SUTHERLAND ASSET MANAGEMENT CORPORATION CONTINGENT SHARE PRIVATE PLACEMENT AGREEMENT
Exhibit 1.4
▇▇▇▇▇▇▇▇▇▇ ASSET MANAGEMENT CORPORATION
CONTINGENT SHARE PRIVATE PLACEMENT AGREEMENT
PRIVATE PLACEMENT PURCHASE AGREEMENT (this “Agreement”) made as of this [ ] day of [ ],
2009, by and between ▇▇▇▇▇▇▇▇▇▇ Asset Management Corporation, a Maryland corporation (the
“Company”), and Waterfall Asset Management, LLC (the “Purchaser”).
WHEREAS, the Purchaser has a substantive, pre-existing relationship with the Company;
WHEREAS, the Company has filed a registration statement on Form S-11 (File No. 333-159388)
(the “Registration Statement”) under the Securities Act of 1933, as amended (the
“Securities Act”) with the Securities and Exchange Commission (the “SEC”) in
connection with a proposed initial public offering (the “IPO”) of [ ] shares of
the Company’s common stock, par value $0.01 per share (the “Common Stock”);
WHEREAS, the Company and the Purchaser have entered into the management agreement (the
“Management Agreement”), dated as of [ ], 2009, among the Company, ▇▇▇▇▇▇▇▇▇▇ Asset I,
LLC, a Delaware limited liability company (“Asset I”), ▇▇▇▇▇▇▇▇▇▇ Asset II, LLC, a Delaware
limited liability company (“Asset II” and, together with Asset I, the “Subsidiaries”), and
the Purchaser, pursuant to which the Purchaser (in its capacity as external manager of the Company)
will provide management and advisory services to the Company and the Subsidiaries; and
WHEREAS, concurrent with the consummation of the IPO, the Company desires to issue and sell,
and the Purchaser desires to purchase, upon the terms and conditions set forth in this Agreement, [
] shares of Common Stock (the “Contingent Shares” and each, a “Contingent
Share”).
NOW, THEREFORE, for and in consideration of the premises and the mutual covenants hereinafter
set forth, the parties hereto do hereby agree as follows:
1. Sale and Purchase of Private Placement Shares. Subject to and concurrent
with the consummation of the IPO, the Company shall issue and sell to the Purchaser and the
Purchaser shall purchase from the Company, at a purchase price per Contingent Share equal to
the public offering price per share of Common Stock sold in the IPO, the Contingent Shares.
2. Closing. The closing of the purchase and sale of the Contingent Shares
hereunder, including payment for and delivery of the Contingent Shares, will take place at
the offices of the Company or the Company’s legal counsel concurrently with, and shall be
subject to, the completion of the IPO.
3. Representations and Warranties of the Company. In connection with the
issuance and sale of the Contingent Shares, the Company hereby represents and warrants to
the Purchaser the following:
3.1 The Company is a corporation duly formed, validly existing and in good standing
under the laws of the State of Maryland and the Company has all necessary corporate power
and authority to enter into this Agreement and to consummate the transactions contemplated
hereby.
3.2 All corporate action necessary to be taken by the Company to authorize the
execution, delivery and performance of this Agreement and all other agreements and
instruments delivered by the Company in connection with the transactions contemplated hereby
has been duly and validly taken and this Agreement has been duly executed and delivered by
the Company. This Agreement constitutes the valid, binding and enforceable obligation of
the Company, enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or similar laws of general application now or hereafter in effect affecting the
rights and remedies of creditors and by general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). The issuance and sale by the
Company of the Contingent Shares does not conflict with its organizational documents or any
material contract by which the Company or its property or assets is bound, or any federal or
state laws or regulations or decree, ruling or judgment of any United States or state court
applicable to the Company or its property or assets.
3.3 Upon issuance in accordance with, and payment pursuant to, the terms hereof, the
Purchaser will have good title to the Contingent Shares free and clear of all liens, claims
and encumbrances of any kind, other than transfer restrictions hereunder and under other
agreements contemplated hereby.
3.4 The Company has a substantive, pre-existing relationship with the Purchaser and was
directly contacted by the Purchaser or its agents outside of the IPO effort. The Company
(i) did not identify or contact the Purchaser through the marketing of the IPO and (ii) was
not independently contacted by the Purchaser as a result of the general solicitation by
means of the Registration Statement.
4. Representations and Warranties of the Purchaser. The Purchaser hereby represents
and warrants to the Company that:
4.1 The Purchaser is an “accredited investor” as that term is defined in Rule 501 of
Regulation D promulgated under the Securities Act. The Purchaser has accurately completed
the Accredited Investor Questionnaire attached hereto as Exhibit A indicating the
basis for such Purchaser’s accredited investor status.
4.2 The Contingent Shares are being acquired for the Purchaser’s own account, only for
investment purposes and not with a view to, or for resale in connection with, any public
distribution or public offering thereof within the meaning of the Securities Act.
