Business Context and Reporting Period
Company: Care Investment Trust Inc. (Note: Metadata listed "TIPTREE INC." but the filing text identifies Care Investment Trust Inc.)
Filing Type: Form 8-K (Current Report)
Date: January 15, 2010
Context: The Company entered into an Amended and Restated Management Agreement with its external manager, CIT Healthcare LLC. This agreement is contingent upon stockholder approval of a Plan of Liquidation at a special meeting scheduled for January 28, 2010.
Key Financial Metrics and Agreements
This filing details a restructuring of management fees and liquidation costs rather than standard operating financial results.
- Base Management Fee: Reduced to a tiered monthly structure:
- $125,000/month from Feb 1, 2010, until June 30, 2010 or sale of 4 of 6 existing investments.
- $100,000/month thereafter until Dec 31, 2010 or sale of 5 of 6 existing investments.
- $75,000/month thereafter until termination.
- Buyout Payment: Total of $7.5 million payable in three installments of $2.5 million each (Effective Date, April 1, 2010, and June 30, 2011).
- Incentive Fee: Potential $1.5 million fee if aggregate cash dividends or distributable cash reach $9.25 per share by Dec 31, 2011.
- Liquidation Value Impact: The agreement replaces a Termination Fee (NPV $8.7 million) with the Buyout Payment (NPV $7.3 million), revising the Total Liquidation Value Range to $8.05 to $8.90 per share.
Material Changes Versus Prior Period
- Fee Structure: The Original Management Agreement's Termination Fee has been replaced by the new Buyout Payment structure.
- Cost Reduction: The net present value of payments to the Manager is reduced by $1.4 million ($8.7 million vs. $7.3 million), increasing the estimated liquidation value per share.
- Contractual Obligations: The Company agreed to rescind all outstanding put notices under the Mortgage Purchase Agreement dated September 30, 2008.
- Liabilities: A mutual release was executed, discharging both parties from current or future outstanding losses or liabilities.
Outlook, Risks, and Contingencies
- Contingency: The Agreement is effective only upon stockholder approval of the Plan of Liquidation at the January 28, 2010 meeting.
- Termination Rights: Both parties retain the right to terminate the Agreement without cause under certain conditions; the Company retains the right to terminate for cause.
- Reporting Status: The Base Management Fee remains at $125,000/month until 90 days after filing a Form 15 or until the Company is no longer subject to Exchange Act reporting requirements.
Investor Verification Checklist
- Confirm the outcome of the special stockholder meeting on January 28, 2010, regarding the Plan of Liquidation.
- Verify the schedule and status of sales for the Company's six Existing Investments, as this triggers fee reductions.
- Monitor the filing of Form 15 to determine when the Company ceases Exchange Act reporting obligations.
- Review the definitive proxy statement filed December 28, 2009, for the full definition of "Aggregate Distributable Cash" and the liquidation plan details.