The principals of Phoenix are Mark Z. Ames, Craig Bonder and Michael Glover. Prior to the execution of the Agreement, the principals of Phoenix collectively purchased approximately 23% of the outstanding shares of Origen's common stock from a subsidiary of Sun Communities, Inc., and certain other parties. The principals of Phoenix now own approximately 25% of the outstanding shares of Origen's common stock.
Upon the execution of the agreement, Origen's Board of Directors (the "Board") appointed Mr. Ames to fill a vacancy on the Board created when Gary A. Shiffman resigned from the Board on February 29, 2016. After the appointment of Mr. Ames, Origen's Board now consists of Mr. Ames, Ronald A. Klein, Paul A. Halpern (Chairman) and Michael J. Wechsler. Each such director will serve until the next annual meeting of stockholders at which directors are elected or until his successor is duly elected and qualified.
Pursuant to the agreement, Phoenix will use its reasonable best efforts to identify suitable candidates for investment by Origen and assist Origen in negotiating and closing any such investment transaction, with a goal of generating income for Origen that may be offset for income tax purposes by all or a portion of Origen's accumulated net operating loss ("NOLs") that have been carried forward.
The aggregate amount of the NOLs is $75.5 million. Under applicable law Origen's ability to use its NOLs fully will be subject to certain time limitations because, generally, NOLs expire after 20 years. Origen's ability to use the NOLs will also be limited if there are certain changes in ownership of Origen's common stock over a rolling three year period, including changes triggered by the acquisition or disposition of common stock held by persons owning 5.00% or more of Origen's common stock.
The agreement further provides:
- Any transaction sourced under the agreement must be approved by a majority of Origen's Board in its sole discretion.
- During the term of the agreement, Origen will not declare or pay dividends in excess of $0.04 per common share, in the aggregate.
- If one or more transactions sourced under the agreement close, Origen will pay Phoenix a success fee equal to 20% of the aggregate net cash distributable to Origen's stockholders (as defined in the agreement) from the proceeds of the transaction(s) in excess of $3,000,000.
- The term of the agreement will continue through August 31, 2017, provided that (i) Origen may terminate the agreement at any time after February 19, 2017 if Phoenix does not diligently pursue potential transactions, and (ii) subject to certain cure rights, either party may terminate the agreement upon a material breach by the other party. The parties may agree to extend the term of the agreement.
If Origen does not successfully complete a profitable transaction under the agreement and subsequently dissolves and liquidates, the liquidating distributions made to its stockholders will be reduced by the costs and expenses incurred by Origen in pursuing a transaction and operating in the meantime (which costs and expenses are not expected to exceed $1,000,000, or less than 4 cents per share).
As permitted by the plan of dissolution approved by Origen's stockholders in October 2014, Origen has suspended the dissolution of the company and the distribution of its remaining cash net of expenses and reserves pending completion of any transaction sourced under the agreement. If the agreement is terminated before the closing of any transaction, Origen intends to then dissolve and liquidate in accordance with the previously-approved plan of dissolution.
Ronald Klein, Origen's Chief Executive Officer, stated, "We are excited to work together with Phoenix and its principals. Mark Ames and his team bring a wealth of experience and expertise to the company. We anticipate that they will help Origen find the right investment opportunity to deliver value to our stockholders beyond what stockholders might receive if we proceeded directly with a liquidation. The possibility that we may also be able to use our NOLs to maximize after-tax return to our stockholders makes the new relationship more attractive. We believe Phoenix's significant ownership stake in the company, together with the possibility of a success fee under our agreement, create the right incentives for them to realize value for all of our stockholders. At the same time, the structure of the agreement limits Origen's required commitment – of both time and money – and provides us the flexibility to proceed with a liquidation of the company after a period of time if the Board determines that a liquidation is ultimately in the best interests of stockholders."
Mr. Klein continued, "Our Board decided earlier this year to elect not to continue to be taxed as a REIT because the incremental costs of REIT compliance were greater than any benefits given the limited nature of our operations. Given our current plans, maintaining our status as a REIT no longer made sense."
About Origen Financial, Inc.
For more information about Origen, please visit www.origenfinancial.com.
This press release contains various "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, and Origen intends that such forward-looking statements will be subject to the safe harbors created thereby. The words "will," "may," "could," "expect," "anticipate," "believes," "intends," "should," "plans," "estimates," "approximate" and similar expressions identify these forward-looking statements. These forward-looking statements reflect Origen's current views with respect to future events and financial performance, but involve known and unknown risks and uncertainties, both general and specific to the matters discussed in this press release. These risks and uncertainties may cause Origen's actual results to be materially different from any future results expressed or implied by such forward-looking statements. Such risks and uncertainties include, among others, the foregoing assumptions, and the facts that Origen cannot predict whether successful transactions will be completed under the Phoenix agreement on any particular terms, or at all; whether and to what extent Origen's NOLs will be available to be used to offset any income; and the fact that if a transaction is not successfully completed, expenses incurred in pursuing transactions will reduce liquidating distributions made to Origen's stockholders. The forward-looking statements contained in this press release speak only as of the date hereof and Origen expressly disclaims any obligation to provide public updates, revisions or amendments to any forward- looking statements made herein to reflect changes in Origen's expectations or future events.
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SOURCE Origen Financial, Inc.