Attached files
| file | filename |
|---|---|
| EX-2.1 - IMH Financial Corp | v184447_ex2-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
|
Date of report (Date of earliest
event reported):
|
May 5,
2010
|
IMH Secured Loan Fund,
LLC
(Exact name of registrant as
specified in its charter)
|
Delaware
|
000-52611
|
81-0624254
|
||
|
(State or other jurisdiction of
incorporation)
|
(Commission File
Number)
|
(I.R.S.
Employer Identification
No.)
|
|
4900
N. Scottsdale Rd., Suite 5000
Scottsdale,
Arizona
|
85251
|
|||
|
(Address)
|
(Zip
Code)
|
|
Registrant’s telephone number,
including area code:
|
(480)
840-8400
|
N/A
Former name or former address, if
changed since last report
Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of
the registrant under any of the following provisions:
[ ] Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[
] Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12)
[
] Pre-commencement communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
Agreement
and Plan of Conversion and Contribution
Overview. Investors
Mortgage Holdings Inc., the manager of IMH Secured Loan Fund, LLC, or the Fund,
has approved a series of
proposed transactions, referred to as the Conversion Transactions. The Conversion Transactions
involve (i) the conversion of the Fund, which is currently a Delaware limited
liability company, into a Delaware corporation named IMH Financial Corporation,
and (ii) the acquisition by IMH Financial Corporation of all of the outstanding
equity interests in Investors Mortgage Holdings Inc., or the Manager, and IMH
Holdings, LLC, or Holdings, a holding company for other affiliates of the
Manager.
In
connection with the proposed Conversion Transactions, the Fund, the Manager and
its stockholders, and Holdings and its members entered into an agreement and
plan of conversion and contribution, or conversion plan, on May 5, 2010, as
amended on May 10, 2010, which terminated and replaced that certain agreement
and plan of merger previously entered into on February 11, 2010. The
following discussion and summary of the conversion plan is qualified in its
entirety by the terms of the conversion plan, which is attached hereto as
Exhibit 2.1. Pursuant to the conversion plan, IMH Financial
Corporation will issue to the members of the Fund 220.3419 shares of Class B or
Class C common stock in exchange for each outstanding membership unit in the
Fund. The Class B common stock will be divided into separate series
called Class B-1, Class B-2, Class B-3 and Class B-4 common
stock. There will be one series of Class C common stock.
Terms of Class B and Class C Common
Stock. The key terms of the IMH Financial Corporation Class B
and Class C common stock include, without limitation, the
following:
|
•
|
each
share of Class B-1, Class B-2, Class B-3, Class B-4 and Class C common
stock will be initially issued to a custodian for the benefit of the
respective holders, each share of Class C common stock will generally be
nontransferable, subject to certain exceptions, and each share of Class
B-1, Class B-2 and Class B-3 common stock will be subject to certain
restrictions on transfer or sale for six, nine or 12 months following the
earlier of (i) the consummation of an initial public offering, and (ii)
the 90th day after the board of directors of IMH Financial Corporation
determines that it will not pursue an initial public offering, as
described below; Class B-4 common stock will only be issued to Shane
Albers and William Meris, the chief executive officer and president of the
Manager, and will be subject to additional four-year transfer restrictions
(subject to certain exceptions), as discussed further
below;
|
|
•
|
after
the consummation of an initial public offering, IMH Financial Corporation
may, in its sole discretion, use up to 30% of the net proceeds of the
initial public offering (up to an aggregate of $50 million) to effect a
pro rata redemption of Class C common stock (based upon the number of
shares of Class C common stock held by each stockholder) at the initial
public offering price, less selling commissions and discounts paid or
allowed to the underwriters in the initial public offering; IMH Financial
Corporation must determine whether to effect this redemption or not within
30 days of the consummation of an initial public offering; all shares of
Class C common stock that are not so redeemed will automatically be
converted into shares of Class B common stock as follows: 25% of the
outstanding shares of Class C common stock will convert into shares of
Class B-1 common stock; 25% will convert into shares of Class B-2 common
stock; and 50% will convert into shares of Class B-3 common stock; members
of the Fund will not know the per share redemption price of the Class C
common stock at the time they elect to receive shares of Class B or Class
C common stock;
|
|
•
|
at
any time after the six-month anniversary of the earlier of (i) the
consummation of an initial public offering, and (ii) the 90th day after
