of
the issuance are satisfied or, if applicable, waived, we
anticipate closing the issuance promptly after completion of the
tender offer.
Effect of
the Issuance Not Being Completed
Stockholder approval of the issuance of shares to Tiptree is a
condition to closing the transaction. Therefore, if our
stockholders do not approve the proposal to issue shares to
Tiptree, we will be unable to complete the transaction and will
either continue to pursue the plan of liquidation upon
termination of the purchase and sale agreement or consider other
strategic alternatives. If the proposal to issue shares to
Tiptree is not approved, we will not abandon the plan of
liquidation as approved by our stockholders on January 28,
2010.
Board of
Directors Upon Closing
Pursuant to the purchase and sale agreement, at least three
(3) members of our board of directors must resign as of the
closing and the resulting vacancies filled by with candidates
acceptable to Tiptree.
Termination
of Management Agreement
In conjunction with the Tiptree transaction, we intend to
terminate our existing management agreement with CIT Healthcare,
hire certain employees and enter into a management agreement
with TREIT Management, an affiliate of Tiptree Capital
Management, LLC, which is the manager of Tiptree. We expect to
provide notice of termination of the management agreement to CIT
Healthcare and TREIT Management will transition into the role of
manager over an approximately
60-day
transition period.
Absence
of Appraisal or Dissenters Rights
Section 5.4 of our charter provides that our stockholders
shall not be entitled to exercise any preemptive rights, rights
of appraisal or similar rights of an objecting stockholder
unless provided for by our board of directors. Our board of
directors has not provided such rights in connection with the
transaction.
43
SELECTED
FINANCIAL DATA
The following table sets forth selected financial data for the
company:
|
|
|
|
|
As of and for the period from June 22, 2007 (commencement
of operations) to December 31, 2007;
|
|
|
|
As of and for the years ended December 31, 2009 and 2008;
|
We derived the selected financial data for the period from
June 22, 2007 (commencement of operations) to
December 31, 2007 and for the years ended December 31,
2009 and 2008 from our audited financial statements that are
included in our Annual Report of
Form 10-K
for the year ended December 31, 2009, which is incorporated
into this proxy statement by reference. Our historical results
are not necessarily indicative of the results that may be
expected in the future. You should read this data together with
our financial statements and related notes included in our
Annual Report on
Form 10-K
for the year ended December 31, 2009, as well as the
sections of the report entitled Managements
Discussion and Analysis of Financial Condition and Results of
Operations.
Selected
Financial Data
Care Investment Trust Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
Selected Financial
Data
(1)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
BALANCE SHEET DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
315,432,000
|
|
|
$
|
370,906,000
|
|
|
$
|
328,398,000
|
|
Mortgage loans outstanding (including loans held for sale)
|
|
|
25,325,000
|
|
|
|
159,916,000
|
|
|
|
236,833,000
|
|
Credit facility and other debt
|
|
|
81,873,000
|
|
|
|
119,998,000
|
|
|
|
25,000,000
|
|
Stockholders equity
|
|
|
226,793,000
|
|
|
|
241,132,000
|
|
|
|
293,335,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Period
|
|
|
|
|
|
|
|
|
|
June 22,
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
(Commencement
|
|
|
|
Years Ended
|
|
|
of Operations) to
|
|
|
|
December 31
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
OPERATING DATA (BY PERIOD):
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
$
|
20,009,000
|
|
|
$
|
22,259,000
|
|
|
$
|
12,163,000
|
|
(Reduction to)/increase in valuation allowance on loans held at
LOCOM
|
|
|
(4,046,000
|
)
|
|
|
29,327,000
|
|
|
|
|
|
Management fees to related party
|
|
|
2,235,000
|
|
|
|
4,105,000
|
|
|
|
2,625,000
|
|
Marketing, general and administrative expense
|
|
|
11,653,000
|
|
|
|
6,623,000
|
|
|
|
11,714,000
|
|
Interest expense including amortization and write-off of
deferred financing costs
|
|
|
6,510,000
|
|
|
|
4,521,000
|
|
|
|
134,000
|
|
Net income (loss)
|
|
|
(2,826,000
|
)
|
|
|
(30,806,000
|
)
|
|
|
(1,557,000
|
)
|
Net income (loss) per common share basic and
diluted
(2)
|
|
|
(0.14
|
)
|
|
|
(1.47
|
)
|
|
|
(0.07
|
)
|
Distributions declared
|
|
|
13,780,138
|
|
|
|
14,278,617
|
|
|
|
3,572,990
|
|
Distributions per common
share
(2)
|
|
$
|
0.68
|
|
|
$
|
0.68
|
|
|
$
|
0.17
|
|
Weighted average number of shares
outstanding
(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
20,061,763
|
|
|
|
20,952,972
|
|
|
|
20,866,526
|
|
OTHER DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided by operating activities
|
|
$
|
6,654,000
|
|
|
$
|
13,029,000
|
|
|
$
|
11,871,000
|
|
Net cash flows provided by (used in) investing activities
|
|
|
135,966,000
|
|
|
|
(67,925,000
|
)
|
|
|
(227,316,000
|
)
|
Net cash flows (used) in provided by financing activities
|
|
|
(51,908,000
|
)
|
|
|
71,377,000
|
|
|
|
230,764,000
|
|
Funds from
operations
(2)(3)
|
|
$
|
10,188,000
|
|
|
$
|
(19,832,000
|
)
|
|
$
|
(1,557,000
|
)
|
44
|
|
|
(1)
|
|
The above selected financial data
should be read in conjunction with the historical consolidated
financial statements and related notes appearing in our Annual
Reports on
Form 10-K
for the years ended December 31, 2009 and 2008 as of
December 31, 2009, 2008 and 2007, and for the periods ended
December 31, 2009 and 2008 and for the period from
June 22, 2007 (commencement of operations) to
December 31, 2007.
|
|
(2)
|
|
Net income (loss) and distributions
per share are based upon the weighted average number of shares
of common stock outstanding. Distributions by us of the current
and accumulated earnings and profits for federal income tax
purposes are taxable to our stockholders as ordinary income.
Distributions in excess of these earnings and profits generally
are treated as a non-taxable reduction of our stockholders
basis in the shares of common stock to the extent thereof (a
return of capital for tax purposes), and thereafter as taxable
gain. These distributions in excess of earnings and profits will
have the effect of deferring taxation of the distributions until
the sale of the stockholders shares. In order to maintain
our qualification as a REIT, we must make annual distributions
to our stockholders of at least 90% of our REIT taxable income.
REIT taxable income does not include net capital gains. Under
certain circumstances, we may be required to make distributions
in excess of cash available for distribution in order to meet
the REIT distribution requirements. Distributions are determined
by our board of directors and are dependent on a number of
factors, including the amount of funds available for
distribution, our financial condition, any decision by our board
of directors to reinvest funds rather than to distribute funds,
our capital expenditures, the annual distribution required to
maintain REIT status under the Code and other factors our board
of directors may deem relevant.
|
|
(3)
|
|
One of our objectives is to provide
cash distributions to our stockholders from cash generated from
operations. We believe that Funds From Operations, or FFO, is a
useful supplemental measure of our operating performance. We
compute FFO in accordance with standards established by the
National Association of Real Estate Investment Trusts, or
NAREIT, which may not be comparable to FFO reported by other
REITs that do not compute FFO in accordance with the NAREIT
definition, or that interpret the NAREIT definition differently
than we do. The revised White Paper on FFO, approved by the
Board of Governors of NAREIT in April 2002 defines FFO as net
income (loss) computed in accordance with generally accepted
accounting principles, or GAAP, excluding gains (or losses) from
debt restructuring and sales of properties, plus real estate
related depreciation and amortization and after adjustments for
unconsolidated partnerships and joint ventures.
|
Because FFO excludes depreciation and amortization, gains and
losses from property dispositions and extraordinary items, it
provides a performance measure that, when compared year over
year, reflects the impact to operations from trends in occupancy
rates, rental rates, operating costs, development activities,
general and administrative expenses and interest costs,
providing a perspective not immediately apparent from net
income. In addition, we believe FFO provides useful information
to the investment community about our financial performance when
compared with other REITs since FFO is generally recognized as
the industry standard for reporting the operations of REITs.
However, FFO should not be viewed as an alternative measure of
our operating performance since it does not reflect either
depreciation and amortization costs or the level of capital
expenditures and leasing costs necessary to maintain the
operating performance of our properties, which are significant
economic costs and could materially impact our results of
operations.
Non-cash adjustments to arrive at FFO consisted of adjustments
for, depreciation and amortization. For additional information,
see Funds from Operations, in our Annual Reports on
Form 10-K
for the year ended December 31, 2009 which includes a
reconciliation of our GAAP net income available to our
stockholders to FFO for the years ended December 31, 2009
and 2008 and for the period from June 22, 2007
(commencement of operations) to December 31, 2007.
45
UNAUDITED
PRO FORMA FINANCIAL INFORMATION
The following presents our unaudited pro forma financial
information for the year ended December 31, 2009 and as of
and for three months ended March 31, 2010. The pro forma
statement of operations for the year ended December 31,
2009 and the three months ended March 31, 2010 give effect
to the following series of transactions: (i) our tender
offer for all of the outstanding shares of our common stock for
$9.00 per share and (ii) the issuance to Tiptree of shares
of our common stock at a price of $9.00 per share as if each of
the transactions had occurred at January 1, 2009. We cannot
be certain as to the number of shares which will be tendered in
the transaction and have therefore assumed, for the purposes of
preparing these pro forma financial statements, that
16,500,000 shares, or approximately 81.6% of our
outstanding common stock, will be tendered. The unaudited pro
forma balance sheet as of March 31, 2010 has been prepared
as if the outstanding shares were tendered, new shares were
issued and a change of control occurred at January 1, 2010.
The pro forma adjustments are based upon available information
and certain assumptions that we believe are reasonable.
The unaudited pro forma financial information is for
informational purposes only and does not purport to present what
our results would actually have been had these transactions
actually occurred on the dates presented or to project our
results of operations or financial position for any future
period. You should read the information set forth below together
with the Care Investment Trust Inc. consolidated financial
statements as of December 31, 2009 and 2008 and for each of
the years ended December 31, 2009 and 2008 and for the
period from June 22, 2007 (Commencement of Operations) to
December 31, 2007, including the notes thereto, included in
the Care Investment Trust Inc. Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009 and the Care
Investment Trust Inc. condensed consolidated financial
statements as of March 31, 2010 and for each of the
three-month periods ended March 31, 2010 and 2009,
including the Notes thereto, included in the Care Investment
Trust Inc.
Form 10-Q.
Care
Investment Trust Inc.
