UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
____________________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 11, 2015
Trade Street Residential, Inc. |
(Exact Name of Registrant as Specified in its Charter) |
Maryland |
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001-32365 |
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13-4284187 |
(State or Other Jurisdiction of Incorporation) |
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(Commission File Number) |
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(IRS Employer
Identification No.) |
19950 West Country Club Drive, Suite 800, Aventura, Florida |
33180 |
(Address of Principal Executive Offices) |
(Zip Code) |
(786) 248-5200 |
(Registrant's telephone number, including area code) |
N/A |
(Former Name or Former Address, if Changed Since Last Report) |
Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions
(see General Instruction A.2. below):
þ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c) |
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Item 1.01. Entry into a Material Definitive Agreement.
Agreement and Plan of Merger
On May 11, 2015, Trade Street
Residential, Inc. (“TSRE”) and Trade Street Operating Partnership, L.P. (the “Operating Partnership” and,
together with TSRE, the “TSRE Parties”) entered into an Agreement and Plan of Merger (the “Merger Agreement”)
with Independence Realty Trust, Inc., a Maryland corporation (“IRT”), Independence Realty Operating Partnership, LP,
a Delaware limited partnership and a subsidiary of IRT (“IRT OP”), IRT Limited Partner, LLC, a Delaware limited liability
company and a wholly-owned subsidiary of IRT (“IRT LP LLC”), and Adventure Merger Sub LLC, a Delaware limited liability
company and a wholly-owned subsidiary of IRT OP (“OP Merger Sub” and collectively
with IRT, IRT OP and IRT LP LLC, the “Buyer Parties”). The Merger Agreement and the transactions contemplated thereby
were approved by TSRE’s Board of Directors.
Pursuant to the terms of the Merger Agreement, subject to the
satisfaction or waiver of certain conditions set forth in the Merger Agreement,
| · | OP Merger Sub will be merged with and into the Operating Partnership (the “Partnership Merger”) at the effective
time of the Partnership Merger (the “Partnership Merger Effective Time”), whereupon the separate corporate existence
of the OP Merger Sub will cease and the Operating Partnership will be the surviving entity and a wholly-owned subsidiary of IRT
OP; and |
| · | TSRE will be merged with and into IRT LP LLC (the “Company Merger” and collectively with the Partnership Merger,
the “Merger”) at the effective time of the Company Merger (the “Company Merger Effective Time”), whereupon
the separate corporate existence of TSRE will cease and IRT LP LLC will be the surviving entity and a wholly-owned subsidiary of
IRT. |
At the Company Merger Effective Time, each share of common stock
of TSRE, par value $0.01 per share (the “Common Stock”), issued and outstanding immediately prior to the Company Merger
Effective Time will be converted automatically into the right to receive, subject to certain adjustments, the following consideration
(the “Share Merger Consideration”):
| · | an amount in cash equal to $3.80 (provided that IRT may elect prior to the closing of the Merger to increase the per share
cash amount up to $4.56) (such cash amount, the “Per Share Cash Amount”), and |
| · | a number of shares of IRT’s common stock equal to the quotient determined by dividing (i) $7.60 less the Per Share Cash
Amount, by (ii) $9.25, and rounding the result to the nearest 1/10,000 (the “Exchange Ratio”). |
It is intended that the Company Merger be treated as a tax free
reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended. In the event that the tax free status of
the Company Merger would potentially be compromised because the aggregate cash consideration to be paid in the Company Merger (based
on the Per Share Cash Amount determined by IRT) is greater than 60% of the value of the aggregate Share Merger Consideration, then
the Company has the right, subject to the terms and conditions of the Merger Agreement, to elect to terminate the Merger Agreement,
proceed with the Merger as a taxable transaction or, in the event IRT has selected a Per Share Cash Amount greater than $3.80,
have the Per Share Cash Amount and Exchange Ratio adjusted such that the aggregate cash consideration to be paid in the Company
Merger is equal to 60% of the value of the aggregate Share Merger Consideration.
At the Partnership Merger Effective Time, each unit of limited
partnership interest of the Operating Partnership issued and outstanding immediately prior
to the Partnership Merger Effective Time and owned by a party other than TSRE or one of its subsidiaries will be converted automatically
into the right to receive the following consideration:
| · | an amount in cash equal to the Per Share Cash Amount; and |
| · | a number of common units of limited partnership interest in IRT OP equal to the Exchange Ratio. |
In connection with the Merger, each share of Common Stock subject
to vesting or other forfeiture conditions that remains unvested or subject to forfeiture conditions shall, at the Company Merger
Effective Time, automatically become fully vested and free of such forfeiture conditions and shall be considered an outstanding
share of Common Stock for all purposes, including with respect to the right to receive the Share Merger Consideration.
The TSRE Parties and the Buyer Parties have made customary representations,
warranties and covenants in the Merger Agreement, including, among others, TSRE’s covenant not to solicit alternative transactions
or, subject to certain exceptions, participate in discussions relating to an alternative transaction, furnish non-public information
relating to an alternative transaction, change the TSRE Board of Directors’ recommendation to the TSRE stockholders or enter
into an agreement with respect to an alternative transaction.
TSRE will be permitted to pay its regular quarterly dividend
(including a pro-rated dividend for any partial quarter ending on the date the Merger is consummated) in an amount not to exceed
$0.095 per share of Common Stock per quarter.
The Merger is subject to customary closing conditions including,
among other things, (1) the approval of the Merger by the affirmative vote of holders of TSRE’s Common Stock representing
a majority of the votes entitled to be cast on the matter, (2) the approval of the issuance of shares of IRT common stock in connection
with the Merger by the affirmative vote of a majority of the votes cast by holders of IRT’s common stock entitled to vote
on the matter, (3) the absence of any law, injunction, judgment, order or ruling prohibiting the Merger, (4) the accuracy of the
representations and warranties made by the parties (subject to customary materiality qualifications), (5) the performance by the
parties in all material respects of their covenants, obligations and agreements under the Merger Agreement, (6) the delivery of
tax opinions related to each of TSRE’s and IRT’s status as a REIT, (7) the delivery of tax opinions that the Merger
will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, (8) the
receipt of lock-up agreements from Senator Investment Group, LP (“Senator”) and Monarch Alternative Capital LP (“Monarch”)
in favor of IRT and (9) the absence of a material adverse effect on either party prior to the closing.
The Buyer Parties provided TSRE with an executed debt financing
commitment letter, the proceeds of which will provide for funds to consummate the transactions contemplated by the Merger Agreement.
The consummation of the Merger is not subject to a financing condition.
The Merger Agreement contains certain termination rights for
TSRE and the Buyer Parties, including, without limitation, the ability of TSRE to terminate the Merger Agreement if the Board of
Directors of TSRE makes an adverse recommendation change with respect to the Merger, and in such event to reimburse IRT for its
expenses incurred in connection with the Merger up to a maximum amount of $5 million. TSRE also has the ability to terminate the
Merger Agreement if it receives a takeover proposal that the Board determines constitutes a superior proposal and TSRE is not in
breach of the non-solicitation provisions of the Merger Agreement. In connection with the termination of the Merger Agreement for
such reason and under other specified circumstances, TSRE will be required to pay a termination fee of $12 million to the Buyer
Parties. The Merger Agreement also provides that the Buyer Parties will be required to pay TSRE a reverse termination fee of $25
million under specified circumstances set forth in the Merger Agreement. As described above, TSRE also has the right to terminate
the Merger Agreement if the aggregate amount of cash consideration to be paid in the Company Merger would exceed 60% of the total
Share Merger Consideration. TSRE may also terminate the Merger Agreement if the 20-day average price per share of IRT common stock
as of the date of the Merger Agreement through the date five days prior to closing of the Merger declines 15% or more than the
MSCI US REIT Index over the same period.
In addition, the parties to the Merger Agreement have the right,
prior to termination of the agreement, to seek specific performance of the other party, including the right of TSRE to seek to
require the Buyer Parties to consummate the Merger if the conditions to closing of the Merger have been satisfied.
Concurrently with the execution
of the Merger Agreement, funds and accounts managed by each of Senator and Monarch, respectively holding approximately 25% and
23% of TSRE’s Common Stock as of May 11, 2015, entered into a voting agreement (the “Voting Agreement”) with
IRT pursuant to which, among other things, each of Senator and Monarch agreed to (i) vote its shares of TSRE’s Common Stock
in favor of approval of the Merger and (ii) comply with certain restrictions on the disposition of such shares, subject to the
terms and conditions contained therein. Additionally, in connection with the execution of
the Merger Agreement, RAIT Financial Trust (“RAIT”), which holds approximately 23% of IRT’s common stock as of
March 13, 2015, entered into a voting agreement (the “RAIT Voting Agreement”) with TSRE pursuant to which, among other
things, RAIT agreed to vote its shares of IRT’s common stock in favor of approval of the Merger. In addition, each of Senator
and Monarch entered into lock-up agreements in favor of IRT (the “Lock-Up Agreements”), in satisfaction of one of the
closing conditions for the Merger. Pursuant to the Lock-Up Agreements, subject to certain exceptions, Senator and Monarch will
be subject to restrictions on the sale of shares of IRT common stock for a period of 180 days following the closing of the Merger.
The foregoing description of the Merger, the Merger
Agreement, the Voting Agreement and the Lock-Up Agreements does not purport to be complete and is qualified in its entirety
by reference to the Merger Agreement, which is filed as Exhibit 2.1 hereto, and the RAIT Voting Agreement, which is filed as
Exhibit 10.1 hereto, both of which are incorporated into this Current Report on Form 8-K by reference.
Item 2.02. Results of Operations and Financial Condition.
On May 11, 2015, TSRE announced its financial results for the
three months ended March 31, 2015 and made available supplemental information concerning the operations and portfolio of TSRE as
of March 31, 2015. A copy of TSRE’s May 11, 2015 press release and a copy of TSRE’s Quarterly Supplemental Operating
and Financial Data are furnished as Exhibit 99.1 and Exhibit 99.2, respectively, to this Current Report on Form 8-K.
In accordance with General Instructions B.2 and B.6 of Form
8-K, the information included in this Item 2.02 (including Exhibits 99.1 and 99.2 hereto) shall not
be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any
filing made by TSRE under the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”), except
as shall be expressly set forth by specific reference in such filing.
Item 8.01. Other Events.
Press Release
On May 11, 2015, TSRE and IRT issued a joint press release announcing
the execution of the Merger Agreement. A copy of such press release is attached as Exhibit 99.3 to this Current Report on Form
8-K and incorporated by reference in this Item 8.01.
Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These statements are based on current
expectations, estimates and projections about the industry, markets in which TSRE operates, management’s beliefs, assumptions
made by management and the transactions described in this Current Report on Form 8-K. While TSRE’s management believes the
assumptions underlying its forward-looking statements and information are reasonable, such information is necessarily subject to
uncertainties and may involve certain risks, many of which are difficult to predict and are beyond management’s control.
These risks include, but are not limited to: (1) the occurrence of any event, change or other circumstances that could give rise
to the termination of the Merger Agreement; (2) the outcome of any legal proceedings that may be instituted against TSRE, the Operating
Partnership and others following announcement of the Merger Agreement; (3) the inability to complete the Merger due to the failure
to obtain stockholder approval or the failure to satisfy other conditions to completion of the Merger; (4) risks that the proposed
transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the Merger;
(5) the ability to recognize the benefits of the Merger; (6) the amount of the costs, fees, expenses and charges related to the
Merger and the actual terms of certain financings that will be obtained for the Merger; and (7) the impact of the substantial indebtedness
incurred to finance the consummation of the Merger; and other risks that are set forth under “Risk Factors” in TSRE’s
2014 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the quarter ended March 31, 2015. All forward-looking statements
speak only as of the date of this Current Report on Form 8-K or, in the case of any document incorporated by reference, the date
of that document. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf
are qualified by the cautionary statements in this section. Except as may be required by law, we undertake no obligation to update
or publicly release any revisions to forward-looking statements to reflect events, circumstances or changes in expectations after
the date of this Current Report on Form 8-K.
Cautionary Statements
The Merger Agreement has been attached as an exhibit to this
Current Report on Form 8-K to provide investors with information regarding its terms. Except for its status as the contractual
document that establishes and governs the legal relations among the parties thereto with respect to the transactions described
above, the Merger Agreement is not intended to be a source of factual, business or operational information about the parties.
The representations, warranties and covenants made by the parties
in the Merger Agreement are qualified and limited, including by information in the schedules referenced in the Merger Agreement
that the TSRE Parties and the Buyer Parties delivered in connection with the execution of the Merger Agreement. Representations
and warranties may be used as a tool to allocate risks between the respective parties to the Merger Agreement, including where
the parties do not have complete knowledge of all facts, instead of establishing such matters as facts. Furthermore, the representations
and warranties may be subject to standards of materiality applicable to the contracting parties, which may differ from those applicable
to investors. These representations and warranties may or may not have been accurate as of any specific date and do not purport
to be accurate as of the date of this filing. Accordingly, they should not be relied upon as statements of factual information.
Investors are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties and
covenants or any descriptions thereof as characterizations of the actual state of facts or condition of TSRE or its affiliates.
TSRE acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering
whether additional specific disclosures of material information regarding material contractual provisions are required to make
the statements in this Current Report on Form 8-K not misleading.
Important Information For Investors And Stockholders
This communication does not constitute an offer to buy or sell
or the solicitation of an offer to buy or sell any securities or a solicitation of any vote or approval. This communication relates
to the proposed Merger. In connection with the Merger, TSRE and/or IRT may file one or more proxy statements, registration statements,
proxy statement/prospectus or other documents with the SEC. This communication is not a substitute for any proxy statement, registration
statement, proxy statement/prospectus or other document TSRE and/or IRT may file with the SEC in connection with the proposed transaction.
INVESTORS AND SECURITY HOLDERS OF TSRE AND IRT ARE URGED TO READ THE PROXY STATEMENT(S), REGISTRATION STATEMENT(S), PROXY STATEMENT/PROSPECTUS
AND OTHER DOCUMENTS THAT MAY BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION. Any definitive proxy statement(s) (if and when available) will be mailed to stockholders of
TSRE and/or IRT, as applicable. Investors and security holders will be able to obtain free copies of these documents (if and when
available) and other documents filed with the SEC by TRSE and/or IRT through the website maintained by the SEC at http://www.sec.gov.
Copies of the documents filed with the SEC by TSRE will be available free of charge on TSRE’s internet website at http://www.tradestreetresidential.com
or by contacting TSRE’s Investor Relations Department by email at ir@trade-street.com or by phone at +1-786-248-6099.Copies
of the documents filed with the SEC by IRT will be available free of charge on IRT’s internet website at http://www.irtreit.com
or by contacting IRT’s Investor Relations Department by email at aviroslav@irtreit.com or by phone at +1-215-243-9000.
Participants in Solicitation
TSRE, IRT, their respective directors and certain of their respective
executive officers may be considered participants in the solicitation of proxies in connection with the proposed Merger. Information
about the directors and executive officers of TSRE is set forth in its Annual Report on Form 10-K/A for the year ended December
31, 2014, which was filed with the SEC on March 25, 2015. Information about the directors and executive officers of IRT is set
forth in its Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the SEC on March 16, 2015, and
its proxy statement for its 2015 annual meeting of stockholders, which was filed with the SEC on April 7, 2015. These documents
can be obtained free of charge from the sources indicated above. Additional information regarding the participants in the proxy
solicitations and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in
the proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available.
Item 9.01. Financial Statements and Exhibits.
2.1 |
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Agreement and Plan of Merger, dated as of May 11, 2015,
by and among Independence Realty Trust, Inc., Independence Realty Operating Partnership, LP, IRT Limited Partner, LLC, Adventure
Merger Sub LLC, Trade Street Residential, Inc. and Trade Street Operating Partnership, L.P. |
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10.1 |
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Voting Agreement, by and between Trade Street Residential, Inc. and RAIT Financial Trust. |
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99.1 |
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Press Release of Trade Street Residential, Inc., dated May 11, 2015. |
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99.2 |
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First Quarter 2015 -- Supplemental Operating and Financial Data
for Trade Street Residential, Inc. for the three months ended March 31, 2015. |
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99.3 |
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Joint Press Release, dated as of May 11, 2015, issued by Trade Street
Residential, Inc. and Independence Realty Trust, Inc. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Trade Street Residential, Inc. |
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Date: May 11, 2015 |
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By: |
/s/ Richard H. Ross |
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Richard H. Ross |
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Chief Executive Officer |
EXHIBIT LIST
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Exhibit
No. |
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Description |
2.1 |
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Agreement and Plan of Merger, dated as of May 11, 2015, by and among
Independence Realty Trust, Inc., Independence Realty Operating Partnership, LP, IRT Limited Partner, LLC, Adventure Merger Sub
LLC, Trade Street Residential, Inc. and Trade Street Operating Partnership, L.P. |
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10.1 |
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Voting Agreement, by and between Trade Street Residential, Inc. and RAIT Financial Trust. |
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99.1 |
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Press Release of Trade Street Residential, Inc., dated May 11, 2015. |
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99.2 |
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First Quarter 2015 -- Supplemental Operating and Financial Data
for Trade Street Residential, Inc. for the three months ended March 31, 2015. |
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99.3 |
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Joint Press Release, dated as of May 11, 2015, issued by Trade Street
Residential, Inc. and Independence Realty Trust, Inc. |
Exhibit 2.1
EXECUTION VERSION
AGREEMENT
AND PLAN of merger
among
INDEPENDENCE REALTY TRUST, INC.,
INDEPENDENCE REALTY OPERATING PARTNERSHIP,
LP,
ADVENTURE MERGER SUB LLC,
IRT LIMITED PARTNER, LLC
TRADE STREET RESIDENTIAL, INC.
and
TRADE STREET OPERATING PARTNERSHIP, LP.
Dated as of May 11, 2015
TABLE OF CONTENTS
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Page |
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Article I THE MERGER |
2 |
1.01 |
The Merger. |
2 |
1.02 |
Legal Effects of the Merger. |
3 |
1.03 |
Closing |
3 |
1.04 |
Effective Time. |
3 |
1.05 |
Effect of the Merger on the Organizational Documents of the Surviving Partnership and the Surviving Company. |
4 |
1.06 |
Effect of the Merger on Directors and Officers |
4 |
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Article II EFFECTs of the merger ON SHARES AND INTERESTS |
5 |
2.01 |
Effects of the Company Merger on Company Common Stock |
5 |
2.02 |
Effects of the Partnership Merger |
5 |
2.03 |
Exchange of Shares and Units. |
7 |
2.04 |
Withholding Rights |
11 |
2.05 |
Treatment of Company Restricted Stock |
11 |
2.06 |
Further Action. |
11 |
2.07 |
Dissenters’ Rights |
12 |
2.08 |
Fractional Shares |
12 |
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Article III REPRESENTATIONS AND WARRANTIES OF THE COMPANY and the Company OP |
12 |
3.01 |
Organization, Standing and Power. |
12 |
3.02 |
Capital Structure. |
14 |
3.03 |
Authority; Execution and Delivery; Enforceability. |
15 |
3.04 |
No Conflicts; Consents. |
16 |
3.05 |
SEC Documents; Financial Statements; Undisclosed Liabilities. |
17 |
3.06 |
Information Supplied |
18 |
3.07 |
Absence of Certain Changes or Events |
19 |
3.08 |
Taxes. |
19 |
3.09 |
Labor Relations. |
21 |
3.10 |
Employee Benefits. |
22 |
3.11 |
Litigation |
23 |
3.12 |
Compliance with Applicable Laws |
24 |
3.13 |
Environmental Matters |
24 |
3.14 |
Property. |
25 |
3.15 |
Intellectual Property |
28 |
3.16 |
Contracts. |
28 |
3.17 |
Insurance |
30 |
3.18 |
Interested Party Transactions |
30 |
3.19 |
Vote Required |
30 |
3.20 |
Brokers |
31 |
3.21 |
Opinion of Financial Advisor |
31 |
3.22 |
Takeover Statutes |
31 |
TABLE OF CONTENTS
(continued)
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Page |
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3.23 |
Investment Company Act |
31 |
3.24 |
Dissenters’ Rights |
31 |
3.25 |
Hart-Scott-Rodino Antitrust Improvements Act |
31 |
3.26 |
No Other Representations and Warranties |
32 |
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Article IV REPRESENTATIONS AND WARRANTIES OF PARENT, PARENT OP, OP MERGER SUB AND irt lp LLC |
32 |
4.01 |
Organization, Standing and Power. |
32 |
4.02 |
Capital Structure. |
34 |
4.03 |
Authority; Execution and Delivery; Enforceability. |
35 |
4.04 |
No Conflicts; Consents. |
35 |
4.05 |
SEC Documents; Financial Statements; Undisclosed Liabilities. |
36 |
4.06 |
Information Supplied |
38 |
4.07 |
Absence of Certain Changes or Events |
38 |
4.08 |
Taxes |
38 |
4.09 |
Labor Relations. |
41 |
4.10 |
Employee Benefits. |
41 |
4.11 |
Litigation |
42 |
4.12 |
Compliance with Applicable Laws |
42 |
4.13 |
Environmental Matters |
42 |
4.14 |
Property. |
43 |
4.15 |
Intellectual Property |
46 |
4.16 |
Contracts. |
46 |
4.17 |
Insurance |
48 |
4.18 |
Interested Party Transactions |
48 |
4.19 |
Vote Required |
48 |
4.20 |
Brokers |
48 |
4.21 |
Opinion of Financial Advisor |
48 |
4.22 |
Takeover Statutes |
49 |
4.23 |
Financing |
49 |
4.24 |
Investment Company Act |
49 |
4.25 |
Hart-Scott-Rodino Antitrust Improvements Act |
49 |
4.26 |
No Other Representations and Warranties |
50 |
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Article V COVENANTS RELATING TO CONDUCT OF BUSINESS |
50 |
5.01 |
Conduct of Business by the Company |
50 |
5.02 |
Conduct of Business by Parent, Parent OP, OP Merger Sub and IRT LP LLC |
54 |
5.03 |
No Solicitation. |
57 |
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Article VI ADDITIONAL AGREEMENTS |
61 |
6.01 |
Preparation of Form S-4 and Joint Proxy Statement; Stockholder Approvals. |
61 |
TABLE OF CONTENTS
(continued)
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Page |
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6.02 |
Access to Information; Confidentiality |
63 |
6.03 |
Reasonable Best Efforts; Notification. |
64 |
6.04 |
Employment of Company Personnel; Benefit Plans. |
67 |
6.05 |
Indemnification. |
68 |
6.06 |
Rule 16b-3 Matters |
70 |
6.07 |
Public Announcements |
70 |
6.08 |
Transfer Taxes |
70 |
6.09 |
Stockholder Litigation |
71 |
6.10 |
Financing |
71 |
6.11 |
Certain Tax Matters. |
73 |
6.12 |
401(k) Plan |
73 |
6.13 |
Pre-Closing Dividends |
74 |
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Article VII CONDITIONS PRECEDENT |
74 |
7.01 |
Conditions to Each Party’s Obligation to Effect the Merger |
74 |
7.02 |
Additional Conditions to Obligations of Parent and Parent OP |
75 |
7.03 |
Additional Conditions to Obligations of the Company and the Company OP |
77 |
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Article VIII TERMINATION, AMENDMENT AND WAIVER |
78 |
8.01 |
Termination |
78 |
8.02 |
Effect of Termination |
80 |
8.03 |
Fees and Expenses. |
80 |
8.04 |
Amendment |
82 |
8.05 |
Extension; Waiver |
83 |
8.06 |
Procedure for Termination, Amendment, Extension or Waiver |
83 |
8.07 |
No Recourse to Financing Sources |
83 |
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Article IX GENERAL PROVISIONS |
83 |
9.01 |
Nonsurvival of Representations and Warranties |
83 |
9.02 |
Notices |
84 |
9.03 |
Definitions. |
85 |
9.04 |
Interpretation; Exhibits and Disclosure Letters |
97 |
9.05 |
Severability |
97 |
9.06 |
Counterparts |
97 |
9.07 |
Entire Agreement; No Third Party Beneficiaries |
97 |
9.08 |
Governing Law |
98 |
9.09 |
Jurisdiction; Venue |
98 |
9.10 |
WAIVER OF JURY TRIAL |
99 |
9.11 |
Assignment |
99 |
9.12 |
Consents and Approvals |
99 |
9.13 |
Enforcement. |
100 |
AGREEMENT
AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER
(this “Agreement”) dated as of May 11, 2015, among Independence Realty Trust, Inc., a Maryland corporation (“Parent”),
Independence Realty Operating Partnership, LP, a Delaware limited partnership (“Parent OP”), Adventure Merger
Sub LLC, a Delaware limited liability company and a direct wholly owned Subsidiary of Parent OP (“OP Merger Sub”),
IRT Limited Partner, LLC, a Delaware limited liability company and direct wholly owned Subsidiary of Parent (“IRT LP LLC”),
Trade Street Residential, Inc., a Maryland corporation (the “Company”), and Trade Street Operating Partnership,
LP, a Delaware limited partnership (the “Company OP”).
