CRE Care Investment Trust Inc. Common Stock

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

SCHEDULE 14F-1

 

INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14f-1 THEREUNDER

 

 

Commission File No. 001-33549

 

CARE INVESTMENT TRUST INC.
(Exact name of registrant as specified in its charter)

 

 

 

 

Registrant’s telephone number, including area code: (212) 771-0505

 

TABLE OF CONTENTS

 

CARE INVESTMENT TRUST INC.
505 Fifth Avenue, 6th Floor
New York, New York 10017
(212) 771-0505

 

INFORMATION STATEMENT PURSUANT TO SECTION 14(f) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
NOTICE OF ANTICIPATED CHANGE IN MAJORITY OF DIRECTORS

 

August 3, 2010

 

This Information Statement is being transmitted on August 3, 2010, to the holders of shares of common stock, par value $0.001 per share, of Care Investment Trust Inc., a Maryland corporation (the “common stock” and shares thereof, the “shares”), in accordance with the requirements of Section 14(f) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 14f-1 promulgated thereunder. As used in this Information Statement, the terms “we,” “us,” “our,” the “company” and “Care” mean Care Investment Trust Inc.

 

We are not asking you to take any action in this Information Statement. You are receiving this Information Statement in connection with the possible appointment of four (4) new directors representing a majority of our Board of Directors (the “Board”) in connection with the closing of the transactions contemplated by the terms of the purchase and sale agreement (the “purchase and sale agreement”), dated as of March 16, 2010, between the company and Tiptree Financial Partners, L.P., a Delaware limited partnership (“Tiptree”). Because the directors so designated by Tiptree pursuant to the purchase and sale agreement will have been appointed by our Board, rather than at a meeting of our stockholders, we are required by federal securities law to provide this Information Statement to our stockholders. All descriptions of the purchase and sale agreement in this Information Statement are qualified in their entirety by reference to the complete text of the purchase and sale agreement.

 

As of August 3, 2010, there were 20,235,924 outstanding shares of common stock. Each share is entitled to one vote on each matter on which common stock is entitled to vote.

 

NO VOTE OR OTHER ACTION BY OUR STOCKHOLDERS IS REQUIRED IN RESPONSE TO THIS INFORMATION STATEMENT. NO PROXIES ARE BEING SOLICITED AND YOU ARE NOT BEING REQUESTED TO SEND A PROXY TO THE COMPANY.

 

BACKGROUND

 

You are receiving this Information Statement in connection with the possible election or appointment of four (4) new directors to our Board, representing a majority of our Board, as more fully described below.

 

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, so long as certain 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.”

 

Pursuant to the tender offer commenced by the company, and as disclosed in the Tender Offer Statement on Schedule TO, dated as of July 15, 2010 (as may be amended or supplemented from time to time), the company has offered to purchase up to all of its outstanding shares of common stock at a price of $9.00 per share in cash upon the terms and subject to the conditions set forth in the company’s Offer to Purchase, dated July 15, 2010 (as may be amended or supplemented from time to time, the “Offer to Purchase”). The tender offer is subject to conditions set forth in the Offer to Purchase, including, among other things, (i) a minimum of 10,300,000 shares of our common stock shall have been validly tendered (and not withdrawn) prior to the expiration of the tender offer (as it may be

extended as provided in the Offer to Purchase) and (ii) Tiptree must have delivered $60,430,932 in cash to the escrow agent, and Tiptree and the company shall have delivered a joint written direction to the escrow agent to fund, in part, Care’s purchase of tendered shares.

 

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. Furthermore, pursuant to the purchase and sale agreement, Care’s stockholders have been asked to vote at a special meeting to approve the issuance of stock to Tiptree, in addition to several other proposals as disclosed in the Schedule 14A Proxy Statement filed on July 15, 2010.

 

As a result of the Tiptree Transaction, Tiptree will likely hold a controlling interest in the company.

 

As a condition to the closing of the Tiptree Transaction, the purchase and sale agreement requires us to cause three (3) of the company’s current five (5) directors serving on our Board immediately prior to the closing of the Tiptree Transaction (the “Closing Date”) to resign from their positions on the company’s Board of Directors, effective as of the Closing Date, and to cause the resulting vacancies on our Board to be filled by persons acceptable to Tiptree. Accordingly, we anticipate that Gerald Bisbee, Karen Robards and Steven Warden will resign from the Board of Directors effective as of the Closing Date. We further anticipate that the Care Board will, at the request of Tiptree, take action to increase the size of the Care Board of Directors to six members effective as of the closing of the Tiptree Transaction and to appoint the following four (4) individuals designated by Tiptree as directors of the company to fill the vacancies caused by such resignations and thereby fulfill the increase in the size of the Board: Michael Barnes, Geoffrey Kauffman, Jonathan Ilany and William Houlihan

 

Two (2) persons currently serving as directors on our Board, Flint Besecker and J. Rainer Twiford, are not expected to resign in connection with the consummation of the Tiptree Transaction. However, with the appointment of the four (4) additional directors designated by Tiptree, Tiptree’s designees will comprise a majority of the Care Board upon closing of the Tiptree Transaction.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth the beneficial ownership of our common stock, as of August 1, 2010, for (1) each person known to us to be the beneficial owner of more than 5% of our outstanding common stock, (2) each of our directors, (3) each of our named executive officers (including Mr. Kellman and Mr. McDugall who resigned on December 4, 2009 and March 18, 2010, respectively, and whose beneficial ownership figures are as of March 25, 2010) and (4) our directors and named executive officers as a group. Except as otherwise described in the notes below, the following beneficial owners have sole voting power and sole investment power with respect to all shares of common stock set forth opposite their respective names.

