| SUBSEQUENT EVENTS | 10. SUBSEQUENT EVENTS
The Agreement and Plan of Merger
On July 28, 2015, the Company, Western Logistics LLC
(“Parent”), a Delaware limited liability company and an
affiliate of Global Logistic Properties Limited
(“GLP”), and Western Logistics II LLC (“Merger
Sub”), a Delaware limited liability company and wholly-owned
subsidiary of Parent, entered into an Agreement and Plan of Merger
(the “Merger Agreement”). The Merger Agreement provides
that, upon the terms and subject to the conditions set forth in the
Merger Agreement, the Company will merge with and into Merger Sub
(the “Merger”), with Merger Sub continuing as the
surviving entity (the “Surviving Entity”). Upon
completion of the Merger, the separate corporate existence of the
Company will cease. The board of directors of the Company has
unanimously approved the Merger, the Merger Agreement and the other
transactions contemplated by the Merger Agreement.
Prior to the closing of the Merger, the Company will transfer
subsidiaries that own 11 of its properties that are under
development or in the lease-up stage (the “Excluded
Properties”) to a liquidating entity, the beneficial
interests in which will be distributed pro rata to the
Company’s stockholders immediately prior to the effective
time of the Merger (the “Merger Effective Time”).
Pursuant to the terms and conditions in the Merger Agreement,
subject to the satisfaction or waiver of certain conditions set
forth in the Merger Agreement, at the Merger Effective Time, each
share of common stock, $0.01 par value per share, of the Company
issued and outstanding immediately prior to the Merger Effective
Time will be converted into the right to receive an amount in cash
equal to $10.30, without interest and subject to any applicable
withholding tax obligations (the “Merger
Consideration”).
In addition, on the closing date of the Merger and prior to the
Merger Effective Time, each special partnership unit of Industrial
Income Operating Partnership LP, the Company’s operating
partnership (the “Operating Partnership”), will
automatically be redeemed by the Operating Partnership for the
receipt by the holder of such special partnership units of a number
of partnership units of the Operating Partnership (“OP
Units”), in accordance with the operating partnership
agreement (the “Special Partnership Unit Redemption”).
Immediately after the Special Partnership Unit Redemption, each OP
Unit received as part of the Special Partnership Unit Redemption
will automatically be converted into one share of Common Stock of
the Company (the “OP Unit Conversion”). The Merger will
occur immediately after the OP Unit Conversion.
Immediately prior to the Merger Effective Time, all of the
outstanding shares of restricted stock granted under the
Company’s Equity Incentive Plan and Private Placement Equity
Incentive Plan will automatically become fully vested and free of
any forfeiture restrictions (whether or not then vested or subject
to any performance condition that has not been satisfied). At the
Merger Effective Time, each share of restricted stock will be
considered an outstanding share of Common Stock for all purposes of
the Merger Agreement, including the right to receive the Merger
Consideration.
The Company and Parent have made certain customary representations
and warranties in the Merger Agreement and have agreed to customary
covenants, including, among others, with respect to the conduct of
business of the Company prior to the closing and covenants
prohibiting the Company and its subsidiaries and representatives
from soliciting or entering into discussions concerning proposals
relating to alternative business combination transactions, subject
to certain limited exceptions.
The Merger Agreement requires the Company to convene a
stockholders’ meeting for purposes of obtaining the approval
of the holders of a majority of the outstanding Common Stock and to
prepare and file a proxy statement with the SEC with respect to
such meeting as promptly as practicable after the date of the
Merger Agreement, which proxy statement will contain, subject to
certain exceptions, the Company Board’s recommendation that
the Company’s stockholders vote in favor of the Merger.
Prior to the approval of the Merger by the Company’s
stockholders, the Company Board may in certain circumstances adopt,
approve or declare advisable certain alternative business
combination transactions or take similar actions in accordance with
its obligations under applicable law, subject to complying with
specified notice and other conditions set forth in the Merger
Agreement.