WHEREAS, the parties wish to effect
a business combination involving (a) first, a merger of OP Merger Sub with and into the Company OP (the “Partnership Merger”)
on the terms and subject to the conditions set forth in this Agreement and in accordance with the Delaware Revised Uniform Limited
Partnership Act, as amended (“DRULPA”), and the Delaware Limited Liability Company Act, as amended (“DLLCA”);
(b) immediately following the Partnership Merger, a merger of the Company with and into IRT LP LLC (the “Company Merger”)
on the terms and subject to the conditions set forth in this Agreement and in accordance with the Maryland General Corporation
Law, as amended (the “MGCL”) and the DLLCA (the Company Merger and the Partnership Merger collectively shall
be referred to herein as the “Merger”);
WHEREAS, for federal income tax purposes,
it is intended that the Company Merger shall qualify as a reorganization under Section 368(a) of the Internal Revenue Code of 1986,
as amended (the “Code”), and that this Agreement shall constitute a plan of reorganization under Section 368(a)
of the Code;
WHEREAS, for federal income tax purposes,
it is intended that the Partnership Merger, regardless of form, shall be treated as an “asset-over” form of merger
governed by Treasury Regulations Section 1.708-1(c)(3)(i), with Parent OP being a continuation of Company OP;
WHEREAS, the board of directors of
the Company (the “Company Board”) has approved this Agreement, the Merger and the other transactions contemplated
by this Agreement (collectively with the Merger, the “Transactions”) and determined that the Merger and the
other Transactions are advisable and in the best interests of the Company;
WHEREAS, the Company Board has directed
that the Company Merger and, to the extent stockholder approval is required, the other Transactions be submitted for consideration
at a meeting of the Company’s stockholders and has resolved to recommend that the Company’s stockholders vote to adopt
this Agreement and approve the Company Merger and, to the extent stockholder approval is required, the other Transactions;
WHEREAS, Trade Street OP GP, LLC,
a Delaware limited liability company and a wholly owned Subsidiary of the Company (the “Company OP GP”), as
the sole general partner of the Company OP, has approved this Agreement, the Partnership Merger and the other Transactions and
declared that this Agreement, the Partnership Merger and the other Transactions are advisable and in the best interest of the Company
OP;
WHEREAS, the board of directors of
Parent (the “Parent Board”) has approved this Agreement, the Merger and the other Transactions and determined
that the Merger and the other Transactions are advisable and in the best interests of the Parent;
WHEREAS, the Parent Board has directed
that the issuance of Parent Common Stock in the Company Merger (including Parent Common Stock issuable upon redemption of Parent
OP Common Units issued in the Partnership Merger) be submitted for consideration at a meeting of Parent’s stockholders and
has resolved to recommend that Parent’s stockholders vote to approve the issuance of Parent Common Stock in the Company Merger
(including Parent Common Stock issuable upon redemption of Parent OP Common Units issued in the Partnership Merger) as contemplated
by this Agreement; and
WHEREAS, Parent OP, as the sole member
of the OP Merger Sub, has approved this Agreement and the Partnership Merger.
WHEREAS, concurrently with the execution
and delivery of this Agreement, and as an inducement to Parent’s willingness to enter into this Agreement, certain stockholders
of the Company are each entering into agreements with Parent pursuant to which such stockholders, on the terms and subject to the
conditions set forth therein, shall vote the Company Common Stock held by them in favor of the Merger as contemplated by this Agreement
(together, the “Company Voting Agreements”);
WHEREAS, concurrently with the execution
and delivery of this Agreement, and as an inducement to the Company’s willingness to enter into this Agreement, certain stockholders
of Parent are each entering into agreements with the Company pursuant to which such stockholders, on the terms and subject to the
conditions set forth therein, shall vote the Parent Common Stock held by them in favor of the issuance of Parent Common Stock in
the Merger as contemplated by this Agreement (together, the “Parent Voting Agreements”);
NOW, THEREFORE, the parties hereto
agree as follows (capitalized terms shall have the meanings ascribed to such terms in Section 9.03 hereof or as otherwise
ascribed to such terms herein):
Article
I
THE MERGER
1.01 The
Merger.
(a) Partnership
Merger. Upon the terms and subject to the conditions set forth herein, and in accordance with the DRULPA and the DLLCA, at
the Partnership Merger Effective Time, the OP Merger Sub shall be merged with and into the Company OP, and the separate existence
of the OP Merger Sub shall cease. The Company OP will continue as the surviving company in the Partnership Merger (the “Surviving
Partnership”) and as a wholly owned Subsidiary of Parent OP, except that the general partnership interest in Company
OP shall continue to be held by Company OP GP until such time, after the Merger, as Parent may determine.
(b) Company
Merger. Upon the terms and subject to the conditions set forth herein, and in accordance with the MGCL, at the Effective Time,
the Company shall be merged with and into IRT LP LLC, and the separate existence of the Company shall cease, and IRT LP LLC will
continue as the surviving company in the Company Merger (the “Surviving Company”).
1.02 Legal
Effects of the Merger.
(a) At
the Partnership Merger Effective Time, the effect of the Partnership Merger shall be as provided herein and in the applicable provisions
of the DRULPA. Without limiting the generality of the foregoing, and subject thereto, at the Partnership Merger Effective Time,
all property, rights, privileges, powers and franchise of the Company OP shall vest in the Surviving Partnership, and all debts,
liabilities and duties of the Company OP shall become debts, liabilities and duties of the Surviving Partnership.
(b) At
the Effective Time, the effect of the Company Merger shall be as provided herein and in the applicable provisions of the MGCL and
the DLLCA.
(c) Without
limiting the generality of the foregoing, and subject thereto, at the Effective Time, all property, rights, privileges, powers
and franchises of the Company shall vest in the Surviving Company, and all debts, liabilities and duties of the Company shall become
debts, liabilities and duties of the Surviving Company.
1.03 Closing.
The closing of the Merger (the “Closing”) shall take place at the offices of Morrison & Foerster, LLP, 2000
Pennsylvania Avenue N.W., Suite 6000, Washington, D.C. at 9:29 a.m. Eastern time on the second Business Day after the satisfaction
or waiver of the conditions set forth in Article VII (other than those conditions that by their nature are to be satisfied
at the Closing), or at such other place, date and time as the Company and Parent may agree in writing. The date on which the Closing
occurs is sometimes referred to herein as the “Closing Date”).
1.04 Effective
Time.
(a) On
the Closing Date, prior to the Effective Time, in order to effectuate the Partnership Merger, the applicable parties hereto shall
duly file a certificate of merger with respect to the Partnership Merger in a form that complies with the DRULPA and DLLCA (the
“Partnership Certificate of Merger”) with the Delaware Secretary of State (the “SOS”) in
accordance with the relevant provisions of the DRULPA and DLLCA. The parties shall make all other filings or recordings required
under the DRULPA and DLLCA. The Partnership Merger shall become effective upon the Partnership Certificate of Merger being duly
filed in the office of the Delaware Secretary of State (the “Partnership Merger Effective Time”), it being understood
and agreed that the applicable parties shall cause the Partnership Merger Effective Time to occur on the Closing Date prior to
the Effective Time.
(b) On
the Closing Date as promptly as practicable following the Partnership Merger Effective Time, in order to effectuate the Company
Merger, the applicable parties hereto shall duly file (i) articles of merger with respect to the Company Merger in a form that
complies with the MGCL (the “Articles of Merger”) with the State Department of Assessments and Taxation of Maryland
(the “SDAT”) in accordance with the relevant provisions of the MGCL and (ii) a certificate of merger with respect
to the Company Merger in a form that complies with the DLLCA (the “Company Certificate of Merger”) with the
SOS in accordance with the relevant provisions of the DLLCA. The parties shall make all other filings or recordings required under
the MGCL and the DLLCA. The Company Merger shall become effective upon the Articles of Merger and the Company Certificate of Merger
being duly filed and accepted for record by the SDAT and the SOS, respectively, and the parties will take such actions as are necessary
to have such filing effective at 9:29 a.m. Eastern time on the Closing Date (the “Effective Time”).
1.05 Effect
of the Merger on the Organizational Documents of the Surviving Partnership and the Surviving Company.
(a) Unless
otherwise determined by Parent and the Company prior to the Partnership Merger Effective Time, without any further action on the
part of the parties hereof, at the Partnership Merger Effective Time, the limited partnership agreement of the Company OP in effect
immediately prior to the Partnership Merger Effective Time shall be the limited partnership agreement of the Surviving Partnership;
provided that, immediately following the Partnership Merger, the limited partnership agreement of the Surviving Partnership shall
be amended and restated to be in such form as Parent shall direct, until thereafter amended as provided by the DRULPA and such
limited partnership agreement of the Surviving Partnership.
(b) Unless
otherwise determined by Parent and the Company prior to the Effective Time, without any further action on the part of Parent and
the Company or their respective Affiliates, at the Effective Time:
(i) the
certificate of formation of IRT LP LLC as in effect immediately prior to the Effective Time shall be the certificate of formation
of the Surviving Company, until thereafter amended as provided by the DLLCA or the certificate of formation of the Surviving Company;
and
(ii) the
operating agreement of IRT LP LLC as in effect immediately prior to the Effective Time shall be the operating agreement of the
Surviving Company, until thereafter amended as provided by the DLLCA or the operating agreement of the Surviving Company.
1.06 Effect
of the Merger on Directors and Officers. Unless otherwise determined by Parent and the Company prior to the Effective Time,
the applicable parties hereto shall take all necessary action to:
(a) cause
the officers of IRT LP LLC immediately prior to the Effective Time to be, effective as of the Effective Time, appointed as the
sole officers of the Surviving Company until their respective successors are duly appointed and qualified or their earlier death,
resignation or removal in accordance with the operating agreement of the Surviving Company;
(b) cause
the Parent Board to be increased by two (2) members immediately prior to the Effective Time to be effective as of the Effective
Time and to elect Richard Ross and Mack Pridgen as members of the Parent Board who, together with the members of the Parent Board
immediately prior to the Effective Time, shall constitute the board of directors of Parent until their respective successors are
duly elected or appointed and qualified or their earlier death, resignation or removal in accordance with the charter and bylaws
of Parent.
Article
II
EFFECTs of the merger ON SHARES AND INTERESTS
2.01 Effects
of the Company Merger on Company Common Stock. Upon the terms and subject to the conditions set forth herein, at the Effective
Time, by virtue of the Company Merger and without any action on the part of any party hereto, the holders of Company Common Stock,
or any other Person:
(a) Conversion
of Company Common Stock.
(i) Each
share of common stock of the Company, par value $0.01 per share (the “Company Common Stock” and each share of
Company Common Stock, a “Share”), outstanding immediately prior to the Effective Time, other than any Cancelled
Shares (as hereinafter defined), shall be automatically converted into the right to receive the following consideration (the “Share
Merger Consideration”):
(1) an
amount in cash equal to the Per Share Cash Amount as the same may be adjusted in accordance with the applicable terms of Section
9.03 (the “Share Cash Consideration); and
(2) a
number of shares of Parent Common Stock equal to the Exchange Ratio (the “Share Stock Consideration”).
(ii) Each
Share that has been converted into the right to receive the Share Merger Consideration as provided in this Section 2.01(a)
shall cease to exist, and the Persons holding such Shares immediately prior to the Effective Time shall cease to have any rights
with respect to such Shares other than the right to receive the Share Merger Consideration, without interest.
(b) Treatment
of Company and Parent-Owned Shares. Each Share that is owned by Parent or any wholly-owned Subsidiary of Parent or the Company
(in each case, other than Shares held by on behalf of third parties) as of immediately prior to the Effective Time (collectively,
the “Cancelled Shares”) shall be cancelled and shall cease to exist, and no consideration shall be delivered
in respect of such Cancelled Shares.
(c) Adjustments.
In the event of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible
into capital stock), reorganization, reclassification, combination, recapitalization or other like change with respect to the outstanding
Shares occurring after the date of this Agreement and prior to the Effective Time, all references herein to specified numbers of
shares of any class or series affected thereby, and all calculations provided for that are based upon numbers of shares of any
class or series (or trading prices therefor) affected thereby, including the Share Merger Consideration, shall be equitably adjusted
to the extent necessary to provide the parties the same economic effect as contemplated by this Agreement prior to such stock split,
reverse stock split, stock dividend, reorganization, reclassification, combination, recapitalization or other like change.
2.02 Effects
of the Partnership Merger. Upon the terms and subject to the conditions set forth herein, at the Partnership Merger Effective
Time, by virtue of the Partnership Merger and without any action on the part of any party hereto, the holders of any Company OP
Units or any other Person:
(a) Conversion
of Company OP Units; Exchanged OP Units.
(i) Each
unit of limited partnership interest of Company OP (each, a “Company OP Unit”) issued and outstanding immediately
prior to the Partnership Merger Effective Time, other than the Exchanged OP Units (as hereinafter defined) shall be automatically
converted into the right to receive, the following consideration (the “Unit Merger Consideration”):
(1) an
amount in cash equal to the Per Share Cash Amount as the same may be adjusted in accordance with the applicable terms of Section
9.03 (the “Unit Cash Consideration”); and
(2) a
number of Parent OP Common Units equal to the Exchange Ratio, together with exchange rights associated with such Parent OP Common
Units substantially similar to the exchange rights previously granted to other limited partners of Parent OP (the “Unit
Ownership Consideration”).
(ii) Each
Company OP Unit that has been converted into the right to receive the Unit Merger Consideration as provided in this Section 2.02(a)
shall cease to exist, and the Persons holding such Company OP Units immediately prior to the Partnership Merger Effective Time
shall cease to have any rights with respect to such Company OP Units other than the right to receive the Unit Merger Consideration,
without interest.
(b) Exchanged
OP Units. Each Company OP Unit that is owned by the Company or any wholly-owned Subsidiary of the Company as of immediately
prior to the Partnership Merger Effective Time (collectively, the “Exchanged OP Units”) shall be exchanged for
a number of Parent OP Common Units equal to the Unit Merger Consideration, together with exchange rights associated with such Parent
OP Common Units substantially similar to the exchange rights previously granted to other limited partners of Parent OP.
(c) Company
OP General Partner Interest. The general partnership interest of Company OP, which is owned entirely by Company OP GP,
shall remain issued and outstanding and unchanged by the Partnership Merger.
(d) Conversion
of OP Merger Sub Membership Interests. The membership interests of OP Merger Sub issued and outstanding immediately prior to
the Partnership Merger Effective Time shall be converted into and become one unit of partnership interest of the Surviving Partnership.
(e) Adjustments.
Without limiting the other provisions of this Agreement, if at any time during the period between the date of this Agreement and
the Partnership Merger Effective Time, Company OP should split, combine or otherwise reclassify the Company OP Units, or make a
dividend or other distribution in Company OP Units (including any dividend or other distribution of securities convertible into
Company OP Units), or engage in a reclassification, reorganization, recapitalization or exchange or other like change, then the
consideration, if any, into which the Company OP Units is converted shall be ratably adjusted to reflect fully the effect of any
such change.
2.03 Exchange
of Shares and Units.
(a) Prior
to the Closing Date, Parent shall enter into an agreement (in a form reasonably acceptable to the Company, the “Paying
Agent Agreement”) with a United States bank or trust company that shall be appointed by Parent (and reasonably satisfactory
to the Company) to act as a paying agent hereunder (the “Paying Agent”) for the purpose of exchanging Shares,
shares of Company Restricted Stock and Company OP Units represented by Certificates or Book-Entry Shares for Merger Consideration.
(b) Prior
to the Effective Time, Parent shall deposit, or shall cause to be deposited, with the Paying Agent in trust for the benefit of
the holders of Shares, holders of shares of Company Restricted Stock and holders of Company OP Units, for exchange in accordance
with this Article II, (i) evidence of Parent Common Stock in book-entry form issuable pursuant to Section 2.01 equal
to the aggregate Share Stock Consideration, (ii) evidence of Parent OP Units issuable pursuant to Section 2.02 equal to
the aggregate Unit Ownership Consideration and (iii) immediately available funds equal to the aggregate Share Cash Consideration
and Unit Cash Consideration (together with, to the extent then determinable, any cash payable in lieu of fractional shares pursuant
to Section 2.08 collectively, the “Exchange Fund”), and Parent shall instruct the Paying Agent to timely
pay the Share Cash Consideration and Unit Cash Consideration, and cash in lieu of fractional shares of Parent Common Stock, in
accordance with this Agreement.
(c) Payment
Procedures.
(i) As
soon as reasonably practicable (and in any event within three (3) Business Days) after the Effective Time, to the extent not previously
delivered, the Surviving Company or the Surviving Partnership, as applicable, shall cause the Paying Agent to mail to each holder
of record of Shares or Company OP Units whose Shares or Company OP Units, as applicable, were converted into the Merger Consideration
pursuant to Section 2.01 or Section 2.02, (A) a letter of transmittal (the “Letter of Transmittal”)
in customary form as agreed to between the Company and Parent prior to the date of this Agreement, and (B) any agreement or additional
documents necessary to admit the holders of Company OP Units as of immediately prior to the Partnership Merger Effective Time as
new limited partners of the Surviving Partnership, to afford such holders the same exchange rights afforded to other holders of
Parent OP Common Units pursuant to the limited partnership agreement of Parent OP, as amended and restated, and to record such
holders as the owners of the aggregate number of Parent OP Common Units as each is entitled to receive in respect of their aggregate
Unit Ownership Consideration pursuant to Section 2.02(a)(i)(2). The Letter of Transmittal shall be accompanied by instructions
for use in effecting the surrender of certificates that immediately prior to the Effective Time represented Shares or certificates
that immediately prior to the Partnership Merger Effective Time represented the Company OP Units (“Certificates”)
(or effective affidavits of loss in lieu thereof) or non-certificated Shares or Company OP Units represented by book-entry of the
Company or the Company OP, as applicable (“Book-Entry Shares”) pursuant to this Article II, representing
the shares of Company Common Stock or Company OP Units to which such Letter of Transmittal relates, duly endorsed in blank or otherwise
in form acceptable for transfer on the books of the Company or the Company OP, as applicable, or by an appropriate customary guarantee
of delivery of such Certificates, as set forth in such Letter of Transmittal, from a firm that is an “eligible guarantor
institution” (as defined in Rule 17Ad-15 under the Exchange Act); provided, that such Certificates are in fact delivered
to the Paying Agent by the time required in such guarantee of delivery, and, in the case of Book-Entry Shares, any additional documents
specified in the procedures set forth in the Letter of Transmittal. The Letter of Transmittal shall specify that delivery shall
be effected, and risk of loss and title to Certificates shall pass, only upon delivery of such Certificates (or effective affidavits
of loss in lieu thereof as provided in this Section 2.03(c)(i)) or Book-Entry Shares to the Paying Agent and shall be in
such form and have such other provisions as Parent and the Company may agree.
(ii) As
soon as reasonably practicable after the date of delivery (or, if later, after the Effective Time) to the Paying Agent of a Certificate
(or effective affidavit of loss in lieu thereof as provided in Section 2.03(c)(i)) or Book-Entry Shares (or, in the case
of Book-Entry Shares, receipt of an “agent’s message” by the Paying Agent, or such other evidence, if any, of
transfer as the Paying Agent may reasonably request), together with a properly completed and duly executed Letter of Transmittal
and any other documentation required hereby, the holder of record of such Certificate (or effective affidavit of loss in lieu thereof
as provided in Section 2.03(c)(i)) or Book-Entry Shares shall be entitled to receive from the Exchange Fund in exchange
therefor the applicable Merger Consideration in respect of the shares of Company Common Stock or Company Restricted Stock or Company
OP Units formerly represented by such holder’s properly surrendered Certificate (or effective affidavit of loss in lieu thereof
as provided in Section 2.03(c)(i)) or Book-Entry Shares. Any Share Cash Consideration or Unit Cash Consideration payments
shall be made via check or wire or other electronic transfer of immediately available funds, at each such holder’s election
as specified in the Letter of Transmittal. No interest will be paid or accrued on any amount payable upon due surrender of Certificates
(or effective affidavits of loss in lieu thereof) or Book-Entry Shares. In the event of a transfer of ownership of Shares that
is not registered in the transfer records of the Company or Company OP Units that is not registered in the transfer records of
the Company OP, payment upon due surrender of the Certificate may be paid to such a transferee if the Certificate formerly representing
such Shares or Company OP Units, as applicable, is presented to the Paying Agent, accompanied by all documents required to evidence
and effect such transfer and to evidence that any applicable stock transfer Taxes have been paid or are not applicable. The Merger
Consideration, paid in full with respect to any Share or Company OP Unit in accordance with the terms hereof, shall be deemed to
have been paid in full satisfaction of all rights pertaining to such Share or Company OP Unit, as applicable.