 

In accordance with SEC rules, each listed person’s beneficial ownership includes:

 

 

Unless otherwise indicated, all shares are owned directly and the indicated person has sole voting and investment power. Unless otherwise indicated, the business address for each beneficial owner listed below shall be c/o Care Investment Trust Inc., 505 Fifth Avenue, 6th Floor, New York, New York 10017.

 

 

 

 

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and persons who own more than 10% of a registered class of our equity securities are required to furnish us with copies of all Section 16(a) forms that they file. To our knowledge, based solely on review of the copies of such reports furnished to us, all Section 16(a) filing requirements applicable to our executive officers, directors and persons who own more than 10% of a registered class of our equity securities were filed on a timely basis during 2009, except that Mr. Besecker filed one (1) late report with respect to one (1) transaction (shares purchased through the reinvestment of dividends declared on our common stock).

 

LEGAL PROCEEDINGS

 

On September 18, 2007, a class action complaint for violations of federal securities laws was filed in the United States District Court, Southern District of New York alleging that the Registration Statement relating to the initial public offering of shares of our common stock, filed on June 21, 2007, failed to disclose that certain of the assets in the contributed portfolio were materially impaired and overvalued and that we were experiencing increasing difficulty in securing our warehouse financing lines. On January 18, 2008, the court entered an order appointing co-lead plaintiffs and co-lead counsel. On February 19, 2008, the co-lead plaintiffs filed an amended complaint citing additional evidentiary support for the allegations in the complaint. We believe the complaint and allegations are without merit, and we 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. Defendants filed their motion for summary judgment on July 9, 2010. Plaintiffs are to file their opposition on August 20, 2010 and Defendants are to file their reply on September 17, 2010. The outcome of this matter cannot currently be predicted

 

On November 25, 2009, we filed a lawsuit in the U.S. District Court for the Northern District of Texas against Cambridge Holdings and its affiliates, including its chairman and chief executive officer (collectively, “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 (4) 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.

 

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 complaint to assert a breach of contract action against Cambridge Holdings. Cambridge Holdings did not oppose ERC Sub’s motion. To date, the Court has not acted on either of these pending motions for leave to amend.

 

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.

 

DIRECTORS AND EXECUTIVE OFFICERS

 

Information about Directors

 

Set forth below is the name, age, title and tenure of each current director of the company, excluding Messrs. Bisbee and Warden and Ms. Robards who are expected to resign their positions from our Board of Directors effective as of the closing of the Tiptree Transaction, followed by a summary of each director’s background and principal occupations.

 

 

Flint D. Besecker has been a member of our Board of Directors since Care was formed in 2007 and serves as our chairman. Mr. Besecker is a veteran of both the commercial finance and healthcare industries and currently runs Firestone Asset Management, a healthcare middle market private equity business he founded in 2008. Firestone owns a variety of private equity investments focused on early stage life science drug development as well as specialty pharmaceutical companies. In addition, Mr. Besecker was formerly a director and chairman of the compensation committee of Allion Healthcare, a specialty pharmaceutical company serving patients throughout the U.S. Prior to founding Firestone Asset Management, Mr. Besecker served as the president and founder of CIT Healthcare LLC, our Manager, and also served as president of CIT Commercial Real Estate. Prior to joining CIT in 2004, Mr. Besecker held a variety of executive positions including managing director of GE Healthcare Financial Services, executive vice president and chief risk officer of Heller Healthcare Finance and president and co-founder of Healthcare Analysis Corporation. He also served as an officer of Healthcare Financial Partners prior to its acquisition by Heller. Mr. Besecker is treasurer and board member for the Center of Hospice and Palliative Care of Western NY. He received a BS in Accounting from Canisius College in 1988 and is a Certified Public Accountant. Mr. Besecker was selected to serve as a member and chairman of our Board of Directors because of his significant achievements with, and intimate knowledge of, the company and his extensive experience in healthcare and real estate.

 

J. Rainer Twiford has been a member of our Board of Directors since the consummation of our initial public offering in 2007. Since 1999, Mr. Twiford has been president of Brookline Partners, Inc., an investment advisory

company. Prior to joining Brookline Partners, Mr. Twiford was partner of Trammell Crow Company from 1987 until 1991. Mr. Twiford is currently a director of IPI, Inc., Smith of Georgia and Tracon Pharmaceuticals, and previously served on the board of a children’s behavioral health company. Mr. Twiford received a BA and a Ph.D. from the University of Mississippi, an MA from the University of Akron and a JD from the University of Virginia. Mr. Twiford was selected to be a member of our Board of Directors because of his extensive high level experience in the financial industry.

