CRE Care Investment Trust Inc. Common Stock

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

SCHEDULE 14A

(Amendment No. 3)

 

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:

 

o   Preliminary Proxy Statement

 

o    Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

x   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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

July 15, 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 Friday, August 13, 2010, at 9:00 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in order to obtain ownership of up to 53.4% of the company, and if more than 18,000,000 shares are tendered (and not withdrawn) in the tender offer, then Tiptree must purchase additional newly issued company shares equal to the difference between 18,000,000 and the number of shares that are tendered (and not withdrawn) in the tender offer.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 37% 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

July 15, 2010

 

CARE INVESTMENT TRUST INC.
505 Fifth Avenue
Sixth Floor
New York, NY 10017

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

to be held on August 13, 2010

 

 

 

NOTICE IS HEREBY GIVEN that a special meeting of the stockholders of Care Investment Trust Inc. will be held on August 13, 2010, at 9:00 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 July 15, 2010. At the special meeting, stockholders will vote upon the following proposals:

 

 

 

 

 

 

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 July 8, 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.

 

Neither the U.S. Securities and Exchange Commission (the “Commission” or the “SEC”) nor any state securities commission has approved or disapproved of this transaction or passed upon the merits or fairness of such transaction or passed upon the adequacy or accuracy of the information contained in this document. Any representation to the contrary is a criminal offense.

 

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

July 15, 2010

 

Table of Contents

 

 

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 exhibits 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

At a board meeting held on April 4, 2008, Mr. Besecker reported that two of the company’s 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 company’s financial advisor in connection with the company’s consideration of strategic alternatives. Following an executive session during which the board discussed Credit Suisse’s 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 company’s exclusive financial advisor in connection with the board’s exploration and review of the company’s strategic alternatives. At this meeting, the board also received a presentation from the company’s 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 Healthcare’s consideration of our request to modify the economic terms of the management agreement.

 

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 company’s 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 company’s 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 company’s 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 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 company’s real-estate portfolio with Cambridge Holdings.

 

At a board meeting held on August 11, 2008, the board discussed the terms of Party A’s 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 Suisse’s 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 Care’s 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 company’s 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 committee’s and the board’s 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.

 

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. Besecker’s 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 Cambridge’s 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 D’s 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 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 company’s stockholders would receive 0.35 shares of Party B’s common stock as consideration for every share of the company’s 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 company’s 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 bidder’s bid was successful and a transaction was consummated. Mr. Gorman, responded that he would consult with the special committee and the company’s 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 company’s 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 company’s 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 company’s 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 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 committee’s 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 committee’s 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 committee’s 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 company’s 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 E’s 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 E’s 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 D’s 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 D’s 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 D’s 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 D’s 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.

 

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 company’s assets, and the special committee began considering an orderly liquidation of the company’s 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 D’s proposal, to assist the company in reviewing financial and other information with respect to Party D’s 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 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 D’s 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 D’s 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 company’s outstanding stock and not an acquisition of the entire company.

 

The special committee discussed Party D’s 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 D’s proposal was not sufficiently attractive to the company’s 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 company’s then chief investment officer, provided an overview for the special committee of the possible approaches that could be taken to liquidating the company’s 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.

 

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 Tiptree’s 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 Tiptree’s 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 D’s 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 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 committee’s instruction, Credit Suisse contacted Party F communicating that Party F’s 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 D’s 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 D’s 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 other’s 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 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 Cambridge’s 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 company’s 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 company’s 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 company’s 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 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 company’s 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 company’s 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 company’s 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 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 management’s 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 Group’s 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 company’s various options, including continued operation or liquidation. The special committee and its advisors also discussed the issues surrounding CIT Group’s 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 company’s 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 Care’s 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.

 

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 Group’s 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 company’s 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 company’s 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 management’s 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 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 management’s 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 company’s 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 company’s assets. Seven of these parties entered into confidentiality agreements and were granted access to the company’s 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 company’s 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 company’s 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 company’s common stock to each of Mr. Besecker and Mr. Riso, the grant of a performance share award for 3,000 shares of the company’s common stock to Mr. Hughes, the company’s 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 company’s then chief investment officer. See “Proposal One: Issuance of Care Common Stock to Tiptree — Interests of Certain Persons in the Tiptree Transaction” on page 50 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 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 Tiptree’s management company. Tiptree’s proposal provided that the source for the cash tender offer would be (i) the company’s cash on hand net of short term payables and announced dividends and (ii) Tiptree’s cash on hand. Tiptree’s 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 Tiptree’s 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 CIT’s 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 company’s 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 company’s common stock for $3.00 per share net of the company’s 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 of Tricadia Capital and Mr. Scheuer, met telephonically with members of Schulte Roth and members of McDermott to discuss Cambridge litigation due diligence.