Unaudited Pro Forma Balance Sheet
as of March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
Pro Forma
|
|
|
|
|
|
|
2010
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(dollars in thousands)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
5,020
|
|
|
|
|
|
|
$
|
5,020
|
|
Buildings and improvements
|
|
|
101,000
|
|
|
|
|
|
|
|
101,000
|
|
Less: accumulated depreciation
|
|
|
(5,239
|
)
|
|
|
|
|
|
|
(5,239
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate, net
|
|
$
|
101,781
|
|
|
$
|
|
|
|
$
|
100,781
|
|
Cash and cash equivalents
|
|
|
136,586
|
|
|
|
(148,500
|
)
(a)
|
|
|
31,569
|
|
|
|
|
|
|
|
|
40,005
|
(b)
|
|
|
|
|
|
|
|
|
|
|
|
3,478
|
(c)
|
|
|
|
|
Investments in loans held at (lower of cost or market)
|
|
|
9,791
|
|
|
|
|
|
|
|
9,791
|
|
Investments in partially-owned entities
|
|
|
54,505
|
|
|
|
|
|
|
|
54,505
|
|
Accrued interest receivable
|
|
|
59
|
|
|
|
|
|
|
|
59
|
|
Deferred financing costs, net of accumulated amortization of
$1,155
|
|
|
680
|
|
|
|
|
|
|
|
680
|
|
Identified intangible assets leases in place, net
|
|
|
4,388
|
|
|
|
|
|
|
|
4,388
|
|
Other assets
|
|
|
4,577
|
|
|
|
|
|
|
|
4,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
311,267
|
|
|
$
|
(105,017
|
)
|
|
$
|
206,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
Pro Forma
|
|
|
|
|
|
|
2010
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(dollars in thousands)
|
|
|
Liabilities and Stockholders Equity Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under warehouse line of credit
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Mortgage notes payable
|
|
|
81,659
|
|
|
|
|
|
|
$
|
81,659
|
|
Accounts payable and accrued expenses
|
|
|
2,110
|
|
|
|
|
|
|
|
2,110
|
|
Accrued expenses payable to related party
|
|
|
5,572
|
|
|
|
|
|
|
|
5,572
|
|
Obligation to issue operating partnership units
|
|
|
3,468
|
|
|
|
|
|
|
|
3,468
|
|
Other liabilities
|
|
|
525
|
|
|
|
|
|
|
|
525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
93,334
|
|
|
$
|
|
|
|
$
|
93,334
|
|
Commitments and Contingencies (Note 16)
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock: $0.001 par value, 250,000,000 shares
authorized, 21,284,544 shares issued and
20,224,548 shares outstanding
|
|
|
21
|
|
|
|
4
|
(b)
|
|
|
25
|
|
Treasury stock
|
|
|
(8,824
|
)
|
|
|
|
|
|
|
(8,824
|
)
|
Additional
paid-in-capital
|
|
|
301,989
|
|
|
|
(148,500
|
)
(a)
|
|
|
193,490
|
|
|
|
|
|
|
|
|
40,001
|
(b)
|
|
|
|
|
Accumulated deficit
|
|
|
(72,253
|
)
|
|
|
3,478
|
(c)
|
|
|
(71,775
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
$
|
217,933
|
|
|
$
|
(105,017
|
)
|
|
$
|
112,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity
|
|
$
|
311,267
|
|
|
$
|
(105,017
|
)
|
|
$
|
206,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Unaudited Pro Forma
Balance Sheet as of March 31, 2010
|
|
|
(a)
|
|
The adjustment reflects the payment
for 16.5 million shares tendered at $9 per share.
|
|
(b)
|
|
The adjustment reflects the
issuance and sale of 4,445,000 shares to Tiptree at $9 per
share. Shares issued and outstanding on an actual and pro forma
basis are 25,729,544 and 8,103,894, respectively.
|
|
(c)
|
|
The adjustment reflects the impact
on cash and equity of the pro forma entries included in the pro
forma statements of operations
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
3,478
|
|
|
|
|
|
Accumulated deficit
|
|
|
|
|
|
$
|
3,478
|
|
47
Care
Investment Trust Inc.
Unaudited
Pro Forma Statement of Operations for the Year Ended
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
Pro Forma
|
|
|
|
|
|
|
2009
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
|
|
(Audited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(dollars in thousands, except share and per share data)
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental revenue
|
|
$
|
12,710
|
|
|
|
|
|
|
$
|
12,710
|
|
Income from investments in loans
|
|
|
7,135
|
|
|
|
|
|
|
|
7,135
|
|
Other income
|
|
|
164
|
|
|
|
|
|
|
|
164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
20,009
|
|
|
$
|
|
|
|
$
|
20,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees to related party
|
|
|
2,235
|
|
|
|
30
|
(b)
|
|
|
2,265
|
|
Marketing, general and administrative (including stock-based
compensation expense of $2,270)
|
|
|
11,653
|
|
|
|
(3,491
|
)
(a)
|
|
|
8,162
|
|
Depreciation and amortization
|
|
|
3,375
|
|
|
|
|
|
|
|
3,375
|
|
Realized (gain) on loans sold
|
|
|
(1,064
|
)
|
|
|
|
|
|
|
|
|
Adjustment to valuation allowance on loans held at (lower of
cost or market)
|
|
|
(4,046
|
)
|
|
|
|
|
|
|
(4,046
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
$
|
12,153
|
|
|
$
|
(3,460
|
)
|
|
$
|
9,757
|
|
Other (Income)/Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from investments in partially-owned entities
|
|
|
4,397
|
|
|
|
|
|
|
|
4,397
|
|
Unrealized (income)/loss on derivative instruments
|
|
|
(153
|
)
|
|
|
|
|
|
|
(153
|
)
|
Interest income
|
|
|
(73
|
)
|
|
|
(17
|
)
(c)
|
|
|
(90
|
)
|
Interest expense including amortization of deferred financing
costs
|
|
|
6,510
|
|
|
|
|
|
|
|
6,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)/income
|
|
$
|
(2,825
|
)
|
|
$
|
3,478
|
|
|
$
|
653
|
|
Net (loss)/income per share of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)/income per share of common stock
|
|
$
|
(0.14
|
)
|
|
|
|
|
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding, basic and diluted
|
|
|
20,061,763
|
|
|
|
(12,055,000
|
)
(d)
|
|
|
8,006,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Unaudited Pro Forma
Statement of Operations for the Year Ended December 31, 2009
|
|
|
(a)
|
|
The adjustment reflects the
elimination of estimated third party costs incurred to pursue
strategic initiatives
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
3,491
|
|
|
|
|
|
Marketing, general and administrative expense
|
|
|
|
|
|
$
|
3,491
|
|
|
|
|
(b)
|
|
The adjustment reflects the
increase to the management fee for the change in equity
associated with the loans sold
|
|
|
|
|
|
|
|
|
|
Management fees to related party
|
|
$
|
30
|
|
|
|
|
|
Cash
|
|
|
|
|
|
$
|
30
|
|
|
|
|
(c)
|
|
The adjustment reflects the income
from reinvestment into money market funds of eliminated costs to
pursue strategic initiatives
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
17
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
$
|
17
|
|
|
|
|
(d)
|
|
The adjustment reflects the net
impact of 16,500,000 fewer shares outstanding for 365 days
in 2009 as a result of the tender offer and an additional
4,445,000 shares outstanding for 365 days in 2009 as a
result of the Tiptree issuance.
|
48
Care
Investment Trust Inc.
Unaudited
Pro Forma Statement of Operations for the Three Months Ended
March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
Pro Forma
|
|
|
|
|
|
|
2010
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(dollars in thousands, except share and per share data)
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental revenue
|
|
$
|
3,215
|
|
|
|
|
|
|
$
|
3,215
|
|
Income from investments in loans
|
|
|
744
|
|
|
|
|
|
|
|
744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
3,959
|
|
|
$
|
|
|
|
$
|
3,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fee and buyout payment to related party
|
|
|
7,929
|
|
|
|
|
|
|
|
7,929
|
|
Marketing, general and administrative (including stock-based
compensation expense of $63)
|
|
|
1,816
|
|
|
|
|
|
|
|
1,816
|
|
Depreciation and amortization
|
|
|
841
|
|
|
|
|
|
|
|
841
|
|
Realized (gain) on loans sold and repayment of loans
|
|
|
(4
|
)
|
|
|
|
|
|
|
(4
|
)
|
Adjustment to valuation allowance on loans held at (lower of
cost or market)
|
|
|
(745
|
)
|
|
|
|
|
|
|
(745
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
$
|
9,837
|
|
|
$
|
|
|
|
$
|
9,837
|
|
Other (income)/expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from investments in partially-owned entities
|
|
|
583
|
|
|
|
|
|
|
|
583
|
|
Unrealized (income)/loss on derivative instruments
|
|
|
578
|
|
|
|
|
|
|
|
578
|
|
Interest income
|
|
|
(47
|
)
|
|
|
(4
|
)
(a)
|
|
|
(51
|
)
|
Interest expense including amortization of deferred financing
costs
|
|
|
1,438
|
|
|
|
|
|
|
|
1,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)/income
|
|
$
|
(8,430
|
)
|
|
$
|
4
|
|
|
$
|
(8,426
|
)
|
Net (loss)/income per share of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)/income per share of common stock
|
|
$
|
(0.42
|
)
|
|
|
|
|
|
$
|
(1.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding, basic and diluted
|
|
|
20,205,996
|
|
|
|
(12,055,000
|
)
(b)
|
|
|
8,150,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Unaudited Pro Forma
Statement of Operations for the Three Months Ended
March 31, 2010
|
|
|
(a)
|
|
The adjustment reflects the income
from reinvestment into money market funds of eliminated costs to
pursue strategic alternatives
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
4
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
$
|
4
|
|
|
|
|
(b)
|
|
The adjustment reflects the net
impact of 16,500,000 fewer shares outstanding for 90 days
in 2010 as a result of the tender offer and an additional
4,445,000 shares outstanding for 90 days in 2010 as a
result of the Tiptree issuance.
|
49
THE
PURCHASE AND SALE AGREEMENT
This section of the proxy statement describes the material
provisions of the purchase and sale agreement but does not
purport to describe all of the terms of the purchase and sale
agreement. The following summary is qualified in its entirety by
reference to the complete text of the purchase and sale
agreement, which was filed as exhibit 10.1 to our
Form 8-K
filed on March 16, 2010. We urge you to read the full text
of the purchase and sale agreement because it is the legal
document that governs the transaction. It is not intended to
provide you with any other factual information about us. Such
information can be found elsewhere in this proxy statement and
in the public filings we make with the SEC, as described in the
section entitled Where You Can Find More Information
below.
The
Transaction
On March 16, 2010, we entered into a purchase and sale
agreement with Tiptree for the sale of control of our company
through a combination of an equity investment by Tiptree in
newly issued common stock at $9.00 per share and a cash tender
offer by us for up to all of our issued and outstanding shares
of common stock at the same price, as long as at least
10,300,000 shares are validly tendered and not withdrawn
prior to the expiration date of the tender offer and the other
conditions to the issuance and tender offer are satisfied or
waived.