 

Information about Executive Officers

 

Our current executive officers are as follows:

 

Salvatore (Torey) V. Riso Jr. , age 48, has served as our president and chief executive officer since December 2009. Mr. Riso formerly served as our secretary and chief compliance officer from February 2008 and has been employed by CIT Group since September 2005, serving as senior vice president and chief counsel of CIT Corporate Finance since March 2007. Prior to his current position at CIT Group, Mr. Riso served as chief counsel for our Manager, CIT Healthcare, and other business units of CIT Group. Between 1997 and 2005, Mr. Riso was in private practice in the New York office of Orrick Herrington & Sutcliffe LLP, where he worked in Orrick’s global finance practice group. Mr. Riso received a BA in economics and history cum laude from UCLA, as well as a JD from the Loyola Law School of Los Angeles.

 

Paul F. Hughes , age 55, has been our chief financial officer and treasurer since March 2009 and has served as our secretary and chief compliance officer since December 2009. Mr. Hughes is senior vice president and chief financial officer of the CIT Corporate Finance Unit. Mr. Hughes has over 30 years of finance and accounting experience, including 25 years with CIT. Mr. Hughes joined CIT in 1983 as a manager in the Internal Audit Department. He has held a number of executive positions including a leadership position in CIT Equipment Finance from 1986 to 2002 where he was responsible for the financial operations and other management roles with the business unit. Most recently, Mr. Hughes served as Senior Vice President of Corporate Development from 2003 to 2009 where he handled all aspects of pricing, contract negotiations and internal/external coordination for acquisitions and dispositions of CIT businesses. Prior to joining CIT, Mr. Hughes was an audit manager at Coopers and Lybrand. Mr. Hughes is a graduate of Northeastern University in Boston, MA, with a B.S. in Business Administration. Mr. Hughes has also attended the Executive Management Program at the Tuck School of Business at Dartmouth. Mr. Hughes is a CPA, licensed in the State of New York.

 

INFORMATION CONCERNING DESIGNEES TO OUR BOARD OF DIRECTORS

 

Effective upon the resignation of Messrs. Warden and Bisbee and Ms. Robards, the Care Board is expected to appoint the Tiptree designees listed below as directors. Set forth below is the name and age of each designee for director of the company followed by a summary of such person’s background and principal occupations. The information provided in this Information Statement regarding Tiptree’s designees for director was provided to the company by Tiptree and has not been independently verified by the company.

 

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Overview

 

We have no employees. We are managed by CIT Healthcare LLC, our Manager, pursuant to a management agreement between our Manager and us. All of our named executive officers (Messrs. Riso and Hughes) are, or in the case of Messrs. Kellman, McDugall and Plenskofski, were, employees of our Manager or one of its affiliates. We have not paid, and we do not intend to pay, any cash compensation to our executive officers and we do not currently intend to adopt any policies with respect thereto. We do not have agreements with any of our executive officers or any employees of our Manager or its affiliates with respect to their cash compensation. Our Manager determines the levels of base salary and cash incentive compensation that may be earned by our executive officers, as our Manager determines is appropriate. Our Manager also determines whether and to what extent our executive officers are provided with pension, deferred compensation and other employee benefits plans and programs.

 

Cash compensation paid to our executive officers is paid by our Manager or its affiliates in part from the fees paid by us to our Manager under the management agreement. We do not control how such fees are allocated by our Manager to its employees. In addition, we understand that, because the services performed by our Manager’s and its affiliates’ employees, including our executive officers, are not performed exclusively for us, our Manager is not able to segregate that portion of the cash compensation paid to our executive officers by our Manager or its affiliates that relates to their services to us.

Equity Compensation

 

Our Compensation, Nominating and Governance Committee (“CNG Committee”), may, from time to time, grant equity awards designed to align the interests of our executive officers with those of our stockholders, by allowing our executive officers to share in the creation of value for our stockholders through stock appreciation and dividends. The equity awards granted to our executive officers are generally subject to time-based vesting requirements designed to promote the retention of management and to achieve strong performance for our company. These awards further provide flexibility to us in our ability to enable our Manager to attract, motivate and retain talented individuals at our Manager. We have adopted the Care Investment Trust Inc. 2007 Equity Plan, which provides for the issuance of equity-based awards, including stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock awards and other awards based on our common stock that may be made by us to our directors and officers and to our advisors and consultants who are providing services to the company (which may include employees of our Manager and its affiliates) as of the date of the grant of the award. Shares of common stock issued to our independent directors with respect to their annual retainer fees are also issued under this plan.

 

Our Board of Directors has delegated its administrative responsibilities under the 2007 Equity Plan to our CNG Committee. In its capacity as plan administrator, the CNG Committee has the authority to make awards to eligible directors, officers, advisors and consultants, and to determine what form the awards will take and the terms and conditions of the awards. Grants of equity-based or other compensation to our chief executive officer must also be approved by the independent members of our Board.