 

On February 19, 2010, a loan from the company’s 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 of Schulte Roth 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 Tiptree’s 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 company’s 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 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 management’s proposed response; the March 2 letter concerned Cambridge Holdings’ proposal to acquire the company’s 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 substantively and procedurally fair to Care’s stockholders, including Care’s unaffiliated stockholders, and that the price to be paid to Care’s stockholders was fair to Care’s stockholders, including Care’s 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 Tiptree’s 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 Tiptree’s 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 company’s 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 company’s 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.

 

On June 10, 2010, our special committee and our board of directors met to clarify that they believed that the stock issuance to Tiptree was substantively and procedurally fair to Care’s stockholders, including Care’s unaffiliated stockholders, and the price to be paid by Tiptree for the company’s common stock was fair from a financial point of view to Care’s stockholders, including Care’s unaffiliated stockholders.

 

On June 30, 2010, our special committee and our board of directors unanimously approved an amendment to the purchase and sale agreement extending the outside date by which Care would have to extend the offer period to September 30, 2010. On July 6, 2010, Care and Tiptree executed a First Amendment to the purchase and sale agreement to so extend the outside date.

 

Purpose of the Tiptree Transaction.   The purpose of the Tiptree Transaction is to provide our stockholders with a liquidity event and to facilitate the equity investment by Tiptree. Our rationale was that the tender offer would represent a mechanism to provide all stockholders with the opportunity to tender all or a portion of their shares for cash at a premium to the trading price of Care’s common stock on the last trading day prior to the public announcement of the execution of the purchase and sale agreement and at a premium to the price per share estimated to be received under the plan of liquidation, which will be abandoned, subject to the satisfaction of certain offer conditions described in this proxy statement. The tender offer would also afford stockholders the option not to participate in the tender offer if they are able to achieve a higher price in the market or otherwise desire to retain ownership of their shares of the company following the investment by Tiptree.

 

Certain Effects of the Tiptree Transaction.   The Tiptree Transaction provides participating stockholders with the benefit of being able to obtain liquidity for their shares on potentially more favorable terms than would otherwise be available in the open market. The amount per share each participating stockholder may receive is equal to an amount that exceeds the current and recent historical market prices of our shares. The Tiptree Transaction provides certainty of a premium price determined to be a fair price by our board of directors and a special committee thereof without the risk of not being able to sell in the open market and without the brokerage fees and commissions typically associated with sales of securities. Stockholders who tender all their shares, however, will not participate in any future value or profits generated by the company. As a result of the transaction, all of our stockholders, including the unaffiliated stockholders, may recognize a gain or loss in the event they tender their shares in the tender offer. Stockholders who do not tender, both our affiliated and the unaffiliated stockholders, will not have any tax implications as a result of the Tiptree Transaction.

 

Stockholders who choose not to tender their shares in the tender offer and stockholders who otherwise retain an equity interest in the company as a result of a partial tender of shares will continue to be stockholders of the company and thus share in the company’s future results of operations, and will bear the attendant risks and rewards associated with owning equity securities of the company, including risks resulting from the company’s purchase of shares in the tender offer and the sale of shares to Tiptree. Stockholders who choose not to tender their shares in the tender offer may realize an increase or a decrease in their relative equity interest in the company following the consummation of the tender offer, depending on the number of shares tendered in the tender offer and the number of shares purchased by Tiptree pursuant to the purchase and sale agreement.

 

Additionally, stockholders who choose not to tender their shares may experience significantly reduced trading volume and liquidity in Care 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 issuance to Tiptree, Tiptree will likely acquire a controlling interest in the company. At the launch of the tender offer, Care had approximately 93 record holders and approximately 1,372 beneficial holders. Due to its low number of record stockholders, Care is currently eligible to terminate the registration of its common stock under the Exchange Act and cease filing periodic reports with the SEC. Under the stockholder distribution requirements contained in the continued listing standards of the NYSE, Care is required to have a minimum of 400 stockholders. Under the purchase and sale agreement, Tiptree has represented to us that it intends to maintain the company’s Exchange Act registration and NYSE listing, and has covenanted to use commercially reasonable efforts to maintain the company’s NYSE listing for a period of one year following completion of the Tiptree Transaction. However, notwithstanding Tiptree’s representation and covenant in the purchase and sale agreement, depending upon the success of the tender offer, the company’s stockholder numbers may fall below the numbers required under the continued listing standards of the NYSE or the company may fail to continue to meet any of the other requirements for continued listing. As a result, we cannot ensure that, as a result of the tender offer, the NYSE will not involuntarily delist the company for falling below the minimum shareholder requirements under its

continued listing standards. If an involuntary delisting were to occur, Care may choose to list on another exchange or on the OTC Bulletin Board which would likely result in lower trading volume and less liquidity. 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.