4.3 The Purchaser is a limited liability company duly organized, validly existing and
in good standing under the laws of the State of Delaware. The Purchaser has all necessary
power and authority to enter into this Agreement and to consummate the transactions
contemplated hereby.
4.4 All action necessary to be taken by the Purchaser to authorize the execution,
delivery and performance of this Agreement and all other agreements and instruments
delivered by the Purchaser in connection with the transactions contemplated hereby has been
duly and validly taken and this Agreement has been duly executed and delivered by the
Purchaser. This Agreement constitutes the valid, binding and enforceable obligation of the
Purchaser, enforceable in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or
similar laws of general application now or hereafter in effect affecting the rights and
remedies of creditors and by general principles of equity (regardless of whether enforcement
is sought in a proceeding at law or in equity). The purchase by the Purchaser of the
Contingent Shares does not conflict with the
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organizational documents of the Purchaser or with any material contract by which the
Purchaser or its property or assets is bound, or any laws or regulations or decree, ruling
or judgment of any court applicable to the Purchaser or its property or assets.
4.5 The Purchaser understands and acknowledges that (i) the offering of the Contingent
Shares pursuant to this Agreement will not be registered under the Securities Act on the
grounds that the offering and sale of the Contingent Shares is exempt from registration
under the Securities Act pursuant to Rule 506 of Regulation D thereof and exempt from
registration pursuant to applicable state securities or blue sky laws and, therefore, the
Contingent Shares will be characterized as “restricted securities” under the Securities Act
and such laws and may not be sold unless the Contingent Shares are subsequently registered
under the Securities Act and qualified under state law or unless an exemption from such
registration and such qualification is available.
4.6 The Purchaser has a substantive, pre-existing relationship with the Company and was
directly contacted by the Company or the Company’s agents outside of the IPO effort. The
Purchaser (i) was not identified or contacted through the marketing of the IPO and (ii) did
not independently contact the Company as a result of the general solicitation by means of
the Registration Statement.
4.7 The Purchaser (i) has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of the Purchaser’s prospective
investment in the Contingent Shares; (ii) has the ability to bear the economic risks of the
Purchaser’s prospective investment; and (iii) has not been offered the Contingent Shares by
any form of advertisement, article, notice, or other communication published in any
newspaper, magazine, or similar medium; or broadcast over television or radio; or any
seminar or meeting whose attendees have been invited by any such medium.
5. Contingent Shares.
(i) All of the Contingent Shares shall vest in the event that, during any full four calendar
quarter period during the 16 full calendar quarters after the date of the completion of the IPO
(excluding any partial quarter following the completion of the IPO) (the “Vesting Period”), the
Company’s Core Earnings (as defined below) for such four-quarter period equals or exceeds the Hurdle Rate (as defined below). In
addition, the Contingent Shares shall vest immediately upon termination of the Management
Agreement.
(ii) The holders of the Contingent Shares shall be entitled to
vote and to receive distributions paid by the Company on such shares, whether or not such
Contingent Shares are vested.
(iii) To the extent that the Contingent Shares have not vested at or prior to the end of the
Vesting Period, the Contingent Shares shall be forfeited by the Purchaser and returned to the
Company for no consideration and the holders thereof shall no longer be entitled to vote such
shares or receive distributions paid by the Company with respect to such shares.
(iv) The hurdle rate (the “Hurdle Rate”) for any calendar quarter shall be the
product of (1) the weighted average of the issue price per share of Common Stock in all of the
Company’s offerings through the end of the applicable quarter multiplied by the weighted average
number of shares of Common Stock outstanding during such quarter and (2) 8.0% (expressed as a
quarterly percentage). For
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purposes of calculating the Hurdle Rate, the Contingent Shares shall not be considered to be
outstanding and the proceeds from the sale of such shares shall not be considered received by the
Company.
(v) For purposes of determining whether the Contingent Shares vest in accordance with this
Section 5,“Core Earnings” means GAAP net income (loss) excluding non-cash equity
compensation expense, any unrealized gains, losses or other items that do not affect realized net
income (regardless of whether such items are included in other comprehensive income or loss, or in
net income), and adjusted to exclude one-time events pursuant to changes in GAAP and certain
non-cash items after discussions between the Purchaser (in its capacity as external manager of the
Company) and the Company’s Independent Directors and after approval by a majority of the Company’s
Independent Directors.
6. Registration Rights Agreements; Legal Opinion. As a further inducement for
the Purchaser to purchase the Contingent Shares, at the time of the completion of the IPO,
the Company and the Purchaser shall enter into a registration rights agreement,
substantially in the form of Exhibit B hereto, pursuant to which the Company will
grant certain registration rights to the Purchaser relating to the Contingent Shares. In
addition, at or prior to the closing of the purchase and sale of the Contingent Shares, the
Purchaser shall have received the favorable opinion of ▇▇▇▇▇▇▇ LLP, counsel for the Company,
substantially in the form of Exhibit C hereto.