 

Special Equity Grant to Mr. Kellman

 

On March 13, 2009, our Board of Directors approved a special grant of 21,440 restricted stock units to Mr. Kellman. The award was structured to vest in four equal installments beginning on the first anniversary of the grant date (March 13, 2010). Our Board of Directors granted the award to Mr. Kellman, which had a grant date fair value of $124,995 based on our closing stock price on March 13, 2009 of $5.83 per share, to recognize his service as Chief Executive Officer and President of the company. Mr. Kellman resigned from the company on December 4, 2009. Pursuant to the terms of his award, the 21,440 restricted stock units vested upon his resignation.

 

Special Equity Grant to Mr. Riso

 

On March 12, 2009, our Board of Directors approved a special grant of 10,486 restricted stock units to Mr. Riso. The award was structured to vest in four equal installments beginning on the first anniversary of the grant date. Our Board of Directors granted the award to Mr. Riso, which had a grant date fair value of $62,497 based on our closing stock price on March 12, 2009 of $5.96 per share, to recognize Mr. Riso’s continued service to the company. These shares vested on January 28, 2010, upon the approval of the plan of liquidation by our stockholders.

 

Special Equity Grant to Mr. Hughes

 

On May 7, 2009, our Board of Directors approved a special grant of 13,333 restricted stock units to Mr. Hughes. The award was structured to vest in four equal installments beginning on the first anniversary of the grant date. Our Board of Directors granted the award to Mr. Hughes, which had a grant date fair market value of $66,265 based on our closing stock price on May 7, 2009 of $4.97 per share, to recognize Mr. Hughes’s service to our company as the new chief financial officer and treasurer. These shares vested on January 28, 2010, upon the approval of the plan of liquidation by our stockholders.

 

Performance Share Awards to Mr. Riso and Mr. Hughes

 

On December 10, 2009, our Board of Directors awarded Mr. Riso and Mr. Hughes performance share awards with target levels of 5,000 and 3,000, respectively. These awards were amended and restated on February 23, 2010, such that the awards are triggered upon the execution, during 2010, of one or more of the following transactions that results in a return of liquidity 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 the 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 the our Board equal to or exceeding $8.00 per share. If the net proceeds are less than $7.50 per share, each individual will receive 50% of their respective target awards. If the net proceeds are greater than or equal to $7.50 per share and less than or equal to $7.99 per share, each individual will receive his respective target award. If the net proceeds are equal to or exceed $8.00 per share, each individual will receive 200% of his respective target award. Each performance share award will accrue any distributions declared during the award period without duplication. If any of these individuals is terminated or removed during the award period for cause, they will automatically forfeit their performance share award. If any of these individuals is terminated or removed during the award period for any other reason, then they will receive a prorated award at the end of the award period based on the number of days during the award period that they were with the company. Upon a change in control of the company, other than a liquidity event, during the award period, the award period will automatically be deemed completed and payouts will be made to each individual at their respective target levels.

 

Mr. Riso will be entitled to receive 10,000 performance shares in connection with the Tiptree Transaction, which will represent $90,000 in value if the tender offer to be conducted as part of the Tiptree Transaction is completed.

 

Mr. Hughes will be entitled to receive 6,000 performance shares in connection with the Tiptree Transaction, which will represent $54,000 in value if the tender offer to be conducted as part of the Tiptree Transaction is completed.

 

EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

The following table sets forth information regarding the compensation paid to our named executive officers by us in 2009, 2008 and 2007.

 

 

 

 

 

Grants of Plan-Based Awards

 

The following table sets forth information about awards granted to our named executive officers by us during the fiscal year ended December 31, 2009.

 

 

 

 

Outstanding Equity Awards at Fiscal Year End

 

The following table sets forth certain information with respect to all outstanding Care equity awards held by each named executive officer at the end of the fiscal year ended December 31, 2009.

 

 

 

 

Option Exercises and Stock Vested

 

We have not granted any stock options. The 40,000 shares of restricted stock granted to Mr. Kellman at the time of our initial public offering vested due to his termination from our Manager (after he had resigned from Care) without cause. Apart from Mr. Kellman, no other named executive’s restricted shares vested during the fiscal year ended December 31, 2009.

 

Pension Benefits

 

Our named executive officers received no benefits in fiscal year 2009 from us under defined pension or defined contribution plans.

 

Nonqualified Deferred Compensation

 

Our company does not have a nonqualified deferred compensation plan that provides for deferral of compensation on a basis that is not tax-qualified for our named executive officers.

 

Potential Payments Upon Termination or Change in Control

 

Our named executive officers are employees of our Manager or its affiliates and therefore we generally have no obligation to pay them any form of cash compensation upon their termination of employment, except with respect to the restricted stock award agreements, RSU agreements and performance share award agreements.

 

On January 28, 2010, our stockholders approved a plan of liquidation, which was filed as Exhibit A to our definitive proxy statement filed on December 28, 2009. Pursuant to the terms of the restricted stock and RSU grant instruments and our Equity Plan, stockholder approval of the plan of liquidation resulted in the accelerated vesting of restricted stock and RSUs. Therefore, our directors’ and executive officers’ outstanding restricted stock and RSUs vested on January 28, 2010.

