Item 1.01
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Entry into a Material Definitive Agreement.
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On May 25, 2017, RAIT Financial Trust, a Maryland real
estate investment trust (
RAIT
or the
Company
), entered into a Cooperation Agreement (the
Cooperation Agreement
) with Highland Capital Management, L.P. (
Highland
) and each of
the other persons set forth on the signature page of the Cooperation Agreement (each, an
Investor
and collectively, the
Investors
or the
Investor Group
).
Pursuant to the Cooperation Agreement, the Investor Group has agreed to terminate its pending proxy contest against the Company and withdraw the notice of
nomination submitted by a Highland affiliate proposing to seek the election of five candidates to the RAIT Board of Trustees (the
Board
) at RAITs 2017 Annual Meeting of Shareholders (the
2017 Annual
Meeting
).
Pursuant to the Cooperation Agreement, RAIT has agreed that (i) following the certification of the vote of RAITs
shareholders at the 2017 Annual Meeting, but no later than forty-five (45) calendar days from the date of execution of the Cooperation Agreement, the Board shall appoint either Nancy Jo Kuenstner or Andrew C. Richardson to its membership (the
New Trustee
) to serve on the Board until the 2018 Annual Meeting of Shareholders (the
2018 Annual Meeting
), (ii) within one hundred twenty (120) calendar days from the execution of the Cooperation
Agreement, the RAIT Board shall appoint a new trustee (the
Second New Trustee
) who shall not be an Affiliate or Associate (as such terms are defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended) of the Investor
Group (or a previous member of a Schedule 13D group with any member of the Investor Group) to serve on the Board until the 2018 Annual Meeting, provided that the Investor Group will have one veto right with respect to the person chosen by the RAIT
Board to serve as the Second New Trustee, (iii) during the Cooperation Period (as defined below), no less frequently than once every sixty (60) days, one or more members of RAITs management shall use its commercially reasonable
efforts to schedule a telephonic meeting with a representative of the Investor Group to discuss information regarding RAIT that RAIT has, prior to such meeting, publicly disclosed, and (iv) RAIT will reimburse the Investor Group $250,000 for
its out-of-pocket expenses, including legal fees and expenses, as actually incurred by the Investor Group in connection with the matters related to the 2017 Annual Meeting, the filing of a Schedule 13D amendment in connection with the 2017
Annual Meeting and the negotiation and execution of the Cooperation Agreement.
Under the terms of the Cooperation Agreement, the Investor Group has
agreed to certain standstill provisions with respect to the Investor Groups actions with regard to RAIT and its Common Shares of Beneficial Interest, $0.03 par value per share (the
Common Shares
), RAITs 7.75% Series A
cumulative redeemable preferred shares, liquidation preference $25.00 per share, $0.01 par value per share, RAITs 8.375% Series B cumulative redeemable preferred shares, liquidation preference $25.00 per share, $0.01 par value per share, and
RAITs 8.875% Series C cumulative redeemable preferred shares, liquidation preference $25.00 per share, $0.01 par value per share. A majority of the standstill provisions would be in effect for a standstill period commencing on the
date of the Cooperation Agreement and ending two years from the date of the Cooperation Agreement. The other standstill provisions would be in effect for a cooperation period that commenced on the date of the Cooperation Agreement and
ends at 11:59 p.m. Eastern Time on the date of the certification of the vote of shareholders at the 2018 Annual Meeting (the
Cooperation Period
).
2
Pursuant to the Cooperation Agreement, each of the Investors has agreed, at each annual and special meeting of
shareholders held prior to the expiration of the Cooperation Period, to (A) appear, in person or by execution of the Companys proxy card, at such shareholders meeting or otherwise cause all Common Shares beneficially owned by each
Investor and their respective Affiliates and Associates to be counted as present thereat for purposes of establishing a quorum; (B) vote, or cause to be voted, all Common Shares beneficially owned by each Investor and their respective
Affiliates and Associates on the Companys proxy card or voting instruction form (1) in favor of each of the nominees for election as trustees nominated by the Board and recommended by the Board (and not in favor of any other nominees to
serve on the Board), and (2) in accordance with the Boards recommendations with respect to each of the proposals listed on the Companys proxy card or voting instruction form as identified in the Companys definitive proxy
statement and any supplements thereto, including in favor of all matters recommended by the Board for shareholder approval and against all matters which the Board recommends against shareholder approval; provided however that, in connection with any
matter (other than the election of nominees to the Board) to be voted upon by the Companys shareholders, after the certification of the vote of the Companys shareholders at the 2017 Annual Meeting, to the extent that the recommendation
of Institutional Shareholder Services Inc. (
ISS
) differs from the Boards recommendation with respect to such matter, the Investors may vote on the Companys proxy card or voting instruction form in accordance with the
recommendation of ISS; and (C) not execute any proxy card or voting instruction form in respect of such shareholders meeting other than the proxy card and related voting instruction form being solicited by or on behalf of the Company or
the Board.
Pursuant to the Cooperation Agreement, each of the Investors has agreed, in connection with any action by written consent that is sought to be
taken by any party other than the Company or the Board prior to the expiration of the Cooperation Period, not to vote and to take all necessary action, including, without limitation, the execution and completion of any consent revocation card
solicited by the Company or the Board, in accordance with the recommendation of the Board, to cause not to be voted, any of the Common Shares beneficially owned by each Investor and/or their respective Affiliates and Associates on any consent card
related to or affecting the removal, replacement or election of Board members and solicited by any party, other than the Company or the Board.
Pursuant
to the Cooperation Agreement, each of the Investors has agreed, in connection with any demand by a shareholder of the Company that the Company call a special meeting of shareholders made prior to the expiration of the Cooperation Period, not to vote
and to take all necessary action, including, but not limited to, the execution and completion of any consent revocation card solicited by the Company or the Board in accordance with the recommendation of the Board, to cause not to be voted, any of
the Common Shares beneficially owned by each Investor and/or their respective Affiliates and Associates for any special meeting demand proposed or sought to be made by any party.
3
The Company and the Investor Group have also agreed to certain mutual non-disparagement and mutual release
of claims provisions.
The foregoing description of the Cooperation Agreement is qualified in its entirely by reference to the full text of the
Cooperation Agreement, which is filed herewith as Exhibit 10.1 and incorporated herein by reference.