 

The Tiptree Transaction could also have the result of disqualifying Care as a REIT if Care is not able to meet the organizational requirements under the Internal Revenue Code that require that (i) Care’s common stock be held by at least 100 actual stockholders for at least 335 days in any tax year and (ii) not more than 50% in value of a REIT’s outstanding stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Internal Revenue Code to include certain entities) at any time during the last half of each taxable year. In conjunction with the Tiptree Transaction, and if approved by our stockholders, we will 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. If approved by stockholders, it is further expected that the REIT protective provision would be reinstated 20 calendar days after the consummation of the Tiptree Transaction in order to protect our REIT status going forward. As a result of an amendment to our charter to remove the REIT protective provision, we could cease to qualify as a REIT. If we cease 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 and this would have significant adverse consequences to us and the value of our common stock.

 

Pursuant to the terms of the purchase and sale agreement, after the closing of the tender offer, expected to occur on August 13, 2010, Care will issue, and Tiptree will purchase, a minimum of 4,445,000 newly issued shares of the company’s common stock, subject to upward adjustment (a) if more than 18,000,000 shares are tendered (and not withdrawn) in the tender offer, by a number of shares equal to the difference between the actual number of shares tendered in the tender offer (and not withdrawn) and 18,000,000 in order to fund the purchase of shares by the company in the tender offer, or (b) at the election of Tiptree, if fewer than 16,500,000 shares are tendered in the tender offer, in order to give Tiptree ownership of up to 53.4% of the shares of the company’s common stock on a fully-diluted basis after taking into account the shares tendered by the stockholders to the company in the tender offer. For example, if 14,000,000 shares are tendered, Tiptree is required to purchase 4,445,000 newly issued shares and has the option to purchase up to an additional 2,735,500 newly issued shares, for a total of 7,180,500 shares of our common stock, resulting in Tiptree owning 53.4% of the company. If, however, 19,000,000 shares of our common stock are tendered (and not withdrawn), Tiptree must purchase a total of 5,445,000 newly issued shares, resulting in Tiptree owning 81.1% of the company after consummation of the tender offer.

 

The following table illustrates the relationship of Tiptree’s expected ownership in the company pursuant to the terms of the purchase and sale agreement and that of existing stockholders following the closing of the tender offer 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

 

 

 

 

 

 

Stockholders may be able to sell non-tendered shares in the future on the NYSE or otherwise at a net price significantly higher or lower than the purchase price in the tender offer. We can give no assurance as to the price at which a stockholder may be able to sell his or her shares in the future, which may be higher or lower than the purchase price paid by us in the tender offer.

 

Our shares are registered under the Exchange Act, which requires, among other things, that we furnish certain information to our stockholders and the SEC and comply with the SEC’s proxy rules in connection with meetings of our stockholders. Currently, our shares are eligible for termination of registration under the Exchange Act since we have less than 300 holders of record. Although the tender offer will result in fewer holders of record, the company intends to continue to be registered under the Exchange Act and intends to continue to list its shares on the NYSE to the extent it remains eligible to do so.

 

We currently intend to cancel and retire shares purchased pursuant to the tender offer. Such shares will return to the status of authorized and unissued shares and will be available for us to issue without further stockholder action for all purposes except as required by applicable law or the rules of the NYSE. In accordance with the purchase and sale agreement, we will issue new shares of our common stock to Tiptree at the closing of the tender offer (as described below).

 

We may, in the future, decide to purchase additional shares of our common stock. Any such purchases may be on the same terms as, or on terms which are more or less favorable to stockholders than, the terms of the tender offer. Rule 13e-4 promulgated under the Exchange Act, however, prohibits us and our affiliates from purchasing any shares, other than pursuant to the tender offer, until at least ten (10) business days after the Expiration Time.

 

Our shares are currently “margin securities” under the rules of the Federal Reserve Board. This has the effect, among other things, of allowing brokers to extend credit to their customers using such shares as collateral. We believe that, following the repurchase of shares pursuant to the tender offer, our shares will continue to be “margin securities” for purposes of the Federal Reserve Board’s margin rules and regulations.

 

If the maximum of 20,265,924 shares, or all of the issued and outstanding common stock and performance share awards of the company eligible to be tendered, are purchased in the tender offer at a price of $9.00 per share, the aggregate purchase price for the shares will be approximately $182,393,316. We expect to fund the purchase of shares pursuant to the tender offer and the related fees and expenses from available cash on hand and from the proceeds of the issuance of stock to Tiptree.

 

We do not have any plans to utilize alternative sources of financing to pay for the shares purchased pursuant to the tender offer, as well as related fees and expenses.