 

On May 12, 2008, Mr. Kellman, our former chief executive officer, was granted a performance share award to cover the performance period from January 1, 2008 through December 31, 2010. In connection with Mr. Kellman’s resignation as our chief executive officer, we agreed that, notwithstanding the terms of his performance share award, when the determination of the payout percentage is made by our compensation committee at the end of the award period, the performance goals under the award shall be deemed to have been attained at “target” level performance, or 23,255 shares of common stock. Under the terms of the performance share award and our Equity Plan, stockholder approval of the plan of liquidation on January 28, 2010, resulted in the acceleration of the award period and the 23,255 shares vested.

 

Messrs. Riso and Hughes were awarded performance share awards on December 10, 2009, as amended on February 23, 2010. If Messrs. Riso or Hughes are terminated for “cause,” as defined in their Amended and Restated Performance Share Award Agreements, prior to December 31, 2010, all performance shares awarded to them under the performance share award agreements would be automatically forfeited. If Messrs. Riso or Hughes are terminated for any reason other than for “cause” prior to December 31, 2010, the individual will receive a pro-rata percentage of the performance shares that would otherwise be payable if he had not been terminated.

 

If we experienced a “change in control” as of December 31, 2009, other than a liquidity event, the performance period would have been deemed to have completed as of such date, and the company would have been deemed to have achieved target level performance, resulting in an award of 5,000 shares of common stock to Mr. Riso and 3,000 shares of common stock to Mr. Hughes, which would have had a fair market value as of December 31, 2009 of $38,900 and $23,340, respectively, based on our closing stock price on December 31, 2009 of $7.78 per share.

Director Compensation

 

The following table sets forth information regarding the compensation paid to, and the compensation expense we recognized, with respect to our Board of Directors during the fiscal year ended December 31, 2009:

 

 

 

 

Each independent director receives an annual retainer of $100,000. The annual retainer payable to our independent directors is payable quarterly in arrears, half in cash and half in unrestricted stock. Any portion of the annual retainer that an independent director receives in stock is granted pursuant to our 2007 Equity Plan.

 

The Chairman of our Board of Directors is entitled to receive an additional annual retainer of $10,000. The Chairs of our Audit Committee and our former NCGIO Committee are each entitled to receive an additional annual retainer of $7,500. The Chairman of our former Compensation Committee is entitled to receive an additional annual retainer of $5,000. Effective January 28, 2010, the Compensation Committee and NCGIO Committee were combined into the CNG Committee. The Chair of our CNG Committee is entitled to receive an additional annual retainer of $7,000. These additional retainer amounts paid to our Board and committee chairs are payable in cash. In addition, we reimburse all directors for reasonable out-of-pocket expenses incurred in connection with their services on our Board of Directors.

Performance Share Award to Mr. Besecker

 

On December 10, 2009, our Board of Directors awarded Mr. Besecker a performance share award with a target share award of 5,000 shares of our common stock. This award was amended and restated on February 23, 2010, such that the award is triggered upon the execution, during 2010, of one or more of the following transactions that results in a return of liquidity 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 the 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 the our Board equal to or exceeding $8.00 per share.

 

Mr. Besecker will be entitled to receive 10,000 performance shares in connection with the Tiptree Transaction, which will represent $90,000 in value if the tender offer to be conducted as part of the Tiptree Transaction is completed.

 

Compensation Committee Interlocks and Insider Participation

 

The Compensation Committee of our Board is responsible for determining executive compensation. Messrs. Bisbee and Twiford and Ms. Lebenthal were the members of the Compensation Committee during fiscal 2009. None of the Compensation Committee members were at any time during fiscal 2009, or at any other time, an officer or employee of Care or any of our subsidiaries. No member on the Compensation Committee serves as a member of the Board or Compensation Committee of any entity that has one or more executive officers serving as a member of our Board or Compensation Committee.

 

BOARD OF DIRECTORS AND GOVERNANCE

 

Director Attendance at Annual Meetings

 

During 2009, our Board of Directors held 14 meetings (telephonic and in-person), our Compensation Committee held three (3) meetings, and our Nominating and Governance Committee held three (3) meetings. None of our current directors attended less than 75% of the Board and committee meetings that he or she was required to attend.

 

Care’s directors are expected to attend Care’s annual meeting of stockholders. All but one of our directors at the time attended the 2009 annual meeting.

 

Director Independence

 

Our Board of Directors has previously determined that J. Rainer Twiford is independent under the independence criteria established by the New York Stock Exchange (“NYSE”). We expect that our Board of Directors will determine, at the time they are nominated, that Jonathan Ilany and William Houlihan are independent and that Flint Besecker is also now independent, in each case under the independence criteria established by the NYSE.

 

Audit Committee

 

Our Board of Directors has established an audit committee that meets the definition provided by Section 3(a)(58)(A) of the Exchange Act. The Audit Committee is currently comprised of Mr. Bisbee, serving as chairperson, Mr. Twiford and Ms. Robards, all independent directors within the definition of independence imposed by Rule 10A-3 under the Exchange Act. Mr. Bisbee qualifies as an “audit committee financial expert” as that term is defined in the Exchange Act. We have not yet determined the composition of our Audit Committee following the closing of the Tiptree Transaction.