(d) Subject
to the terms of the Paying Agent Agreement, Parent and the Company, in the exercise of their reasonable discretion, shall have
the joint right to make all determinations, not inconsistent with the terms of this Agreement, governing (i) the issuance and delivery
of certificates representing the number of shares of Parent Common Stock into which shares of Company Common Stock or Company Restricted
Stock are converted into the right to receive Share Stock Consideration in the Merger, (ii) the issuance of any Parent OP Common
Units into which any Company OP Units are converted into the right to receive the Unit Ownership Consideration and the procedures
for admitting and joining former holders of Company OP Units to the partnership agreement of the Surviving Partnership as limited
partners and holders of Parent OP Common Units, and (iii) the method of payment of cash for shares of Company Common Stock or Company
Restricted Stock or Company OP Units converted into the right to receive the Share Cash Consideration or Unit Cash Consideration,
as applicable, and cash in lieu of fractional shares of Parent Common Stock.
(e) Closing
of Transfer Books.
(i) At
the Effective Time, the stock transfer books of the Company shall be closed, and there shall be no further registration of transfers
on the stock transfer books of the Surviving Company of the Shares that were outstanding immediately prior to the Effective Time.
If, after the Effective Time, any Certificate or Book-Entry Share representing ownership of Shares is presented to the Surviving
Company, Parent or the Paying Agent for transfer, the holder of such Certificate or Book-Entry Share shall be given a copy of the
Letter of Transmittal and instructed to comply with the instructions in the Letter of Transmittal in order to receive the Share
Merger Consideration to which such holder is entitled pursuant to this Article II.
(ii) At
the Partnership Merger Effective Time, the equity transfer books of the Company OP shall be closed, and there shall be no further
registration of transfers on the equity transfer books of the Surviving Partnership of the Company OP Units that were outstanding
immediately prior to the Partnership Merger Effective Time. If, after the Partnership Merger Effective Time, any Certificate or
Book-Entry Share representing ownership of Company OP Units is presented to the Surviving Partnership, Parent or the Paying Agent
for transfer, the holder of such Certificates or Book-Entry Share shall be given a copy of the Letter of Transmittal and instructed
to comply with the instructions in the Letter of Transmittal in order to receive the Unit Merger Consideration to which such holder
is entitled pursuant to this Article II.
(f) Transfer
of Ownership. If any cash amount payable pursuant to this Section 2.03 is to be paid to a Person other than the Person
to whom the Certificate surrendered in exchange therefor is registered, it shall be a condition of the payment thereof that any
such Certificate so surrendered shall be properly endorsed and otherwise in proper form for transfer and that the Person requesting
such exchange shall have paid to Parent or any agent designated by Parent any transfer or other Taxes required by reason of the
payment of cash in any name other than that of the registered holder of such Certificate, or established to the satisfaction of
Parent or any agent designated by Parent that such Tax has been paid or is not payable.
(g) Dividends
with Respect to Parent Common Stock. No dividends or other distributions with respect to Parent Common Stock with a record
date after the Effective Time shall be paid to the holder of any unsurrendered Certificate or Book-Entry Share with respect to
the shares of Parent Common Stock issuable with respect to such Certificate or Book-Entry Share in accordance with this Agreement,
and all such dividends and other distributions shall be paid by Parent to the Paying Agent and shall be included in the Exchange
Fund, in each case until the surrender of such Certificate (or affidavit of loss in lieu thereof) or Book-Entry Share in accordance
with this Agreement. Subject to applicable Laws, following surrender of any such Certificate (or affidavit of loss in lieu thereof)
or Book-Entry Share there shall be paid to the record holder of the shares of Parent Common Stock, if any, issued in exchange therefor,
without interest, (i) all dividends and other distributions payable in respect of any such shares of Parent Common Stock with a
record date after the Effective Time and a payment date on or prior to the date of such surrender and not previously paid and (ii)
at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but
prior to such surrender and with a payment date subsequent to such surrender payable with respect to such shares of Parent Common
Stock.
(h) Distributions
with Respect to Parent OP Common Units. No distributions with respect to Parent OP Common Units with a record date after the
Partnership Merger Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to Parent OP Common
Units issuable with respect to such Certificate in accordance with this Agreement, and all such distributions shall be paid by
Parent to the Paying Agent and shall be included in the Exchange Fund, in each case until the surrender of such Certificate (or
affidavit of loss in lieu thereof) in accordance with this Agreement. Subject to applicable Laws, following surrender of any such
Certificate (or affidavit of loss in lieu thereof) there shall be paid to the record holder of the Parent OP Common Units, if any,
issued in exchange therefor, without interest, (i) all distributions payable in respect of any such Parent OP Common Units with
a record date after the Partnership Merger Effective Time and a payment date on or prior to the date of such surrender and not
previously paid and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after
the Partnership Merger Effective Time but prior to such surrender and with a payment date subsequent to such surrender payable
with respect to such Parent OP Common Units.
(i) Termination
of Exchange Fund. Any portion of the Exchange Fund (including the proceeds of any investments thereof) that remains undistributed
to the former holders of Shares or Company OP Units for one year after the Effective Time shall be delivered to the Surviving Company
upon demand, and any former holders of Shares or Company OP Units who have not surrendered their Shares in accordance with this
Section 2.03 shall thereafter look only to the Surviving Company for payment of their claim for the Merger Consideration
(including any cash in lieu of fractional shares and any applicable dividends or other distributions with respect to Parent Common
Stock), without any interest thereon, upon due surrender of their Shares or Company OP Units, as applicable.
(j) No
Liability. Notwithstanding anything to the contrary contained in this Section 2.03, no party hereto shall be liable
to any Person for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar
applicable Law.
(k) Investment
of Exchange Fund. The Paying Agent shall invest all cash included in the Exchange Fund as reasonably directed by Parent; provided
that any investment of such cash shall be limited to direct short-term obligations of, or short-term obligations fully guaranteed
as to principal and interest by, the United States government or in commercial paper obligations rated A-1 or P1 or better by Moody’s
Investors Service, Inc. or Standard & Poor’s Corporation, to the extent such investments are REIT qualifying assets.
Any interest and other income resulting from such investments shall become a part of the Exchange Fund, and any amounts in excess
of the aggregate amount payable pursuant to this Article II shall be paid to the Surviving Company. Notwithstanding anything
to the contrary contained herein, no investment losses resulting from investment of the Exchange Fund shall diminish the rights
of any holder of Certificates or Book-Entry Shares to receive the Merger Consideration as provided herein. To the extent that there
are any losses with respect to any investments of the Exchange Fund, or the Exchange Fund diminishes for any reason below the level
required for the Paying Agent promptly to pay the Merger Consideration to all holders of Certificates and Book-Entry Shares entitled
thereto, Parent shall, or shall cause the Surviving Company to, promptly replace or restore the cash in the Exchange Fund so as
to ensure that the Exchange Fund is at all times maintained at a level sufficient for the Paying Agent to make such payments.
(l) Lost
Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the Person claiming such document to be lost, stolen or destroyed and, if determined by Parent in its sole discretion, the posting
by such Person of a bond in customary amount as indemnity against any claim that may be made against it or the Surviving Company
with respect to the Certificate, the Paying Agent will pay in exchange for such lost, stolen or destroyed document the amount equal
to the number of Shares or Company OP Units represented by such lost, stolen or destroyed Certificate multiplied by the Share Merger
Consideration or Unit Merger Consideration, as applicable, without any interest thereon.
2.04 Withholding
Rights. Each of Parent, Parent OP, the Surviving Partnership, the Surviving Company and the Paying Agent shall be entitled
to deduct and withhold from any payments pursuant to this Agreement to any holder of any Shares or Company OP Units such amounts
as Parent, Parent OP, the Surviving Partnership, the Surviving Company or the Paying Agent is required to deduct and withhold with
respect to any such payments under the Code, or any applicable provision of state, local, provincial or foreign Tax law. To the
extent that amounts are so withheld and paid over to the appropriate Governmental Entity (as hereinafter defined) on a timely basis
by Parent, Parent OP, the Surviving Partnership, the Surviving Company or the Paying Agent, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to such Persons.
2.05 Treatment
of Company Restricted Stock. At the Effective Time, without any further action by the parties hereto, each share of Company
Common Stock outstanding immediately prior to the Effective Time that is subject to vesting or other forfeiture conditions (such
shares, the “Company Restricted Stock”) that remain unvested or otherwise subject to forfeiture conditions shall,
as of the Effective Time, automatically become fully vested and free of any such forfeiture conditions, and each share of Company
Restricted Stock shall be considered an outstanding share of Company Common Stock for all purposes of this Agreement, including
the right to receive the Share Merger Consideration. The Company may provide for the net settlement of shares of Company Restricted
Stock that vest pursuant to the foregoing provision in order to provide for the payment of withholding taxes on behalf of the holder
of such shares of Company Restricted Stock.
2.06 Further
Action.
(a) If,
at any time after the Effective Time, any further action is determined by the Surviving Company to be necessary or desirable to
carry out the purposes of this Agreement or to vest the Surviving Company with full right, title and possession of and to all rights
and property of IRT LP LLC and the Company, the officers and directors of the Surviving Company and Parent shall be fully authorized
(in the name of IRT LP LLC, in the name of the Company and otherwise) to take and shall take such action.
(b) If,
at any time after the Partnership Merger Effective Time, any further action is determined by the Surviving Partnership to be necessary
or desirable to carry out the purposes of this Agreement or to vest the Surviving Partnership with full right, title and possession
of and to all rights and property of Parent OP and Company OP, the general partner of the Surviving Partnership shall be fully
authorized (in the name of Parent OP, in the name of the Company OP and otherwise) to take and shall take such action.
2.07 Dissenters’
Rights. No dissenters’ or appraisal rights shall be available with respect to the Company Merger, the Partnership Merger
and the other Transactions.
2.08 Fractional
Shares. No certificate representing fractional shares of Parent Common Stock or fractional Parent OP Common Units shall be
issued upon the surrender for exchange of Certificates or with respect to Book-Entry Shares or otherwise, and such fractional interests
shall not entitle the owner thereof to voting rights or to any other rights of a stockholder of Parent or a partner of Parent OP.
Notwithstanding any other provision of this Agreement, each holder of shares of Company Common Stock or Company OP Units converted
pursuant to the Merger who would otherwise have been entitled to receive a fraction of a share of Parent Common Stock or a fraction
Parent OP Common Unit shall receive (aggregating for this purpose all the shares of Parent Common Stock or Parent OP Common Units,
as applicable, that such holder is entitled to receive hereunder), in lieu thereof, cash, without interest, in an amount equal
to the product of (a) such fractional part of a share of Parent Common Stock or a Parent OP Common Unit multiplied by (b) the per
share closing price of Parent Common Stock on the NYSE MKT LLC (the “NYSE MKT”) on the last Trading Day prior
to the Closing Date.
Article
III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY and the Company OP
Except as set forth in (i) the Company SEC
Documents filed with the U.S. Securities and Exchange Commission (the “SEC”) on or after May 13, 2013 and publicly
available prior to the date of this Agreement (the “Filed Company SEC Documents”);
provided that the applicability of any such document to any representation or warranty is reasonably apparent on
its face, or (ii) the letter, dated as of the date of this Agreement, from the Company and the Company OP to Parent and Parent
OP (the “Company Disclosure Letter”), the Company and the Company OP, jointly and severally, represent and warrant
as of the date hereof (except to the extent that a representation, warranty or the Company Disclosure Letter speaks as of another
date, in which case as of such date) to Parent and Parent OP that:
3.01 Organization,
Standing and Power.
(a) The
Company is duly organized, validly existing and in good standing under the Laws of the State of Maryland and has full corporate
power and authority to own, lease or otherwise hold and operate its properties and assets and to conduct its businesses as presently
conducted. The Company is duly qualified or licensed to do business and is in good standing (to the extent the concept is recognized
by such jurisdiction) in each jurisdiction where the nature of its business or its ownership, leasing or operation of its properties
makes such qualification or licensing necessary, except where the failure to be so qualified or licensed or to be in good standing,
individually or in the aggregate, would not reasonably be likely to have a Company Material Adverse Effect. The Company is the
sole member of, and owns 100% of the membership interests in, Company OP GP.
(b) The
Company OP is duly formed, validly existing and in good standing under the Laws of the State of Delaware and has full limited partnership
power and authority to own, lease or otherwise hold and operate its properties and assets and to conduct its businesses as presently
conducted. The Company OP is duly qualified or licensed to do business and is in good standing (to the extent the concept is recognized
by such jurisdiction) in each jurisdiction where the nature of its business or its ownership, leasing or operation of its properties
makes such qualification or licensing necessary, except where the failure to be so qualified or licensed or to be in good standing,
individually or in the aggregate, would not reasonably be likely to have a Company Material Adverse Effect.
(c) Section 3.01(c)
of the Company Disclosure Letter sets forth as of the date hereof a true and complete list of the Company Subsidiaries (including
Company OP GP), together with the jurisdiction of organization or incorporation, as the case may be, of each Company Subsidiary.
Each Company Subsidiary (i) is duly organized, validly existing, in good standing (to the extent the concept is recognized by such
jurisdiction) under the Laws of the jurisdiction of its organization, (ii) has all requisite corporate, partnership, limited liability
company or other company (as the case may be) power and authority to conduct its business as now being conducted, and (iii) is
duly qualified or licensed to do business and is in good standing (to the extent the concept is recognized by such jurisdiction)
in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification
or licensing necessary, except for those jurisdictions where the failure to be so qualified or licensed or to be in good standing
would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(d) Except
as set forth on Section 3.01(d) of the Company Disclosure Letter, the Company has made available to Parent (i) complete
and correct copies of the Company Article and Company Bylaws and (ii) complete and correct copies of the organizational documents
or governing documents of each Company Subsidiary.
(e) Neither
the Company nor any Company Subsidiary directly or indirectly owns any interest or investment (whether equity or debt) in any Person
(other than in the Company Subsidiaries and investments in short-term securities).
3.02 Capital
Structure.
(a) The
authorized capital stock of the Company consists of 1,000,000,000 shares of the Company Common Stock and 50,000,000 shares of preferred
stock, par value $0.01 per share (the “Company Preferred Stock”, and, together with the Company Common Stock,
the “Company Capital Stock”). At the close of business on May 8, 2015 (the “Measurement Date”),
(a) 36,809,108 shares of Company Common Stock (which includes 290,566 shares of Company Restricted Stock) were issued and outstanding
and (b) no shares of Company Preferred Stock were issued or outstanding. All issued and outstanding shares of the capital stock
of the Company are duly authorized, validly issued, fully paid and non-assessable, and no class of capital stock of the Company
is entitled to preemptive rights. Except as set forth above, at the close of business on the Measurement Date, no shares
of capital stock or other voting securities of the Company were issued, reserved for issuance or outstanding. There are no bonds,
debentures, notes or other indebtedness of the Company or any Company Subsidiary having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters on which holders of the Company Common Stock, the Company
OP Units or the general partnership interests in the Company OP may vote (“Voting Company Debt”). Except as
set forth above, as of the Measurement Date, there were no options, warrants, rights, convertible or exchangeable securities, commitments,
or undertakings of any kind to which the Company or any Company Subsidiary was a party or by which any of them was bound (i) obligating
the Company or any Company Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock
of or other equity interest in, the Company or of any Company Subsidiary or any Voting Company Debt or (ii) obligating the Company
or any Company Subsidiary to issue, grant, extend or enter into any such option, warrant, security, commitment or undertaking.
At the close of business on the Measurement Date, (a) Company OP GP, as sole general partner of Company OP, owned the entire general
partnership interest in Company OP; (b) 39,152,608 Company OP Units were issued and outstanding (c) no preferred units of the Company
OP were issued and outstanding; (d) no Class B Contingent Units (as defined in the Company OP Limited Partnership Agreement) were
issued and outstanding; (e) no LTIP Units (as defined in the Company OP Limited Partnership Agreement) were issued and outstanding;
and (f) no other partnership interests were issued and outstanding or issuable. There are no partners of the Company OP or holders
of Company OP Units other than as set forth on Section 3.02(a) of the Company Disclosure Letter. Section 3.02(a)
of the Company Disclosure Letter sets forth the number of partnership units held by each partner in the Company OP. Other than
the Company OP Units owned by the limited partners of the Company OP set forth in Section 3.02(a) of the Company Disclosure
Letter, the Company directly owns all of the issued and outstanding Company OP Units of the Company OP, free and clear of any Liens,
and all Company OP Units have been duly authorized and validly issued and are free of preemptive rights. The Company OP GP is the
sole general partner of the Company OP and owns the general partnership interest free and clear of any Liens.
(b) Except
as set forth above, as of the close of business on the Measurement Date, there were no (i) restricted shares, restricted share
units, stock appreciation rights, performance shares, performance share units, contingent value rights, “phantom” stock
or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value
or price of, any capital stock of, or other voting securities or ownership interests in, the Company or any Company Subsidiary,
(ii) voting trusts, proxies or other similar agreements or understandings to which the Company or any Company Subsidiary was a
party or by which the Company or any Company Subsidiary was bound with respect to the voting of any shares of capital stock of
the Company or any Company Subsidiary, or (iii) contractual obligations or commitments of any character to which the Company or
any Company Subsidiary was a party or by which the Company or any Company Subsidiary was bound restricting the transfer of, or
requiring the registration for sale of, any shares of capital stock of the Company or any Company Subsidiary. Neither the Company
nor any Company Subsidiary has granted any preemptive rights, anti-dilutive rights or rights of first refusal or similar rights
with respect to any of its capital stock or other equity interests.
(c) Except
as set forth in Section 3.02(c) of the Company Disclosure Letter, all of the outstanding shares of capital stock or other
equity interests of each Company Subsidiary are owned by the Company, by another Company Subsidiary or by the Company and another
Company Subsidiary, free and clear of all pledges, liens, charges, mortgages, encumbrances and security interests of any kind or
nature whatsoever (collectively, “Liens”) and free of any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other equity interests other than transfer and other restrictions under applicable federal and
state securities Laws.
(d) All
dividends or other distributions on the shares of Company Common Stock and any material dividends or other distributions on any
securities of any Company Subsidiary which have been authorized and declared prior to the date hereof have been paid in full (except
to the extent such dividends have been publicly announced and are not yet due and payable).
3.03 Authority;
Execution and Delivery; Enforceability.
(a) The
Company and Company OP each has all requisite corporate or limited partnership power and authority, as applicable, to execute and
deliver this Agreement and, subject to receipt of the Company Stockholder Approval, to consummate the Transactions. The execution,
delivery and performance by the Company and the Company OP of this Agreement and the consummation by the Company and the Company
OP of the Transactions have been duly authorized by all necessary corporate action on the part of the Company and partnership action
on the part of Company OP, respectively, and no other corporate or partnership actions on the part of the Company or the Company
OP are necessary to authorize this Agreement, the Merger or the other Transactions, subject to receipt of the Company Stockholder
Approval. Each of the Company and the Company OP has duly executed and delivered this Agreement, and, assuming due authorization,
execution and delivery by the other parties hereto, this Agreement constitutes the legal, valid and binding obligation of each
of the Company and the Company OP, enforceable against each of the Company and the Company OP in accordance with its terms, except
that such enforceability may be (i) limited by bankruptcy, insolvency, reorganization, moratorium and other similar Laws of general
application relating to or affecting creditors’ rights generally and (ii) subject to general equitable principles (whether
considered in a proceeding in equity or at law) (clauses (i) and (ii), the “Bankruptcy and Equity Exception”).
(b) The
Company Board, at a meeting duly called and held, duly adopted resolutions (i) approving and declaring advisable this Agreement,
the Merger and the other Transactions, (ii) determining that the terms of the Merger and the other Transactions are advisable
and in the best interests of the Company and (iii) recommending that the Company’s stockholders approve the Company Merger
and the other Transactions contemplated by this Agreement.
(c) The
Company OP GP, as the sole general partner of the Company OP, has adopted this Agreement and approved the Partnership Merger and
the other Transactions (the “Company OP GP Approval”).
3.04 No
Conflicts; Consents.
(a) The
execution and delivery by the Company and the Company OP of this Agreement do not, and the consummation of the Merger and the other
Transactions and compliance with the terms hereof will not, assuming receipt of the Company Stockholder Approval, conflict with,
or result in any violation or breach of or default (with or without notice or lapse of time, or both) under, or give rise to a
right of, or result in, termination, cancelation or acceleration of any obligation or the loss of a material benefit under, or
result in the creation of any Lien upon any of the properties or assets of the Company or any Company Subsidiary under, any provision
of (i) the Company Articles, the Company Bylaws or the comparable charter or organizational documents of any Company Subsidiary,
(ii) the Company OP Limited Partnership Agreement, (iii) any written loan or credit agreement, debenture, contract, lease,
license, indenture, note, bond, mortgage, agreement, concession, franchise or other obligation, commitment or instrument (a “Contract”),
to which the Company or any Company Subsidiary is a party or by which any of their respective properties or assets is bound, (iv) subject
to the filings and other matters referred to in Section 3.04(b), any federal, state, local or foreign judgment, injunction,
order, writ, ruling or decree (“Judgment”) or any federal, state, local or foreign statute, law, code, ordinance,
rule or regulation (“Law”) applicable to the Company, the Company OP or any Company Subsidiary or their respective
properties or assets, other than, in the case of clauses (iii) and (iv) above, any such items that, individually or in the aggregate,
would not reasonably be likely to have a Company Material Adverse Effect.