Under the purchase and sale agreement, we agreed to sell shares
to Tiptree upon completion of the tender offer. The number of
shares to be sold to Tiptree will be a minimum of
4,445,000 shares of our common stock at a price of $9.00
per share in conjunction with a cash tender offer by us of $9.00
per share for up to all publicly held shares of our company.
Tiptree has the option to purchase additional newly issued
company shares if less than 16,500,000 shares are tendered
in the tender offer in order to obtain ownership of up to 53.4%
of the company, and if more than 18,000,000 shares are
tendered (and not withdrawn) in the tender offer, then Tiptree
must purchase additional newly issued company shares equal to
the difference between 18,000,000 and the number of shares that
are tendered (and not withdrawn) in the tender offer.
Tiptree has sufficient unencumbered cash, net of short-term
accruals and liabilities, to complete the share issuance, which
requires it to deposit $60,430,932 in escrow. As of
March 31, 2010, Tiptrees most recent quarter end, it
had $99.9 million of unencumbered cash and
$4.4 million of short-term accruals and liabilities
recorded on its balance sheet. On June 1, 2010, its
financial position was even stronger. As of such date, Tiptree
had $100.5 million of unencumbered cash and
$1.5 million of short-term accruals and liabilities on its
balance sheet.
Based on Tiptrees anticipated business activities and
expenses through to the closing date of the share issuance, from
June 1, 2010 through the date immediately prior to closing
date of the share issuance, Tiptree is expected to have a
similar financial position as of June 1, 2010, and will
continue to have sufficient cash to enable it to fund its escrow
deposit in full.
Closing
The issuance to Tiptree will close upon the acceptance for
payment of the shares validly tendered and not withdrawn as of
the expiration of the tender offer, which shall occur upon
satisfaction or waiver of the conditions set forth in
Conditions to Closing below.
Conditions
to Closing
Based on our cash on hand as of March 31, 2010, if more
than 15,100,000 shares are tendered in the tender offer, we
will need to use some or all of the proceeds from the Tiptree
share issuance transaction to purchase such additional shares.
As a result, one of the conditions to our obligation to accept
and pay for the shares in the tender offer is the deposit by
Tiptree of the maximum purchase price for the shares to be
issued to it into escrow. The obligation of Tiptree to deposit
the funds into escrow is subject to certain customary
conditions, including conditions that provide Tiptree with
comfort that the tender offer will close and permit it to obtain
the minimum ownership interest in the company that it seeks.
50
Cares obligation to accept for payment and pay for the
shares validly tendered and not withdrawn in the tender offer is
subject to the satisfaction or waiver of the following
conditions set forth in the purchase and sale agreement, each of
which must be satisfied or, subject to the requirements of the
purchase and sale agreement, waived by Care prior to the
expiration date of the tender offer:
|
|
|
|
|
a minimum of 10,300,000 shares of our company common stock
shall have been validly tendered (and not withdrawn) in the
tender offer; (Condition 1)
|
|
|
|
Tiptree must have delivered $60,430,932 and a joint written
declaration to BNY Mellon Shareowner Services, the escrow agent;
(Condition 2)
|
|
|
|
our stockholders must have approved the issuance to Tiptree
proposal, the abandonment of the liquidation proposal and the
first amendment proposal set forth in this proxy statement;
(Condition 3)
|
|
|
|
there must be no temporary restraining order, preliminary or
permanent injunction, or other order issued by any court of
competent jurisdiction that prevents the consummation of the
transaction; (Condition 4)
|
|
|
|
there must be no statute, rule, regulation or order enacted or
enforced which prevents or prohibits the consummation of the
transaction and that remains in effect; (Condition 5)
|
|
|
|
any applicable waiting period under the HSR Act shall have
expired or been terminated, and any approvals and consents
required to be obtained under the antitrust laws before the
transaction can be consummated shall have been obtained;
(Condition 6)
|
|
|
|
Tiptrees representations and warranties contained in the
purchase and sale agreement must be true and correct, except
where the failure of such representations and warranties to be
true and correct, taken as a whole, would not reasonably be
expected to cause a material adverse effect on the ability of
Tiptree to timely consummate the transaction or otherwise
comply, in all material respects, with the terms and conditions
of the purchase and sale agreement; (Condition 7)
|
|
|
|
each of the covenants and obligations that Tiptree is required
to perform or to comply with pursuant to the purchase and sale
agreement at or prior to the date that the company accepts for
payment all of the shares of company common stock validly
tendered pursuant to the tender offer shall have been duly
performed or complied with in all respects, except to the extent
the non-performance thereof would not be material to the
transaction; (Condition 8)
|
|
|
|
each of Tiptree and the company must have obtained certain
required consents; (Condition 9)
|
|
|
|
the escrow agreement, entered into by and among the company,
Tiptree, and BNY Mellon Shareowner Services, in its capacity as
escrow agent, must be in full force and effect, which it is as
of the date of this proxy statement; and (Condition 10)
|
|
|
|
since March 16, 2010, there must not have occurred an event
or development that has had or would reasonably be expected to
have a material adverse effect on the ability of Tiptree to
timely consummate the transaction or otherwise comply, in all
material respects, with the terms and conditions of the purchase
and sale agreement. (Condition 11)
|
Upon acceptance by the company for payment of the shares validly
tendered and not withdrawn in the offer, the company must issue
to Tiptree the shares required to be sold to it under the
purchase and sale agreement.
The obligation of Tiptree to deposit $60,430,932 with the escrow
agent is subject to the satisfaction (or waiver by Tiptree) at
or prior to the time such deposit is required of each of the
following conditions:
|
|
|
|
|
our representations and warranties contained in the purchase and
sale agreement are true and correct, except where the failure of
such representations and warranties to be true and correct,
taken as a whole, would not reasonably be expected to have any
effect that is material and adverse to the assets, business,
results of operations or financial condition of the company and
its subsidiaries taken as a whole or that prevents or materially
delays or materially impairs the
|
51
|
|
|
|
|
ability of the company to consummate the transaction subject to
certain exceptions set forth in the purchase and sale agreement
(a Company Material Adverse Effect);
|
|
|
|
|
|
we must have performed or complied with each of our covenants
and obligations that we are required to perform or comply with
pursuant to the purchase and sale agreement at or prior to the
time that such deposit is required except to the extent that
non-performance would not be material to the transaction or
result in a Company Material Adverse Effect;
|
|
|
|
the registration rights agreement entered into by and between
the company and Tiptree and the escrow agreement among the
company, Tiptree and BNY Shareowner Services must be in full
force and effect;
|
|
|
|
between March 16, 2010 and the time that such deposit is
required, there must not have occurred any change, event or
development that has had or would reasonably be expected to have
individually or in the aggregate a Company Material Adverse
Effect;
|
|
|
|
at least three (3) members of our board of directors must
have resigned and the resulting vacancies shall have been filled
with candidates acceptable to Tiptree effective as of the
consummation of the share issuance;
|
|
|
|
Tiptree shall have received a legal opinion stating that the
shares, when issued, will be duly authorized, fully paid,
validly issued and non-assessable and that the shares, when
issued, will not have been issued in violation of preemptive
rights;
|
|
|
|
there must be no restraining order, preliminary or permanent
injunction, or other order issued, enacted, or entered by any
governmental entity of competent jurisdiction that prevents the
consummation of the transaction and that remains in effect at
the time such deposit is required;
|
|
|
|
we must provide Tiptree with a certificate of a duly authorized
officer of the company certifying to certain of the foregoing
conditions having been satisfied;
|
|
|
|
a minimum of 10,300,000 shares of our company common stock
shall have been tendered (and not withdrawn) in the tender offer
as of 9:00 a.m. on any date on which the offer is scheduled
to expire; and
|
|
|
|
the conditions denoted as Conditions
3-11
above
with respect to the tender offer must have been satisfied or
waived by Care, subject to the requirements of the purchase and
sale agreement.
|
Once the deposit by Tiptree of $60,430,932 is made into escrow,
the only condition to Tiptrees obligation to purchase the
shares to be issued to it is that the company has accepted for
payment all shares tendered (and not withdrawn) without waiver
or modification of the minimum condition.
As of the date of this proxy statement, the required consents
and government approvals have either been obtained or are
otherwise not applicable.
Representations
and Warranties of the Company
The purchase and sale agreement contains representations and
warranties made by us to Tiptree and representations and
warranties made by Tiptree to us. The assertions embodied in
those representations and warranties were made solely for
purposes of the purchase and sale agreement and may be subject
to important qualifications and limitations agreed by the
parties in connection with negotiating its terms. Moreover, some
of those representations and warranties may not be accurate or
complete as of any particular date because they are subject to a
contractual standard of materiality or material adverse effect
that is different from the standard generally applicable to
public disclosures to stockholders, or because they are used for
the purpose of allocating risk between the parties to the
purchase and sale agreement rather than establishing matters of
fact. For the foregoing reasons, you
52
should not rely on the representations and warranties contained
in the purchase and sale agreement as statements of factual
information or for any other purpose.
In the purchase and sale agreement, we make representations and
warranties relating to, among other things:
|
|
|
|
|
our and our subsidiaries proper corporate organization,
good standing and existence;
|
|
|
|
our and our subsidiaries corporate power and authority to
own our properties and assets and to carry on our business as it
is being conducted;
|
|
|
|
our capitalization, including in particular the number of shares
of our outstanding common stock and stock options outstanding
and the amount and certain terms of our outstanding indebtedness;
|
|
|
|
our corporate power and authority to enter into the purchase and
sale agreement, escrow agreement and registration rights
agreement and to consummate the transaction;
|
|
|
|
the absence of any violation of, conflict with or defaults under
our organizational documents, applicable law or certain
agreements as a result of entering into the purchase and sale
agreement, escrow agreement and registration rights agreement
and consummating the transaction;
|
|
|
|
required regulatory filings and consents and approvals of
governmental entities;
|
|
|
|
our SEC filings since June 27, 2007 and the financial
statements contained therein;
|
|
|
|
our implementation of certain internal controls over financial
reporting and a system of disclosure controls as required by the
Securities Exchange Act or 1934, as amended (the Exchange
Act), and compliance with the Sarbanes-Oxley Act;
|
|
|
|
the absence of certain changes or events since January 1,
2009;
|
|
|
|
the absence of certain liabilities and obligations, other than
(i) as set forth on our September 30, 2009 balance
sheet, (ii) ordinary course liabilities consistent with
past practice since September 30, 2009, (iii) those
incurred pursuant to the purchase and sale agreement and
(iv) those that do not, individually or in the aggregate,
exceed $1 million;
|
|
|
|
disclosure regarding litigation matters and the absence of
investigations and proceedings by governmental entities;
|
|
|
|
disclosure of, including the status of, certain tax matters;
|
|
|
|
the absence of employees, the status of company benefit plans
and other employee matters;
|
|
|
|
compliance with applicable laws and other regulatory matters;
|
|
|
|
the existence and status of material contracts of the company
and its subsidiaries;
|
|
|
|
the status of the material assets owned and leased by us and
title to assets;
|
|
|
|
the status of insurance policies;
|
|
|
|
the absence of undisclosed brokers and finders fees;
|
|
|
|
the accuracy of information regarding the company in certain
documents;
|
|
|
|
the status of the company under the Investment Company Act of
1940, as amended;
|
|
|
|
the absence of agreements with affiliated parties; and
|
|
|
|
the inapplicability of anti-takeover statutes or regulations to
the purchase and sale agreement and transaction.