The Audit Committee operates under an Audit Committee Charter adopted by our Board. The Audit Committee assists the Board of Directors in overseeing:

 

 

The Audit Committee is also responsible for engaging the independent auditors, reviewing with the independent auditors the plans and results of the audit engagement, approving professional services provided by the independent auditors and considering the range of audit and non-audit fees.

 

Compensation, Nominating and Governance Committee

 

On January 28, 2010, we combined our Compensation Committee and our Nominating and Corporate Governance Committee into a single committee. The Compensation, Nominating and Governance Committee (the “CNG Committee”) is comprised of our three (3) current independent directors: Ms. Robards and Messrs. Bisbee, and Twiford. We have not yet determined the composition of our CNG Committee following the closing of the Tiptree Transaction.

 

The CNG Committee operates under a Compensation, Nominating and Governance Committee Charter adopted by our Board. The principal functions of the CNG Committee are to:

 

 

Identification of Director Candidates

 

Our CNG Committee assists our Board of Directors in identifying and reviewing director candidates to determine whether they qualify for membership on the Board of Directors and for recommending to the Board the director nominees to be considered for election at our annual meetings of stockholders.

In making recommendations to our Board, our CNG Committee considers such factors as it deems appropriate. The Board seeks diversity in its members with respect to background, skills and expertise, industry knowledge and experience. The CNG Committee uses the following general criteria for identifying director candidates:

 

1. Directors should possess senior level management and decision-making experience;

 

2. Directors should have a reputation for integrity and abiding by exemplary standards of business and professional conduct;

 

3. In selecting director nominees, the Board should seek candidates with the commitment and ability to devote the time and attention necessary to fulfill their duties and responsibilities to Care and its stockholders;

 

4. Directors should be highly accomplished in their respective field, with leadership experience in corporations or other complex organizations, including government, educational and military institutions;

 

5. In addition to satisfying the independence criteria described in the Corporate Governance Guidelines, non-management directors should be able to represent all stockholders of Care;

 

6. Directors who are expected to serve on a Committee of the Board shall satisfy the New York Stock Exchange and legal criteria for members of the applicable Committee;

 

7. Directors should have the ability to exercise sound business judgment to provide advice and guidance to the Chief Executive Officer with candor; and

 

8. The Board’s assessment of a director candidate’s qualifications includes consideration of diversity, age, skills and experience in the context of the needs of the Board.

 

The foregoing general criteria apply equally to the evaluation of all potential, non-management director nominees, including those individuals recommended by stockholders.

 

Care does not have a formal policy with regard to its consideration of diversity when considering candidates for election as directors but believes that diversity is an important factor in determining the composition of the Board. Thus, the CNG Committee strives to nominate directors with diverse experience and background that complement each other so that, as a group, the Board will possess the appropriate talent, skills, depth of experience, and expertise to manage Care’s business. In considering whether to recommend any candidate for inclusion in the Board’s director nominees, including those submitted by stockholders, the CNG Committee will apply the selection criteria set forth in the Company’s Corporate Governance Guidelines. These criteria include a nominee’s background, skills, expertise, industry knowledge and experience.

 

Our CNG Committee may solicit and consider suggestions of our directors, our Manager or our management regarding possible nominees. Our CNG Committee may also procure the services of outside sources or third parties to assist in the identification of director candidates.

 

Our CNG Committee may consider director candidates recommended by our stockholders. Our CNG Committee will apply the same standards in considering candidates submitted by stockholders as it does in evaluating candidates submitted by members of our Board. Any recommendations by stockholders should follow the procedures outlined in our Corporate Governance Guidelines and should also provide the reasons supporting a candidate’s recommendation, the candidate’s qualifications and the candidate’s written consent to being considered as a director nominee. In addition, any stockholder recommending a director candidate should submit information demonstrating the number of shares of common stock that he or she owns.

Code of Business Conduct, Code of Ethical Conduct and Board Committee Charters

 

Our Board of Directors has adopted a Code of Business Conduct and a Code of Ethical Conduct as required by the listing standards of the NYSE that applies to our directors, executive officers and employees of our Manager and its affiliates. The Code of Business Conduct and Code of Ethical Conduct were designed to assist our directors, executive officers and employees of our Manager and its affiliates in complying with the law, resolving moral and ethical issues that may arise and in complying with our policies and procedures. Among the areas addressed by the Code of Business Conduct and Code of Ethical Conduct are compliance with applicable laws, conflicts of interest, use and protection of our company’s assets, confidentiality, communications with the public, accounting matters, records retention and discrimination and harassment.

 

Corporate Governance Documents Available at Our Website

 

We are committed to operating our business under strong and accountable corporate governance practices. You are encouraged to visit the corporate governance section of our corporate website at http://www.carereit.com to view or to obtain copies of the respective charters of our Audit Committee and Compensation, Nominating and Governance Committee, our Code of Business Conduct, Code of Ethical Conduct and Corporate Governance Guidelines.