 

Other Plans or Alternatives.   Except as otherwise disclosed or incorporated by reference in this proxy statement, we currently have no plans, proposals or negotiations underway that relate to or would result in:

 

 

 

 

 

 

 

 

 

 

Fairness of the Tiptree Transaction.   The special committee has determined that the Tiptree Transaction is substantively and procedurally fair to our stockholders, including our unaffiliated stockholders, and the price to be paid by Tiptree in the stock issuance and the price to be paid to our stockholders in the tender offer are both fair from a financial point of view to our stockholders, including our unaffiliated stockholders, and the Tiptree Transaction was unanimously approved by the special committee and the board. All Care stockholders will have the opportunity to receive the same price for their shares as an unaffiliated third-party purchaser will pay for shares that it has agreed to purchase from Care. Additionally, stockholders will have the right to retain all or a portion of their shares and retain the opportunity to benefit from the growth of the company subject to the risks.

 

In reaching these determinations, our board of directors and our special committee consulted with our management and our financial and legal advisors and considered the following factors:

 

 

 

 

 

 

 

 

 

 

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, including those listed below:

 

 

 

 

 

 

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. Our special committee and our board of directors considered a number of additional valuation factors but ultimately concluded that those valuation factors were not relevant to the nature of the Tiptree Transaction or our business. For example, our special committee and board of directors did not believe that net book value was relevant to their conclusion that the Tiptree Transaction was fair to our stockholders. Liquidation value, based on asset fair market values, and historical market prices were deemed to be relevant measures of actual value, whereas book value which is based on historic costs of assets was not deemed to reflect the actual value of Care assets.

 

In addition, the special committee and board of directors did not believe that the going concern value of Care was relevant to a determination of the fairness of the Tiptree Transaction. After an extensive sale process for the company undertaken over a period of more than a year, after receiving, evaluating and negotiating numerous strategic alternatives, our special committee and our board of directors determined that the proposed plan of liquidation was in the best interests of stockholders. Subsequent to the approval of the plan of liquidation, Care negotiated a transaction which increased the value to stockholders and also allowed stockholders to retain their investment in Care. Consequently, the special committee and board of directors did not believe that the going concern value of Care provided a useful means of valuing Care in connection with the Tiptree Transaction.

 

The special committee and our board of directors also considered various factors in determining the procedural fairness of the Tiptree Transaction. The special committee and the board of directors

believe that appropriate procedural safeguards were taken in connection with the deliberation and approval of the Tiptree Transaction because:

 

 

 

 

 

 

 

Due to the timing and nature of the Tiptree Transaction, neither the special committee nor the board of directors appointed an independent representative to act exclusively as the agent of the unaffiliated stockholders for the purpose of negotiating the Tiptree Transaction or preparing a written report concerning the fairness of the Tiptree Transaction. In addition, the special committee and our board of directors recognize that the Tiptree Transaction is not being submitted to a vote of the unaffiliated stockholders; however, the special committee and the board believe that a decision to tender or not to tender is tantamount to such unaffiliated stockholder’s “vote”. Given the above listed procedural safeguards, the special committee and the board of directors believe that the Tiptree Transaction is procedurally fair to the unaffiliated stockholders despite the fact that the Tiptree Transaction is not being submitted to a vote of such stockholders and there is no separate independent unaffiliated representative for such stockholders.

 

In determining that the Tiptree Transaction is fair to our stockholders, including our unaffiliated stockholders, each of the special committee and our board of directors considered the above substantive and procedural factors as a whole and concluded that the positive factors relating to the Tiptree Transaction outweighed the negative factors. Because of the variety of factors considered, however, neither the special committee nor the board of directors found it practicable to quantify or otherwise assign relative weights to, and did not make specific assessments of, the specific factors considered in reaching its determination. However, individual members of the special committee and the board of directors may have assigned

different weights to various factors. The determination of the special committee and the board of directors was made after consideration of all the factors together.

 

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 Tiptree 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.

 

SUMMARY

	•	the extensive sale process for the company undertaken over a period of more than one year, led by our financial advisor, 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 Care’s 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 company’s 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 company’s stockholders in the tender offer represents a 7.7% premium over the closing price of the company’s 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 company’s 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.

	•	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”;

	•	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 Tiptree Transaction.

	•	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.

 

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 Tiptree Transaction 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 Transaction is subject to conditions, and there can be no assurance that these conditions will be satisfied.

 

Pursuant to the purchase and sale agreement, Tiptree’s 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 Care’s 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 company’s 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.

 

Even if the conditions to completion of the Tiptree Transaction are satisfied, there can be no assurance that this transaction will be completed in a timely manner, under the same terms, or at all.