|
53
Representations
and Warranties of Tiptree
In the purchase and sale agreement, Tiptree makes
representations and warranties relating to, among other things:
|
|
|
|
|
its proper organization, good standing and corporate or other
power to operate its business;
|
|
|
|
its corporate power and authority to enter into the purchase and
sale agreement, escrow agreement and registration rights
agreement and to consummate the transaction;
|
|
|
|
the absence of any violation of or conflict with or defaults
under any of its organizational documents, applicable law or
certain agreements as a result of entering into the purchase and
sale agreement escrow agreement and registration rights
agreement and consummating the transaction;
|
|
|
|
the absence of approval of any governmental entity or third
party necessary for the consummation by Tiptree of the
transactions contemplated by the purchase and sale agreement;
|
|
|
|
the absence of any legal proceedings;
|
|
|
|
the absence of brokers and finders fees;
|
|
|
|
the accuracy of information regarding Tiptree in certain
documents;
|
|
|
|
the intention of Tiptree to cause the shares of our company
common stock to continue to be listed on the NYSE;
|
|
|
|
the fact that it has not relied upon any representations or
warranties of our company other than those expressly provided
for in the purchase and sale agreement and has conducted its own
due diligence efforts and has made its decision to enter into
the transaction based upon its own judgment and any advice from
its advisors;
|
|
|
|
the sufficiency of its available funds to enable Tiptree to make
a deposit of $60,430,932 with the escrow agent; and
|
|
|
|
its status as a sophisticated investor.
|
Many of our representations and warranties are qualified by a
Company Material Adverse Effect standard. For
purposes of the purchase and sale agreement, Company
Material Adverse Effect means any effect that is material
and adverse to the assets, business, results of operations or
financial condition of the company and our subsidiaries taken as
a whole or that prevents or materially delays or materially
impairs the ability of the company to consummate the
transaction; provided, however, that no effect resulting from or
relating to the following shall constitute, or be taken into
account in determining whether there is or has been, a Company
Material Adverse Effect: (i) changes in conditions
generally affecting the industry in which we operate or the
United States or global economy; (ii) general political,
economic or business conditions or changes therein (including
the commencement, continuation or escalation of a war, material
armed hostilities or other material international or national
calamity or acts of terrorism or earthquakes, hurricanes, other
natural disasters or acts of God); (iii) general financial
or capital market conditions, including interest rates, or
changes therein; (iv) any changes in applicable law, rules,
regulations, or generally accepted accounting principles or
other accounting standards, or authoritative interpretations
thereof, after the date of the purchase and sale agreement;
(v) the negotiation, execution, announcement or performance
of the purchase agreement or the performance or consummation of
the transaction, any litigation resulting therefrom, or the
impact thereof on relationships, contractual or otherwise, with
customers, suppliers, lenders, investors or employees;
(vi) any failure by us or any of our affiliates to meet any
analysts expectations or estimates of revenues or
earnings, including any failure arising out of changes in the
business of the company or any of our affiliates or any changes
in their respective credit ratings; (vii) any action or
omission required pursuant to the terms of the purchase and sale
agreement, or pursuant to the express written request of
Tiptree, or any action otherwise taken by Tiptree; (viii) a
decrease in the market price of the shares of our common stock;
provided, that the exception in this
54
clause (viii) shall not prevent or otherwise affect a
determination that any change or effect underlying such a
decrease in market price has resulted in, or contributed to, a
Company Material Adverse Effect; or (ix) the existence of
the litigation with Cambridge or any settlement thereof or any
other actions taken or omitted to be taken by us or any of our
subsidiaries or any of the Cambridge parties relating to the
ownership interest of ERC Sub, L.P. in any Cambridge entity or
the ownership of any partnership interests in ERC Sub, L.P. by
any of the Cambridge parties; provided, further, however, that
changes, events, occurrences or effects set forth in clause (i),
(ii), (iii) or (iv) above may be taken into account in
determining whether there has been or is a Company Material
Adverse Effect to the extent such changes, events, occurrences
or effects have a materially disproportionate adverse effect on
us and our subsidiaries, taken as a whole, as compared to other
participants in the industries in which we and our subsidiaries
operate, but only to the extent of such materially
disproportionate adverse effect as compared to such other
participants; provided, further, however, that the exceptions in
clauses (vi) and (viii) shall not prevent or otherwise
affect a determination that the underlying cause of any decline,
change or failure referred to therein (if not otherwise falling
within any of the exceptions provided by clause (i) through
(ix) above) is a Company Material Adverse Effect.
Conduct
of Business Pending the Transaction
We have agreed that, subject to certain exceptions, until the
earlier of the closing date or the termination of the purchase
and sale agreement (except as may be required by law or with the
prior consent of Tiptree), we will, and will cause each of our
subsidiaries to, conduct our business in the ordinary course
consistent with past practice.
We have also agreed that during the same time period, and
subject to certain exceptions, we will not, and will not permit
any of our subsidiaries to:
|
|
|
|
|
cause or permit any amendment, modification, alteration or
rescission of our certificate of incorporation, bylaws or other
charter or organizational documents;
|
|
|
|
declare or pay any dividend or other distribution in respect of
our capital stock other than dividends or other distributions by
our subsidiary to us or another wholly owned subsidiary and
quarterly cash dividends of up to $0.17 per share of our common
stock, with record and payment dates consistent with past
practice;
|
|
|
|
split, combine or reclassify any of our capital stock, or
repurchase or otherwise acquire, directly or indirectly, any
shares of our capital stock except from former employees,
directors or consultants in accordance with agreements in effect
on March 16, 2010, and the exercise of any warrants;
|
|
|
|
issue, deliver or sell or authorize or propose the issuance,
delivery or sale of any shares of our capital stock or
securities convertible into, or subscriptions, rights, warrants
or options to acquire, or other agreements or commitments of any
character obligating us to issue any such shares or other
convertible securities, other than (i) pursuant to the
exercise of any warrants outstanding or the vesting and
settlement of our restricted stock units or performance share
awards, (ii) pursuant to our benefit plans,
(iii) pursuant to the exercise of any warrants outstanding
to effectuate a grantee direction upon exercise or for
withholding of Taxes, or (iv) pursuant to any other
agreements existing as of March 16, 2010 to the extent set
forth on a schedule to the purchase and sale agreement;
|
|
|
|
sell, lease, license or otherwise dispose of or encumber any
assets having a value in excess of $250,000 in the aggregate;
|
|
|
|
incur any indebtedness for borrowed money or assume, guarantee,
endorse or otherwise as an accommodation become responsible for
the obligations of any third party, in excess of $250,000 in the
aggregate;
|
55
|
|
|
|
|
make any capital expenditures, capital additions or capital
improvements except in the ordinary course of business
consistent with past practice that do not exceed individually or
in the aggregate $250,000;
|
|
|
|
(i) terminate, amend or waive any material right in, or
fail to perform any material obligations under, any material
contract in a manner that could reasonably be expected to have a
Company Material Adverse Effect, or (ii) enter into any
material contract;
|
|
|
|
except as required by existing written agreements or company
benefit plans, increase the compensation or other benefits
payable or provided to our directors or officers or any other
person that provides services to us or our subsidiaries;
|
|
|
|
(i) enter into any employment, change of control, severance
or retention agreement with any of our or our subsidiaries
employees or directors or any other person that provides
services to us or our subsidiaries, (ii) establish, adopt,
enter into or amend any collective bargaining agreement, plan,
trust, fund, policy or arrangement for the benefit of any of our
or our subsidiaries current or former directors, officers
or employees or any of their beneficiaries, or (iii) grant
any equity or equity based awards;
|
|
|
|
acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any
other manner, any business or any person or otherwise acquire or
agree to acquire any assets;
|
|
|
|
make any change to our financial accounting methods or
practices, except as may be required by GAAP,
Regulation S-X
or any other rule or regulation promulgated by the Securities
and Exchange Commission;
|
|
|
|
make or change any material tax elections, apply for or pursue
any tax ruling, change any tax identification number, execute
any powers of attorney in respect of any tax matter, extend or
waive the application of any statute of limitations regarding
the assessment or collection of any material tax of the company
or our subsidiaries, or take any action which could cause us to
fail to qualify as a REIT (other than in connection with or as a
result of the transaction with Tiptree), or adopt or change in
any material respect any accounting method in respect of taxes;
|
|
|
|
settle or offer to settle the litigation with Cambridge Holdings
(other than any settlement that (i) does not require us to
pay any material amounts, (ii) would not reasonably be
expected to have a Company Material Adverse Effect from and
after the settlement date, or (iii) would not require us to
waive any material right or to undertake any material
obligation);
|
|
|
|
enter into any new line of business or enter into any agreement
that restrains, limits or impedes our or any of our
subsidiaries ability to compete with or conduct any
business or line of business;
|
|
|
|
expand the size of our board of directors; or
|
|
|
|
take or agree in writing to take any of the foregoing actions.
|
Efforts
to Complete the Transaction
Subject to the terms and conditions of the purchase and sale
agreement, we have agreed to take all action necessary under all
applicable laws to call, give notice of and hold a meeting
special meeting of the stockholders to vote on the issuance to
Tiptree proposal, the abandonment of the liquidation proposal
and the first amendment proposal, and to use commercially
reasonable efforts to ensure that all proxies solicited in
connection with the special meeting of stockholders are
solicited in compliance with all applicable laws. In connection
with the special meeting, we have prepared this proxy statement
and have agreed to recommend the issuance to our stockholders.
In addition, both parties have agreed to, and to cause their
respective subsidiaries to, use commercially reasonable efforts
to, (i) take, or cause to be taken, all actions necessary,
proper or advisable to comply promptly with all legal
requirements which may be imposed on such party or its
56
subsidiaries with respect to the transactions, including
obtaining any third party consent which may be required to be
obtained in connection with the transaction, to challenge the
imposition of any preliminary or permanent injunction or other
order of a court of competent jurisdiction preventing the
consummation of the transaction (which challenge shall be at the
companys cost and expense), and, subject to the conditions
to such partys obligations set forth in the purchase and
sale agreement, to consummate the transaction and
(ii) obtain (and cooperate with the other party to obtain)
any consent, authorization, order or approval of, or any
exemption by, any governmental entity which is required to be
obtained by either party or any of their respective subsidiaries
in connection with the transaction; provided that, in no event
shall the company or any of its subsidiaries or Tiptree be
required to (a) seek to remove any temporary restraining
order, preliminary or permanent injunction or other order issued
by a court of competent jurisdiction preventing the consummation
of the transaction or (b) pay any amounts to any third
parties in settlement of pending litigation relating to or
arising out of the transaction.