The completion of the Merger is subject to a number of conditions,
including, among others: (i) approval of the Merger by the
requisite vote of stockholders as of the record date for the
special meeting of stockholders; (ii) the accuracy of the
Company’s and Parent’s representations and warranties
as of the Merger Effective Time, subject to certain materiality,
material adverse effect and other exceptions; (iii) the
Company and Parent having performed in all material respects all
material obligations and complied in all material respects with all
material agreements and covenants required under the Merger
Agreement; (iv) the absence of a material adverse effect on
the Company; (v) the receipt by Parent of tax opinions
relating to the REIT status of the Company; (vi) the execution
by certain affiliates of Industrial Income Advisors LLC (the
“Prior Advisor”) of a transition services agreement
pursuant to which, among other things, affiliates of the Prior
Advisor will, for a transition period following closing of the
Merger, provide certain accounting, asset management and other
oversight services to the Surviving Entity in connection with the
transition of the management, operation, maintenance, leasing and
servicing of the Company’s properties; (vii) the receipt
of applicable payoff letters; (viii) the receipt of Committee
on Foreign Investment in the United States (“CFIUS”)
clearance by GLP, an affiliate of Parent that guarantees certain of
Parent’s obligations under the Merger Agreement, related to
notices filed with CFIUS prior to the date of the Merger Agreement
in connection with GLP’s syndication of interests in the
completed acquisition of the logistics platform portfolio of IndCor
Properties, Inc.; (ix) the transfer of the Excluded Properties
to a liquidating entity, the beneficial interests in which will be
distributed pro rata to the Company’s stockholders; and
(x) the completion of the Replacement Advisor Contribution and
the transactions contemplated by the OP Unit Purchase Agreement
(each as defined under “The Amended and Restated Advisory
Agreement and the Contribution Agreement” below). The
obligations of the parties to consummate the Merger are not subject
to any financing condition or the receipt of any financing by
Parent or Merger Sub.
The Merger Agreement may be terminated under certain circumstances,
including: (A) by mutual written consent of the parties;
(B) by either party (1) if the Merger has not been
consummated on or before November 16, 2015 (the “Outside
Date”), (2) if a final and non-appealable order is
entered permanently restraining or otherwise prohibiting the Merger
or the other transactions contemplated by the Merger Agreement, or
(3) upon a failure of the Company to obtain approval of the
requisite vote of its stockholders; (C) by Parent if
(1) the Company has breached its representations and
warranties or covenants and agreements, and the breach results in
the applicable closing condition with respect to its
representations and warranties or covenants and agreements being
incapable of being satisfied by the Outside Date (subject to
certain exceptions) or (2) the Company or the Company Board
breaches certain covenants related to the non-solicitation of
alternative acquisition agreements; or (D) by the Company if
(1) Parent has breached its representations and warranties or
covenants and agreements, and the breach results in the applicable
closing condition with respect to its representations and
warranties or covenants and agreements being incapable of being
satisfied by the Outside Date (subject to certain exceptions),
(2) the Company Board approves and authorizes the Company to
enter into a definitive agreement to implement a superior business
combination proposal, subject to the satisfaction of conditions set
forth in the Merger Agreement or (3) Parent informs the
Company or the Company otherwise becomes aware that the closing
condition related to CFIUS clearance will not be satisfied or
fulfilled at or prior to the Outside Date.
The Merger Agreement provides that, in connection with the
termination of the Merger Agreement under specified
circumstances, the Company may be required to reimburse
Parent’s reasonable transaction expenses up to an aggregate
amount equal to $25.0 million. In connection with the termination
of the Merger Agreement under other specified circumstances, Parent
may be required to reimburse the Company’s reasonable
transaction expenses up to an aggregate amount equal to $7.5
million. The Merger Agreement also provides that, in
connection with the termination of the Merger Agreement under
specified circumstances, the Company may be required to pay to
Parent a termination fee of $110.0 million, less any transaction
expenses reimbursement amount paid by the Company to Parent. The
Merger Agreement also provides that in connection with the
termination of the Merger Agreement under certain other
circumstances, Parent will be required to pay to Company a
termination fee of $250.0 million.
Distribution Reinvestment Plan and Share Redemption
Program
In connection with the approval of the Merger, on July 28,
2015, the Company announced that the board of directors, including
all of the independent directors, had voted to terminate the
distribution reinvestment plan and the share redemption plan, each
termination effective immediately prior to the effective time of
the Merger. The board of directors, including all of the
independent directors, also voted to suspend indefinitely the
distribution reinvestment plan and the share redemption plan from
and after July 28, 2015.