 

There can be no assurance that the Tiptree Transaction 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 Tiptree 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 Tiptree 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:

 

 

 

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 Tiptree Transaction, 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 Tiptree’s 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.

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:

 

 

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 company’s common stock in exchange for $100,000 effective upon the closing of the Tiptree Transaction.

 

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” on page 50.

 

Cambridge Holdings may seek to delay or prevent the Tiptree Transaction.

 

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 proposed issuance to Tiptree 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 45 for more information on the litigation.

 

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:

 

 

 

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 31 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 86), 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:

 

 

 

 

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.

 

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.

 

The enclosed proxy is solicited by our board of directors for use in voting at the special meeting of stockholders to be held on Friday, August 13, 2010, at 9:00 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.

 

 

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 July 8, 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

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 holder’s 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 stockholder’s 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 stockholder’s 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

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 August 12, 2010. The touch-tone telephone proxy authorization procedures are designed to authenticate the stockholder’s 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 August 12, 2010. The internet proxy authorization procedures are designed to authenticate the stockholder’s 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.

 

Only stockholders of record at the close of business on July 8, 2010 will be entitled to vote at the special meeting. As of the record date, we had 20,235,924 shares of common stock issued and outstanding and entitled to vote.

 

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 of 15,000,000 shares on June 27, 2007 at a price of $15.00 per share resulting in net proceeds, after deducting underwriting discounts, commissions and expenses related to the offering, of about $210 million.

 

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 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.

 

 

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.

 

 

 

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:

 

 

Lease Maturity Cycle

 

 

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.

 

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, 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 May 31, 2010.

 

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 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 the conclusion of the pre-trial conference, the Court asked the parties to agree on a summary judgment briefing schedule. The parties have since agreed, and the Court has ordered, that the Defendants file their motion for summary judgment on July 9, 2010 Plaintiffs file their opposition on August 6, 2010 and Defendants file their reply on August 27, 2010.

 

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.

 

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.

 

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. Care filed its opposition on June 18, 2010 and Cambridge Holdings replied on July 1, 2010. In the meantime, on June 21, 2010, ERC Sub sought leave to amend its counterclaims to assert a breach of contract action against Cambridge Holdings. Cambridge Holdings did not oppose ERC Sub’s motion.

 

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.

 

The following table sets forth selected financial data for the company:

 

 

 

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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

Selected Financial Data
Care Investment Trust Inc.

 

 

 

 

 

 

 

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.

 

Ratio of Earnings to Fixed Charges.   The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. For purposes of computing this ratio, earnings represent pre-tax income (loss) from continuing operations plus fixed charges. Fixed charges represent interest expensed plus amortization and write off of deferred financing costs over the respective periods.

 

 

 

 

 

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 (ii) 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, and the first amendment to the purchase and sale agreement, dated July 6, 2010, by and between Care and Tiptree, which was filed as Exhibit 10.1 to our Form 8-K filed on July 7, 2010.

 

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 Tiptree 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 “Tiptree 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 Tiptree’s 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

 

 

 

 

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.

 

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. Tiptree’s 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. Tiptree’s 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 Tiptree’s access to capital and financial expertise can facilitate creating a stronger business. Tiptree’s primary focus is on five sectors of financial services: insurance, tax exempt finance, real estate, corporate loans and banking and specialty finance. Tiptree’s holdings include a structured corporate loan portfolio and Muni Funding Company of America, LLC, a municipal finance company. In June 2010, Tiptree acquired 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 Transaction, 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.

 

In considering the recommendation of our board of directors to approve the issuance of shares to Tiptree in connection with the Tiptree 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.

 

 

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 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 company’s common stock in exchange for $100,000 effective upon the closing of the Tiptree Transaction.

 

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.

 

Recent Securities Transactions.   Based upon our records and upon information provided to us by (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 and (3) each of our named executive officers as of July 2, 2010, including our former chief executive officer and our former chief investment officer who resigned on December 4, 2009 and March 18, 2010 respectively, and whose beneficial ownership figures are available as of March 25, 2010, neither we nor any of our beneficial owners of more than 5% of our outstanding common stock, nor any director or named executive officer have effected any transactions involving shares of our common stock during the 120 days prior to July 2, 2010, except as described below or incorporated by reference into this Offer to Purchase:

 

On March 18, 2010 and April 8, 2010, respectively, J. Rainer Twiford, a member of our board of directors, sold 18,334 shares of common stock at $8.92 per share and 1,401 shares of common stock at $8.92 per share, in open market transactions.

 

On March 18, 2010 and April 8, 2010, respectively, Flint D. Besecker, our chairman, sold 20,000 shares of common stock at $8.91 per share and 1,401 shares of company common stock at $8.92 per share, in open market transactions.