(b) No
consent, approval, license, permit, order or authorization (“Consent”) of, or registration, declaration or filing
with, or permit from, any U.S. federal, state, local or foreign government or any court of competent jurisdiction, administrative,
regulatory or other governmental agency, authority or commission, other governmental authority or instrumentality or any non-governmental
self-regulatory agency, authority or commission, domestic or foreign (a “Governmental Entity”), is required
to be obtained or made by or with respect to the Company or any Company Subsidiary in connection with the execution, delivery and
performance of this Agreement or the consummation of the Transactions, other than (i) the filing with the SEC of (A) the Joint
Proxy Statement and of the Form S-4 and the declaration of the effectiveness of the Form S-4, and (B) such reports under Section
13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as may be required in connection
with this Agreement, the Merger and the other Transactions, (ii) such filings as may be required under any state securities Laws,
(iii) the filing of the Articles of Merger with the SDAT and appropriate documents with the relevant authorities of the other jurisdictions
in which the Company is qualified to do business, (iv) the filing of the Partnership Certificate of Merger and the Company Certificate
of Merger with the SOS and appropriate documents with the relevant authorities of the other jurisdictions in which the Company
OP is qualified to do business, (v) such filings as may be required in connection with the Taxes described in Section 6.08,
(vi) such filings as may be required under the rules and regulations of the NASDAQ Stock Market and (vii) such other items that
would not reasonably be likely to, individually or in the aggregate, have a Company Material Adverse Effect.
3.05 SEC
Documents; Financial Statements; Undisclosed Liabilities.
(a) The
Company has filed or furnished, as applicable, all reports, schedules, forms, certifications, statements and other documents on
a timely basis with the SEC required to be filed or furnished, as applicable, by the Company since and including May 13, 2013 through
the date of this Agreement under the Exchange Act or the Securities Act (such documents, together with any documents and information
incorporated therein by reference and together with any documents filed during such period by the Company with the SEC on a voluntary
basis on Current Reports on Form 8-K, the “Company SEC Documents”).
(b) As
of its respective date, each Company SEC Document complied (or with respect to Company SEC Documents filed after the date hereof,
will comply) as to form in all material respects with the requirements of the Exchange Act and the Securities Act and the rules
and regulations of the SEC promulgated thereunder applicable to such Company SEC Document, each as in effect on the date so filed.
As of their respective dates (or, if amended prior to the date hereof, as of the date of such amendment), except to the extent
revised or superseded by a later filed Company SEC Document, none of the Company SEC Documents contained (or with respect to Company
SEC Documents filed after the date hereof, will contain) any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(c) Each
of the financial statements (including the related notes) of the Company included in the Company SEC Documents complied as to form
at the time it was filed in all material respects with the applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto in effect at the time of filing, was prepared in accordance with accounting principles generally
accepted in the U.S. (“GAAP”) in all material respects (except, in the case of unaudited financial statements,
as permitted by the rules and regulations of the SEC) applied on a consistent basis during the periods involved (except as may
be indicated in the notes thereto) and fairly presented in all material respects the consolidated financial position of the Company
and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the
periods shown (subject, in the case of unaudited financial statements, to normal year-end audit adjustments).
(d) None
of the Company or any Company Subsidiary has any liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) except liabilities or obligations (i) disclosed and provided for in the most recent financial statements included
in the Filed Company SEC Documents or of a nature not required by GAAP to be reflected thereon, (ii) related to the future performance
of any Contract, (iii) incurred or arising in the ordinary course of business consistent with past practice since the date of the
most recent financial statements included in the Filed Company SEC Documents, (iv) incurred under this Agreement or in connection
with the Transactions, (v) disclosed in the Company Disclosure Letter, (vi) as would not reasonably be likely to, individually
or in the aggregate, have a Company Material Adverse Effect or (vii) that will be discharged or paid in full prior to the Closing
Date.
(e) Section
3.05(e) of the Company Disclosure Letter sets forth with respect to all Indebtedness of the Company and the Company Subsidiaries
for borrowed money outstanding on the date hereof: (i) the amount of such indebtedness, (ii) the lender of such indebtedness, (iii)
the interest rate of such indebtedness, (iv) the maturity date of such indebtedness and (v) the collateral securing such indebtedness.
(f) Since
May 13, 2013, the Company has established and maintained a system of internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act). Such internal controls provide reasonable assurance (i) regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, (ii) that transactions
are executed in accordance with management’s general or specific authorizations, (iii) that transactions are recorded as
necessary to permit preparation of financial statements and to maintain asset accountability, (iv) that access to assets is permitted
only in accordance with management’s general or specific authorization and (v) that the recorded accountability for assets
is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Since
May 13, 2013, (x) the Company has designed and maintains disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Exchange Act) to ensure that material information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms and is accumulated and communicated to the Company’s management as appropriate to allow
timely decisions regarding required disclosure, (y) to the Knowledge of the Company, such
disclosure controls and procedures are effective in timely alerting the principal executive officer and principal financial officer
of the Company to material information required to be included in the Company’s periodic reports required under the Exchange
Act, and (z) the Company’s principal executive officer and its principal financial officer have disclosed to the Company’s
independent registered public accounting firm and the audit committee of the Company Board (and made summaries of such disclosures
available to Parent) (A) all known significant deficiencies and material weaknesses in the design or operation of internal controls
over financial reporting that are reasonably likely to adversely affect in any material respect the Company’s ability to
record, process, summarize and report financial information, and (B) any known fraud, whether or not material, that involves
management or other employees who have a significant role in the Company’s internal controls over financial reporting. As
of the date of this Agreement, the principal executive officer and principal financial officer of the Company have made all certifications
required by the Sarbanes-Oxley Act of 2002 and the regulations of the SEC promulgated thereunder, and the statements contained
in all such certifications were, as of their respective dates made, complete and correct in all material respects.
3.06 Information
Supplied. None of the information supplied or to be supplied by or on behalf of the Company and Company OP for inclusion or
incorporation by reference in (a) the Form S-4 will, at the time such document is filed with the SEC, at any time such
document is amended or supplemented or at the time such document is declared effective by the SEC, contain any untrue statement
of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not misleading, or (b) the Joint Proxy Statement will, at the
date that it is first mailed to the Company’s stockholders or Parent’s stockholders, at the time of the Company Stockholder
Meeting and Parent Stockholder Meeting, at the time the Form S-4 is declared effective by the SEC or at the Effective Time,
contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Joint Proxy
Statement, at the date such materials are first mailed to the Company’s stockholders or Parent’s stockholders and at
the time of the Company Stockholder Meeting and the Parent Stockholder Meeting, will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations thereunder. No representation or warranty is made by the
Company in this Section 3.06 with respect to statements made or incorporated by reference therein based on information supplied
by Parent or Parent OP or any of their respective Representatives for inclusion or incorporation by reference therein
3.07 Absence
of Certain Changes or Events
. Since January 1, 2015, (i) there has not been any Event that,
individually or together with any other Event, has had or would reasonably be likely to have a Company Material Adverse Effect,
and (ii) except in connection with this Agreement and the Transactions or as expressly contemplated or permitted by this Agreement,
the Company and each Company Subsidiary has conducted its respective business in all material respects only in the ordinary course
of business consistent with past practice.
3.08 Taxes.
(a) Each
of the Company and the Company Subsidiaries (i) has timely filed (or had filed on their behalf) all U.S. federal income and other
material Tax Returns (as defined below) required to be filed by it (after giving effect to any filing extension granted by a Taxing
Authority) under applicable Law and such Tax Returns are true, correct and complete in all material respects, and (ii) has timely
paid (or had timely paid on its behalf) all U.S. federal income and other material Taxes shown on such Tax Returns, other than
Taxes being contested in good faith and for which adequate reserves have been established in the Company’s most recent financial
statements contained in the Filed Company SEC Documents. Neither the Company nor any of the Company Subsidiaries has executed or
filed with the Internal Revenue Service (the “IRS”) or any other Taxing Authority any agreement, waiver or other
document or arrangement extending the period for assessment or collection of material Taxes (including, but not limited to, any
applicable statute of limitation). As used herein, the term “Tax Returns” means all reports, returns, declarations,
or other written statements required to be supplied to a Taxing Authority in connection with Taxes.
(b) The
Company (i) for each taxable year commencing with its taxable year ended December 31, 2012 through December 31, 2014 has been organized
in conformity with the requirements for qualification and taxation as a real estate investment trust (a “REIT”)
pursuant to Sections 856 through 860 of the Code, (ii) has operated since December 31, 2012 to the date hereof in a manner to enable
it to qualify for taxation as a REIT and has a proposed method of operation that will enable it to continue to qualify for taxation
as a REIT for the taxable year that includes the date hereof, and (iii) shall continue to operate in such a manner as to enable
it to continue to qualify for taxation as a REIT for each taxable year through the taxable year that will end with the Merger.
(c) No
Company Subsidiary is a corporation for U.S. federal income tax purposes, other than a corporation that, at all times during which
the Company has held, directly or indirectly, its stock, has qualified as a “qualified REIT subsidiary,” within the
meaning of Section 856(i)(2) of the Code, or as a “taxable REIT subsidiary,” within the meaning of Section 856(1) of
the Code.
(d) Each
Company Subsidiary that is a partnership, joint venture, trust or limited liability company has been, since its formation, treated
for U.S. federal income tax purposes as a partnership or disregarded entity, as the case may be, and not as a corporation or an
association taxable as a corporation, or a “publicly traded partnership” within the meaning of Section 7704(b) of
the Code.
(e) Neither
the Company nor any Company Subsidiary holds any asset the disposition of which would be subject to rules similar to Section
1374 of the Code.
(f) To
the Knowledge of the Company, neither the Company nor any Company Subsidiary (other than a “taxable REIT subsidiary”
of the Company) has engaged at any time in any “prohibited transactions” within the meaning of Section 857(b)(6) of
the Code.
(g) All
material deficiencies asserted or assessments made with respect to the Company or any Company Subsidiary as a result of any examinations
by the IRS or any other Taxing Authority of the Tax Returns of the Company or any Company Subsidiary have been fully paid and,
to the Knowledge of the Company, there are no other audits, examinations or other proceedings relating to any material Taxes of
the Company or any Company Subsidiary by any Taxing Authority in progress. Neither the Company nor any Company Subsidiary has received
any written notice from any Taxing Authority that it intends to conduct such an audit, examination or other proceeding in respect
of Taxes or to make any assessment for material Taxes and, to the Knowledge of the Company, no such audit, examination, or other
proceeding is threatened. Neither the Company nor any Company Subsidiary is a party to any litigation or pending litigation or
administrative proceeding relating to Taxes (other than litigation dealing with appeals of property Tax valuations).
(h) The
Company and the Company Subsidiaries have complied, in all material respects, with all applicable Laws relating to the payment
and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 1445, 1446, 1471, and 3402 of the Code
or similar provisions under any foreign Laws) and have duly and timely withheld and paid over to the appropriate Taxing Authorities
all material amounts required to be so withheld and paid over on or prior to the due date thereof under all applicable Laws.
(i) No
claim has been made in writing by a Taxing Authority in a jurisdiction where the Company or any Company Subsidiary does not file
Tax Returns that the Company or any such Company Subsidiary is or may be subject to a material amount of Taxes in that jurisdiction
and, to the Knowledge of the Company, no such claim is threatened.
(j) Neither
the Company nor any Company Subsidiary has requested any extension of time within which to file any material Tax Return, which
material Tax Return has not yet been filed.
(k) Neither
the Company nor any Company Subsidiary is a party to any Tax sharing or similar agreement or arrangement, other than any agreement
or arrangement solely between the Company and any Company Subsidiary, pursuant to which it will have any obligation to make any
payments after the Closing.
(l) Neither
the Company nor any Company Subsidiary has requested or received a ruling from, or requested or entered into a binding agreement
with, the IRS or other Taxing Authorities relating to Taxes.
(m) There
are no Liens for Taxes (other than the Company Permitted Liens) upon any of the assets of the Company or any Company Subsidiary.
(n) Neither
the Company nor any Company Subsidiary is subject, directly or indirectly, to any Tax Protection Agreements.
(o) Neither
the Company nor any Company Subsidiary is a party to any “reportable transaction” as such term is used in the Treasury
regulations under Section 6011 of the Code.
(p) Section 3.08(p) of
the Company Disclosure Letter sets forth each Company Subsidiary and whether such Company Subsidiary is, for U.S. federal income
Tax purposes, a partnership, disregarded entity, “qualified REIT subsidiary” within the meaning of Section 856(i)(2)
of the Code or “taxable REIT subsidiary” under Section 856(l) of the Code.
(q) Neither
the Company nor any Company Subsidiary (i) has been a member of an affiliated group filing a consolidated federal income Tax Return
or (ii) has any liability for the Taxes of any Person (other than the Company or any Company Subsidiary) under Treasury Regulations
Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise.
(r) Neither
the Company nor any of the Company Subsidiaries has entered into any “closing agreement” as described in Section 7121
of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law).
(s) Notwithstanding
any provision herein to the contrary, the representations in this Section 3.08 are the sole representations of the Company
and the Company Subsidiaries regarding their Tax matters.
3.09 Labor
Relations.
(a) Neither
the Company nor any Company Subsidiary is a party to any collective bargaining agreements. Since May 13, 2013, none of the Company
or any Company Subsidiary has experienced any strikes, work stoppages, slowdowns, lockouts or, to the Knowledge of the Company,
union organization attempts, and, to the Knowledge of the Company, there is no such item threatened against the Company or any
Company Subsidiary.
(b) Except
as set forth in Section 3.09(b) of the Company Disclosure Letter, there are no proceedings pending or, to the Knowledge
of the Company, threatened against the Company or any of the Company Subsidiaries in any forum by or on behalf of any present or
former employee of the Company or any of the Company Subsidiaries, any applicant for employment or classes of the foregoing alleging
unpaid or overdue wages or compensation due, breach of any express or implied employment contract, violation of any law or regulation
governing employment or the termination thereof, or any other discriminatory, wrongful or tortious conduct on the part of the Company
of any of the Company Subsidiaries, in connection with the employment relationship that, individually or in the aggregate, would
reasonably be expected to have a Company Material Adverse Effect.
3.10 Employee
Benefits.
(a) Section
3.10(a) of the Company Disclosure Letter lists each (i) “employee benefit plan” as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and (ii) any bonus, incentive,
deferred compensation, stock purchase, stock option, stock or stock-based, severance, retention, employment, change in control
or fringe benefit plan, program, policy or agreement that is sponsored, maintained or contributed to by the Company or any Company
ERISA Affiliate for the benefit of any current or former employee, officer, director or consultant of the Company or any Company
Subsidiary, or under which the Company or any Company ERISA Affiliate has or may have any obligation or liability (collectively,
the “Company Benefit Plans”).
(b) The
Company has made available to Parent true and complete copies of the following with respect to the Company Benefit Plans, as applicable:
(i) the Company Benefit Plan and current amendments thereto, (ii) the most recently filed annual report on Form 5500, (iii) the
most recently received IRS determination letter or opinion letter, (iv) the most recent summary plan description and all material
modifications thereto, (v) the most recent actuarial report or other financial statement relating to such Company Benefit Plan,
(vi) the most recent nondiscrimination tests performed under the Code, and (vii) all filings made with any Governmental Entity,
including but not limited to any filings under the Employee Plans Compliance Resolution System or the Department of Labor Delinquent
Filer Program.
(c) Each
Company Benefit Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter
from the IRS, or is entitled to rely on a favorable opinion issued by the IRS, and no fact or event has occurred since the date
of such determination or opinion letter that would reasonably be likely to adversely affect the qualified status of any such Company
Benefit Plan.
(d) Each
Company Benefit Plan has been operated in all respects in material compliance with its terms and the requirements of all applicable
Laws, including ERISA and the Code, and all reports, documents and notices required to be filed with respect to each Company Benefit
Plan have been timely filed.
(e) Neither
the Company nor any Company ERISA Affiliate sponsors or has sponsored or contributed to, or has contributed to, any Company Benefit
Plan that is subject to the provisions of Section 412 of the Code or Title IV or Section 302 of ERISA, is a voluntary employee
beneficiary association, or is a multiemployer plan within the meaning of Section 3(37) of ERISA. Neither the Company nor any Company
Subsidiary has any liability with respect to any Company Benefit Plan that provides for any post-employment or postretirement health
or medical or life insurance benefits for retired, former or current employees of the Company or any Company Subsidiary, except
(i) as required by Section 4980B of the Code, (ii) coverage or benefits the entire cost of which is borne by the employee or former
employee or (iii) coverage or benefits in the nature of severance not to exceed eighteen (18) months under the employment, severance
or change in control plans or agreements listed in Section 3.10(a) of the Company Disclosure Letter, in each case, except
for such liability that would not, individually or in the aggregate, reasonably be likely to have a Company Material Adverse Effect.
(f) No
material action, suit, investigation, audit, proceeding or claim (other than routine claims for benefits) is pending against or
involves or, to the Knowledge of the Company, is threatened against or threatened to involve, any Company Benefit Plan before any
court or arbitrator or any Governmental Entity, including the IRS, the Department of Labor or the Pension Benefit Guaranty Corporation.
(g) Each
Company Benefit Plan that constitutes a “non-qualified deferred compensation plan” within the meaning of Section 409A
of the Code, materially complies in both form and operation with the requirements of Section 409A of the Code so that no amounts
paid pursuant to any such Company Benefit Plan are subject to tax under Section 409A of the Code. No payment required to be made
to any service provider to the Company as a result of the closing of the transaction contemplated by this Agreement will be subject
to tax under Section 409A of the Code.
(h) Except
as set forth on Section 3.10(h) of the Company Disclosure Letter, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby (either alone or in combination with any other event) will result in any
payment, acceleration, vesting or creation of any rights of any person to benefits under any Company Benefit Plan. Except as set
forth on Section 3.10(h) of the Company Disclosure Letter, no amount that could be received (whether in cash, property,
the vesting of property or otherwise) as a result of or in connection with the consummation of the transactions contemplated by
this Agreement (either alone or in combination with any other event), by any employee, officer, director or other service provider
of the Company or any Company Subsidiary who is a “disqualified individual” (as such term is defined in Treasury Regulation
Section 1.280G-1) could be characterized as an “excess parachute payment” (as defined in Section 280G(b)(1) of the
Code).
(i) No
employee of the Company or any Company Subsidiary has any entitlement to continue to be employed by the Company or any Company
Subsidiary from and after the Partnership Merger Effective Time.
(j) The
term “Company ERISA Affiliate” means any entity that, together with the Company, would be treated as a single
employer under Section 414 of the Code.
3.11 Litigation.
From January 1, 2014 through the date of this Agreement, there has been no claim, suit, action, arbitration or proceeding pending
or, to the Knowledge of the Company, threatened against the Company, any Company Subsidiary or any executive officer or director
of the Company (in their capacity as such), other than as have not had and would not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect (each a “Company Specified Action”). There is no material
Judgment outstanding against the Company or any Company Subsidiary or any of their respective assets. From January 1, 2014 through
the date of this Agreement, the Company has not received any written notification of any, and to the Knowledge of the Company there
is no, investigation by any Governmental Entity involving the Company or any Company Subsidiary or any of their respective assets
that could validly give rise to a Company Specified Action.
3.12 Compliance
with Applicable Laws. Since January 1, 2014, none of the Company or any Company Subsidiary has been, or is, in violation of,
or has been given written notice of or been charged with any violation of, any Law or order of any Governmental Entity
applicable to the Company or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary
is bound, other than as have not had and would not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. The Company and each Company Subsidiary has all permits, authorizations, approvals, registrations, certificates,
orders, waivers, clearances and variances (each, a “Permit”) necessary to conduct its business as presently
conducted except those the absence of which would not reasonably be likely to have a Company Material Adverse Effect. To the Knowledge
of the Company, none of the Company or any Company Subsidiary has received notice that any Permit will be terminated or modified
or cannot be renewed in the ordinary course of business.
3.13 Environmental
Matters. Section 3.13 of the Company Disclosure Letter sets forth a list of all reports related to the environmental
condition of the Company Property that have been provided to Parent prior to the date hereof. Except as set forth in such reports
or as would not reasonably be likely to have a Company Material Adverse Effect:
(a) to
the Knowledge of the Company, the Company and the Company Subsidiaries (i) are in compliance with all Environmental Laws,
(ii) hold all Permits, identification numbers and licenses required under any Environmental Law to own or operate their assets
as currently owned and operated (“Environmental Permits”) and (iii) are in compliance with their respective
Environmental Permits;
(b) none
of the Company, any Company Subsidiary or, to the Knowledge of the Company, any other Person, has released Hazardous Substances
on any real property owned, leased or operated by the Company or the Company Subsidiaries;
(c) none
of the Company or any Company Subsidiary has received any written notice alleging that the Company or any Company Subsidiary may
be in violation of, or liable under, or a potentially responsible party pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980 or any other Environmental Law;
(d) none
of the Company or any Company Subsidiary has entered into or agreed to any consent decree or order or is a party to any judgment,
decree or judicial order relating to compliance with Environmental Laws, Environmental Permits or the investigation, sampling,
monitoring, treatment, remediation, removal or cleanup of Hazardous Substances and, to the Knowledge of the Company, no investigation,
litigation or other proceeding is pending or threatened in writing with respect thereto; and
(e) none
of the Company or any Company Subsidiary has assumed, by Contract or, to the Knowledge of
the Company, by operation of Law, any liability under any Environmental Law or relating to any Hazardous Substances or is
an indemnitor in connection with any threatened or asserted claim by any third-party indemnitee for any liability under any Environmental
Law or relating to any Hazardous Substances.
3.14 Property.
(a) As
of the date hereof, the Company or a Company Subsidiary owns good, valid and marketable fee simple title to each of the real properties
identified in Section 3.14(a)(i) of the Company Disclosure Letter (each real property so owned, an “Owned
Company Property” and, collectively, the “Owned Company Properties”), and a good and valid leasehold
interest in each of the real properties identified in Section 3.14(a)(ii) of the Company Disclosure Letter (each real property
so leased, a “Leased Company Property” and, collectively, the “Leased Company Properties”
and the Leased Company Properties together with the Owned Company Properties, the “Company Properties”), which
comprise all of the real estate properties owned or leased by the Company and the Company Subsidiaries, as of the date hereof,
in each case (except as provided below) free and clear of Liens, except for Company Permitted Liens.