 

Executive Sessions of Independent Directors

 

In accordance with our Corporate Governance Guidelines, the independent directors serving on our Board of Directors generally meet in executive session during each regularly scheduled Board meeting without the presence of any non-independent directors or other persons who are part of our management. The executive sessions regularly are chaired by Ms. Robards, the Lead Director elected by a majority of the independent directors. Interested parties may communicate directly with the presiding director or non-management directors as a group through the process set forth above under “Communications with our Board of Directors.”

 

Current Board Leadership Structure.

 

Our Board is led by a non-executive Chairman. Flint Besecker became our Chairman in October 2009 when Mr. Kirk Gorman, our then Chairman resigned. Mr. Besecker formerly served as president of CIT Healthcare LLC. As Chairman, Mr. Besecker performs many important duties on behalf of the Board, including reviewing and approving the Board agenda and presiding at all Board meetings, acting as the principal contact for the Chief Executive Officer and other members of the Board and management. The Board decided to elect a non-executive Chairman and separate the positions of Chief Executive Officer and Chairman of the Board because it believes that this structure is appropriate given the fact that Mr. Besecker is a former chief executive officer of CIT Healthcare, our Manager, and can bring this experience to bear in assisting the company in realizing its strategic objectives.

 

To help ensure that the Board carries out its oversight responsibilities, our Governance Guidelines require the Board as a whole to maintain a substantial degree of independence from management. Pursuant to the Governance Guidelines, a substantial majority of the Board must be independent under the independence criteria established by the NYSE. As of the date hereof, three (3) of our current five (5) directors have been determined to be independent, and we expect that the Care Board will determine, prior to closing of the Tiptree Transaction, that Mr. Besecker satisfies the independence criteria established by the NYSE.

 

The company requires that there be a Lead Director should the Chairman of the Board be an employee or former employee of the company. Karen Robards currently serves as the Company’s Lead Director and provides the following services to the company: review and provide input with respect to Board meeting agendas, preside at executive sessions or at meetings of the Board when the Chairman is not present, and coordinate communications between the Board and the Chief Executive Officer. In accordance with the Governance Guidelines, independent

directors meet in regularly scheduled executive sessions at such times and for such reasons as they desire and set. At this time, Ms. Robards as Lead Director presides at such executive sessions.

 

Board’s Role in Risk Oversight.

 

Our Board oversees our business in general, including risk management and performance of the Chief Executive Officer and other members of senior management, to assure that the long-term interests of the stockholders are being served. Each committee of our Board is also responsible for reviewing the risk exposure related to such committee’s areas of responsibility and providing input to senior management on such risks.

 

Management and our Board have a process to identify, analyze, manage and report all significant risks facing us. Our Chief Executive Officer and other members of senior management regularly report to the Board on significant risks facing us, including legal, financial, operational and strategic risks. The Audit Committee reviews with senior management significant risks related to the company and periodically reports to the Board on such risks.

 

In addition, pursuant to its charter, the Audit Committee is responsible for reviewing and discussing the company’s business risk management process, including the quality and integrity of Care’s financial statements, and accounting and reporting processes; Care’s compliance with legal and regulatory requirements; the independent auditors’ qualifications and independence; and the performance of Care’s internal audit and credit audit functions. Furthermore, the Audit Committee evaluates key financial statement issues and risks, their impact or potential effect on reported financial information and the process used by management to address such matters. At each Audit Committee meeting, management briefs the committee on the current business and financial position of the company, as well as such items as internal audits and independent audits.

 

COMMUNICATIONS WITH OUR BOARD OF DIRECTORS

 

We have a process by which stockholders and/or other parties may communicate with our Board of Directors, our independent directors as a group or our individual directors. Any such communications may be sent to our Board by U.S. mail or overnight delivery and should be directed to the Board of Directors, a Committee, the independent directors as a group, or an individual director, c/o Paul Hughes, Chief Financial Officer, Treasurer, Secretary and Chief Compliance Officer, at Care Investment Trust Inc., 505 Fifth Avenue, 9th Floor, New York, New York 10017, who will forward such communications on to the intended recipient. Any such communications may be made anonymously. In addition, stockholder communications can be directed to the Board by calling the Care hotline listed on our website.

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

Policies and Procedures With Respect to Related Party Transactions

 

It is the policy of our Board of Directors that all related party transactions (generally, transactions involving amounts exceeding $120,000 in which a related party (directors and executive officers or their immediate family members, or stockholders owning 5% of more of our outstanding stock) had or will have a direct or indirect material interest) shall be subject to approval or ratification by the Audit Committee in accordance with the following procedures.

 

Each party to a potential related party transaction is responsible for notifying our Manager’s legal department of the potential related person transaction in which such person or any immediate family member of such person may be directly or indirectly involved as soon as he or she becomes aware of such transaction. Our Manager’s legal department will determine whether the transaction should be submitted to the Audit Committee for consideration. The Audit Committee will then review the material facts of the transaction and either approve or disapprove of the entry into such transaction.