The parties have also agreed to cooperate with each other and
promptly prepare and file all necessary documentation, and
effect all applications, notices, petitions and filings
(including any notification required by the HSR Act), to obtain
as promptly as practicable all permits, consents, approvals,
authorizations of all third parties and governmental entities,
and the expiry or termination of all applicable waiting periods,
which are required to consummate the transaction. In addition,
the parties have agreed that they will consult with each other
with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and
governmental entities necessary or advisable to consummate the
transactions and each party will keep the other apprised of the
status of matters relating to completion of the transaction.
Both parties have agreed to give prompt notice to the other of
(i) the occurrence, or failure to occur, of any event,
which occurrence or failure to occur is reasonably likely to
cause any representation or warranty of such party contained in
the purchase and sale agreement to be untrue or inaccurate in a
manner that would cause the conditions to Tiptrees
obligations to deposit the $60,430,932 or the conditions to our
obligation to accept for payment the shares validly tendered and
not withdrawn not to be satisfied as of the relevant date
specified in the purchase and sale agreement, or (ii) any
failure of Tiptree or the company, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under purchase and sale
agreement in a manner that would cause the conditions to
Tiptrees obligations to deposit the $60,430,932 or the
conditions to our obligation to accept for payment the shares
validly tendered and not withdrawn not to be satisfied as of the
relevant date specified in the purchase and sale agreement.
No
Solicitation of Alternative Transaction; Superior
Proposal
We have agreed, among other things, that we shall not, nor shall
we authorize any of our subsidiaries or any of our or our
subsidiaries executive officers and directors, employees,
accountants, counsel, financial advisors, agents or other
representatives to:
|
|
|
|
|
directly or indirectly, solicit, initiate, or encourage any
inquiries regarding or the submission of, any takeover proposal;
|
|
|
|
participate in any discussions or negotiations regarding, or
furnish to any person any confidential information or data with
respect to, or take any other action to knowingly facilitate the
making of, a takeover proposal or any inquiry that may
reasonably be expected to lead to a takeover proposal; or
|
|
|
|
enter into any agreement with respect to any takeover proposal
or approve or resolve to approve any takeover proposal.
|
Notwithstanding anything to the contrary above, prior to the
date that the company accepts for payment all shares of company
common stock validly tendered pursuant to the tender offer (and
not
57
withdrawn), if the company receives from any third party a
written inquiry or takeover proposal that was not solicited in
violation of the purchase and sale agreement:
|
|
|
|
|
the company may contact such third party or its advisors for the
purpose of clarifying such inquiry or takeover proposal and the
material terms and conditions thereof, so as to determine
whether such inquiry or takeover proposal is reasonably likely
to lead to a superior proposal; and
|
|
|
|
the company may furnish information concerning its business or
assets to such third party pursuant to a customary
confidentiality agreement with provisions not materially less
favorable in the aggregate to the company than the
confidentiality agreement it executed with Tiptree, and may
negotiate and participate in discussions and negotiations with
such third party concerning a takeover proposal, if such third
party has submitted a superior proposal, or a takeover proposal
that the companys board of directors determines in good
faith (after consultation with its advisors) is reasonably
likely to constitute or lead to a superior proposal.
|
Pursuant to the purchase and sale agreement, the company agreed
to promptly (and, in any event, within 72 hours) notify
Tiptree if any proposals or offers with respect to a takeover
proposal are received by, any non-public information is
requested from, or any discussions or negotiations are sought to
be initiated or continued with, the company or any of its
representatives including, in connection with such notice, a
written summary of the material terms and conditions of any
proposals or offers that are not made in writing and copies of
any requests, proposals or offers, including proposed
agreements, of proposals or offers that are made in writing. The
company agreed to keep Tiptree reasonably informed, on a prompt
basis, of the status and terms of any proposals or offers
(including any amendments thereto) and the status of any
discussions, negotiations or developments, as well as to
promptly provide Tiptree with any non-public information
concerning the company provided to any other third party which
was not previously provided to Tiptree.
For purposes of the purchase and sale agreement, takeover
proposal means any proposal or offer, whether in writing
or otherwise, from a third party to acquire beneficial ownership
(as defined under
Rule 13d-3
of the Exchange Act) of assets that constitute 15% or more of
our assets or 15% or more of our common stock or outstanding
voting power, whether pursuant to a merger, consolidation or
other business combination, sale of shares of capital stock,
sale of assets, tender offer, exchange offer or similar
transaction.
For purposes of the purchase and sale agreement, superior
proposal means a bona fide written proposal by a third
party to acquire, directly or indirectly, more than 50% of the
shares of our common stock then outstanding or of the assets,
which (i) our board determines in good faith (after
consultation with its advisors) to be more favorable to our
stockholders than the transaction with Tiptree and
(ii) which, in the good faith judgment of our board, is
reasonably likely to be consummated, taking into consideration
(with respect to both subsections (i) and (ii) above)
all financial, regulatory, legal, timing and other aspects of
such proposal.
Except as described above, and subject to any additional
conditions as described in the purchase and sale agreement,
neither our board nor any committee thereof may (i) adopt,
approve or recommend, or propose to adopt, approve or recommend,
(publicly or otherwise) a takeover proposal, (ii) make any
recommendation or public statement in connection with a tender
offer or exchange offer by a third party other than a
recommendation against such offer or a stop, look and
listen communication by our board pursuant to
Rule 14d-9(f)
of the Exchange Act, or (iii) cause or permit the company
to enter into any acquisition agreement, merger agreement or
similar definitive agreement (other than a confidentiality
agreement as described above) relating to any takeover proposal.
Notwithstanding anything in the purchase and sale agreement to
the contrary, prior to the date that the company accepts for
payment all shares of our common stock validly tendered pursuant
to the tender offer (and not withdrawn), our board may take any
of the actions in the preceding paragraph if (i) our board
has determined in good faith, after consultation with outside
counsel, that failure to take such action would be inconsistent
with our directors fiduciary duties to our stockholders
and (ii) in the
58
case of the actions referred to in clauses (ii) or
(iii) of the preceding paragraph, (a) we shall have
received a superior proposal which is pending at the time we
determine to take such action, (b) we shall have provided
Tiptree with written notice advising Tiptree that our board has
received such a superior proposal which it intends to approve,
recommend or accept, specifying the identity of the party making
the superior proposal and the material terms and conditions
thereof, and (c) at least two (2) business days shall
have passed following Tiptrees receipt of such notice
(each subsequent material amendment or material revision to such
superior proposal will require us to deliver to Tiptree a new
notice of superior proposal and result in an additional two
(2) business day period from the date of receipt of any
such material amendment or material revision) and Tiptree must
not have made a binding written offer that our board has
concluded in its good faith judgment, after consultation with
its financial advisors, is at least as favorable to the our
stockholders as such superior proposal.
Governance
As a condition to Tiptrees obligations under the purchase
and sale agreement, at least three of our directors must resign
from the board, effective as of closing, and the vacancies shall
be filled with candidates acceptable to Tiptree.
Exchange
Listing
Tiptree has agreed to use commercially reasonable efforts to
cause the shares of our common stock to continue to be listed
for trading on the NYSE for a period of one year after the
closing date.
Termination
of the Purchase and Sale Agreement
The purchase and sale agreement may be terminated before closing
by:
|
|
|
|
|
mutual consent of the company and Tiptree at any time prior to
the date on which the company accepts the shares tendered in the
tender offer (and not withdrawn);
|
|
|
|
either Tiptree or the company, by written notice, at any time
prior to 5:00 p.m. on August 31, 2010 if we have not
accepted for payment shares tendered (and not withdrawn) in the
tender offer; provided, that the failure to complete the tender
offer is not due to the fault of the party requesting
termination;
|
|
|
|
Tiptree at any time prior to the date on which Tiptree is
required to deposit $60,430,932 in connection with the
transaction by written notice to the company, if (i) the
company breaches any of its representations, warranties or
obligations under the purchase and sale agreement to an extent
that would cause certain conditions not to be satisfied and such
breach has not been cured within ten (10) business days of
receipt by the company of written notice of such breach if such
breach is capable of cure; provided, that Tiptrees right
to terminate the purchase and sale agreement will not be
available to Tiptree if it is at that time in material breach of
purchase and sale agreement, (ii) the companys board
shall have withdrawn or modified, or proposed publicly to
withdraw or modify, the boards approval of the transaction
in a manner adverse to Tiptree or (iii) the companys
board shall have approved or recommended, or proposed publicly
to approve or recommend, a takeover proposal, or within five
(5) days of a written request by Tiptree for the
companys board to reaffirm its approval of the transaction
following the date on which any takeover proposal, or any
material modification thereto, is first publicly announced,
published or sent to the stockholders of the company, the
company fails to issue a press release that reaffirms its
boards approval of the transaction (which request may only
be made once with respect to such takeover proposal absent
further material changes or amendments in such takeover
proposal);
|
|
|
|
the company at any time prior to the closing date if Tiptree
breaches any of its representations, warranties or obligations
under the purchase and sale agreement to an extent that would
cause the conditions set forth in subsections (e) or
(f) of Annex I to the purchase and sale agreement
|
59
|
|
|
|
|
not to be satisfied and Tiptree has not cured such breach within
ten (10) business days of receiving written notice of such
breach and such breach is capable of cure; provided, that the
company cannot terminate the purchase and sale agreement if the
company is at that time in material breach of the purchase and
sale agreement;
|
|
|
|
|
|
the company at any time prior to accepting for payment shares
tendered (and not withdrawn) in the tender offer in order to
enter into a definitive agreement with respect to a superior
proposal in accordance with the purchase and sale agreement;
provided, the company has complied with its obligations
regarding takeover proposals in the purchase and sale
agreement; and
|
|
|
|
either the company or Tiptree at any time prior to the company
accepting all shares of its common stock validly tendered
pursuant to the tender offer if any governmental entity issues
an order, decree or ruling or takes any other action permanently
enjoining, restraining or otherwise prohibiting the transaction
as violative of any antitrust law or for any reason other than
antitrust law, and such order, decree or ruling has become final
and non-appealable.
|
Termination
Fees
In the event of a termination of the purchase and sale
agreement, we have agreed to the following:
|
|
|
|
|
if the termination is due to us entering into a definitive
agreement with respect to a superior proposal, our breach of our
non-solicitation obligation, our failure to conduct the tender
offer, our failure to file a preliminary proxy statement seeking
stockholder approval in accordance with the purchase and sale
agreement, or our failure to take all action necessary to hold a
special meeting of the stockholders to approve the issuance to
Tiptree proposal, the abandonment of the liquidation proposal
and the first amendment proposal, we will pay Tiptree a
$1.6 million termination fee;
|
|
|
|
if the termination follows a publicly announced takeover
proposal and is pursuant to: (i) a withdrawal of our
boards approval of the transactions contemplated in the
purchase and sale agreement, (ii) our boards approval
of an alternate takeover proposal, or (iii) less than
10,300,000 shares being tendered in the tender offer by
August 31, 2010, and within twelve months of terminating
the agreement we consummate the transaction contemplated by the
takeover proposal, we will pay Tiptree a $1.6 million
termination fee;
|
|
|
|
if the termination is due to Tiptree breaching any of its
representations, warranties or obligations that would cause the
conditions set forth in subsections (e) and (f) Annex I to the
purchase and sale agreement not to be satisfied and Tiptree has
not cured such breach within ten (10) business days after
receiving written notice of such breach if such breach is
capable of cure, Tiptree will pay us a $1.6 million
termination fee; and
|
|
|
|
if the termination is due to the transaction not closing by
August 31, 2010 and Tiptree has not obtained its required
consents or there has occurred a Purchaser Material Adverse
Effect, Tiptree will pay us a $1.6 million termination fee.
|
Purchaser Material Adverse Effect means any material adverse
effect on the ability of Tiptree to timely consummate the
Tiptree transaction or otherwise comply, in all material
respects, with the terms and conditions of the purchase and sale
agreement.