 

On March 18, 2010, Salvatore (Torey) V. Riso, Jr., our chief executive officer, sold 17,700 shares of common stock at $8.91 per share in an open market transaction.

 

On March 18, 2010, Paul F. Hughes, our chief financial officer, sold 8,524 shares of common stock at $8.91 per share in an open market transaction.

 

On March 22, 2010, Steven N. Warden, a member of our board of directors, sold 9,648 shares of common stock at $8.92 per share in an open market transaction.

 

On April 8, 2010, Gerald E. Bisbee, Jr., PhD., a member of our board of directors, sold 1,401 shares of common stock at $8.92 per share in an open market transaction.

 

On April 8, 2010, Karen P. Robards, a member of our board of directors, sold 1,401 shares of common stock at $8.92 per share in an open market transaction.

 

Equity Incentive Plans / Other Arrangements Regarding Securities.

 

Restricted Stock Grants.   At the time of our initial public offering in June 2007, we issued 133,333 shares of common stock to our manager’s employees, some of whom are officers or directors of Care and we also awarded 15,000 shares of common stock to Care’s independent board members. The shares granted to our manager’s employees had an initial vesting date of June 22, 2010, three years from the date of grant. The shares granted to our independent board members vest ratably on the first, second and third anniversaries of the grant. During the year ended December 31, 2008, 42,000 shares of restricted stock granted to our manager’s employees were forfeited and 10,000 shares vested due to a termination of an officer of the manager without cause. In addition, 20,000 shares of restricted stock were granted to a board member who formerly served as an employee of our manager. These shares had a fair value of $183,000 at issuance and had an initial vesting date of June 27, 2010. On January 28, 2010, our shareholders approved the plan of liquidation. Under the terms of each of these awards, the approval of the plan of liquidation by our stockholders accelerated the vesting of all outstanding awards on that day.

 

Restricted Stock Units.   On April 8, 2008, the compensation committee of the board of directors of Care awarded the company’s chief executive officer, 35,000 shares of restricted stock units (“RSUs”) under the Care Investment Trust Inc. Equity Incentive Plan (“Equity Plan”). The RSUs had a fair value of $385,000 on the grant date. The initial vesting of the award was 50% on the third anniversary of the award and the remaining 50% on the fourth anniversary of the award. Under the terms of these awards, stockholder approval of the plan of liquidation accelerated the vesting of the awards on that day.

 

On November 5, 2009, the board awarded the chairman of the board of directors 10,000 restricted stock units, which were initially subject to vesting in four equal installments, commencing on November 5, 2010. Under the terms of this award, shareholder approval of the plan of liquidation accelerated the vesting of this award on that day.

 

Long-Term Equity Incentive Programs.   On May 12, 2008, the compensation committee approved two new long-term equity incentive programs under the Equity Plan. The first program is an annual performance-based RSU award program (the “RSU Award Program”). All RSUs granted under the RSU Award Program included a vesting period of four years. The second program is a three-year performance share plan (the “Performance Share Plan”).

 

In connection with the initial adoption of the RSU Award Program, certain employees of our manager and its affiliates were granted 68,308 RSUs on the adoption date with a grant date fair value of $0.7 million. 9,242 of these shares were forfeited in 2009. 14,763 of these shares vested in May 2009. Achievement of awards under the 2008 RSU Award Program was based upon the company’s ability to meet both financial (AFFO per share) and strategic (shifting from a mortgage to an equity REIT) performance goals during 2008, as well as on the individual employee’s ability to meet performance goals. In accordance with the 2008 RSU Award Program, 49,961 RSUs and 30,333 RSUs were granted on March 12, 2009 and May 7, 2009, respectively. RSUs granted in connection with the 2008 RSU Award Program were initially subject to the following vesting schedule:

 

 

Under the terms of each of these awards, stockholder approval of the plan of liquidation accelerated the vesting of the awards on that day.

 

Under the Performance Share Plan, a participant is granted a number of performance shares or units, the settlement of which will depend on the company’s achievement of certain pre-determined financial goals at the end of the three-year performance period. Any shares received in settlement of the performance award will be issued to the participant in early 2011, without any further vesting requirements. With respect to the 2008-2010 performance periods, the performance goals relate to the company’s ability to meet both financial (compound growth in AFFO per share) and share return goals (total shareholder return versus the company’s healthcare equity and mortgage REIT peers). The compensation committee has established threshold, target and maximum levels of performance. If the company meets the threshold level of performance, a participant will earn 50% of the performance share grant if it meets the target level of performance, a participant will earn 100% of the performance share grant and if it achieves the maximum level of performance, a participant will earn 200% of the performance share grant. As of December 31, 2009, no shares have been earned under this plan.