Transactions with Related Persons

 

Management Agreement

 

In connection with our initial public offering, we entered into a Management Agreement with our Manager, which describes the services to be provided by our Manager and its compensation for those services. On September 30, 2008, we amended (the “Amendment”) the Management Agreement between ourselves and the Manager, and on January 15, 2010 we further amended and restated (the “Amendment and Restatement”) the Management Agreement. In consideration of the Amendment and for the Manager’s continued and future services to us, we granted the Manager warrants to purchase 435,000 shares of our common stock at $17.00 per share under the 2007 Manager Equity Plan. See “Transactions with Related Persons — Warrant” below.

 

Under the Amendment and Restatement, our Manager, subject to the oversight of our board of directors, is required to conduct our business affairs in conformity with the policies and the investment guidelines that are approved by our Board of Directors. The Amendment and Restatement continues in effect, unless earlier terminated, until December 31, 2011.

 

The Amendment and Restatement reduces the base management fee 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 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 existing investments have been sold; then from such date (iii) $75,000 until the effective date of expiration or earlier termination of the Amendment and Restatement by either of us or the Manager; provided, however, that notwithstanding the foregoing, the base management fee will 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 the we are no longer subject to the reporting requirements of the Exchange Act.

 

In addition, pursuant to the Amendment and Restatement, we will pay the Manager a Buyout Payment of $7.5 million, payable as follows: (i) $2.5 million on the Effective Date; (ii) $2.5 million upon the earlier of (a) April 1, 2010 and (b) the effective date of the termination of the Amendment and Restatement by either of us 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 Amendment and Restatement by either us or the Manager. The termination fee that is operative under the original Management Agreement was replaced by the Buyout Payments under the Amendment and Restatement. On January 29, 2010 and April 1, 2010, we paid our Manager $2.5 million and $2.5 million, respectively, pursuant to the Buyout Payments under the Amendment and Restatement.

 

The Manager is also eligible for an incentive fee of $1.5 million if (i) at any time prior to December 31, 2011, the aggregate cash dividends paid to our stockholders since the Effective Date equal or exceed $9.25 per share or (ii) as of December 31, 2011, the sum of (x) the aggregate cash dividends paid to our stockholders since the Effective Date and (y) the company’s cash and cash equivalents on hand less cash flows and expenses and other obligations of the company, including the incentive fee, equals or exceeds $9.25 per share. If the Manager would be eligible for the incentive fee but for the impact of the payment of the $1.5 million incentive fee, we will pay the Manager a reduced incentive fee up to the amount that allows the company to satisfy such $9.25 per share eligibility requirement.

 

Both parties can terminate the Amendment and Restatement without cause under certain circumstances, and we can terminate the Amendment and Restatement with cause.

 

For the year ended December 31, 2009, we recognized $2.2 million in management fee expense related to the base management fee, and our Manager was not eligible for an incentive fee.

 

Mortgage Purchase Agreement

 

On September 30, 2008, we entered into a Mortgage Purchase Agreement (the “MPA”) with our Manager in order to secure a potential additional source of liquidity. The MPA expired on September 30, 2009. Pursuant to the MPA, we had the right, but not the obligation, to cause the Manager to purchase our current senior mortgage assets at their then-current fair market value, as determined by a third party appraiser. However, the MPA provided that in no event shall the Manager be obligated to purchase any mortgage asset if (a) the Manager has already purchased

mortgage assets with an aggregate sale price of $125.0 million pursuant to the MPA or (b) the third-party appraiser determines that the fair market value of such mortgage asset is greater than 105% of the then outstanding principal balance of such mortgage asset. We had the right to exercise our rights under the MPA with respect to any or all of the mortgage assets identified in the MPA at any time or from time to time until the MPA expired on September 30, 2009.

 

Pursuant to the MPA, we sold loans made to four (4) borrowers with carrying amounts of $24.8 million, $22.5 million, $2.9 million and $18.7 million for total proceeds of $65.2 million. The sale of the first loan closed in November of 2008 and the company recorded a loss on the sale of $2.4 million in the consolidated statement of operations for the year ended December 31, 2008. The second loan closed in February of 2009 at a loss of $4.5 million, the third loan closed in August 2009 at its approximate net carrying value and the fourth loan closed in September 2009 at a loss of $1.3 million. In consideration of the Amendment and Restatement, we agreed to terminate the MPA and rescind all outstanding put notices under the MPA.

 

Warrant

 

In consideration of the Amendment and for the Manager’s continued and future services to the Company, the Company granted the Manager warrants to purchase 435,000 shares of the Company’s common stock at $17.00 per share (the “Warrant”) under the 2007 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 the Warrant to Tiptree on the closing of the Tiptree Transaction.

 

Purchase and Sale Agreement

 

Subject to their appointment to our Board, Michael Barnes and Geoffrey Kauffman, may be deemed to have an indirect material interest in the purchase and sale agreement, pursuant to which 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.

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Information Statement to be signed on its behalf by the undersigned hereunto duly authorized.

 

CARE INVESTMENT TRUST INC.
(Registrant)

 

Name:      Paul F. Hughes

 

Dated: August 3, 2010

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