Item 1.01.
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Entry into a Material Definitive Agreement.
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On November 29, 2017, NRM Acquisition LLC (the “Purchaser”), a Delaware limited liability company and a wholly owned subsidiary of New Residential Investment Corp., a Delaware corporation (the “Company”), entered into a Securities Purchase Agreement (the “SPA”) with Shellpoint Partners LLC, a Delaware limited liability company (“Shellpoint”), the Sellers party thereto and Shellpoint Services LLC, a Delaware limited liability company, as the representative of the Sellers. The SPA provides that, upon the terms and subject to the conditions set forth therein, the Purchaser
will purchase all of the outstanding equity interests of
Shellpoint
(the “Acquisition”) for a purchase price (currently expected to be approximately $150 million, in addition to the approximately $40 million for the MSR Purchase discussed in Item 8.01, below) to be determined at the closing of the Acquisition (the “Closing”) based on the tangible book value of Shellpoint, subject to certain customary Closing and post-closing adjustments. As additional consideration for the Acquisition, the Purchaser will make up to three cash earnout payments, which will be calculated following each of the first three anniversaries of the Closing as a percentage of the amount by which the pre-tax income of certain of Shellpoint’s businesses
exceeds certain specified thresholds, up to an aggregate maximum amount of $60 million (the “Earnout Payments”), and allocated approximately 92% to the Sellers and approximately 8% to a long-term employee incentive plan of Shellpoint.
In connection with the Acquisition, the Company also entered into a guaranty in favor of the Sellers in respect of all of the
Purchaser’s
payment obligations under the SPA. In connection with the SPA, New Residential Mortgage LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“NRM”), also entered into certain other agreements, including an MSR Purchase Agreement and a Subservicing Agreement (each described below).
The SPA contains certain customary representations and warranties made by each party, which are qualified by the confidential disclosures provided to the
Purchaser
in connection with the SPA. The
Purchaser
and Shellpoint have agreed to various customary covenants, including, among others, covenants regarding the conduct of Shellpoint’s business prior to the Closing and covenants requiring the
Purchaser
and Shellpoint to use commercially reasonable efforts to obtain certain third-party and governmental consents, approvals or other authorizations required in connection with the
Acquisition
. The SPA also contains certain indemnification provisions. A portion of the closing purchase price will be held back by the Purchaser, which holdback amount, together with a right of offset against the Earnout Payments, will be available to the
Purchaser
to satisfy certain indemnification claims.
Each party’s obligation to consummate the
Acquisition
is subject to certain closing conditions, including among others, (i) the accuracy of the other party’s representations and warranties (subject to certain qualifications); (ii) the other party’s compliance with its covenants contained in the SPA (subject to certain qualifications); (iii) the applicable waiting periods under the HSR Act shall have expired or been terminated; (iv) no judgment, decree or judicial order shall have been entered or might be entered which would materially and adversely affect the consummation of the Transaction; and (v) certain conditions relating to litigation and regulatory matters. In addition, the obligations of the
Purchaser
to consummate the
Acquisition
are subject to (i) the absence of any Material Adverse Effect (as defined in the SPA); (ii) the receipt of certain approvals from governmental entities, government-sponsored entities and other third parties; and (iii) the consummation of the transactions contemplated by the MSR Purchase Agreement.
The SPA may be terminated by either party under certain circumstances, including, among others: (i) if the Closing has not occurred on or before October 31, 2018 (unless extended under certain circumstances by the
Purchaser
); (ii) if a court or other governmental entity has issued a final and non-appealable order prohibiting the Closing; (iii) upon a material uncured breach by the other party that would result in a failure of the conditions to the Closing to be satisfied; or (iv) certain circumstances relating to litigation and regulatory matters.
The representations, warranties and covenants contained in the SPA (i) were made by the parties thereto only for purposes of the SPA and as of specific dates; (ii) were made solely for the benefit of the parties to the SPA; (iii) may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the SPA; (iv) may have been made for the purposes of allocating contractual risk between the parties to the SPA instead of establishing these matters as facts; and (v) may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Accordingly, the SPA is included with this filing only to provide investors with information regarding the terms of the SPA, and not to provide investors with any other factual information regarding the Company, the
Purchaser
or Shellpoint or their respective businesses as of the date of the SPA or as of any other date.