the board of directors of IMH Financial Corporation determines that it
will not pursue an initial public offering, all shares of Class B-1 common
stock will be eligible to convert, at the option of the respective
holders, into shares of IMH Financial Corporation common stock that will
not be subject to restrictions on transfer under the certificate of
incorporation of IMH Financial Corporation, and may only be so converted
by a holder of Class B-1 common stock by sending a notice of conversion to
the custodian and representing to the custodian that the holder has
complied with the applicable transfer
restrictions;
|
|
•
|
at
any time after the nine-month anniversary of the earlier of (i) the
consummation of an initial public offering, and (ii) the 90th day after
the board of directors of IMH Financial Corporation determines that it
will not pursue an initial public offering, all shares of Class B-2 common
stock will be eligible to convert, at the option of the respective
holders, into shares of IMH Financial Corporation common stock that will
not be subject to restrictions on transfer under the certificate of
incorporation of IMH Financial Corporation, and may only be so converted
by a holder of Class B-2 common stock by sending a notice of conversion to
the custodian and representing to the custodian that the holder has
complied with the applicable transfer
restrictions;
|
|
•
|
following
the twelve-month anniversary of the earlier of (i) the consummation of an
initial public offering, and (ii) the 90th day after the board of
directors of IMH Financial Corporation determines not to pursue an initial
public offering, all outstanding shares of Class B-1, Class B-2 and Class
B-3 common stock will automatically convert into shares of IMH Financial
Corporation common stock that will not be subject to restrictions on
transfer under the certificate of incorporation of IMH Financial
Corporation;
|
|
•
|
if,
at any time after the five-month anniversary of the consummation of an
initial public offering, the closing price of IMH Financial Corporation
common stock price is greater than or equal to 125% of the offering price
in an initial public offering for 20 consecutive trading days, all shares
of Class B-1, Class B-2 and Class B-3 common stock will be eligible to
convert, at the option of the respective holders, into shares of IMH
Financial Corporation common stock that will not be subject to
restrictions on transfer under the certificate of incorporation of IMH
Financial Corporation, only if the holder has submitted a notice to the
custodian that the holder has complied with the applicable transfer
restrictions;
|
|
•
|
the
shares of Class B-4 common stock issuable to Messrs. Albers and Meris will
be subject to restrictions on transfer for a period of four years
following the consummation of the Conversion Transactions that will
terminate as follows: (i) if, any time after five months from the first
day of trading on a national securities exchange, either the market
capitalization (based on the closing price of IMH Financial Corporation
common stock) or the book value of IMH Financial Corporation will have
exceeded $730,383,531 (subject to upward adjustment by the amount of any
net proceeds from new capital raised in an initial public offering or
otherwise, and to downward adjustment by the amount of any dividends or
distributions paid on membership units of the Fund or IMH Financial
Corporation securities before or after the Conversion Transactions), (ii)
if the restrictions on the Class B common stock are eliminated as a result
of a change of control of the shares of Class B common stock under the
certificate of incorporation of IMH Financial Corporation, or (iii) if,
after entering into an employment agreement approved by the compensation
committee of IMH Financial Corporation, the holders of Class B-4 common
stock is terminated without cause, as this term will be defined in their
employment agreements as approved by the compensation committee of IMH
Financial Corporation; additionally, unless IMH Financial Corporation has
both (i) raised an aggregate of at least $50 million in one or more
transactions through the issuance of new equity securities, new
indebtedness with a maturity of no less than one year, or any combination
thereof, and (ii) completed a listing on a national securities exchange,
then, in the event of a liquidation of IMH Financial Corporation, no
portion of the proceeds from the liquidation will be payable to the shares
of Class B-4 common stock until such proceeds exceed $730,383,531;
although IMH Financial Corporation intends to initiate an initial public
offering and to list its shares of common stock on a national securities
exchange following the consummation of the Conversion Transactions, IMH
Financial Corporation may ultimately complete one, both, or neither of
these intended actions;
|
|
•
|
the
shares of Class B and Class C common stock will also automatically convert
into shares of IMH Financial Corporation common stock that will not be