 

On December 10, 2009, the company granted performance share awards to plan participants for an aggregate amount of 15,000 shares at target levels and an aggregate maximum of 30,000 shares. On February 23, 2009, the terms of the awards were modified such that the awards are now triggered upon the execution, during 2010, of one or more of the following transactions that results in a return of liquidity to the company’s 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 the company, (ii) a tender offer made directly to the company’s stockholders either by the company or a third party for at least a majority of the company’s issued and outstanding common stock, or (iii) the declaration of aggregate distributions by the company’s board equal to or exceeding $8.00 per share.

 

As of December 31, 2009, 210,677 shares of our common stock and 197,615 RSUs had been granted pursuant to the Equity Plan and 267,516 shares remain available for future issuances. The Equity Plan will automatically expire on the 10th anniversary of the date it was adopted. Care’s board of directors may terminate, amend, modify or suspend the Equity Plan at any time, subject to stockholder approval in the case of amendments or modifications. We recorded $2.3 million of expense related to compensation and $1.2 million of expense related to remeasurement of grants to fair value for the years ended December 31, 2009 and 2008, respectively, Approximately $0.8 million of the expense recorded in 2009 related to accelerated vesting in the aggregate. All of the shares issued under our Equity Plan are considered non-employee awards. Accordingly, the expense for each period is determined based on the fair value of each share or unit awarded over the required performance period.

 

Shares Issued to Directors for Board Fees.   On January 5, 2009, April 3, 2009, July 1, 2009, October 1, 2009, January 4, 2010, April 8, 2010 and July 2, 2010, respectively, 9,624, 13,734, 14,418, 9,774, 8,030, 5,604 and 5,772 shares of common stock with an aggregate fair value of approximately $462,500 were granted to our independent directors as part of their annual retainer. Each independent director receives an annual base retainer of $100,000, payable quarterly in arrears, of which 50% is paid in cash and 50% in common stock of Care. Shares granted as part of the annual retainer vest immediately.

 

Manager Equity Incentive Plan.   Upon completion of our initial public offering in June 2007, approximately 1.3 million shares were made available and we granted 607,690 fully vested shares of our common stock to our manager under the Manager Equity Plan adopted by the company on June 21, 2007 (the “Manager Equity Plan”). These shares are subject to our manager’s right to register the resale of such shares pursuant to a registration rights agreement we entered into with our manager in connection with our initial public offering. At December 31, 2009, 282,945 shares are available for future issuances under the Manager Equity Plan. The Manager Equity Plan will automatically expire on the 10th anniversary of the date it was adopted. Care’s board of directors may terminate, amend, modify or suspend the Manager Equity Plan at any time, subject to stockholder approval in the case of amendments or modifications.

 

Manager Warrants.   In consideration of an amendment to the CIT Healthcare management agreement and for the manager’s continued and future services to the company, the company granted CIT Healthcare, in its capacity as manager, warrants to purchase 435,000 shares of the company’s common stock at $17.00 per share under the Manager Equity Plan. The Warrant, which is immediately exercisable, expires on September 30, 2018. On March 16, 2010, our manager entered into a warrant purchase agreement with Tiptree, pursuant to which our manager will sell its warrants to purchase the 435,000 shares of our company’s common stock in exchange for $100,000 effective upon the closing of the Tiptree Transaction.

 

Purchase and Sale Agreement.   The tender offer is being made in connection with the purchase and sale agreement, dated March 16, 2010, by and between Care and Tiptree which provides that Care will issue, and Tiptree will purchase, a minimum of 4,445,000 newly issued shares of the company’s common stock, and may purchase additional shares depending on the number of shares tendered in the tender offer, for a purchase price of $9.00 per share. In that purchase and sale agreement, we agreed to use the proceeds from the issuance of common stock to Tiptree to fund the tender offer for up to all of our outstanding common stock at a fixed price of $9.00 per share. If the tender offer is fully subscribed, Tiptree is expected to own 100% of the issued and outstanding shares of the company’s common stock. See “Certain Effects of the Tender Offer” under “Special Factors.”

 

Other Agreements, Arrangements or Understandings.   Except for the purchase and sale agreement, outstanding warrants, company Performance Share Awards and company RSUs, and except as

otherwise described in this proxy statement or incorporated by reference into this proxy statement, neither we nor, to the best of our knowledge, any beneficial owner of 5% or more of our common stock or any of our directors or named executive officers is a party to any agreement, arrangement, understanding or relationship with any other person relating, directly or indirectly, to the tender offer or with respect to any of our securities, including, but not limited to, any agreement, arrangement, understanding or relationship concerning the transfer or the voting of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees or loans, guarantees against loss or the giving or withholding of proxies, consents or authorizations.