(b) Except
as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, the Company and
each of the Company Subsidiaries has good and sufficient title to all of the personal and non-real properties and assets reflected
in their books and records as being owned by them (including those reflected in the Company’s consolidated balance sheet
for the year ended December 31, 2014, except as since sold or otherwise disposed of in the ordinary course of business), or used
by them in the ordinary course of business, free and clear of all Liens, except for Company Permitted Liens.
(c) Forms
of tenant leases for each state in which the Company or a Company Subsidiary operates have been made available to Parent on or
prior to the date hereof, and each Company Lease is in substantially the form provided for in the state in which such Owned Company
Property is located.
(d) Except
for discrepancies, errors or omissions that, individually or in the aggregate, would not reasonably be expected to have a Company
Material Adverse Effect, the rent rolls for each of the Company Properties, as of April 20, 2015, which rent rolls have previously
been made available by or on behalf of the Company or any Company Subsidiary to Parent, are true and correct in all respects with
respect to Owned Company Properties and (i) correctly reference each lease or sublease that was in effect as of such date, and
to which the Company or a Company Subsidiary is a party as lessor or sublessor with respect to each of the Owned Company Properties
(each a “Company Lease”) and (ii) identify the rent payable under the Company Lease as of such date with respect
to Owned Company Properties. The Company has provided or made available to Parent a list of all security deposit amounts held as
of the date hereof under the Company Leases and such security deposits are in the amounts required by the applicable Company Lease
as of the date hereof and which security deposits have been held and applied in all material respects in accordance with Law and
the applicable Company Leases as of the date hereof.
(e) With
respect to Owned Company Properties as of the date hereof, the Owned Company Properties are not subject to any rights of way, restrictive
covenants (including deed restrictions or limitations issued pursuant to any Environmental Law), declarations, agreements, or Laws
affecting building use or occupancy, or reservations of an interest in title except for Company Permitted Liens. With respect to
Leased Company Properties as of the date hereof, to the Knowledge of the Company, the Leased Company Properties are not subject
to any rights of way, restrictive covenants (including deed restrictions or limitations issued pursuant to any Environmental Law),
declarations, agreements, or Laws affecting building use or occupancy, or reservations of an interest in title except for Company
Permitted Liens.
(f) Valid
policies of title insurance (each a “Company Title Insurance Policy”) have been issued insuring, as of the effective
date of each such Company Title Insurance Policy, the Company’s or the applicable Company Subsidiary’s fee simple title
to or leasehold interest in each Company Property, subject to the matters disclosed on the Company Title Insurance Policies and
Company Permitted Liens. As of the date of this Agreement, to the Knowledge of the Company, each Company Title Insurance Policy
is in full force and effect and no claim has been made against any such policy.
(g) To
the Knowledge of the Company, as of the date hereof, (i) each material certificate, Permit or license from any Governmental Entity
having jurisdiction over any of the Company Properties or agreement, easement or other right that is necessary to permit the lawful
use and operation of the buildings and improvements on any of the Company Properties or that is necessary to permit the lawful
egress and ingress to and from any of the Company Properties has been obtained and is in full force and effect, except for any
such permits and approvals that (A) are being sought in connection with the development or redevelopment of any Company Properties,
or (B) the failure to obtain or be in full force and effect would not reasonably be likely to have a Company Material Adverse Effect,
and (ii) neither the Company nor any Company Subsidiary has received written notice of any violation of any Law affecting any of
the Company Properties issued by any Governmental Entity which has not been cured, other than violations which (I) are being contested
in good faith and with respect to which enforcement has been tolled pending the resolution of such contest, or (II) would not,
individually or in the aggregate, reasonably likely to result in a Company Material Adverse Effect. To the Knowledge of the Company,
except for Company Permitted Liens, the buildings and improvements on the Company Properties are located within the boundary lines
of the Company Property, are not encroached upon, are not in violation of any applicable setback, Law, restriction or similar agreement,
and do not encroach on any other property or any easement that may burden the Company Property, in each case in a way that would
reasonably be likely to result in a Company Material Adverse Effect.
(h) As
of the date hereof, neither the Company nor any Company Subsidiary has received any written notice to the effect that (i) any condemnation
or rezoning proceedings are pending or threatened with respect to any of the Company Properties, except for any such rezoning proceedings
that have been initiated in connection with the development or redevelopment of any of the Company Properties, or (ii) any Laws
including any zoning regulation or ordinance, building, fire, health or similar Law, code, ordinance, order or regulation has been
violated for any Company Property which in the case of clauses (i) and (ii) above, would, individually or in the aggregate, reasonably
be likely to have a Company Material Adverse Effect. There are no material unrestored casualties to any Company Property or any
part thereof. The physical condition of the Company Property is sufficient to permit the continued conduct of the business as presently
conducted subject to the provision of usual and customary maintenance and repair performed in the ordinary course of business consistent
with past practice.
(i) Section
3.14(i) of the Company Disclosure Letter sets forth a correct and complete list as of the date of this Agreement of all of
the leases, subleases and licenses entitling the Company or any Company Subsidiary to the use or occupancy of each of the Leased
Company Properties (the “Company Real Property Leases”). The Company has made available to Parent copies of
each Company Real Property Lease and all amendments or other modifications thereto, which copies are correct and complete. To the
Knowledge of the Company, as of the date hereof, each Company Real Property Lease is in full force and effect and neither the Company
nor any Company Subsidiary has received a written notice that it is in default under any Company Real Property Lease which remains
uncured. Neither the Company nor any Company Subsidiary is and, to the Knowledge of the Company, no other party is in breach or
violation of, or default under, any Company Real Property Lease in any material respect. No event has occurred which would result
in a material breach or violation of, or a default under, any Company Real Property Lease by the Company or any Company Subsidiary
or, to the Knowledge of the Company, any other person thereto (in each case, with or without notice or lapse of time or both).
Each Company Real Property Lease is valid, binding and enforceable in accordance with its terms and is in full force and effect
with respect to the Company or the applicable Company Subsidiary and, to the Knowledge of the Company, with respect to the other
parties thereto. Except as set forth on Section 3.14(i) of the Company Disclosure Letter, to the Knowledge of the Company,
there are no leases, subleases, licenses, concessions or other agreements granting to any party or parties (other than the Company
or a Company Subsidiary) the right of use or occupancy of any material portion of any premises subject to a Company Real Property
Lease.
(j) Section
3.14(j) of the Company Disclosure Letter lists (i) each Company Property that is under development as of the date hereof (other
than normal repair and maintenance), and describes the status of such development as of the date hereof or (ii) each Company Property
that is subject to a binding agreement for development or commencement of construction by the Company or a Company Subsidiary,
as of the date hereof, in each case other than those pertaining to customary capital repairs, replacements and other similar correction
or deferred maintenance items in the ordinary course of business.
(k) As
of the date hereof, none of the Company or any Company Subsidiary has entered into or is a party to any unexpired option agreements,
rights of first offer, rights of first negotiation or rights of first refusal with respect to the purchase of a Company Property
or any portion thereof or any other unexpired rights in favor of third parties to purchase or otherwise acquire a Company Property
or any portion thereof or entered into any Contract for sale, ground lease or letter of intent to sell or ground lease any Company
Property or any portion thereof. Except as set forth on Section 3.14(k) of the Company Disclosure Letter, as of the date
hereof, none of the Company or any Company Subsidiary has entered into or is a party to any unexpired purchase agreements, option
agreements, rights of first offer, rights of first negotiation or rights or first refusal with respect to the purchase of any real
property, or any Contract for sale, ground lease or letter of intent to purchase or ground lease for any real property.
(l) As
of the date hereof, none of the Company or any Company Subsidiary is a party to any agreement relating to the management of any
of the Company Properties by a party other than the Company or a Company Subsidiary.
(m) The
Company or a Company Subsidiary has good and valid title to, or a valid and enforceable leasehold interest in, or other right to
use, all material personal property owned, used or held for use by them as of the date of this Agreement (other than property owned
by tenants and used or held in connection with the applicable tenancy). None of the Company’s or such Company Subsidiaries’
ownership of or leasehold interest in any such personal property is subject to any Liens, except for Company Permitted Liens.
(n) With
respect to the 20-unit building in The Point at Canyon Ridge community that was destroyed by fire on November 22, 2014, (i) as
of the date hereof, reconstruction of this building is on schedule for completion prior to the end of calendar year 2015, (ii)
as of the date hereof, there are no cost overruns with respect to the reconstruction, and (iii) as of December 31, 2014, the aggregate
expenditures budgeted to complete the reconstruction were $865,553 in the aggregate.
(o) As
of the date hereof, neither the Company nor any of the Company Subsidiaries is engaged in any development or redevelopment of any
communities.
3.15 Intellectual
Property. Except as individually or in the aggregate would not reasonably be likely to have a Company Material Adverse Effect,
(a) to the Knowledge of the Company, the conduct of the business of the Company and the Company Subsidiaries as currently
conducted does not infringe the Intellectual Property rights of any third party in the United States, (b) with respect to
Intellectual Property owned by or licensed to the Company or any Company Subsidiary that is necessary for the conduct of the business
of the Company and the Company Subsidiaries, taken as a whole, as currently conducted (“Company Intellectual Property”),
the Company or such Company Subsidiary has the right to use such Company Intellectual Property in the operation of its business
as currently conducted, (c) all fees and filings required to maintain any registration of any Intellectual Property used by
the Company have been paid or timely filed, are current and are not in default or in arrears, (d)
to the Knowledge of the Company, no third party is currently infringing or misappropriating Intellectual Property owned
by the Company or any Company Subsidiary, and (e) there are no pending or, to the Knowledge
of the Company, threatened claims with respect to any of the Intellectual Property rights owned by the Company or any Company Subsidiary.
3.16 Contracts.
(a) Except
for (x) this Agreement, (y) Contracts listed on Section 3.16 of the Company Disclosure Letter and (z) Contracts filed as
exhibits to the Filed Company SEC Documents, as of the date of this Agreement, none of the Company or the Company Subsidiaries
is a party to or bound by any of the following Contracts (each such Contract, a “Company Material Contract”):
(i) any
Contract that would be required to be filed by the Company as an exhibit to the Company’s Annual Report on Form 10-K pursuant
to Item 601(b)(2), (4), (9) or (10) of Regulation S-K under the Securities Act of 1933, as amended (the “Securities
Act”);
(ii) any
Contract containing covenants binding upon the Company or the Company Subsidiaries that materially restrict the ability of the
Company or any of the Company Subsidiaries (or that, following the consummation of the Merger, would materially restrict the ability
of the Surviving Company, the Surviving Partnership or any of their respective Affiliates) to compete in any business or geographic
area or with any Person;
(iii) any
Contract pursuant to which the Company or any Company Subsidiary is subject to continuing indemnification or “earn-out”
obligations (whether related to environmental matters or otherwise), in each case, that would reasonably be likely to result in
payments by the Company or any Company Subsidiary in excess of $500,000;
(iv) any
material partnership, limited liability company agreement, joint venture or other similar agreement entered into with any third
party;
(v) any
Contract for the pending sale, option to sell, right of first refusal, right of first offer or any other contractual right to sell,
dispose of, or master lease, by merger, purchase or sale of assets or stock or otherwise, any real property, including any Company
Property or any asset that, if purchased by the Company or any Company Subsidiary, would be a Company Property;
(vi) any
Contract concerning an interest rate cap, interest rate collar, interest rate swap, or currency hedging transaction to which the
Company or any Company Subsidiary is a party;
(vii) any
Contract that requires the Company or any Company Subsidiary to dispose of or acquire assets or properties (other than any real
property) that (together with all of the assets and properties subject to such requirement in such Contract) have a fair market
value in excess of $1,000,000, or involves any pending or contemplated merger, consolidation or similar business combination transaction;
(viii) any
Contract relating to indebtedness for borrowed money (whether incurred, assumed, guaranteed or secured by any asset) or under which
the Company or any Company Subsidiary has, directly or indirectly, made any loan, capital contribution to, or other investment
in, any Person (other than in the Company or any Company Subsidiary) in excess of $2,000,000;
(ix) any
Contract that obligates the Company or any Company Subsidiary to make non-contingent aggregate annual expenditures (other than
principal and/or interest payments or the deposit of other reserves with respect to debt obligations) in excess of $1,000,000
and is not cancelable within ninety (90) days without material penalty to the Company or any Company Subsidiary; or
(x) any
Contract that prohibits the pledging of the capital stock of the Company or any Company Subsidiary or prohibits the issuance of
guarantees by any Company Subsidiary.
(b) As
of the date hereof, each of the Company Material Contracts is valid, binding and enforceable on the Company or the Company Subsidiaries,
as the case may be, and, to the Knowledge of the Company, each other party thereto and is in full force and effect, in each case
subject to the Bankruptcy and Equity Exception, except for such failures to be valid, binding or enforceable or to be in full force
and effect as would not be material to the Company and any Company Subsidiary. As of the date hereof, each of the Company and the
Company Subsidiaries has complied in all material respects with the terms and conditions of the Company Material Contracts and
is not (with or without notice or lapse of time, or both) in breach or default thereunder, in each case except as would not, individually
or in the aggregate, reasonably be likely to have a Company Material Adverse Effect. Neither the Company nor any Company Subsidiary
has received notice of any violation or default under any Company Material Contract, except for violations or defaults that would
not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. The Company has delivered
or made available to Parent, prior to the execution of this Agreement, true and complete copies of all of the Company Material
Contracts.
3.17 Insurance.
The Company and the Company Subsidiaries have policies of insurance covering the Company, the Company Subsidiaries and their respective
properties and assets, in such amounts and with respect to such risks and losses, which the Company believes are adequate for the
operation of its business and the protection of its assets. All such insurance policies of the Company and each Company Subsidiary
are in full force and effect, all premiums due and payable through the date hereof under all such policies have been paid, and
the Company and each Company Subsidiary are otherwise in compliance in all respects with the terms of such policies, except for
such failures to be in full force and effect, to pay any premiums, or to be in compliance that would not reasonably be likely to
have a Company Material Adverse Effect. As of the date hereof, no outstanding written notice of cancellation or termination has
been received with respect to any such insurance policy, other than in connection with ordinary renewals.
3.18 Interested
Party Transactions. None of the Company or any Company Subsidiary, on the one hand, is a party to any transaction or Contract
with any Affiliate, stockholder that beneficially owns 5% or more of the Company Common Stock or the Company OP Units, or director
or executive officer of the Company or any Company Subsidiary, on the other hand, and no event has occurred since the date of the
Company’s last proxy statement to its stockholders that would be required to be reported by the Company pursuant to Item
404 of Regulation S-K promulgated by the SEC.
3.19 Vote
Required. Assuming the accuracy of the representation in Section 4.22, the Company Stockholder Approval is the only
vote of the holders of any class or series of shares of the Company necessary to approve the Company Merger and the other Transactions.
Other than the Company OP GP Approval, no vote of or consent or approval by the holders of any limited partnership units or general
partnership units of Company OP is necessary to approve this Agreement, the Partnership Merger and the other Transactions.
3.20 Brokers.
Neither the Company, the Company OP nor any of the Company or the Company OP’s officers, directors or employees has employed
any broker, investment banker or finder or incurred any liability for any broker’s fees, commissions, finder’s fees
or other similar fees in connection with the Transactions, except that the Company has employed JPMorgan Securities, LLC as its
financial advisor, whose fees and expenses will be paid by the Company in accordance with the Company’s agreement with such
firm.
3.21 Opinion
of Financial Advisor. The Company Board has received an oral opinion of JPMorgan Securities, LLC, to be confirmed by a written
opinion, dated as of the date of this Agreement, to the effect that, as of such date and based on and subject to the limitations,
qualifications and assumptions set forth therein, the Share Merger Consideration proposed to be received in the Company Merger
by the holders of the Company Common Stock pursuant to this Agreement, is fair to such holders from a financial point of view.
3.22 Takeover
Statutes. Assuming the accuracy of the representation in Section 4.22, the Company Board has taken all action necessary
to render inapplicable to the Company Merger and the other Transactions, the restrictions on business combinations contained in
Subtitle 6 of Title 3 of the MGCL and Subtitle 7 of Title 3 of the MGCL. No other “business combination,” “control
share acquisition,” “fair price,” “moratorium” or other takeover or anti-takeover statute or similar
federal or state Law is applicable to this Agreement, the Company Merger, the Partnership Merger or the other Transactions. None
of the Company, the Company OP or any other Company Subsidiary is, nor at any time during the last two (2) years has been, an “interested
stockholder” of Parent as defined in Section 3-601 of the MGCL.
3.23 Investment
Company Act. Neither the Company nor any Company Subsidiary is required to be registered as an investment company under the
Investment Company Act of 1940, as amended.
3.24 Dissenters’
Rights. No dissenters’, appraisal or similar rights are available under the Company Articles or the limited partnership
agreement of the Company OP to the holders of Company Common Stock or Company OP Units with respect to the Company Merger, the
Partnership Merger or the other Transactions.
3.25 Hart-Scott-Rodino
Antitrust Improvements Act
. In reliance upon, and subject to the accuracy of the representations
and warranties provided in Section 4.25, the Transactions are exempt from any requirement to make any filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the implementing regulations thereto, 16 C.F.R. parts 801-803,
because (a) the Company is a REIT and (b) the Company Board has determined that the aggregate fair market value of the non-exempt
assets of Parent and the entities controlled by the Company is less than $76.3 million.
3.26 No
Other Representations and Warranties. Each of the Company and the Company OP acknowledges and agrees that, except for the representations
and warranties contained in Article IV, (a) none of Parent, Parent OP, OP Merger Sub or IRT LP LLC makes, or has made, and
the Company and the Company OP have not relied upon, any representation or warranty, whether express or implied, relating to itself
or its business, affairs, assets, liabilities, financial condition, results of operations or otherwise in connection with the Merger,
(b) no Person has been authorized by Parent, Parent OP, OP Merger Sub or IRT LP LLC to make any representation or warranty relating
to itself or its business or otherwise in connection with the Merger, and if made, such representation or warranty must not be
relied upon by the Company or the Company OP as having been authorized by such party and (c) any estimates, projections, predictions,
data, financial information, memoranda, presentations or any other materials or information provided or addressed to the Company,
the Company OP or any of its Representatives are not and shall not be deemed to be or include representations or warranties unless
any such materials or information are the subject of any express representation or warranty set forth in Article IV.
Article
IV
REPRESENTATIONS AND WARRANTIES
OF PARENT, PARENT OP, OP MERGER SUB AND irt lp LLC
Except as set forth in (i) the Parent SEC Documents
filed with the SEC on or after January 1, 2013 and publicly available prior to the date of this Agreement (the “Filed
Parent SEC Documents”); provided that the applicability of any such document to any representation or warranty
is reasonably apparent on its face, or (ii) the letter, dated as of the date of this Agreement, from Parent, Parent OP, OP Merger
Sub and IRT LP LLC to the Company and the Company OP (the “Parent Disclosure Letter”), Parent, Parent OP, OP
Merger Sub and IRT LP LLC, jointly and severally, represent and warrant as of the date hereof (except to the extent that a representation,
warranty or the Parent Disclosure Letter speaks as of another date, in which case as of such date) to the Company and the Company
OP that:
4.01 Organization,
Standing and Power.
(a) Parent
is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of Maryland and has full
corporate power and authority to own, lease or otherwise hold and operate its properties and assets and to conduct its businesses
as presently conducted.
(b) Parent
OP is a limited partnership duly formed, validly existing and in good standing under the Laws of the State of Delaware and has
full organizational power and authority to own, lease or otherwise hold and operate its properties and assets and to conduct its
businesses as presently conducted.
(c) OP
Merger Sub is a limited liability company formed, validly existing and in good standing under the Laws of the State of Delaware
and has full organizational power and authority to own, lease or otherwise hold and operate its properties and assets and to conduct
its businesses as presently conducted. OP Merger Sub is a wholly owned Subsidiary of Parent OP. OP Merger Sub was formed solely
for the purpose of engaging in the Transactions and has not conducted any activities other than in connection with its organization,
the negotiation and execution of this Agreement and the consummation of the Transactions.
(d) IRT
LP LLC is a limited liability company formed, validly existing and in good standing under the Laws of the State of Delaware and
has full organizational power and authority to own, lease or otherwise hold and operate its properties and assets and to conduct
its businesses as presently conducted.
(e) Each
of Parent, Parent OP, OP Merger Sub and IRT LP LLC is duly qualified or licensed to do business and is in good standing (to the
extent the concept is recognized by such jurisdiction) in each jurisdiction where the nature of its business or its ownership,
leasing or operation of its properties make such qualification or licensing necessary, except where the failure to be so qualified
or licensed or to be in good standing, individually or in the aggregate, would not reasonably be likely to have a Parent Material
Adverse Effect.
(f) Section
4.01(f) of the Parent Disclosure Letter sets forth as of the date hereof a true and complete list of the Parent Subsidiaries
(including Parent OP and OP Merger Sub), together with the jurisdiction of organization or incorporation, as the case may be, of
each such Parent Subsidiary. Each such Parent Subsidiary (i) is duly organized, validly existing, in good standing (to the extent
the concept is recognized by such jurisdiction) under the Laws of the jurisdiction of its organization, (ii) has all requisite
corporate, partnership, limited liability company or other company (as the case may be) power and authority to conduct its business
as now being conducted, and (iii) is duly qualified or licensed to do business and is in good standing (to the extent the concept
is recognized by such jurisdiction) in each jurisdiction in which the nature of its business or the ownership, leasing or operation
of its properties makes such qualification or licensing necessary, except for those jurisdictions where the failure to be so qualified
or licensed or to be in good standing would not reasonably be expected to have, individually or in the aggregate, a Parent Material
Adverse Effect.
(g) Neither
Parent nor any Parent Subsidiary directly or indirectly owns any interest or investment (whether equity or debt) in any Person
(other than in the Parent Subsidiaries and investments in short-term securities).
(h) Parent
has made available to the Company complete and correct copies of the organizational documents or governing documents of Parent,
Parent OP and OP Merger Sub and each other Parent Subsidiary.
4.02 Capital
Structure.
(a) The
authorized capital stock of Parent consists of 300,000,000 shares of the Parent Common Stock and 50,000,000 shares of preferred
stock, par value $0.01 per share (the “Parent Preferred Stock”, and, together with the Parent Common Stock,
the “Parent Capital Stock”). At the close of business on the Measurement Date, (a) 33,150,734 shares of the
Parent Common Stock were issued and outstanding and (b) no shares of Parent Preferred Stock were issued or outstanding. All issued
and outstanding shares of the capital stock of Parent are duly authorized, validly issued, fully paid and non-assessable, and no
class of capital stock of Parent is entitled to preemptive rights. Except as set forth above, at the close of business on
the Measurement Date, no shares of capital stock or other voting securities of Parent were issued, reserved for issuance or outstanding.