subject to restrictions on transfer under the certificate of incorporation
of IMH Financial Corporation, upon consummation of any “change in control”
transaction, which generally includes (i) a merger of IMH Financial
Corporation in which the IMH Financial Corporation’s holders of record do
not immediately after such merger hold a majority of the voting power of
the surviving corporation, (ii) any transaction in which 50% or more of
IMH Financial Corporation’s voting power is transferred, or (iii) a sale
of all or substantially all of the assets of IMH Financial Corporation,
except to one or more affiliates of IMH Financial
Corporation;
|
|
•
|
on
the twelve-month anniversary of an initial public offering, the Manager
intends IMH Financial Corporation to pay, subject to the availability of
legally distributable funds at that time, a one-time dividend equal to
$0.95 per share of for each share of Class B common stock then
outstanding, which we refer to as the “Special Dividend” (the Special
Dividend will not be payable if we do not consummate an initial public
offering);
|
|
•
|
if
any holder of Class B-1, B-2 or B-3 common stock submits a notice of
conversion to the custodian but does not represent to the custodian that
the holder has complied with the applicable transfer restrictions, the
conversion will not be effected, and if the holder represents that it has
not complied with the applicable transfer restrictions, all of the shares
of Class B-1, Class B-2, and Class B-3 common stock owned by the holder
will be automatically converted into Class D common stock and will not be
entitled to the Special Dividend and will not be convertible into common
stock until the 12 month anniversary of the consummation of the earlier of
(i) the consummation of an initial public offering and (ii) the 90th day
after the board of directors of IMH Financial Corporation determines that
it will not pursue an initial public offering, and then, only if the
holder submits a representation to the custodian that the holder has
complied with the applicable transfer restrictions for the 90 days prior
to such representation and is not currently in violation of those transfer
restrictions; if any holder’s shares of Class B-1, B-2 or B-3 common stock
are automatically converted into shares of Class D common stock as
discussed in this paragraph, then each share of Class C common stock held
by the holder will automatically convert into one share of Class D common
stock;
|
|
•
|
similarly,
if a holder’s shares of Class B-1, B-2 or B-3 common stock have been
automatically converted into IMH Financial Corporation common stock on the
12 month anniversary as described above, then to withdraw or transfer
those shares, the holder must provide a representation to the custodian
that the holder has complied with the applicable transfer restrictions,
and if the holder represents to the custodian that it has not complied
with the applicable transfer restrictions then the custodian will not
release the shares for a period of 90 days thereafter, and then, only upon
receipt of a representation that the holder (i) has complied with the
restrictions for the 90 days prior to such representation and is not
currently in violation, and (ii) will return to IMH Financial Corporation
the Special Dividend (if it has been declared and paid);
and
|
|
•
|
if
the board of directors of IMH Financial Corporation determines that it
will not pursue an initial public offering, it may, beginning 90 days
after that determination, convert up to 20% of the outstanding shares of
Class C common stock into shares of IMH Financial Corporation common stock
that will not be subject to restrictions on transfer under the certificate
of incorporation of IMH Financial Corporation. No fractional shares of
common stock will be issued in any such conversion and no certificate for
any fractional shares will be issued. After aggregating all fractional
share amounts of a particular holder into one or more whole shares of
common stock, any remaining fractional share interest will either be (i)
rounded up to the nearest whole share if the fractional interest is equal
to or greater than 0.5 of a share, in which case one additional share of
common stock will be issued to the applicable holder, or (ii) rounded down
to the nearest whole share if the fractional interest is less than 0.5 of
a share. The remaining shares of Class C common stock would automatically
convert into shares of Class B common stock on the following basis: 25%
would convert into Class B-1 common stock, 25% would convert into Class
B-2 common stock and 50% would convert into Class B-3 common
stock. The restrictions on transfer of the Class B-1, B-2 and
B-3 Shares will continue, subject to certain exceptions, for six, nine or
12 months following the 90th day after the board of directors makes the
determination not to pursue an initial public
offering.
|
Holders
of Class B common stock may not be notified when their shares of Class B common
stock become eligible for conversion.