 

Other Transactions with Affiliates

 

On September 30, 2008, we entered into an amendment to the management agreement with CIT Healthcare, our manager. Pursuant to the terms of the amendment, the base management fee payable to the manager under the management agreement was reduced from a monthly amount equal to 1 / 12 of 1.75% of Care’s equity to a monthly amount equal to 1 / 12 of 0.875% of Care’s equity. In addition, pursuant to the terms of the amendment, the incentive fee payable to the manager pursuant to the management agreement was eliminated and the termination fee payable to the manager upon the termination or non-renewal of the management agreement was amended to equal the average annual base management fee as earned by the manager during the two years immediately preceding the most recently completed fiscal quarter prior to the date of termination times three, but in no event less than $15.4 million. No termination fee would be payable if we terminate the management agreement for cause.

 

In consideration of the amendment and for the manager’s continued and future services to Care, we granted the manager warrants to purchase 435,000 shares of our common stock at $17.00 per share under the manager equity plan adopted by Care on June 21, 2007. See “Equity Incentive Plans / Other Arrangements Regarding Securities” in this section for more information on the manager warrants.

 

In November 2008, we repurchased 1,000,000 shares of our common stock from GoldenTree Asset Management LP at $8.33 per share pursuant to our share repurchase program.

 

On January 15, 2010, we entered into an amended and restated management agreement with CIT Healthcare, our manager. Pursuant to the terms of the amended and restated management agreement, which became effective upon approval of the plan of liquidation by our stockholders on January 28, 2010, the base management fee was reduced to a monthly amount equal to (i) $125,000 from February 1, 2010 until the earlier of (x) June 30, 2010 and (y) the date on which four of our six then-existing investments have been sold; then from such date (ii) $100,000 until the earlier of (x) December 31, 2010 and (y) the date on which five of our six then-existing investments have been sold; then from such date (iii) $75,000 until the effective date of expiration or earlier termination of the agreement by either Care or the manager; provided, however, that notwithstanding the foregoing, the base management fee shall remain at $125,000 per month until the later of (a) ninety (90) days after the filing by us of a Form 15 with the SEC; and (b) the date that Care is no longer subject to the reporting requirements of the Exchange Act. In addition, the termination fee payable to the manager upon the termination or non-renewal of the management agreement was replaced by a buyout payment of $7.5 million, payable in installments of (i) $2.5 million upon approval of the plan of liquidation by our stockholders; (ii) $2.5 million upon the earlier of (a) April 1, 2010 and (b) the effective date of the termination of the amended and restated management agreement by either Care or the manager; and (iii) $2.5 million upon the earlier of (a) June 30, 2011 and (b) the effective date of the termination of the amended and restated management agreement by either Care or the manager. The amended and restated management agreement also provided the manager with an incentive fee of $1.5 million if (i) at any time prior to December 31, 2011, the aggregate cash dividends paid by Care to stockholders since the effective date of the amended and restated management agreement equal or exceed $9.25 per share or (ii) as of December 31, 2011, the sum of (x) the aggregate cash dividends paid to Care’s stockholders since the effective date of the amended and restated management agreement and (y) the aggregate distributable cash equals or exceeds $9.25 per share. In the event that the aggregate

distributable cash equals or exceed $9.25 per share but for the impact of payment of a $1.5 million incentive fee, Care shall pay the manager an incentive fee in an amount that allows the aggregate distributable cash to equal $9.25 per share. Under the amended and restated management agreement, the mortgage purchase agreement by and between us and our manager was terminated and all outstanding notices of our intent to sell additional loans to our manager were rescinded. The amended and restated management agreement shall continue in effect, unless earlier terminated in accordance with the terms thereof, until December 31, 2011.

 

In conjunction with the Tiptree Transaction, if the maximum of 20,265,924 shares, or all of the issued and outstanding common stock and performance share awards of the company eligible to be tendered, are purchased in the tender offer at a price of $9.00 per share, the aggregate purchase price for the tendered shares will be approximately $182,393,316. We expect to fund the purchase of shares pursuant to the tender offer and the related fees and expenses from available cash on hand and from the proceeds of the issuance of shares to Tiptree. Upon the satisfaction of certain conditions set forth in the purchase and sale agreement, Tiptree is required to deposit $60,430,932 into escrow to be used to purchase shares.

 

Tiptree has represented to us that it has, and will have immediately prior to the closing of the issuance to Tiptree, sufficient cash or other sources of immediately available funds to enable it to deposit the $60,430,932 with the escrow agent.

 

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. On May 31, 2010, Tiptree had $100.8 million of unencumbered cash and $4.9 million of short-term accruals and liabilities on its balance sheet.

 

The following presents Tiptree’s unaudited Balance Sheet as of May 31, 2010:

 

TIPTREE FINANCIAL PARTNERS, LP and SUBSIDIARIES

 

Consolidated Balance Sheet