There are no bonds, debentures, notes or other indebtedness of Parent or any Parent Subsidiary having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any matters on which holders of the Parent Common Stock, the
Parent OP Units or the general partnership interests in Parent OP may vote (“Voting Parent Debt”). Except as
set forth above, as of the Measurement Date, there were no options, warrants, rights, convertible or exchangeable securities, commitments,
or undertakings of any kind to which Parent or any Parent Subsidiary was a party or by which any of them was bound (i) obligating
Parent or any Parent Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or
other equity interest in, Parent or of any Parent Subsidiary or any Voting Parent Debt or (ii) obligating Parent or any Parent
Subsidiary to issue, grant, extend or enter into any such option, warrant, security, commitment or undertaking. At the close of
business on the Measurement Date, there are 1,255,983 Parent OP Common Units issued and outstanding and no preferred units of Parent
OP issued and outstanding. There are no partners of Parent OP or holders of Parent OP Common Units other than as set forth on Section
4.02(a) of the Parent Disclosure Letter. Section 4.02(a) of the Parent Disclosure Letter sets forth the number of partnership
units held by each partner in Parent OP. Parent is the sole general partner of Parent OP and owns the general partnership interest
free and clear of any Liens.
(b) Except
as set forth above and as set forth on Section 4.02(b) of the Parent Disclosure Letter, as of the close of business on the
Measurement Date, there were no (i) restricted shares, restricted share units, stock appreciation rights, performance shares, performance
share units, contingent value rights, “phantom” stock or similar securities or rights that are derivative of, or provide
economic benefits based, directly or indirectly, on the value or price of, any capital stock of, or other voting securities or
ownership interests in, Parent or any Parent Subsidiary, (ii) voting trusts, proxies or other similar agreements or understandings
to which Parent or any Parent Subsidiary was a party or by which Parent or any Parent Subsidiary was bound with respect to the
voting of any shares of capital stock of Parent or any Parent Subsidiary, or (iii) contractual obligations or commitments of any
character to which Parent or any Parent Subsidiary was a party or by which Parent or any Parent Subsidiary was bound restricting
the transfer of, or requiring the registration for sale of, any shares of capital stock of Parent or any Parent Subsidiary. Neither
Parent nor any Parent Subsidiary has granted any preemptive rights, anti-dilutive rights or rights of first refusal or similar
rights with respect to any of its capital stock or other equity interests.
(c) Except
as set forth on Section 4.02(c) of the Parent Disclosure Letter, all of the outstanding shares of capital stock or other
equity interests of each Parent Subsidiary are owned by Parent, by another Parent Subsidiary or by Parent and another Parent Subsidiary,
free and clear of all Liens and free of any restriction on the right to vote, sell or otherwise dispose of such capital stock or
other equity interests other than transfer and other restrictions under applicable federal and state securities Laws.
(d) All
dividends or other distributions on the shares of Parent Common Stock and any material dividends or other distributions on any
securities of any Parent Subsidiary which have been authorized and declared prior to the date hereof have been paid in full (except
to the extent such dividends have been publicly announced and are not yet due and payable).
4.03 Authority;
Execution and Delivery; Enforceability.
(a) Each
of Parent, Parent OP, OP Merger Sub and IRT LP LLC has all requisite corporate, limited partnership or limited liability company
power and authority, as applicable, to execute and deliver this Agreement and, subject to receipt of the Parent Stockholder Approval,
to consummate the Transactions. The execution, delivery and performance by each of Parent, Parent OP, OP Merger Sub and IRT LP
LLC of this Agreement and the consummation by it of the Transactions have been duly authorized by all necessary corporate action
on the part of Parent, partnership action on the part of Parent OP, and limited liability company action on the part of OP Merger
Sub and IRT LP LLC, and no other corporate, limited partnership or limited liability company actions, as applicable, on the part
of Parent, Parent OP, OP Merger Sub and IRT LP LLC are necessary to authorize this Agreement, the Merger or the other Transactions,
subject to receipt of the Parent Stockholder Approval. Each of Parent, Parent OP, OP Merger Sub and IRT LP LLC has duly executed
and delivered this Agreement, and, assuming due authorization, execution and delivery by the other parties hereto, this Agreement
constitutes the legal, valid and binding obligations of Parent, Parent OP, OP Merger Sub and IRT LP LLC, respectively, enforceable
against each of Parent, Parent OP, OP Merger Sub and IRT LP LLC in accordance with its terms, subject to the Bankruptcy and Equity
Exception.
(b) The
Parent Board, at a meeting duly called and held, duly adopted resolutions approving this Agreement, the Merger and the other Transactions,
and (ii) recommending that Parent’s stockholders approve the issuance of Parent Common Stock in the Company Merger as contemplated
by this Agreement.
(c) Parent,
as the sole general partner of Parent OP, has adopted this Agreement and approved the Merger and the other Transactions (“Parent
OP GP Approval”).
(d) Parent
OP, as the sole member of the OP Merger Sub, has approved this Agreement, the Partnership Merger and the other Transactions.
(e) Parent,
as the sole member of the IRT LP LLC, has approved this Agreement, the Company Merger and the other Transactions.
4.04 No
Conflicts; Consents.
(a) Except
as set forth on Section 4.04(a) of the Parent Disclosure Letter, the execution and delivery by each of Parent, Parent OP,
OP Merger Sub and IRT LP LLC of this Agreement do not, and the consummation of the Merger and the other Transactions and compliance
with the terms hereof will not, assuming receipt of the Parent Stockholder Approval, conflict with, or result in any violation
or breach of or default (with or without notice or lapse of time, or both) under, or give rise to a right of, or result in, termination,
cancelation or acceleration of any obligation or the loss of a material benefit under, or result in the creation of any Lien upon
any of the properties or assets of Parent, Parent OP or any Parent Subsidiaries under, any provision of (i) the charter, bylaws
or other organizational documents of Parent, Parent OP, OP Merger Sub, IRT LP LLC or any Parent Subsidiaries, (ii) any Contract
to which Parent, Parent OP, OP Merger Sub, IRT LP LLC or any Parent Subsidiaries is a party or by which any of their respective
properties or assets is bound or (iii) subject to the filings and other matters referred to in Section 4.04(b), any Judgment
or Law applicable to Parent, Parent OP, OP Merger Sub, IRT LP LLC or any Parent Subsidiaries or their respective properties or
assets, other than, in the case of clauses (ii) and (iii) above, any such items that, individually or in the aggregate, would not
reasonably be likely to have a Parent Material Adverse Effect.
(b) No
Consent of, or registration, declaration or filing with, or permit from, any Governmental Entity is required to be obtained or
made by or with respect to Parent, Parent OP or any Parent Subsidiaries in connection with the execution, delivery and performance
of this Agreement or the consummation of the Transactions, other than (i) the filing with the SEC of (A) the Joint Proxy Statement
and of the Form S-4 and the declaration of the effectiveness of the Form S-4, and (B) such reports under Section 13 of the Exchange
Act as may be required in connection with this Agreement, the Merger and the other Transactions, (ii) such filings as may be required
under any state securities Laws, (iii) the filing of the Articles of Merger with the SDAT, (iv) the filing of the Partnership Certificate
of Merger and the Company Certificate of Merger with the SOS, (v) such filings as may be required in connection with the Taxes
described in Section 6.08, (vi) such filings as may be required under the rules and regulations of the NYSE MKT and (vii)
such other items that would not reasonably be likely to, individually or in the aggregate, have a Parent Material Adverse Effect.
4.05 SEC
Documents; Financial Statements; Undisclosed Liabilities.
(a) Parent
has filed or furnished, as applicable, all reports, schedules, forms, certifications, statements and other documents on a timely
basis with the SEC required to be filed or furnished, as applicable, by Parent since and including January 1, 2013 through the
date of this Agreement under the Exchange Act or Securities Act (such documents, together with any documents filed during such
period by Parent with the SEC on a voluntary basis on Current Reports on Form 8-K, the “Parent SEC Documents”).
(b) As
of its respective date, each Parent SEC Document complied (or with respect to Company SEC Documents filed after the date hereof,
will comply) as to form in all material respects with the requirements of the Exchange Act and the Securities Act and the rules
and regulations of the SEC promulgated thereunder applicable to such Parent SEC Document, each as in effect on the date so filed.
As of their respective dates (or, if amended prior to the date hereof, as of the date of such amendment), except to the extent
revised or superseded by a later filed Parent SEC Document, none of the Parent SEC Documents contained (or with respect to Company
SEC Documents filed after the date hereof, will contain) any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(c) Each
of the financial statements (including the related notes) of Parent included in the Parent SEC Documents, complied as to form at
the time it was filed in all material respects with the applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto in effect at the time of filing, was prepared in accordance with GAAP in all material respects
(except, in the case of unaudited financial statements, as permitted by the rules and regulations of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated in the notes thereto) and fairly presented in all material respects
the consolidated financial position of Parent and its consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods shown (subject, in the case of unaudited financial statements, to normal year-end
audit adjustments).
(d) None
of Parent or any Parent Subsidiary has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise)
except liabilities or obligations (i) disclosed and provided for in the most recent financial statements included in the Filed
Parent SEC Documents or of a nature not required by GAAP to be reflected thereon, (ii) related to the future performance of any
Contract, (iii) incurred or arising in the ordinary course of business consistent with past practice since the date of the most
recent financial statements included in the Filed Parent SEC Documents, (iv) incurred under this Agreement or in connection with
the Transactions, (v) disclosed on Section 4.05(d) of the Parent Disclosure Letter, (vi) as would not reasonably be
likely to, individually or in the aggregate, have a Parent Material Adverse Effect or (vii) that will be discharged or paid in
full prior to the Closing Date.
(e) Section
4.05(e) of the Parent Disclosure Letter sets forth with respect to all Indebtedness of Parent and the Parent Subsidiaries for
borrowed money outstanding on the date hereof: (i) the amount of such indebtedness, (ii) the lender of such indebtedness, (iii)
the interest rate of such indebtedness, (iv) the maturity date of such indebtedness and (v) the collateral securing such indebtedness.
(f) Since
January 1, 2013, Parent has established and maintained a system of internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act). Such internal controls provide reasonable assurance (i) regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, (ii) that transactions
are executed in accordance with management’s general or specific authorizations, (iii) that transactions are recorded as
necessary to permit preparation of financial statements and to maintain asset accountability, (iv) that access to assets is permitted
only in accordance with management’s general or specific authorization and (v) that the recorded accountability for assets
is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Since
January 1, 2013, (x) Parent has designed and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act) to ensure that material information required to be disclosed by Parent in the reports that it
files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the
SEC’s rules and forms and is accumulated and communicated to Parent’s management as appropriate to allow timely decisions
regarding required disclosure, (y) except as set forth on Section 4.05(f) of the Parent Disclosure Letter, to the Knowledge
of Parent, such disclosure controls and procedures are effective in timely alerting the principal executive officer and principal
financial officer of Parent to material information required to be included in Parent’s periodic reports required under the
Exchange Act, and (z) Parent’s principal executive officer and its principal financial officer have disclosed to Parent’s
independent registered public accounting firm and the audit committee of the Parent Board (and made summaries of such disclosures
available to the Company) (A) all known significant deficiencies and material weaknesses in the design or operation of internal
controls over financial reporting that are reasonably likely to adversely affect in any material respect Parent’s ability
to record, process, summarize and report financial information, and (B) any known fraud, whether or not material, that involves
management or other employees who have a significant role in Parent’s internal controls over financial reporting. As of the
date of this Agreement, the principal executive officer and principal financial officer of Parent have made all certifications
required by the Sarbanes-Oxley Act of 2002 and the regulations of the SEC promulgated thereunder, and the statements contained
in all such certifications were, as of their respective dates made, complete and correct in all material respects.
4.06 Information
Supplied. None of the information supplied or to be supplied by or on behalf of Parent, Parent OP, OP Merger Sub and IRT LP
LLC for inclusion or incorporation by reference in (a) the Form S-4 will, at the time such document is filed with the
SEC, at any time such document is amended or supplemented or at the time such document is declared effective by the SEC, contain
any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they are made, not misleading, or (b) the Joint Proxy
Statement will, at the date that it is first mailed to the Company’s stockholders or Parent’s stockholders, at the
time of the Company Stockholder Meeting or Parent Stockholder Meeting, at the time the Form S-4 is declared effective by the SEC
or at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading.
The Joint Proxy Statement, at the date such materials are first mailed to the Company’s stockholders or Parent’s stockholders
and at the time of the Company Stockholder Meeting and the Parent Stockholder Meeting, will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations thereunder. No representation or warranty is made by Parent,
Parent OP, OP Merger Sub and IRT LP LLC in this Section 4.06 with respect to statements made or incorporated by reference
therein based on information supplied by the Company, the Company OP, or any of their respective Representatives for inclusion
or incorporation by reference therein.
4.07 Absence
of Certain Changes or Events. Since January 1, 2015, (i) there has not been any Event that, individually or together with any
other Event, has had or would reasonably be likely to have a Parent Material Adverse Effect, and (ii) except in connection with
this Agreement and the Transactions or as expressly contemplated or permitted by this Agreement, Parent and each Parent Subsidiary
has conducted its respective business in all material respects only in the ordinary course of business consistent with past practice.
4.08 Taxes.
(a) Each
of Parent and the Parent Subsidiaries (i) has timely filed (or had filed on their behalf) all U.S. federal income and other material
Tax Returns (as defined below) required to be filed by it (after giving effect to any filing extension granted by a Taxing Authority)
under applicable Law and such Tax Returns are true, correct and complete in all material respects, and (ii) has timely paid (or
had timely paid on its behalf) all U.S. federal income and other material Taxes shown on such Tax Returns, other than Taxes being
contested in good faith and for which adequate reserves have been established in Parent’s most recent financial statements
contained in the Filed Parent SEC Documents. Neither Parent nor any of the Parent Subsidiaries has executed or filed with the IRS
or any other Taxing Authority any agreement, waiver or other document or arrangement extending the period for assessment or collection
of material Taxes (including, but not limited to, any applicable statute of limitation).
(b) Parent
(i) for each taxable year commencing with its taxable year ended December 31, 2009 through December 31, 2014 has been organized
in conformity with the requirements for qualification and taxation as a REIT pursuant to Sections 856 through 860 of the Code,
(ii) has operated since March 26, 2009 to the date hereof in a manner to enable it to qualify for taxation as a REIT and has a
proposed method of operation that will enable it to continue to qualify for taxation as a REIT for the taxable year that includes
the date hereof, and (iii) shall continue to operate in such a manner as to enable it to continue to qualify for taxation as a
REIT for each taxable year through the taxable year that will end with the Merger.
(c) No
Parent Subsidiary is a corporation for U.S. federal income tax purposes, other than a corporation that, at all times during which
Parent has held, directly or indirectly, its stock, has qualified as a “qualified REIT subsidiary,” within the meaning
of Section 856(i)(2) of the Code, or as a “taxable REIT subsidiary,” within the meaning of Section 856(1) of the Code.
(d) Each
Parent Subsidiary that is a partnership, joint venture, trust or limited liability company has been, since its formation, treated
for U.S. federal income tax purposes as a partnership or disregarded entity, as the case may be, and not as a corporation or an
association taxable as a corporation, or a “publicly traded partnership” within the meaning of Section 7704(b) of
the Code.
(e) Neither
Parent nor any Parent Subsidiary holds any asset the disposition of which would be subject to rules similar to Section 1374
of the Code.
(f) To
the Knowledge of Parent, neither Parent nor any Parent Subsidiary (other than a “taxable REIT subsidiary” of the Company)
has engaged at any time in any “prohibited transactions” within the meaning of Section 857(b)(6) of the Code.
(g) All
material deficiencies asserted or assessments made with respect to Parent or any Parent Subsidiary as a result of any examinations
by the IRS or any other Taxing Authority of the Tax Returns of Parent or any Parent Subsidiary have been fully paid and, to the
Knowledge of Parent, there are no other audits, examinations or other proceedings relating to any material Taxes of Parent or any
Parent Subsidiary by any Taxing Authority in progress. Neither Parent nor any Parent Subsidiary has received any written notice
from any Taxing Authority that it intends to conduct such an audit, examination or other proceeding in respect of Taxes or to make
any assessment for material Taxes and, to the Knowledge of Parent, no such audit, examination, or other proceeding is threatened.
Neither Parent nor any Parent Subsidiary is a party to any litigation or pending litigation or administrative proceeding relating
to Taxes (other than litigation dealing with appeals of property Tax valuations).
(h) Parent
and the Parent Subsidiaries have complied, in all material respects, with all applicable Laws relating to the payment and withholding
of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 1445, 1446, 1471, and 3402 of the Code or similar provisions
under any foreign Laws) and have duly and timely withheld and paid over to the appropriate Taxing Authorities all material amounts
required to be so withheld and paid over on or prior to the due date thereof under all applicable Laws.
(i) No
claim has been made in writing by a Taxing Authority in a jurisdiction where Parent or any Parent Subsidiary does not file Tax
Returns that Parent or any such Parent Subsidiary is or may be subject to a material amount of Taxes in that jurisdiction and,
to the Knowledge of Parent, no such claim is threatened.
(j) Neither
Parent nor any Parent Subsidiary has requested any extension of time within which to file any material Tax Return, which material
Tax Return has not yet been filed.
(k) Neither
Parent nor any Parent Subsidiary is a party to any Tax sharing or similar agreement or arrangement, other than any agreement or
arrangement solely between Parent and any Parent Subsidiary, pursuant to which it will have any obligation to make any payments
after the Closing.
(l) Neither
Parent nor any Parent Subsidiary has requested or received a ruling from, or requested or entered into a binding agreement with,
the IRS or other Taxing Authorities relating to Taxes.
(m) There
are no Liens for Taxes (other than the Parent Permitted Liens) upon any of the assets of Parent or any Parent Subsidiary.
(n) Except
as set forth on Section 4.08(n) of the Parent Disclosure Letter, neither Parent nor any Parent Subsidiary is subject, directly
or indirectly, to any Tax Protection Agreements.
(o) Neither
Parent nor any Parent Subsidiary is a party to any “reportable transaction” as such term is used in the Treasury regulations
under Section 6011 of the Code.
(p) Section 4.08(p) of
the Parent Disclosure Letter sets forth each Parent Subsidiary and whether such Parent Subsidiary is, for U.S. federal income Tax
purposes, a partnership, disregarded entity, “qualified REIT subsidiary” within the meaning of Section 856(i)(2)
of the Code or “taxable REIT subsidiary” under Section 856(l) of the Code.
(q) Neither
Parent nor any Parent Subsidiary (i) has been a member of an affiliated group filing a consolidated federal income Tax Return or
(ii) has any liability for the Taxes of any Person (other than Parent or any Parent Subsidiary) under Treasury Regulations Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise.
(r) Neither
Parent nor any of the Parent Subsidiaries has entered into any “closing agreement” as described in Section 7121 of
the Code (or any corresponding or similar provision of state, local or foreign income Tax Law).
(s) Notwithstanding
any provision herein to the contrary, the representations in this Section 4.08 are the sole representations of Parent and
the Parent Subsidiaries regarding their Tax matters.
4.09 Labor
Relations.
(a) Section
4.09(a) of the Parent Disclosure Letter contains a list, as of the date hereof, of all collective bargaining agreements to
which Parent or any Parent Subsidiary is a party. Since January 1, 2013, none of Parent or any Parent Subsidiary has experienced
any material strikes, work stoppages, slowdowns, lockouts or, to the Knowledge of Parent, union organization attempts, and, to
the Knowledge of Parent, there is no such item threatened against Parent or any Parent Subsidiary.
(b) Except
as set forth on Section 4.09(b) of the Parent Disclosure Letter, there are no proceedings pending or, to the Knowledge of
Parent, threatened against Parent or any of the Parent Subsidiaries in any forum by or on behalf of any present or former employee
of Parent or any of Parent Subsidiaries, any applicant for employment or classes of the foregoing alleging unpaid or overdue wages
or compensation due, breach of any express or implied employment contract, violation of any law or regulation governing employment
or the termination thereof, or any other discriminatory, wrongful or tortious conduct on the part of Parent of any of the Parent
Subsidiaries in connection with the employment relationship that, individually or in the aggregate, would reasonably be expected
to have a Parent Material Adverse Effect.
4.10 Employee
Benefits.
(a) Neither
Parent nor any Parent Subsidiary employs any individual.
(b) Other
than (i) the Long-Term Incentive Plan and forms of Stock Appreciation Rights Award Certificate and Restricted Stock Certification
thereunder and (ii) the Independent Directors Compensation Plan (collectively, the “Parent Benefit Plans”),
neither Parent nor any Parent Subsidiary sponsors, maintains or contributes to any material “employee benefit plan”
as defined in Section 3(3) of ERISA, bonus, incentive, deferred compensation, stock purchase, stock or stock-based, severance,
retention, employment, change in control or fringe benefit plan, program, policy or agreement for the benefit of any current or
former employee, officer, director or consultant of Parent or any Parent Subsidiary
(c) Parent
has made available to the Company true and complete copies of each Parent Benefit Plan and current amendments thereto.
(d) Neither
Parent nor any Parent ERISA Affiliate sponsors or has sponsored or contributed to, or has contributed to, any Parent Benefit Plan
that is subject to the provisions of Section 412 of the Code or Title IV or Section 302 of ERISA, is a voluntary employee beneficiary
association, or is a multiemployer plan within the meaning of Section 3(37) of ERISA. Neither Parent nor any Parent Subsidiary
has any liability with respect to any Parent Benefit Plan that provides for any post-employment or postretirement health or medical
or life insurance benefits for retired, former or current employees of Parent or any Parent Subsidiary, except (i) as required
by Section 4980B of the Code, (ii) coverage or benefits the entire cost of which is borne by the employee or former employee or
(iii) coverage or benefits in the nature of severance under the employment, severance or change in control plans or agreements
listed in Section 4.10(a) of the Parent Disclosure Letter, in each case, except for such liability that would not, individually
or in the aggregate, reasonably be likely to have a Parent Material Adverse Effect.