Acquisition of Manager and
Holdings. Immediately following the exchange of shares IMH
Financial Corporation stock for membership units in the Fund, IMH Financial
Corporation will issue an aggregate of 895,750 shares of Class B and Class C
common stock, subject to downward adjustment pursuant to the conversion plan, in
exchange for all of the outstanding equity interests in the Manager and Holdings
(a portion of which will be issued to holders of outstanding stock appreciation
rights of the Manager in exchange for cancellation of those rights), which will
represent approximately 5.3% of IMH Financial Corporation common stock on a
fully-diluted basis.
Shares Issuable to Equity Holders of
the Manager and Holdings. The shares to be issued in exchange
for the equity interests in the Manager and Holdings are expected to have an
aggregate book value of approximately $17.9 million, calculated by reference to
the Fund’s net asset value of $321.9 million, and outstanding membership units
of 73,038, as of December 31, 2009.
The
781,644 shares issuable to Shane Albers and William Meris, the chief executive
officer and president of the Manager, in exchange for their equity interests in
the Manager and Holdings will be a separate series called Class B-4 common
stock, which is subject to certain restrictions, including the
following:
|
•
|
certain
transfer restrictions for a four year period following the consummation of
the Conversion Transactions, subject to release in certain circumstances,
including, if at any time after five months from the first day of trading
on a national securities exchange, the market capitalization (based on the
closing price of IMH Financial Corporation common stock) or book value of
IMH Financial Corporation exceeds $730,383,531, the net capital
contributed to the Fund as of September 30, 2008, which was the end of the
quarter immediately prior to the suspension of member redemptions (subject
to upward adjustment by the amount of any net proceeds from new capital
raised in an initial public offering or otherwise, and to downward
adjustment by the amount of any dividends or distributions paid on
membership units of the Fund or IMH Financial Corporation securities
before or after the Conversion
Transactions);
|
|
•
|
additionally,
unless IMH Financial Corporation has both (i) raised an aggregate of at
least $50 million in one or more transactions through the issuance of new
equity securities, new indebtedness with a maturity of no less than one
year, or any combination thereof, and (ii) completed a listing on a
national securities exchange, then, in the event of a liquidation of IMH
Financial Corporation, no portion of the proceeds from the liquidation
will be payable to the shares of Class B-4 common stock held by Messrs.
Albers and Meris until those proceeds exceed
$730,383,531.
|
The
remaining 114,106 shares issuable to the other equity holders of the Manager and
Holdings (subject to downward adjustment pursuant to the conversion plan) will
be Class B-3 common stock of IMH Financial Corporation, which is subject to
restrictions on transfer for one year following the consummation of the
Conversion Transactions.
The
number of shares being issued to the stockholders of the Manager and the members
of Holdings will be reduced by one share for each $20 of net loss of the Manager
and Holdings for the period beginning January 1, 2010 through the date of
consummation of the Conversion Transactions. For example, if the net
loss of the Manager and Holdings for this period was $1 million, the number of
shares issued to the stockholders of the Manager and the members of Holdings
would be reduced by 50,000 shares. Any reduction in the number of
shares issuable to the equity holders of the Manager and Holdings will be
allocated pro rata among the stockholders of the Manager and the members of
Holdings based on their pro rata ownership interest in the Manager and
Holdings.
Allocation of Profits and
Losses. The conversion plan provides that (i) all
distributions of earnings of the Manager through the year ended December 31,
2009 will be allocated to the equity holders of the Manager and Holdings in
proportion to their ownership interest in the Manager, (ii) the net income or
net losses of the Manager and Holdings for the period from January 1, 2010
through the consummation of the Conversion Transactions will be allocable to the
equity holders of the Manager and Holdings in proportion to their ownership
interest in the Manager, and (iii) any net profits of the Manager from the
period of January 1, 2010 through the consummation of the Conversion
Transactions will be retained by IMH Financial Corporation.