60
THE
REGISTRATION RIGHTS AGREEMENT
This section of the proxy statement describes the material
provisions of the registration rights agreement but does not
purport to describe all of the terms of the registration rights
agreement. The following summary is qualified in its entirety by
reference to the complete text of the registration rights
agreement, which was filed as exhibit 10.2 to our
Form 8-K
filed on March 16, 2010. We urge you to read the full text
of the registration rights agreement. It is not intended to
provide you with any other factual information about us. Such
information can be found elsewhere in this proxy statement and
in the public filings we make with the SEC, as described in the
section entitled Where You Can Find More Information
below.
Pursuant to the purchase and sale agreement, we have entered
into the registration rights agreement with Tiptree concurrently
with the execution of the purchase and sale agreement. The
registration rights agreement provides Tiptree with certain
rights to cause us to register shares of common stock to be
issued to Tiptree in connection with the consummation of the
transaction.
Demand
Registrations
At any time and from time to time, holders representing a
majority-in-interest
of the to be registrable securities (as defined herein), may
request registration under the Securities Act of 1933, as
amended (the Securities Act), on
Form S-11
or any similar other applicable long-form registration statement
for the offering of all or any portion of such securities.
Within ten days after receiving such written request, we must
use commercially reasonable efforts to include in such
registration all of the registrable securities with respect to
which we have received notice, within 10 days of our
notice, and use our commercially reasonable efforts to effect,
at the earliest possible date, the registration under the
Securities Act. We are obligated to effect this type of
registration no more than three times. The term
registrable securities includes: (i) any of the
shares purchased by Tiptree pursuant to the purchase and sale
agreement; (ii) any additional shares of our company common
stock acquired by Tiptree or any of its affiliates; and
(iii) any class of shares of our capital stock or shares of
capital stock of a successor to our entire business which may be
issued in exchange for any shares or as payment of any dividend
on any such shares.
In addition, commencing on the date that we are eligible for
short form registration pursuant to Rule 415 of the
Securities Act, each holder will be entitled to request
registrations under the Securities Act of all or part of its
registrable securities; provided, that the anticipated aggregate
offering amount exceeds $1,000,000 (net of underwriting
discounts and commissions).
The holders representing a
majority-in-interest
of the registrable securities have the right to request that a
demand registration be effected as an underwritten offering at
any time. In addition, we may not include in any demand
registration securities of any other person, including
ourselves, unless holders representing a majority in interest of
registrable securities approve of such inclusion.
Piggyback
Registrations
If we propose to file a registration statement under the
Securities Act with respect to an offering of equity securities
for our own account or for our other stockholders, then we are
required to give the holders of registrable securities a minimum
of ten days notice prior to the anticipated filing date offering
such holders the opportunity to register the sale of such number
of registrable securities as the holders may request within five
days following receipt of such notice. If we decide for any
reason not to register or to delay registration of such
securities, we must notify the holders of registrable securities
and, in the case of our determination not to register, we shall
be relieved from our obligation to register the registrable
securities, or in the case of our determination to delay the
registration, can delay the registration of the registrable
securities for the same amount of time.
61
Expenses
All registration, filing fees, fees and expenses of compliance
with securities or blue sky laws, expenses in preparing, mailing
and delivering the registration statement and any other related
agreements, and certain other associated expenses incident to
our compliance with the registration rights agreement will be
paid by us. Each holder will bear its pro rata cost of all
underwriting discounts and commissions associated with any sale
of registrable shares by such holder.
Indemnification
We have agreed to indemnify each holder of registrable
securities, pursuant to a customary indemnification provision,
for any Losses (as defined in the registration rights agreement)
arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in, or omission or
alleged omission to state a material fact in, any registration
statement and other related documents and any amendment thereof
or supplement thereto; provided, that we shall not be required
to indemnify a holder if the untrue statement is made in
conformity with information provided by such holder.
Each holder has agreed to indemnify us, pursuant to a customary
indemnification provision, for any Losses arising out of or
based upon any untrue statement or alleged untrue statement of a
material fact contained in, or omission or alleged omission to
state a material fact in, any registration statement and other
related documents and any amendment thereof or supplement
thereto if, in each case, such event occurred in conformity with
information provided by such holder. The obligations of the
holders with respect to indemnification are several and not
joint and are limited to the amount of proceeds received by such
holder pursuant to the sale of registrable securities by such
holder.
Termination
The registration rights agreement will terminate if the
transactions contemplated by the purchase and sale agreement
have not been consummated and the purchase and sale agreement
has been terminated pursuant to its terms.
Recommendations
of Our Board of Directors and the Special Committee
OUR SPECIAL COMMITTEE AND OUR BOARD OF DIRECTORS RECOMMEND
THAT YOU VOTE FOR THE ISSUANCE TO TIPTREE.
62
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of our
common stock, as of May 3, 2010, for (1) each person
known to us to be the beneficial owner of more than 5% of our
outstanding common stock, (2) each of our directors,
(3) each of our named executive officers as of
March 25, 2010 (including Mr. Kellman and
Mr. McDugall who resigned on December 4, 2009 and
March 18, 2010, respectively) and (4) our directors
and named executive officers as a group. Except as otherwise
described in the notes below, the following beneficial owners
have sole voting power and sole investment power with respect to
all shares of common stock set forth opposite their respective
names.
In accordance with SEC rules, each listed persons
beneficial ownership includes:
|
|
|
|
|
all shares the investor actually owns beneficially or of record;
|
|
|
|
all shares over which the investor has or shares voting or
dispositive control (such as in the capacity as a general
partner of an investment fund); and
|
|
|
|
all shares the investor has the right to acquire within
60 days (such as upon exercise of options that are
currently vested or which are scheduled to vest within
60 days).
|
Unless otherwise indicated, all shares are owned directly and
the indicated person has sole voting and investment power.
Unless otherwise indicated, the business address for each
beneficial owner listed below shall be
c/o Care
Investment Trust Inc., 505 Fifth Avenue,
6th Floor, New York, New York 10017.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature
|
|
|
|
|
of Beneficial
|
|
|
|
|
Ownership of
|
|
Percent of
|
Name
|
|
Common Stock
|
|
Total
(1)
|
|
CIT Group
Inc.
(2)
|
|
|
|
|
|
|
|
|
505 5th Avenue,
6
th
Floor
|
|
|
|
|
|
|
|
|
New York, New York 10017
|
|
|
8,024,040
|
|
|
|
38.83
|
%
|
GoldenTree Asset Management
LP
(3)
|
|
|
|
|
|
|
|
|
300 Park Avenue, 21st Floor
|
|
|
|
|
|
|
|
|
New York, New York 10022
|
|
|
2,741,676
|
|
|
|
13.55
|
%
|
Tyndall Capital Partners,
L.P.
(4)
|
|
|
|
|
|
|
|
|
599 Lexington Avenue, Suite 4100
|
|
|
|
|
|
|
|
|
New York, New York 10022
|
|
|
1,049,000
|
|
|
|
5.19
|
%
|
F. Scott
Kellman
(5)
|
|
|
142,950
|
|
|
|
*
|
|
Flint D.
Besecker
(6)
|
|
|
11,675
|
|
|
|
*
|
|
Michael P.
McDugall
(7)
|
|
|
0
|
|
|
|
*
|
|
Salvatore (Torey) V. Riso
Jr.
(8)
|
|
|
40
|
|
|
|
*
|
|
Paul F.
Hughes
(9)
|
|
|
0
|
|
|
|
*
|
|
Gerald E. Bisbee, Jr.
Ph.D.
(10)
|
|
|
20,834
|
|
|
|
*
|
|
Karen P.
Robards
(10)
|
|
|
21,334
|
|
|
|
*
|
|
J. Rainer
Twiford
(10)
|
|
|
0
|
|
|
|
*
|
|
Steven N.
Warden
(11)
|
|
|
5,352
|
|
|
|
*
|
|
All Directors and Executive Officers as a Group (9 Persons)
|
|
|
202,185
|
|
|
|
*
|
|
|
|
|
*
|
|
The percentage of shares
beneficially owned does not exceed one percent of the total
shares of our common stock outstanding.
|
|
(1)
|
|
As of May 3, 2010,
20,230,152 shares of common stock were issued and
outstanding and entitled to vote. The percent of total for all
of the persons listed in the table above is based on such
20,230,152 shares of common stock, except for CIT Group
Inc., whose percent of total is based on 20,665,152 shares
of common stock, which includes a warrant to purchase
435,000 shares of our common stock. CIT Group Inc. is
entitled to vote 7,589,040 shares.
|
63
|
|
|
(2)
|
|
In an amendment to
Schedule 13D filed on October 2, 2008, CIT Real Estate
Holding Corporation and CIT Healthcare LLC, each located at
505 Fifth Avenue, 6th Floor, New York, New York 10017, were
deemed, pursuant to
Rule 13d-3
of the Securities Exchange Act of 1934, as amended, to hold
shared voting and dispositive power over 6,981,350 and
1,042,690 shares of our common stock, respectively. This
amendment to Schedule 13D amended and supplemented the
Schedule 13D originally filed on July 9, 2007 and was
filed to report the grant to CIT Healthcare LLC of warrants to
purchase 435,000 shares of our common stock pursuant to a
warrant agreement by and between CIT Group Inc. and the company,
dated September 30, 2008. By virtue of its 100% ownership
of CIT Real Estate Holding Corporation and CIT Healthcare LLC,
CIT Group Inc. was deemed to have shared voting and dispositive
power over 8,024,040 shares of our common stock. On
March 16, 2010, CIT Group Inc. entered into a warrant
purchase agreement with Tiptree, pursuant to which, CIT Group
Inc. will sell its warrant to purchase 435,000 shares of
our common stock to Tiptree upon the closing of the Tiptree
transaction.