(e) Except
as set forth on Section 4.10(e) of the Parent Disclosure Letter, neither the execution and delivery of this Agreement nor
the consummation of the Transactions (either alone or in combination with any other event) will result in any payment, acceleration,
vesting or creation of any rights of any person to benefits under any Parent Benefit Plan. Except as set forth on Section 4.10(e)
of the Parent Disclosure Letter, no amount that could be received (whether in cash, property, the vesting of property or otherwise)
as a result of or in connection with the consummation of the Transactions (either alone or in combination with any other event),
by any employee, officer, director or other service provider of the Parent or any Parent Subsidiary who is a “disqualified
individual” (as such term is defined in Treasury Regulation Section 1.280G-1) could be characterized as an “excess
parachute payment” (as defined in Section 280G(b)(1) of the Code).
(f) The
term “Parent ERISA Affiliate” means any entity that, together with Parent, would be treated as a single employer
under Section 414 of the Code.
4.11 Litigation.
From January 1, 2014 through the date of this Agreement, there has been no claim, suit, action, arbitration or proceeding pending
or, to the Knowledge of Parent, threatened against Parent or any Parent Subsidiary or any executive officer or director of Parent
(in their capacity as such), other than as have not had and would not reasonably be expected to have, individually or in the aggregate,
a Parent Material Adverse Effect (each a “Parent Specified Action”). There is no material Judgment outstanding
against Parent or any Parent Subsidiary or any of their respective assets. From January 1, 2014 through the date of this Agreement,
Parent has not received any written notification of any, and to the Knowledge of Parent there is no, investigation by any Governmental
Entity involving Parent or any Parent Subsidiary or any of their respective assets that, could validly give rise to a Parent Specified
Action.
4.12 Compliance
with Applicable Laws. Since January 1, 2014, none of Parent or any Parent Subsidiary has been, or is, in violation of, or has
been given written notice of or been charged with any violation of, any Law or order of any Governmental Entity applicable to Parent
or any Parent Subsidiary or by which any property or asset of Parent or any Parent Subsidiary is bound, other than as have not
had and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. Parent and
each Parent Subsidiary has all Permits necessary to conduct its business as presently conducted except those the absence of which
would not reasonably be likely to have a Parent Material Adverse Effect. To the Knowledge of Parent, none of Parent or any Parent
Subsidiary has received notice that any Permit will be terminated or modified or cannot be renewed in the ordinary course of business.
4.13 Environmental
Matters. Section 4.13 of the Parent Disclosure Letter sets forth a list of all reports related to the environmental
condition of the Parent Property that have been provided to the Company prior to the date hereof. Except as set forth in such reports
or as would not reasonably be likely to have a Parent Material Adverse Effect:
(a) to
the Knowledge of Parent, Parent and the Parent Subsidiaries (i) are in compliance with all Environmental Laws, (ii) hold
all Environmental Permits and (iii) are in compliance with their respective Environmental Permits;
(b) none
of Parent, any Parent Subsidiary or, to the Knowledge of Parent, any other Person, has released Hazardous Substances on any real
property owned, leased or operated by Parent or the Parent Subsidiaries;
(c) none
of Parent or any Parent Subsidiary has received any written notice alleging that Parent or any Parent Subsidiary may be in violation
of, or liable under, or a potentially responsible party pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 or any other Environmental Law;
(d) none
of Parent or any Parent Subsidiary has entered into or agreed to any consent decree or order or is a party to any judgment, decree
or judicial order relating to compliance with Environmental Laws, Environmental Permits or the investigation, sampling, monitoring,
treatment, remediation, removal or cleanup of Hazardous Substances and, to the Knowledge of Parent, no investigation, litigation
or other proceeding is pending or threatened in writing with respect thereto; and
(e) none
of Parent or any Parent Subsidiary has assumed, by Contract or, to the Knowledge of Parent, by operation of Law, any liability
under any Environmental Law or relating to any Hazardous Substances or is an indemnitor in connection with any threatened or asserted
claim by any third-party indemnitee for any liability under any Environmental Law or relating to any Hazardous Substances.
4.14 Property.
(a) As
of the date hereof, Parent or a Parent Subsidiary owns good, valid and marketable fee simple title to each of the real properties
identified in Section 4.14(a)(i) of the Parent Disclosure Letter (each real property so owned, an “Owned Parent
Property” and, collectively, the “Owned Parent Properties”), and a good and valid leasehold interest
in each of the real properties identified in Section 4.14(a)(ii) of the Parent Disclosure Letter (each real property so
leased, a “Leased Parent Property” and, collectively, the “Leased Parent Properties” and
the Leased Parent Properties together with the Owned Parent Properties, the “Parent Properties”), which comprise
all of the real estate properties owned or leased by Parent and the Parent Subsidiaries, as of the date hereof, in each case (except
as provided below) free and clear of Liens, except for Parent Permitted Liens.
(b) Except
as would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect, Parent and each
of the Parent Subsidiaries has good and sufficient title to all of the personal and non-real properties and assets reflected in
their books and records as being owned by them (including those reflected in Parent’s consolidated balance sheet for the
year ended December 31, 2014, except as since sold or otherwise disposed of in the ordinary course of business), or used by them
in the ordinary course of business, free and clear of all Liens, except for Parent Permitted Liens.
(c) Forms
of tenant leases for each state in which Parent or a Parent Subsidiary operates have been made available to the Company on or prior
to the date hereof, and each Parent Lease is in substantially the form provided for in the state in which such Owned Parent Property
is located.
(d) Except
for discrepancies, errors or omissions that, individually or in the aggregate, would not reasonably be expected to have a Parent
Material Adverse Effect, the rent rolls for each of the Parent Properties, as of March 31, 2015, which rent rolls have previously
been made available by or on behalf of Parent or any Parent Subsidiary to the Company, are true and correct in all respects with
respect to Owned Parent Properties and (i) correctly reference each lease or sublease that was in effect as of such date, and to
which Parent or a Parent Subsidiary is a party as lessor or sublessor with respect to each of the Owned Parent Properties (each
a “Parent Lease”) and (ii) identify the rent payable under the Parent Lease as of such date with respect to
Owned Parent Properties. Parent has provided or made available to the Company a list of all security deposit amounts held as of
March 31, 2015 under the Parent Leases and such security deposits are in the amounts required by the applicable Parent Lease as
of the date hereof and which security deposits have been held and applied in all material respects in accordance with Law and the
applicable Parent Leases as of the date hereof.
(e) With
respect to Owned Parent Properties as of the date hereof, the Owned Parent Properties are not subject to any rights of way, restrictive
covenants (including deed restrictions or limitations issued pursuant to any Environmental Law), declarations, agreements, or Laws
affecting building use or occupancy, or reservations of an interest in title except for Parent Permitted Liens. With respect to
Leased Parent Properties as of the date hereof, to the Knowledge of Parent, the Leased Parent Properties are not subject to any
rights of way, restrictive covenants (including deed restrictions or limitations issued pursuant to any Environmental Law), declarations,
agreements, or Laws affecting building use or occupancy, or reservations of an interest in title except for Parent Permitted Liens.
(f) Valid
policies of title insurance (each a “Parent Title Insurance Policy”) have been issued insuring, as of the effective
date of each such Parent Title Insurance Policy, Parent’s or the applicable Parent Subsidiary’s fee simple title to
or leasehold interest in each Parent Property, subject to the matters disclosed on the Parent Title Insurance Policies and Parent
Permitted Liens. As of the date of this Agreement, to the Knowledge of Parent, each Parent Title Insurance Policy is in full force
and effect and no claim has been made against any such policy.
(g) To
the Knowledge of Parent, as of the date hereof, (i) each material certificate, Permit or license from any Governmental Entity having
jurisdiction over any of the Parent Properties or agreement, easement or other right that is necessary to permit the lawful use
and operation of the buildings and improvements on any of the Parent Properties or that is necessary to permit the lawful egress
and ingress to and from any of the Parent Properties has been obtained and is in full force and effect, except for any such permits
and approvals (A) that are being sought in connection with the development or redevelopment of any Parent Properties, or (B) the
failure to obtain or be in full force and effect would not reasonably be likely to have a Parent Material Adverse Effect and (ii)
neither Parent nor any Parent Subsidiary has received written notice of any material violation of any Law affecting any of the
Parent Properties issued by any Governmental Entity which has not been cured, other than violations which (I) are being contested
in good faith and with respect to which enforcement has been tolled pending the resolution of such contest, or (II) would not,
individually or in the aggregate, reasonably be likely to result in a Parent Material Adverse Effect. To the Knowledge of Parent,
except for Parent Permitted Liens, the buildings and improvements on the Parent Properties are located within the boundary lines
of the Parent Property, are not encroached upon, are not in violation of any applicable setback, Law, restriction or similar agreement,
and do not encroach on any other property or any easement that may burden the Parent Property, in each case in a way that would
reasonably be likely to result in a Parent Material Adverse Effect.
(h) As
of the date hereof, neither Parent nor any Parent Subsidiary has received any written notice to the effect that (i) any condemnation
or rezoning proceedings are pending or threatened with respect to any of the Parent Properties, except for any such rezoning proceedings
that have been initiated in connection with the development or redevelopment of any of the Parent Properties, or (ii) any Laws
including any zoning regulation or ordinance, building, fire, health or similar Law, code, ordinance, order or regulation has been
violated for any Parent Property, which in the case of clauses (i) and (ii) above, would reasonably be likely to have, individually
or in the aggregate, a Parent Material Adverse Effect. Except as set forth on Section 4.14(h) of the Parent Disclosure
Letter, there are no material unrestored casualties to any Parent Property or any part thereof. The physical condition of the Parent
Property is sufficient to permit the continued conduct of the business as presently conducted subject to the provision of usual
and customary maintenance and repair performed in the ordinary course of business, consistent with past practice.
(i) Section
4.14(i) of the Parent Disclosure Letter sets forth a correct and complete list as of the date of this Agreement of all of the
leases, subleases and licenses entitling Parent or any Parent Subsidiary to the use or occupancy of each of the Leased Parent Properties
(the “Parent Real Property Leases”). Parent has made available to the Company copies of each Parent Real Property
Lease and all amendments or other modifications thereto, which copies are correct and complete. To the Knowledge of Parent, as
of the date hereof, each Parent Real Property Lease is in full force and effect and neither Parent nor any Parent Subsidiary has
received a written notice that it is in default under any Parent Real Property Lease which remains uncured. Neither Parent nor
any Parent Subsidiary is and, to the Knowledge of Parent, no other party is in breach or violation of, or default under, any Parent
Real Property Lease in any material respect. No event has occurred which would result in a material breach or violation of, or
a default under, any Parent Real Property Lease by Parent or any Parent Subsidiary or, to the Knowledge of Parent, any other person
thereto (in each case, with or without notice or lapse of time or both). Each Parent Real Property Lease is valid, binding and
enforceable in accordance with its terms and is in full force and effect with respect to Parent or the applicable Parent Subsidiary
and, to the Knowledge of Parent, with respect to the other parties thereto. Except as set forth on Section 4.14(i) of the
Parent Disclosure Letter, to the Knowledge of Parent, there are no leases, subleases, licenses, concessions or other agreements
granting to any party or parties (other than Parent or a Parent Subsidiary) the right of use or occupancy of any material portion
of any premises subject to a Parent Real Property Lease.
(j) Section
4.14(j) of the Parent Disclosure Letter lists (i) each Parent Property that is under development as of the date hereof (other
than normal repair and maintenance) and describes the status of such development as of the date hereof or (ii) each Parent Property
that is subject to a binding agreement for development or commencement of construction by Parent or a Parent Subsidiary, as of
the date hereof, in each case other than those pertaining to customary capital repairs, replacements and other similar correction
or deferred maintenance items in the ordinary course of business.
(k) As
of the date hereof, none of Parent or any Parent Subsidiary has entered into or is a party to any unexpired option agreements,
rights of first offer, rights of first negotiation or rights of first refusal with respect to the purchase of a Parent Property
or any portion thereof or any other unexpired rights in favor of third parties to purchase or otherwise acquire a Parent Property
or any portion thereof or entered into any Contract for sale, ground lease or letter of intent to sell or ground lease any Parent
Property or any portion thereof. Except as set forth on Section 4.14(k) of the Parent Disclosure Letter, as of the date
hereof, none of Parent or any Parent Subsidiary has entered into or is a party to any unexpired purchase agreements, option agreements,
rights of first offer, rights of first negotiation or rights or first refusal with respect to the purchase of any real property,
or any Contract for sale, ground lease or letter of intent to purchase or ground lease for any real property.
(l) Except
as set forth on Section 4.14(l) of the Parent Disclosure Letter, as of the date hereof, none of Parent or any Parent Subsidiary
is a party to any agreement relating to the management of any of the Parent Properties by a party other than Parent or a Parent
Subsidiary.
(m) Parent
or a Parent Subsidiary has good and valid title to, or a valid and enforceable leasehold interest in, or other right to use, all
material personal property owned, used or held for use by them as of the date of this Agreement (other than property owned by tenants
and used or held in connection with the applicable tenancy). None of Parent’s or such Parent Subsidiaries’ ownership
of or leasehold interest in any such personal property is subject to any Liens, except for Parent Permitted Liens.
4.15 Intellectual
Property. Except as individually or in the aggregate would not reasonably be likely to have a Parent Material Adverse Effect,
(a) to the Knowledge of Parent, the conduct of the business of Parent and the Parent Subsidiaries as currently conducted does
not infringe the Intellectual Property rights of any third party in the United States, (b) with respect to Intellectual Property
owned by or licensed to Parent or any Parent Subsidiary that is necessary for the conduct of the business of Parent and the Parent
Subsidiaries, taken as a whole, as currently conducted (“Parent Intellectual Property”), Parent or such Parent
Subsidiary has the right to use such Parent Intellectual Property in the operation of its business as currently conducted, (c) all
fees and filings required to maintain any registration of any Intellectual Property used by Parent have been paid or timely filed,
are current and are not in default or in arrears, (d) to the Knowledge of Parent, no third party is currently infringing or misappropriating
Intellectual Property owned by Parent or any Parent Subsidiary, and (e) there are no pending or, to the Knowledge of Parent, threatened
claims with respect to any of the Intellectual Property rights owned by Parent or any Parent Subsidiary.
4.16 Contracts.
(a) Except
for (x) this Agreement, (y) Contracts listed on Section 4.16 of the Parent Disclosure Letter and (z) Contracts filed as
exhibits to the Filed Parent SEC Documents, as of the date of this Agreement, none of Parent or the Parent Subsidiaries is a party
to or bound by any of the following (each such Contract, a “Parent Material Contract”):
(i) any
Contract that would be required to be filed by Parent as an exhibit to the Company’s Annual Report on Form 10-K pursuant
to Item 601(b)(2), (4), (9) or (10) of Regulation S-K under the Securities Act;
(ii) any
Contract containing covenants binding upon Parent or the Parent Subsidiaries that materially restrict the ability of Parent or
any of the Parent Subsidiaries (or that, following the consummation of the Merger, would materially restrict the ability of the
Surviving Company, the Surviving Partnership or any of their respective Affiliates) to compete in any business or geographic area
or with any Person;
(iii) any
material partnership, limited liability company agreement, joint venture or other similar agreement entered into with any third
party;
(iv) any
Contract for the pending sale, option to sell, right of first refusal, right of first offer or any other contractual right to sell,
dispose of, or master lease, by merger, purchase or sale of assets or stock or otherwise, any real property, including any Parent
Property or any asset that, if purchased by Parent or any Parent Subsidiary, would be a Parent Property;
(v) any
Contract that requires Parent or any Parent Subsidiary to dispose of or acquire assets or properties (other than any real property)
that (together with all of the assets and properties subject to such requirement in such Contract) have a fair market value in
excess of $1,000,000, or involves any pending or contemplated merger, consolidation or similar business combination transaction;
(vi) any
Contract relating to indebtedness for borrowed money (whether incurred, assumed, guaranteed or secured by any asset) or under which
Parent or any Parent Subsidiary has, directly or indirectly, made any loan, capital contribution to, or other investment in, any
Person (other than in Parent or any Parent Subsidiary) in excess of $2,000,000;
(vii) any
Contract that obligates Parent or any Parent Subsidiary to make non-contingent aggregate annual expenditures (other than principal
and/or interest payments or the deposit of other reserves with respect to debt obligations) in excess of $1,000,000 and is not
cancelable within ninety (90) days without material penalty to Parent or any Parent Subsidiary
(b) As
of the date hereof, each of the Parent Material Contracts is valid, binding and enforceable on Parent or the Parent Subsidiaries,
as the case may be, and, to the Knowledge of Parent, each other party thereto and is in full force and effect, in each case subject
to the Bankruptcy and Equity Exception, except for such failures to be valid, binding or enforceable or to be in full force and
effect as would not be material to Parent and any Parent Subsidiary. As of the date hereof, each of Parent and the Parent Subsidiaries
has complied in all material respects with the terms and conditions of Parent Material Contracts and is not (with or without notice
or lapse of time, or both) in breach or default thereunder, in each case except as would not, individually or in the aggregate,
reasonably be likely to have a Parent Material Adverse Effect. Neither Parent nor any Parent Subsidiary has received notice of
any violation or default under any Parent Material Contract, except for violations or defaults that would not, individually or
in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. Parent has delivered or made available to the
Company, prior to the execution of this Agreement, true and complete copies of all of the Parent Material Contracts.
4.17 Insurance.
Parent and the Parent Subsidiaries have policies of insurance covering Parent, the Parent Subsidiaries and their respective properties
and assets, in such amounts and with respect to such risks and losses, which Parent believes are adequate for the operation of
its business and the protection of its assets. All such insurance policies of Parent and each Parent Subsidiary are in full force
and effect, all premiums due and payable through the date hereof under all such policies have been paid, and Parent and each Parent
Subsidiary are otherwise in compliance in all respects with the terms of such policies, except for such failures to be in full
force and effect, to pay any premiums, or to be in compliance that would not reasonably be likely to have a Parent Material Adverse
Effect. As of the date hereof, no outstanding written notice of cancellation or termination has been received with respect to any
such insurance policy, other than in connection with ordinary renewals.
4.18 Interested
Party Transactions. Except as set forth on Section 4.18 of the Parent Disclosure Letter, none of Parent or any Parent
Subsidiary, on the one hand, is a party to any transaction or Contract with any Affiliate, stockholder that beneficially owns 5%
or more of the Parent Common Stock, or director or executive officer of Parent or any Parent Subsidiary, on the other hand, and
no event has occurred since the date of Parent’s last proxy statement to its stockholders that would be required to be reported
by Parent pursuant to Item 404 of Regulation S-K promulgated by the SEC.
4.19 Vote
Required. Assuming the accuracy of the representation in the last sentence of Section 3.22, the Parent Stockholder Approval
is the only vote of the holders of any class or series of shares of Parent necessary to adopt this Agreement and approve the Merger,
the issuance of Parent Common Stock in the Company Merger and the other Transactions. Other than the Parent OP GP Approval, no
vote of or consent or approval by the holders of any limited partnership units or general partnership units of Parent OP is necessary
to approve this Agreement, the Partnership Merger, the issuance of Parent OP Common Units in the Partnership Merger and the other
Transactions.
4.20 Brokers.
None of Parent, Parent OP, OP Merger Sub, IRT LP LLC nor any of their respective officers, directors or employees has employed
any broker, investment banker or finder or incurred any liability for any broker’s fees, commissions, finder’s fees
or other similar fees in connection with the Transactions, except that Parent has employed Deutsche Bank Securities Inc. as its
financial advisor, whose fees and expenses will be paid by Parent in accordance with Parent’s agreement with such firm.
4.21 Opinion
of Financial Advisor. The Parent Board has received an oral opinion of Deutsche Bank Securities Inc., to be confirmed by a
written opinion, dated as of the date of this Agreement, to the effect that, as of such date and based on and subject to the limitations,
qualifications and assumptions set forth therein, the Merger Consideration proposed to be paid by Parent pursuant to this Agreement
is fair, from a financial point of view, to Parent.
4.22 Takeover
Statutes. None of Parent, Parent OP, OP Merger Sub or any other Parent Subsidiary is, nor at any time during the last two (2)
years has been, an “interested stockholder” of the Company as defined in Section 3-601 of the MGCL. No “business
combination,” “control share acquisition,” “fair price,” “moratorium” or other takeover
or anti-takeover statute or similar federal or state Law is applicable to this Agreement or the Transactions.
4.23 Financing.
(a) Parent
has delivered to the Company true, correct and complete copies, as of the date of this Agreement, of an executed debt commitment
letter, dated as of the date hereof (as the same may be amended or replaced in accordance with Section 6.10, the “Commitment
Letter”), from Deutsche Bank AG New York Branch, regarding debt funding available to Parent in the amount noted therein
for the purpose of funding a portion of the Share Cash Consideration and Unit Cash Consideration and all transaction expenses payable
by Parent pursuant hereto (the “Financing”), subject to the terms thereof.
(b) As
of the date of this Agreement, the Commitment Letter is in full force and effect and is the valid, binding and enforceable obligation
of Parent and the other parties thereto, subject to the Bankruptcy and Equity Exception. There are no conditions precedent to the
funding of the full amount of the Financing, other than as expressly set forth in or contemplated by the Commitment Letter. Subject
to obtaining the Financing in accordance with the terms and conditions of the Commitment Letter, as of the date of this Agreement,
the available funds referenced in the Commitment Letter together with other financial resources of Parent, including cash on hand
of Parent on the Closing Date, will, in the aggregate, be sufficient for the satisfaction of all of Parent’s obligations
under this Agreement, including the payment of any amounts required to be paid by Parent pursuant to Article II and of all fees
and expenses required to be paid by Parent and reasonably expected to be incurred in connection herewith. Parent has fully paid
all fees required to be paid prior to the date of this Agreement pursuant to the Commitment Letter, if any. As of the date of this
Agreement, no event has occurred which, with or without notice, lapse of time or both, would or would reasonably be expected to
constitute a default or breach on the part of Parent or, to the Knowledge of Parent, any other parties thereto, under the Commitment
Letter. As of the date of this Agreement, Parent is not aware of any fact, occurrence or condition that makes any of the assumptions
or statements set forth in the Commitment Letter inaccurate in any material respect.
4.24 Investment
Company Act. Neither Parent nor any Parent Subsidiary is required to be registered as an investment company under the Investment
Company Act of 1940, as amended.
4.25 Hart-Scott-Rodino
Antitrust Improvements Act. In reliance upon, and subject to the accuracy of the representations and warranties provided in
Section 3.25, the Transactions are exempt from any requirement to make any filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the implementing regulations thereto, 16 C.F.R. parts 801-803, because (a) the Company
is a REIT and (b) the Parent Board has determined that the aggregate fair market value of the non-exempt assets of Parent and the
entities controlled by the Company is less than $76.3 million.