Succession to Fund Assets and
Liabilities. The conversion plan provides that upon
consummation of the Conversion Transactions, all of the property, assets
(including, without limitation, all mortgage loans), rights, privileges, powers
and franchises of the Fund shall vest in IMH Financial Corporation, and all
debts, liabilities and duties of the Fund (including, without limitation, the
obligation of IMH Financial Corporation to indemnify and hold harmless the
Manager and its affiliates of the Manager which performed services for the Fund
in respect of any loss or liability suffered by the Manager in such capacity as
Manager, subject to the limitations in the Fund’s operating
agreement).
Non-Competition
Covenant. Under the conversion plan each of Messrs. Albers and
Meris agree not to directly or indirectly (i) compete with the business of IMH
Financial Corporation, and (ii) encourage any IMH Financial Corporation employee
to leave his or her position with IMH Financial Corporation. These restrictions
are applicable from the date of consummation of an initial public offering and
expire upon the earlier to occur of (i) the 18-month anniversary of consummation
of the Conversion Transactions, or (ii) the sale, liquidation or change of
control (as such term is defined in an employment contract with IMH Financial
Corporation once entered into) of IMH Financial Corporation. However, the
conversion plan permits each of Messrs. Albers and Meris to (i) serve
(in any capacity) and invest in other companies that are either affiliated with
or approved by the independent members of the board of directors of IMH
Financial Corporation (including the SWI Fund), and (ii) invest in companies
that compete with IMH Financial Corporation, as long as neither Mr. Albers nor
Mr. Meris is an officer or director of the applicable competitive company. The
independent members of the board of directors of IMH Financial Corporation may
waive any of the non-competition provisions under the conversion
plan.
Representations and Warranties; No
Indemnification. The conversion plan contains minimal
representations warranties made on behalf of each of the Manager, Holdings and
their respective stockholders and members, and the conversion plan does not
provide indemnification rights in favor of the Fund or the members of the Fund
in the event of any inaccuracy in, or breach of, those representations and
warranties.
Closing Conditions. The closing of the
conversion plan is subject to various standard conditions, including, without
limitation, the following:
|
·
|
the
approval of the conversion plan by the necessary vote of the members of
the Fund;
|
|
·
|
the
adoption of the 2010 IMH Financial Corporation Employee Stock Incentive
Plan;
|
|
·
|
the
effectiveness of the registration statement on Form S-4 filed by the Fund
in connection with theConversion Transactions, without the issuance of a
stop order or initiation of anyproceeding seeking astop order by the
Securities and Exchange Commission, or
SEC;
|
|
·
|
the
receipt of all governmental and third party consents necessary to the
transactions contemplated bythe conversion plan;
and
|
|
·
|
all
representations and warranties of the parties being true and correct when
made and as of the closing.
|
Termination. The conversion plan provides that it may
be terminated and the Conversion Transactions abandoned at any time prior to
their completion, before or
after approval of the Conversion Transactions, by the members of the Fund, by
either:
|
·
|
the written consent by each of
the Fund, the Manager, and Holdings;
or
|
|
·
|
the Manager, in its sole
discretion.
|
Item 1.02. Termination of a Material Definitive
Agreement.
The conversion plan discussed in Item 1.01 amends and supersedes that certain
Agreement and Plan of Conversion and Contribution, dated May 5, 2010, by and
among the Fund, the Manager and its stockholders, and Holdings and its
members, to provide for
downward adjustment of the 895,750 shares of IMH Financial Corporation Class B
and Class C common stock issuable to the equityholders of the Manager and
Holdings.
Item 9.01. Financial Statements
and Exhibits.
(d) Exhibits
|
Exhibit
No.
|
Description
|
|
|
2.1
|
Conversion
Plan, dated May 10,
2009.
|
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
| May 11, 2010 |
IMH
SECURED LOAN FUND, LLC
|
||
|
By:
|
Investors Mortgage Holdings,
Inc.
|
||
| Its: |
Manager
|
||
|
|
By:
|
/s/ Shane
Albers
|
|
|
Shane Albers
Chairman
and Chief Executive Officer
|
|||
|
|
|||