|
|
(3)
|
|
In an amendment to
Schedule 13G filed on April 9, 2010, GoldenTree Asset
Management LP was deemed, pursuant to
Rule 13d-3
of the Securities Exchange Act of 1934, as amended, to hold
shared voting and dispositive power over 2,741,676 shares
of our common stock. By virtue of serving as the general partner
of GoldenTree Asset Management LP, GoldenTree Asset Management
LLC was deemed to have shared voting and dispositive power over
the shares held by GoldenTree Asset Management LP. Likewise,
Mr. Steven A. Tananbaum, by virtue of serving as managing
member of GoldenTree Asset Management LLC, was deemed to have
shared voting and dispositive power over the shares held by
GoldenTree Asset Management LP. In a Schedule 13G filed on
March 4, 2009, GoldenTree Asset Management LP, GoldenTree
Asset Management LLC and Mr. Steven A. Tananbaum, together
with GT Asset Management LP and GT Asset Management LLC,
reported that they have ceased to be beneficial
owners of our common stock for purposes of
Section 16(a) of the Securities Exchange Act of 1934, as
amended.
|
|
(4)
|
|
In a Schedule 13G filed on
February 5, 2010, Tyndall Capital Partners, L.P., located
at 599 Lexington Avenue, Suite 4100, New York, New York
10022, was deemed, pursuant to
Rule 13d-3
of the Securities Exchange Act of 1934, as amended, to hold
shared voting and dispositive power over 1,049,000 shares
of our common stock, due to its position as general partner of
Tyndall Partners, L.P. and Tyndall Institutional Partners, L.P.
|
|
(5)
|
|
Mr. Kellman resigned as chief
executive officer and president of our company on
December 4, 2009. All of Mr. Kellmans unvested
restricted stock and restricted stock units vested upon the
approval of the plan of liquidation by our stockholders on
January 28, 2010. The amount of shares beneficially owned
by Mr. Kellman in the table above is as of March 25,
2010.
|
|
(6)
|
|
All of Mr. Beseckers
unvested restricted stock and restricted stock units vested upon
the approval of the plan of liquidation by our stockholders on
January 28, 2010. Mr. Beseckers beneficial
ownership figure does not reflect the 10,000 shares
issuable to him upon settlement of the performance share award
granted to him on December 10, 2009.
|
|
(7)
|
|
Mr. McDugall resigned as chief
investment officer of our company on March 18, 2010. All of
Mr. McDugalls unvested restricted stock and restricted
stock units vested upon approval of the plan of liquidation by
stockholders on January 28, 2010. Mr. McDugalls
beneficial ownership figure does not reflect the performance
share award granted to him on December 10, 2009. The amount
of shares beneficially owned by Mr. McDugall in the table
above is as of March 25, 2010.
|
|
(8)
|
|
All of Mr. Risos
unvested restricted stock units vested upon the approval of the
plan of liquidation by our stockholders on January 28,
2010. Mr. Risos beneficial ownership figure does not
reflect the 10,000 shares issuable to him upon settlement
of the performance share award granted to him on
December 10, 2009.
|
|
(9)
|
|
All of Mr. Hughes
unvested restricted stock units vested upon the approval of the
plan of liquidation by our stockholders on January 28,
2010. Mr. Hughes beneficial ownership figure does not
reflect the 6,000 shares issuable to him upon settlement of
the performance share award granted to him on December 10,
2009.
|
|
(10)
|
|
All of our directors unvested
restricted stock vested upon the approval of the plan of
liquidation by our stockholders on January 28, 2010.
|
|
(11)
|
|
All of Mr. Wardens
unvested restricted stock units vested upon the approval of the
plan of liquidation by our stockholders on January 28, 2010.
|
64
PROPOSAL TWO:
ABANDONMENT OF THE PLAN OF LIQUIDATION
On January 28, 2010, our stockholders approved a plan of
liquidation. Our board of directors is recommending that our
stockholders abandon the plan of liquidation in favor of the
issuance to Tiptree proposal because our board believes that the
transaction will return greater value to our stockholders (and
more quickly) than the plan of liquidation.
Proposal 2 is conditioned on proposal 1 being
approved. If our stockholders do not approve proposal 1, or
if the purchase and sale agreement is terminated prior to the
special meeting, then we would consider proposal 2 moot,
and votes for proposal 2 would not be counted. If our
stockholders do not approve proposal 1, we may pursue the
plan of liquidation as approved by our stockholders or, upon the
termination of the purchase and sale agreement, continue to
pursue other strategic alternatives.
OUR BOARD
OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
ABANDONMENT OF THE PLAN OF LIQUIDATION PROPOSAL.
65
PROPOSAL THREE:
FIRST AMENDMENT TO OUR CHARTER
On March 16, 2010, our board of directors unanimously
approved, subject to stockholder approval, an amendment to our
charter to remove section 7.2.1(a)(iii), which may
otherwise prohibit the issuance of stock to Tiptree in the
transaction.
Section 7.2.1(a)(iii) of our charter states:
Notwithstanding any other provisions contained herein, any
Transfer of shares of Capital Stock (whether or not such
Transfer is the result of a transaction entered into through the
facilities of the NYSE or any other national securities exchange
or automated inter-dealer quotation system) that, if effective,
would result in the Capital Stock being Beneficially Owned by
less than 100 Persons (determined under the principles of
Section 856(a)(5) of the Code) shall be void ab initio, and
the intended transferee shall acquire no rights in such shares
of Capital Stock.
Section 7.1 of our charter defines Transfer as
follows:
Transfer.
The term
Transfer shall mean any issuance, sale, transfer,
gift, assignment, devise or other disposition, as well as any
other event that causes any Person to acquire Beneficial
Ownership or Constructive Ownership, or any agreement to take
any such actions or cause any such events, of Capital Stock or
the right to vote or receive dividends on Capital Stock,
including (a) the granting or exercise of any option (or
any disposition of any option), (b) any disposition of any
securities or rights convertible into or exchangeable for
Capital Stock or any interest in Capital Stock or any exercise
of any such conversion or exchange right and (c) Transfers
of interests in other entities that result in changes in
Beneficial or Constructive Ownership of Capital Stock; in each
case, whether voluntary or involuntary, whether owned of record,
Constructively Owned or Beneficially Owned and whether by
operation of law or otherwise. The terms
Transferring and Transferred shall have
the correlative meanings.
We are conducting a tender offer in conjunction with the Tiptree
transaction, which tender offer will reduce our total number of
stockholders. It is possible that the tender offer may result in
us having fewer than 100 stockholders. As a result, we are
seeking shareholder approval to amend our charter to remove
section 7.2.1(a)(iii), because such provision may be deemed
to void our issuance of common stock to Tiptree if the tender
offer results in our having less than 100 stockholders. See
Exhibit A
to this Proxy Statement for the form of
the charter amendment we intend to file with the Maryland
Department of Assessments and Taxation if this proposal is
approved. See Risk Factors Risks Related to
the Tiptree Transaction.
Proposal 3 is conditioned on proposals 1 and 2 being
approved. If our stockholders do not approve proposal 1 or
proposal 2, or if the purchase and sale agreement is
terminated prior to the date of the special meeting, then we
would consider proposal 3 to be moot, and votes for
proposal 3 would not be counted.
OUR BOARD
OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
FIRST
AMENDMENT PROPOSAL.
66
PROPOSAL FOUR:
SECOND AMENDMENT TO OUR CHARTER
On April 13, 2010, our board of directors unanimously
approved, subject to stockholder approval, an amendment, such
amendment to be effective 20 calendar days after the
consummation of the Tiptree transaction, to our charter to
reinstate section 7.2.1(a)(iii), which is intended to
reinstate the REIT status protective provision removed in
conjunction in the Tiptree transaction.
Section 7.2.1(a)(iii) of our charter is a provision
intended to protect our REIT status by ensuring that no
transfer results in less than 100 company
stockholders. Proposal 3 would remove
section 7.2.1(a)(iii) from our charter in order to
facilitate the Tiptree transaction since
section 7.2.1(a)(iii) may be deemed to void our issuance of
common stock to Tiptree if the tender offer results in our
having less than 100 stockholders. The board of directors has
determined that it is in the best interests of the company and
the stockholders to reinsert section 7.2.1(a)(iii)
20 calendar days after the consummation of the Tiptree
transaction. As a result, we are seeking stockholder approval to
amend our charter, on the date that is 20 calendar days
after the consummation of the Tiptree transaction, to insert a
new section 7.2.1(a)(iii), which shall read as follows:
Notwithstanding any other provisions contained herein, any
Transfer of shares of Capital Stock (whether or not such
Transfer is the result of a transaction entered into through the
facilities of the NYSE or any other national securities exchange
or automated inter-dealer quotation system) that, if effective,
would result in the Capital Stock being Beneficially Owned by
less than 100 Persons (determined under the principles of
Section 856(a)(5) of the Code) shall be void ab initio, and
the intended transferee shall acquire no rights in such shares
of Capital Stock.
See
Exhibit B
to this Proxy Statement for the form
of the charter amendment we intend to file with the Maryland
Department of Assessments and Taxation if this proposal is
approved. See Risk Factors Risks Related to
the Tiptree Transaction.
Proposal 4 is conditioned on proposals 1, 2 and 3
being approved. If our stockholders do not approve
proposal 1, 2 or 3, or if the purchase and sale agreement
is terminated prior to the date of the special meeting, then we
would consider proposal 4 to be moot, and votes for
proposal 4 would not be counted.
OUR BOARD
OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
SECOND AMENDMENT PROPOSAL.
67
PROPOSAL FIVE:
ADJOURNMENT OF SPECIAL MEETING
Stockholders are being asked to consider and vote upon a
proposal to approve any adjournment of the special meeting,
including, if necessary, to solicit additional proxies in favor
of the issuance proposal, the abandonment of the plan of
liquidation proposal, and the first amendment proposal and/or
the second amend proposal if there are not sufficient votes to
approve such plan of liquidation proposal.
OUR BOARD
OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
ADJOURNMENT PROPOSAL.
68
WHERE YOU
CAN FIND MORE AVAILABLE INFORMATION
We are subject to the information filing requirements of the
Exchange Act and, in accordance with that Act, are obligated to
file with the SEC periodic reports, proxy statements and other
information relating to our business, financial condition and
other matters. These reports, proxy statements and other
information may be inspected at the SECs office at the
Public Reference Room of the SEC at 100 F Street, NE,
Washington, D.C. 20549. Copies of these materials can be
obtained, upon payment of the SECs customary charges, by
calling the SEC at
1-800-SEC-0330
or by writing to the SECs Freedom of
Information & Privacy Act Office at
100 F Street, NE, Washington, D.C. 20549. The SEC
also maintains a website at
http://www.sec.gov
that contains reports, proxy statements and other information
regarding issuers that file electronically with the SEC.