As a result of the suspension of the distribution reinvestment
plan, any distributions paid after July 28, 2015 will be paid
to the Company’s stockholders in cash. In addition, as a
result of the suspension of the share redemption plan, the Company
will not process or accept any requests for redemption received
after July 28, 2015.
The Amended and Restated Advisory Agreement and the Contribution
Agreement
Prior to July 27, 2015, the Company, the Operating Partnership
and the Prior Advisor were party to a Seventh Amended and Restated
Advisory Agreement, dated February 21, 2015 (the “Prior
Advisory Agreement”), pursuant to which the Prior Advisor
performed certain duties and responsibilities as a fiduciary of the
Company and its stockholders.
On July 27, 2015, the Company, the Operating Partnership and
the New Advisor entered into the New Advisory Agreement, in order
to, among other things, (i) acknowledge the assignment of the
rights and obligations of the Prior Advisor under the Prior
Advisory Agreement to the New Advisor, (ii) eliminate the
portion of the asset management fee payable to the Company’s
advisor by the Company in the case of certain dispositions equal to
2.0% of the contract sales price (the “Disposition
Fee”), and (iii) reduce certain time periods with
respect to the termination of the New Advisory Agreement from 60
days to 30 days. The Prior Advisor and Academy Partners Ltd.
Liability Company, an affiliate of the Prior Advisor
(“Academy Partners”), collectively own 100% of the
limited liability company interests in the New Advisor. The
foregoing description of the New Advisory Agreement does not
purport to be complete and is qualified in its entirety by
reference to the full text of the New Advisory Agreement, a copy of
which is filed herewith as Exhibit 10.1 and is incorporated by
reference herein.
In addition, on July 28, 2015, the Operating Partnership, the
Prior Advisor, Academy Partners and Industrial Property Advisors
LLC entered into a Contribution Agreement (the “Contribution
Agreement”). As described in the Contribution Agreement,
prior to the Merger Effective Time, the New Advisor will form a new
wholly-owned limited liability company (the “Replacement
Advisor”). Immediately thereafter, the New Advisor will:
(i) assign its rights and obligations under the New Advisory
Agreement to the Replacement Advisor (and the Replacement Advisor
will become the advisor to the Company); and (ii) contribute
all of its right, title and interest in and to certain intellectual
property rights used in the business of the Company, which Parent
wishes to acquire in connection with the Merger, to the Replacement
Advisor. Pursuant to the Contribution Agreement, immediately
thereafter and prior to the Merger Effective Time, (a) the New
Advisor will distribute all of its right, title and interest in the
Replacement Advisor and all of its liabilities to its members in
liquidation of the New Advisor, and (b) following receipt of
the interests in the Replacement Advisor, each of Prior Advisor and
Academy Partners will contribute its right, title and interest in
and to the Replacement Advisor to the Operating Partnership in
exchange for an aggregate of approximately 8.83 million OP
Units (the “Replacement Advisor Contribution”).
In connection with the transactions contemplated by the
Contribution Agreement, on July 28, 2015, the Merger Sub, the
Prior Advisor and Academy Partners also entered into an Operating
Partnership Unit Purchase Agreement (the “OP Unit Purchase
Agreement”) pursuant to which, among other things,
concurrently with the Merger Effective Time, Merger Sub will
acquire all OP Units issued to the Prior Advisor and Academy
Partners in the Replacement Advisor Contribution for an aggregate
price of approximately $91.0 million, without adjustment or
proration of any kind. Under the terms of the OP Unit Purchase
Agreement, a certain portion of the consideration payable for the
OP Units may be held in escrow until January 4, 2016 or the
expiration of a non-competition arrangement pursuant to which the
Prior Advisor is restricted from owning or managing industrial
assets in Asia for a one-year period following the sale of the OP
Units pursuant to the OP Unit Purchase Agreement (subject to
certain exceptions). An additional portion of the consideration
payable for the OP Units may be held in escrow for a two-year
period from the date of the closing under the OP Unit Purchase
Agreement to secure certain indemnification obligations, if any,
under the Contribution Agreement. The Operating Partnership joined
in the execution of the OP Unit Purchase Agreement for the limited
purpose of consenting to the transfer of the OP Units to Merger
Sub. |