7. Successors and Assigns. Except as otherwise expressly provided herein, all
covenants and agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors of the parties
hereto whether so expressed or not. Notwithstanding the foregoing or anything to the
contrary herein, the parties may not assign this Agreement or their obligations hereunder.
8. Amendments. This Agreement may not be amended, modified or waived, in whole
or in part, except by an agreement in writing signed by each of the parties hereto.
9. Counterparts; Facsimile. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same instrument. This Agreement or any
counterpart may be executed via facsimile transmission, and any such executed facsimile copy
shall be treated as an original.
10. Governing Law. This Agreement shall for all purposes be deemed to be made
under and shall be construed in accordance with the laws of the State of New York. The
parties hereby agree that any action, proceeding or claim against it arising out of or
relating in any way to this Agreement shall be brought and enforced in the courts of the
State of New York or the United States District Court for the Southern District of New York,
and irrevocably submit to such jurisdiction, which jurisdiction shall be exclusive. The
parties hereby waive any objection to such exclusive jurisdiction and agree not to plead or
claim that such courts represent an inconvenient forum.
11. Third Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other person.
12. Legends. Each certificate, if any, representing the Contingent Shares
shall be endorsed with the following legend or a substantially similar legend:
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“The securities represented by this certificate have not been registered under the Securities
Act of 1933, as amended, and are “restricted securities” as defined in Rule 144 promulgated under
the Securities Act. The securities may not be sold or offered for sale or otherwise distributed
except (i) in conjunction with an effective registration statement for the shares under the
Securities Act of 1933, as amended, or (ii) pursuant to an opinion of counsel, satisfactory to the
company, that such registration or compliance is not required as to said sale, offer, or
distribution. The securities represented by this certificate are subject to the terms and
conditions of the Contingent Share Private Placement Agreement, dated as of [ ], 2009, by and
between ▇▇▇▇▇▇▇▇▇▇ Asset Management Corporation and Waterfall Asset Management, LLC.”
13. Severability. In case any provision of this Agreement shall be found by a
court of law to be invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions of this Agreement shall not in any way be
affected or impaired thereby.
14. Entire Agreement. This Agreement and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the parties with
regard to the subjects hereof and thereof and they supersede, merge, and render void every
other prior written and/or oral understanding or agreement among or between the parties
hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.
| ▇▇▇▇▇▇▇▇▇▇ ASSET MANAGEMENT CORPORATION |
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| By: | ||||
| Name: | ||||
| Title: | ||||
| WATERFALL ASSET MANAGEMENT, LLC |
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| By: | ||||
| Name: | ||||
| Title: | ||||
EXHIBIT A
ACCREDITED INVESTOR QUESTIONNAIRE
ACCREDITED INVESTOR STATUS FOR ENTITIES (Please check the applicable boxes):
1. o A bank as defined in Section 3(a)(2) of the Securities Act of 1933, as amended (the
“Securities Act”) acting in its individual or fiduciary capacity; a savings and loan
association or other institution as defined in Section 3(a)(5)(A) of the Securities Act acting in
its individual or fiduciary capacity; a broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934, as amended; an insurance company as defined in section 2(13) of
the Securities Act; an investment company registered under the Investment Company Act of 1940, as
amended, or a business development company as defined in Section 2(a)(48) of the Securities Act; a
small business investment company licensed by the U.S. Small Business Administration under Section
301(c) or (d) of the Small Business Investment Act of 1958; an employee benefit plan within the
meaning of Title I of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”) and (i) the investment decision is made by a plan fiduciary, as defined in
Section 3(21) of ERISA, which is either a bank, savings and loan association, insurance company or
registered investment adviser, or (ii) the employee benefit plan has total assets over $5,000,000,
or (iii) the employee benefit plan is self directed and its investment decisions are made solely by
persons that are accredited investors (within the meaning of Rule 501(a) under the Securities Act);
a plan established and maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions for the benefit of its employees, and such
plan has assets in excess of $5,000,000.
2. o A private business development company as defined in Section 202(a)(22) of the Investment
Advisers Act of 1940, as amended.
3. o An organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended,
a corporation, a Massachusetts or similar business trust, or a partnership, not formed for the
specific purpose of acquiring the Contingent Shares, with total assets in excess of $5,000,000.
4. o A trust with total assets in excess of $5,000,000, that was not formed for the specific purpose
of purchasing the Contingent Shares and whose purchase is directed by a sophisticated person as
described in Rule 506(b)(2)(ii).
5. o An entity in which all of the equity owners are accredited investors (within the meaning of Rule
501(a) under the Securities Act).
Ex. A-1
EXHIBIT B
FORM OF REGISTRATION RIGHTS AGREEMENT
Ex. B-1
EXHIBIT C
▇▇▇▇▇▇▇ LLP LEGAL OPINION
Ex. C-1