Termination Agreement
Concurrently with the entry into the Merger Agreement, the Company, GCEAR and Cole Corporate Income Management II, LLC (the “Advisor”) entered into a letter agreement (the “Termination Agreement”). Pursuant to the Termination Agreement, the Advisory Agreement, dated as of August 27, 2013, by and between the Company and the Advisor (as amended, the “Advisory Agreement”) will be terminated upon consummation of the Mergers. Pursuant to the Termination Agreement, (i) upon consummation of the Mergers or (ii) termination of the Advisory Agreement, if such termination occurs prior to the earlier of the consummation of the Mergers and June 30, 2021, for certain reasons other than a material breach of the Advisory Agreement by the Advisor, the Company will pay the Advisor the “Subordinated Performance Fee” (as defined in the Advisory Agreement) in an amount equal to $26,688,591 and the “Disposition Fee” (as defined in the Advisory Agreement) in an amount equal to $1,750,000. The Termination Agreement also provides that the Advisor will not terminate the Advisory Agreement with effect prior to the earlier of the consummation of the Mergers and June 30, 2021, other than in the event of material breach of the Advisory Agreement by the Company. In the event that the Merger Agreement is terminated in accordance with its terms, the Termination Agreement will be automatically terminated.
The foregoing description of the Termination Agreement is only a summary, does not purport to be complete and is qualified in its entirety by reference to the full text of the Termination Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 1.02. | Termination of a Material Definitive Agreement. |
On August 30, 2020, the Company entered into the CMFT Merger Agreement with CMFT and Thor Merger Sub, pursuant to which the Company would have merged with and into Thor Merger Sub, with Thor Merger Sub surviving the merger as the surviving entity such that following the merger, the surviving entity would have continued as a wholly owned subsidiary of CMFT.
On October 26, 2020, the Company notified CMFT that it had received an “Acquisition Proposal” (as defined in the CMFT Merger Agreement) from GCEAR, on substantially the terms set forth above in Section 1.01, and that such Acquisition Proposal constituted a “Superior Proposal” (as defined in the CMFT Merger Agreement) and that failure to terminate the CMFT Merger Agreement to enter into the Merger Agreement would be inconsistent with the Company’s directors’ duties or standard of conduct under Maryland law. CMFT subsequently informed the Company that it did not intend to propose adjusted terms and conditions to the CMFT Agreement and waived its right to further negotiate with the Company pursuant to Section 7.3(f)(i) of the CMFT Merger Agreement.
In light of the forgoing waiver, on October 28, 2020, the Board, on the recommendation of the Special Committee approved termination of the CMFT Merger Agreement in order to enter into the Merger Agreement. Thereafter, the Company terminated the CMFT Merger Agreement pursuant to Sections 9.1(c)(ii) and 9.2 of the CMFT Merger Agreement and entered into an agreement (the “Termination Notice”) with CMFT reflecting such termination and pursuant to which, among other things, the Company paid the termination fee equal to $7,380,00 to CMFT in accordance with the CMFT Merger Agreement, and agreed to pay to CMFT the amount of CMFT’s Expenses (as defined in the CMFT Merger Agreement), up to $3,690,000, required to be paid pursuant to the terms of the CMFT Merger Agreement (such amounts together, the “CMFT Termination Payment”).
The foregoing description does not purport to be complete and is qualified in its entirety by reference to the Termination Notice, which is attached hereto as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 7.01 | Regulation FD Disclosure. |
On November 2, 2020, the Company and GCEAR issued a joint press release announcing the execution of the Merger Agreement as described in detail in Item 1.01 above. A copy of the press release is attached hereto as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein solely for purposes of this Item 7.01 disclosure.
In addition, on November 2, 2020, GCEAR posted to its website (www.gcear.com) an investor presentation prepared by GCEAR containing certain information related to the proposed Mergers.
Pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), the information in this Item 7.01 disclosure, including Exhibit 99.1, and information set forth therein, is deemed to have been furnished and shall not be deemed to be “filed” under the Securities Exchange Act of 1934, as amended.
On October 28, 2020, the Board authorized a distribution for the month of October 2020 of $0.0414 per share of the Company’s Class A and Class T common stock, less the per share distribution and stockholder servicing fees that are payable with respect to shares of Class T common stock (as such fees are calculated on a daily basis for the period of October 1, 2020 to October 31, 2020). On August 30, 2020, the Board approved the suspension of the Company’s amended and restated distribution reinvestment plan, and therefore, distributions for the month of October 2020 will be paid in cash to all stockholders. The distribution for each class of common stock is payable to stockholders of record as of the close of business on October 29, 2020 and will be paid in cash on November 2, 2020.