A copy of our 2009 annual report on
Form 10-K
for the fiscal year ended December 31, 2009 (filed with the
SEC on March 16, 2010), as amended on
Form 10-K/A
(filed with the SEC on April 30, 2010) accompanies this
proxy statement and a copy of our quarterly report on
Form 10-Q
for the quarter ended March 31, 2010 (filed with the SEC on
May 10, 2010) accompanies this proxy statement. We hereby
incorporate by reference into this proxy statement from:
|
|
|
|
|
our annual report, as amended, for the fiscal year ended
December 31, 2009, the information contained under the
heading Risk Factors on pages 20 through 41,
the information contained under the heading Selected
Financial Data on pages 45 through 46, the information
contained under the heading Managements Discussion
and Analysis of Financial Condition and Results of
Operations on pages 46 through 60, the information
contained under the heading Quantitative and Qualitative
Disclosures about Market Risk on pages 61 through 62, the
consolidated financial statements and related notes on pages 63
through 91, and the information contained under the heading
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure; and
|
|
|
|
our quarterly Report on
Form 10-Q
for the quarter ended March 31, 2010 filed on May 10,
2010, the condensed financial statements and related notes on
pages 3 through 18, the information contained under the heading
Managements Discussion and Analysis of Financial
Condition and Results of Operations on pages 19 through
22, and the information contained under the heading
Quantitative and Qualitative Disclosures about Market
Risk on pages 22 through 23.
|
EXPENSES
OF SOLICITATION
We will pay the cost of solicitation of proxies. In addition to
the solicitation of proxies by mail, our directors and officers,
and the employees of our manager may also solicit proxies
personally or by telephone without additional compensation for
such activities. We will also request persons, firms and
corporations holding shares in their names or in the names of
their nominees, which are beneficially owned by others, to send
proxy materials to and obtain proxies from such beneficial
owners. We will reimburse such holders for their reasonable
expenses.
STOCKHOLDER
PROPOSALS
1.
Proposals for Inclusion in the Proxy
Statement
.
Under the rules of the SEC, if a
stockholder wanted to include a proposal for consideration in
our proxy statement and proxy card at our 2010 Annual Meeting,
the proposal should have been received at our executive offices
located at Care Investment Trust Inc., 505 Fifth
Avenue, 6th Floor, New York, New York 10017, Attn: Paul F.
Hughes, Secretary and Chief Compliance Officer no later than
5:00 p.m., Eastern Time, on December 31, 2009. We have
received no proposals for inclusion in our proxy statement for
our 2010 Annual Meeting.
2.
Proposals to be Offered at an Annual
Meeting
.
Under our amended and restated
bylaws, and as permitted by the rules of the SEC, certain
procedures are provided which a stockholder must follow
69
to nominate persons for election as directors or to introduce
an item of business at an annual meeting if such matter is not
intended to be considered for inclusion in the proxy statement.
These procedures provide that nominations for director nominees
and/or
an
item of business to be introduced at an annual meeting of
stockholders must be submitted in writing by certified mail to
the Secretary of the company at our executive offices located at
Care Investment Trust Inc., 505 Fifth Avenue,
9th Floor, New York, New York 10017, Attn: Paul F. Hughes,
Secretary and Chief Compliance Officer. We must have received
the notice of your intention to introduce a nomination or
proposed item of business at our 2010 Annual Meeting no earlier
than 150 days prior to the first anniversary of the date of
mailing of the Notice for the 2009 Annual Stockholders Meeting
and no later than 120 days in advance of such date. In
addition, nominations for a non-incumbent director must be
accompanied by information concerning the proposed nominee,
including such information as is required by the companys
amended and restated bylaws and the proxy rules under the SEC.
For our 2010 Annual Meeting, we have not received any such
proposals by the deadline described above.
OTHER
BUSINESS
Our board of directors is not aware of any other matters that
are to be presented at the special meeting, and it has not been
advised that any other person will present any other matters for
consideration at the meeting. Nevertheless, if other matters
should properly come before the special meeting, the
stockholders present, or the persons, if any, authorized by a
valid proxy to vote on their behalf, shall vote on such matters
in accordance with their judgment.
70
EXHIBIT A
CARE
INVESTMENT TRUST INC.
FORM OF
FIRST CHARTER AMENDMENT
THIS IS TO CERTIFY THAT:
FIRST
:
The charter of Care Investment
Trust Inc., a Maryland corporation (the
Corporation), is hereby amended by deleting existing
section 7.2.1(a)(iii) in its entirety.
SECOND
:
The amendment to the charter of
the Corporation as set forth above has been duly advised by the
board of directors and approved by the stockholders of the
Corporation as required by law.
THIRD
:
The undersigned President
acknowledges these Articles of Amendment to be the corporate act
of the Corporation and as to all matters or facts required to be
verified under oath, the undersigned President acknowledges that
to the best of the Presidents knowledge, information and
belief, these matters and facts are true in all material
respects and that this statement is made under the penalties for
perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles to
be signed in its name and on its behalf by its President and
attested to by its Secretary on
this
day
of ,
2010.
|
|
|
|
|
|
|
|
|
|
ATTEST:
|
|
CARE INVESTMENT TRUST INC.
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
(SEAL)
|
Paul F. Hughes, Secretary
|
|
|
|
Salvatore (Torey) V. Riso Jr., President
|
|
|
A-1
EXHIBIT B
CARE
INVESTMENT TRUST INC.
FORM OF
SECOND CHARTER AMENDMENT
THIS IS TO CERTIFY THAT:
FIRST
:
The charter of Care Investment
Trust Inc., a Maryland corporation (the
Corporation), is hereby amended by inserting the
following provision which shall be a new
section 7.2.1(a)(iii):
Notwithstanding any other provisions contained herein, any
Transfer of shares of Capital Stock (whether or not such
Transfer is the result of a transaction entered into through the
facilities of the NYSE or any other national securities exchange
or automated inter-dealer quotation system) that, if effective,
would result in the Capital Stock being Beneficially Owned by
less than 100 Persons (determined under the principles of
Section 856(a)(5) of the Code) shall be void ab initio, and
the intended transferee shall acquire no rights in such shares
of Capital Stock.
SECOND
:
The amendment to the charter of
the Corporation as set forth above has been duly advised by the
board of directors and approved by the stockholders of the
Corporation as required by law.
THIRD
:
The undersigned President
acknowledges these Articles of Amendment to be the corporate act
of the Corporation and as to all matters or facts required to be
verified under oath, the undersigned President acknowledges that
to the best of the Presidents knowledge, information and
belief, these matters and facts are true in all material
respects and that this statement is made under the penalties for
perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles to
be signed in its name and on its behalf by its President and
attested to by its Secretary on
this
day
of ,
2010.
|
|
|
|
|
|
|
|
|
|
ATTEST:
|
|
CARE INVESTMENT TRUST INC.
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
(SEAL)
|
Paul F. Hughes, Secretary
|
|
|
|
Salvatore (Torey) V. Riso Jr., President
|
|
|
B-1
|
|
|
|
|
|
|
CARE INVESTMENT TRUST INC.
505 FIFTH AVENUE
6TH FLOOR
NEWYORK, NY 10017
|
|
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
Electronic Delivery of Future PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
|
|
|
|
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
|
|
|
KEEP THIS PORTION FOR YOUR RECORDS
|
|
|
DETACH AND RETURN THIS PORTION
ONLY
|
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Board of Directors recommends you
|
|
|
|
|
|
|
|
|
vote FOR the following proposal (s):
|
|
For
|
|
Against
|
|
Abstain
|
|
|
|
|
|
|
|
|
|
|
1
|
Approval of the issuance of a minimum of 4,445,000 shares (subject to upward adjustment) of our common stock to Tiptree at a price of $9.00 per share.
|
|
o
|
|
o
|
|
o
|
|
|
|
|
|
|
|
|
|
|
2
|
Approval of the proposal to abandon the plan of liquidation in favor of Proposal 1.
|
|
o
|
|
o
|
|
o
|
|
|
|
|
|
|
|
|
|
|
3
|
Approval of the proposal to amend our amended and restated articles of incorporation to remove
section 7.2.1(a)(iii), which may otherwise prohibit the issuance of stock to Tiptree.
|
|
o
|
|
o
|
|
o
|
|
|
|
|
|
|
|
|
|
|
4
|
Approval of the proposal to amend our amended and restated articles
of incorporation to reinstate section 7.2.1(a)(iii), which was removed pursuant
to Proposal 3, such amendment to be effective 20 calendar days after the
consummation of the Tiptree transaction.
|
|
o
|
|
o
|
|
o
|
|
|
|
|
|
|
|
|
|
|
5
|
Approval of the proposal to permit the board to adjourn the special
meeting, if necessary, to permit further solicitation of proxies if
there are not sufficient votes at the time of the special meeting to
approve Proposals 1, 2, 3 and 4.
|
|
o
|
|
o
|
|
o
|
|
|
|
|
|
|
|
|
|
|
NOTE:
This proxy, when properly executed, will be voted in the
manner directed herein by the undersigned shareholder(s). If no
direction is made, this proxy will be voted FOR Proposals 1, 2, 3, 4
and 5. If any other matters properly come before the meeting, the persons named in this proxy will vote in their discretion.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED POSTAGE PAID
ENVELOPE.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature [PLEASE SIGN WITHIN BOX]
|
Date
|
|
|
|
|
|
Signature (Joint Owners)
|
Date
|
|
|
CARE INVESTMENT TRUST INC.
SPECIAL MEETING OF STOCKHOLDERS
JULY
[ ], 2010
Important Notice Regarding the Availability of Proxy Materials for the Special Meeting:
The
Special Meeting Proxy Statement is/are available at
www.proxyvote.com.
This proxy card is solicited on behalf of
The Board of Directors for the Special Meeting of
Stockholders
July [ ], 2010
The undersigned hereby appoints Paul F. Hughes and Salvatore (Torey) V. Riso Jr., and each of
them, as proxies, with full power of substitution, to vote all of the undersigneds shares of Care
Investment Trust Inc. Common Stock at the Special Meeting of Stockholders to be held on [ ], June [
], 2010 at 10:00 a.m. (EDT) at CIT Global Headquarters, 505 Fifth Avenue, Seventh Floor, Room C/D,
New York, New York 10017, and any adjournments or postponements thereof, upon all subjects that may
properly come before the meeting, including the matters described in the proxy statement furnished
herewith, subject to any direction indicated on the reverse side of this card. The shares of Common
Stock you beneficially own will be voted as you specify.
If
no directions are given, the proxies will vote FOR Proposals 1, 2, 3,
4 and 5. The proxies, in
their discretion, are further authorized to vote on any other matter that may properly come before
the meeting.
Your vote for the issuance to Tiptree, abandonment of the plan of liquidation, amendments to our
charter and adjournment proposals should be indicated on the reverse.
Continued and to be signed on reverse side