4.26 No
Other Representations and Warranties. Parent, Parent OP, OP Merger Sub and IRT LP LLC each acknowledges and agrees that, except
for the representations and warranties contained in Article III, (a) neither the Company nor the Company OP makes, or has
made, and Parent, Parent OP, OP Merger Sub and IRT LP LLC have not relied upon, any representation or warranty, whether express
or implied, relating to itself or its business, affairs, assets, liabilities, financial condition, results of operations or otherwise
in connection with the Merger, (b) no Person has been authorized by the Company or the Company OP to make any representation or
warranty relating to itself or its business or otherwise in connection with the Merger, and if made, such representation or warranty
must not be relied upon by Parent, Parent OP, OP Merger Sub and IRT LP LLC as having been authorized by such party and (c) any
estimates, projections, predictions, data, financial information, memoranda, presentations or any other materials or information
provided or addressed to Parent, Parent OP, OP Merger Sub, IRT LP LLC or any of their Representatives are not and shall not be
deemed to be or include representations or warranties unless any such materials or information are the subject of any express representation
or warranty set forth in Article III.
Article
V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.01 Conduct
of Business by the Company. Except for matters set forth in Section 5.01 of the Company Disclosure Letter, otherwise
contemplated by this Agreement or required by Law, from the date of this Agreement until the Effective Time, the Company shall,
and shall cause each Company Subsidiary to, conduct its respective business in the ordinary course consistent with past practice
and, to the extent consistent therewith, use commercially reasonable efforts to (i) maintain its material assets and properties
in their current condition (normal wear and tear excepted), (ii) preserve intact its current business organization, keep available
the services of its current officers and employees, keep and preserve its present relationships with tenants, joint venture partners
or co-venturers, suppliers, licensors, licensees, distributors and others having material business dealings with it, and (iii)
preserve the Company’s status as a REIT within the meaning of the Code. In addition, and without limiting the generality
of the foregoing, except for matters set forth in Schedule 5.01, or as otherwise contemplated by this Agreement or required
by Law, from the date of this Agreement until the Effective Time, the Company shall not, and shall not permit any Company Subsidiary
to, do any of the following without the prior written consent of Parent (which consent shall not be unreasonably withheld, conditioned
or delayed):
(a) (i)
declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, other than
dividends and distributions (1) to the extent set forth in, and in accordance with, Section 6.13, or (2) by a direct or
indirect wholly owned Subsidiary of the Company to its parent, (ii) split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital
stock or (iii) purchase, redeem or otherwise acquire any shares of capital stock of the Company or any Company Subsidiary
or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities (except (x) pursuant
to the forfeiture of Company Restricted Stock or the acquisition or withholding by the Company of shares of the Company Common
Stock in settlement of Tax withholding obligations relating to Company Restricted Stock, (y) from holders of Company Restricted
Stock in full or partial payment of any applicable Taxes payable by such holder upon the lapse of restrictions on such restricted
stock, or (z) upon redemption or exchange of Company OP Units in accordance with the limited partnership agreement of Company OP).
Notwithstanding the foregoing, the Company shall be permitted to make distributions reasonably necessary for the Company to maintain
its status as a REIT under the Code and avoid the imposition of corporate level or excise Tax under the Code or other applicable
Tax Law;
(b) issue,
sell, pledge or grant (or enter into an agreement to issue, sell, pledge or grant): (i) any shares of Company Capital Stock (or
capital stock of any Company Subsidiary), including any Company Restricted Stock, (ii) any Voting Company Debt or other voting
securities, (iii) any securities convertible into or exchangeable for, or any options, warrants, calls or rights to acquire, any
Company Capital Stock (or capital stock of any Company Subsidiary), Voting Company Debt, voting securities or convertible or exchangeable
securities or (iv) any “phantom” stock, “phantom” stock rights, stock appreciation rights or stock-based
performance units, other than (x) the issuance of 110,639 shares of Company Restricted Stock authorized prior to the date hereof,
or issuance of Company Restricted Stock in accordance with Section 5.01(e), and (y) issuances upon redemption or exchange
of Company OP Units in accordance with the limited partnership agreement of Company OP);
(c) amend
the Company Articles, the Company Bylaws, the Company OP Limited Partnership Agreement or other comparable formation or organizational
documents of any Company Subsidiary;
(d) acquire
or agree to acquire (including by merging or consolidating with, or by purchasing an equity interest in or portion of the assets
of, or by any other manner), any business or any corporation, partnership, joint venture, association or other business organization
or division thereof, real property, personal property or assets, except for (i) acquisitions of personal property at a total cost
of less than $1,000,000 in the aggregate, (ii) acquisitions by the Company or any wholly owned
Company Subsidiary of or from an existing wholly owned Company Subsidiary or (iii) acquisitions in accordance with the 2015 Capital
Expenditures schedule attached to Schedule 5.01(m) of the Company Disclosure Letter;
(e) (i)
grant to any executive officer, director or employee of the Company or any Company Subsidiary an increase in compensation except
in accordance with Schedule 5.01(e), (ii) grant to any current or former executive officer or director of the Company or
any Company Subsidiary any increase in severance or termination pay, (iii) enter into any severance or termination agreement with
any executive officer or director or (iv) take any action to accelerate any rights or benefits under any Company Benefit Plan,
other than as required pursuant to the terms of any Company Benefit Plan or in the ordinary course of business consistent with
past practice; provided that the foregoing clauses (i), (ii), (iii) and (iv) shall not restrict the Company or any of the
Company Subsidiaries from (A) entering into or making available to newly hired non-executive employees or to non-executive employees,
in the context of promotions based on job performance or workplace requirements, in each case in the ordinary course of business,
benefits and compensation arrangements that have a value that is consistent with the past practice of the Company in providing
compensation and benefits available to newly hired or promoted employees in similar positions and (B) granting annual salary increases
and cash incentive awards, with any such awards to any given individual not to exceed $10,000 and with all such awards, in the
aggregate, not to exceed $50,000; provided, further, however, that neither the Company nor any Company Subsidiary
shall be allowed to grant any shares of Company Capital Stock, including any Company Restricted Stock, or take any action restricted
by Section 5.01(a) other than the issuance of 110,639 shares of Company Restricted Stock to those individuals identified
on Schedule 5.01(e) and with the allocation of such shares among such individuals as specified on Schedule 5.01(e);
provided, however, that nothing in this Section 5.01 shall limit the right of the Company and each of the
Company Subsidiaries to terminate the employment of all of its employees no later than immediately prior to the Partnership Merger
Effective Time;
(f) make
any change in accounting methods, principles or practices materially affecting the reported consolidated assets, liabilities or
results of operations of the Company or any Company Subsidiary, except insofar as may have been required by a change in GAAP;
(g) sell,
lease (as lessor), license, sell and lease back, mortgage or otherwise dispose of or subject to any Lien any properties or assets,
except for (i) tenant leases entered into in the ordinary course of business consistent with past practice, (ii) Liens on property
and assets in the ordinary course of business consistent with past practice and that would not be material to any Company Property
or any assets of the Company or any Company Subsidiary, (iii) Company Permitted Liens, (iv) property or assets with a value of
less than $500,000 in the aggregate, and (v) in connection with the incurrence of indebtedness permitted by Section 5.01(h);
(h) (i)
incur or modify any indebtedness for borrowed money or guarantee any such indebtedness of another Person, except for (1) advances
of credit incurred under the Company’s existing credit facilities, (2) short-term borrowings incurred in the ordinary course
of business, (3) indebtedness solely involving the Company or any of its direct or indirect wholly owned Subsidiaries, and (4)
refinancings of existing or maturing indebtedness, (ii) issue or sell any debt securities or warrants or other rights to acquire
any debt securities of the Company or any Company Subsidiary, guarantee any debt securities of another Person, enter into any “keep
well” or other agreement to maintain any financial statement condition of another Person or enter into any arrangement having
the economic effect of any of the foregoing or (iii) make any loans, advances or capital contributions to, or investments in, any
other Person, other than (x) to any direct or indirect wholly owned Subsidiary of the Company (y) advances to employees in respect
of travel or other related ordinary expenses and (z) advancement of expenses to officers and directors in accordance with the Company
Articles, Company Bylaws, the Company OP Limited Partnership Agreement and any indemnification agreements to which the Company
or the Company OP is a party, in the case of (x) and (y) above, in the ordinary course of business consistent with past practice;
(i) other
than in accordance with Section 6.09, (A) pay, discharge, settle or satisfy any material action, litigation, claim or arbitration
where the amount paid out-of-pocket net of insurance proceeds in settlement or compromise exceeds $500,000 individually or $1,000,000
in the aggregate or (B) enter into any consent decree, injunction or similar restraint or form of equitable relief that would materially
restrict the operation of the business of the Company and the Company Subsidiaries taken as a whole;
(j) cancel
any material indebtedness (individually or in the aggregate) or waive any claims or rights with a value in excess of $500,000;
(k) enter
into or amend, extend or terminate, or waive, release, compromise or assign any rights or claims under any Company Material Contract
or any Contract that would have been deemed to be a Company Material Contract if entered into prior to the date hereof, other than
(i) any expiration or renewal in accordance with the terms of any existing Company Material Contract that occur automatically without
any action by the Company or any Company Subsidiary, (ii) the entry into any modification or amendment of, or waiver or consent
under, any mortgage or related agreement to which the Company or any Company Subsidiary is a party as required or necessitated
by this Agreement or the Transactions; provided that any such modification, amendment, waiver or consent does not increase
the principal amount thereunder or otherwise materially adversely affect the Company, any Company Subsidiary, Parent or any Parent
Subsidiary, or (iii) as may be reasonably necessary to comply with the express terms of this Agreement;
(l) establish,
adopt or enter into any collective bargaining agreement or other labor union Contract applicable to the employees of the Company
or any Company Subsidiary;
(m) authorize,
or enter into any commitment for, any new material capital expenditure (such authorized or committed new material capital expenditures
being referred to hereinafter as the “Capital Expenditures”) relating to the Company Properties other than (i) Capital
Expenditures not exceeding $250,000 per individual expenditure, (ii) Capital Expenditures made in connection with any existing
casualty or condemnation or new casualty or condemnation, (iii) Capital Expenditures in the ordinary course of business and
consistent with past practice to maintain the physical and structural integrity of the Company Properties and as reasonably determined
by the Company to be necessary to keep the Company Properties in working order, to comply with Laws, and to repair and/or prevent
damage to any of the Company Properties as is necessary in the event of an emergency situation and (iv) Capital Expenditures in
accordance with the 2015 Capital Expenditures schedule attached to Schedule 5.01(m) of the Company Disclosure Letter;
(n) make,
change or revoke any material Tax election or settle or compromise any material U.S. federal, state, local or foreign income Tax
liability, unless such election, settlement or compromise is required by Law or necessary (i) to preserve the status of the
Company as a REIT under the Code, or (ii) to qualify or preserve the status of any Company Subsidiary as a partnership or
disregarded entity or as a “qualified REIT subsidiary” or a “taxable REIT subsidiary,” as the case may
be, for U.S. federal income Tax purposes;
(o) enter
into any Contract that would limit or otherwise restrict (or purport to do so) the Company or any of the Company Subsidiaries or
any of their successors from engaging or competing in any line of business or owning property in, whether or not restricted to,
any geographic area;
(p) adopt
a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of Company or any
Company Subsidiary (other than the Merger);
(q) enter
into any joint venture or partnership or other similar Contract with any third party that is not a wholly owned Company Subsidiary;
(r) enter
into any new line of business;
(s) permit
existing insurance policies of the Company or the Company Subsidiaries to be cancelled or terminated without replacing such insurance
policies with comparable insurance policies, to the extent available on commercially reasonable terms; or
(t) authorize
any of, or commit, resolve or agree to take any of, the foregoing actions.
5.02 Conduct
of Business by Parent, Parent OP, OP Merger Sub and IRT LP LLC. Except for matters set forth in Section 5.02 of the
Parent Disclosure Letter, otherwise contemplated by this Agreement or required by Law, from the date of this Agreement until the
Effective Time, Parent shall, and shall cause Parent OP, OP Merger Sub, IRT LP LLC and each Parent Subsidiary to, conduct its respective
business in the ordinary course consistent with past practice and, to the extent consistent therewith, use commercially reasonable
efforts to (i) maintain its material assets and properties in their current condition (normal wear and tear excepted), (ii) preserve
intact its current business organization, keep available the services of its current officers and external manager, keep and preserve
its present relationships with tenants, joint venture partners or co-venturers, suppliers, licensors, licensees, distributors and
others having material business dealings with it, and (iii) preserve Parent’s status as a REIT within the meaning of the
Code. In addition, and without limiting the generality of the foregoing, except for matters set forth in Schedule 5.02,
or as otherwise contemplated by this Agreement or required by Law, from the date of this Agreement until the Effective Time, Parent
shall not, and shall not permit Parent OP, OP Merger Sub, IRT LP LLC or any Parent Subsidiary to, do any of the following without
the prior written consent of the Company (which consent shall not be unreasonably withheld, conditioned or delayed); provided,
that in the event that Parent submits to the Company a written request for the Company’s consent to take an action set forth
in Sections 5.02(c), (e), (f), (h), (j), (k) or (n) below, the Company will use
its commercially reasonable efforts to evaluate such request and respond to Parent within ten (10) days following receipt of such
request; provided, further, that in the event the Company fails to respond to such request within such ten (10) day
period, then the Company shall be deemed to have given the prior written consent of the Company pursuant to this Section 5.02
with respect to the actions in such request:
(a) (i)
declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock or other equity
interests, other than dividends and distributions (1) to the extent set forth in and in accordance with Section 6.13,
or (2) by a direct or indirect wholly owned Subsidiary of Parent to its parent, (ii) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares
of its capital stock or (iii) purchase, redeem or otherwise acquire any shares of capital stock of Parent or any Parent Subsidiary
or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities (except (x) from
holders of options to purchase Parent Capital Stock in full or partial payment of any exercise price and any applicable Taxes payable
by such holder upon exercise of such, (y) from holders of restricted stock of Parent in full or partial payment of any applicable
Taxes payable by such holder upon the lapse of restrictions on such restricted stock, or (z) upon redemption or exchange of Parent
OP Common Units in accordance with the limited partnership agreement of Parent OP). Notwithstanding the foregoing, Parent shall
be permitted to make distributions reasonably necessary for Parent to maintain its status as a REIT under the Code and avoid the
imposition of corporate level or excise Tax under the Code or other applicable Tax Law;
(b) amend
the charter, bylaws or other organizational documents of Parent, Parent OP or any Parent Subsidiaries, other than as required (i)
by Law, (ii) by any Financing Source, or (iii) in connection with any holder of Parent OP Common Units converting such Parent OP
Common Units into Parent Common Stock;
(c) acquire
or agree to acquire (including by merging or consolidating with, or by purchasing an equity interest in or portion of the assets
of, or by any other manner), any business or any corporation, partnership, joint venture, association or other business organization
or division thereof, real property, personal property or assets, except for (i) acquisitions of personal property at a total cost
of less than $1,000,000 in the aggregate, (ii) acquisitions by Parent or any wholly owned Parent Subsidiary of or from an existing
wholly owned Parent Subsidiary or (iii) issuances by Parent OP of units of limited partnership interest in the acquisition of assets
from an unaffiliated third party in an arm’s length transaction;
(d) (i)
grant to Independence Realty Advisors, LLC any increase in advisory fees or incentive fees, (ii) take any action that could result
in a termination of Parent’s advisory agreement with the Parent Advisor, (iii) enter into any severance or termination agreement
with any executive officer or director, (iv) establish, adopt, enter into or amend in any material respect any collective bargaining
agreement or Parent Benefit Plan or (v) take any action to accelerate any rights or benefits under any Parent Benefit Plan, other
than, in the case of the foregoing clauses (i), (ii), (iii), (iv) and (v), (1) in the ordinary course of business, (2) as required
pursuant to the terms of any Parent Benefit Plan, or (3) as otherwise expressly permitted by this Agreement or required by applicable
Law; provided that the foregoing clauses (i), (ii), (iii), (iv) and (v) shall not restrict the Parent or any of the Parent
Subsidiaries from granting annual compensation increases and incentive awards to any director of Parent in the ordinary course
of business;
(e) sell,
lease (as lessor), license, sell and lease back, mortgage or otherwise dispose of or subject to any Lien any properties or assets,
except for (i) tenant leases entered into in the ordinary course of business consistent with past practice, (ii) Liens on property
and assets in the ordinary course of business consistent with past practice and that would not be material to any Parent Property
or any assets of Parent or any Parent Subsidiary, (iii) Parent Permitted Liens, (iv) property or assets with a value of less than
$500,000 in the aggregate, (v) in connection with the incurrence of indebtedness permitted by Section 5.02(f), and (vi)
in connection with obtaining the Necessary Financing;
(f) (i)
incur or modify any indebtedness for borrowed money or guarantee any such indebtedness of another Person, except for (1) advances
of credit incurred under Parent’s existing credit facilities, (2) short-term borrowings incurred in the ordinary course of
business, (3) indebtedness solely involving Parent or any of its direct or indirect wholly owned Subsidiaries, and (4) refinancings
of existing or maturing indebtedness, (ii) issue or sell any debt securities or warrants or other rights to acquire any debt securities
of Parent or any Parent Subsidiary, guarantee any debt securities of another Person, enter into any “keep well” or
other agreement to maintain any financial statement condition of another Person or enter into any arrangement having the economic
effect of any of the foregoing or (iii) make any loans, advances or capital contributions to, or investments in, any other Person,
other than (x) to any direct or indirect wholly owned Subsidiary of Parent (y) advances to employees in respect of travel or other
related ordinary expenses and (z) advancement of expenses to officers and directors in accordance with the Parent Bylaws, the Parent
OP Limited Partnership Agreement and any indemnification agreements to which Parent or the Parent OP is a party, in the case of
(x) and (y) above, in the ordinary course of business consistent with past practice; provided that nothing herein shall
restrict in any way the ability of Parent and the Parent Subsidiaries to obtain the Necessary Financing;
(g) make
any change in accounting methods, principles or practices materially affecting the reported consolidated assets, liabilities or
results of operations of Parent or any Parent Subsidiary, except insofar as may have been required by a change in GAAP;
(h) (A)
pay, discharge, settle or satisfy any material action, litigation, claim or arbitration where the amount paid out-of-pocket net
of insurance proceeds in settlement or compromise exceeds $500,000 individually or $1,000,000 in the aggregate (B) enter into any
consent decree, injunction or similar restraint or form of equitable relief that would materially restrict the operation of the
business of the Parent and the Parent Subsidiaries taken as a whole;
(i) make,
change or revoke any material Tax election or settle or compromise any material U.S. federal, state, local or foreign income Tax
liability, unless such election, settlement or compromise is required by Law or necessary (i) to preserve the status of Parent
as a REIT under the Code, or (ii) to qualify or preserve the status of any Parent Subsidiary as a partnership or disregarded
entity or as a “qualified REIT subsidiary” or a “taxable REIT subsidiary,” as the case may be, for U.S.
federal income Tax purposes;
(j) enter
into or amend, extend or terminate, or waive, release, compromise or assign any rights or claims under any Parent Material Contract
or any Contract that would have been deemed to be a Parent Material Contract if entered into prior to the date hereof, other than
(i) any expiration or renewal in accordance with the terms of any existing Parent Material Contract that occur automatically without
any action by Parent or any Parent Subsidiary, (ii) the entry into any modification or amendment of, or waiver or consent under,
any Material Contract that does not materially adversely affect the Parent or any Parent Subsidiary, or (iii) as may be reasonably
necessary to comply with the express terms of this Agreement;
(k) authorize,
or enter into any commitment for, any new Capital Expenditure relating to the Parent Properties other than (i) Capital Expenditures
not exceeding $250,000 per individual expenditure, (ii) Capital Expenditures made in connection with any existing casualty or condemnation
or new casualty or condemnation, and (iii) Capital Expenditures in the ordinary course of business and consistent with past
practice to maintain the physical and structural integrity of the Parent Properties and as reasonably determined by the Parent
to be necessary to keep the Parent Properties in working order, to comply with Laws, and to repair and/or prevent damage to any
of the Parent Properties as is necessary in the event of an emergency situation;
(l) enter
into any Contract that would limit or otherwise restrict (or purport to do so) Parent or any of the Parent Subsidiaries or any
of their successors from engaging or competing in any line of business or owning property in, whether or not restricted to, any
geographic area;
(m) adopt
a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of Parent or any
Parent Subsidiary (other than the Merger);
(n) enter
into any joint venture or partnership or other similar Contract with any third party that is not a wholly owned Parent Subsidiary;
provided that the foregoing shall not restrict Parent OP from issuing units of limited partnership interest in the acquisition
of assets from an unaffiliated third party in an arm’s length transaction;
(o) enter
into any new line of business;
(p) permit
existing insurance policies of the Parent or the Parent Subsidiaries to be cancelled or terminated without replacing such insurance
policies with comparable insurance policies, to the extent available on commercially reasonable terms; or
(q) authorize
any of, or commit, resolve or agree to take any of, the foregoing actions.
5.03 No
Solicitation.
(a) Except
as permitted by this Section 5.03, from the date hereof until the Effective Time, or, if earlier, the termination of
this Agreement in accordance with its terms, the Company shall not, nor shall it authorize or permit any Company Subsidiary to,
nor shall it authorize any Representatives of the Company or any Company Subsidiary to, directly or indirectly, (i) solicit,
initiate, knowingly encourage or take any other action to knowingly facilitate any inquiry, discussion, offer or request that constitutes,
or could reasonably be expected to lead to, a Company Takeover Proposal, (ii) enter into any agreement, letter of intent, memorandum
of understanding or other similar instrument with respect to any Company Takeover Proposal (other than an Acceptable Confidentiality
Agreement entered into in accordance with this Section 5.03) or (iii) enter into, continue, conduct, engage or otherwise
participate in any discussions or negotiations regarding, or furnish to any Person any non-public information with respect to,
or for the purpose of encouraging or facilitating, any Company Takeover Proposal. The Company shall, shall cause the Company Subsidiaries,
and shall direct its Representatives to, immediately cease and cause to be terminated all existing discussions and negotiations
with any Person conducted theretofore with respect to any Company Takeover Proposal and request
that any such Person promptly return and/or destroy all confidential information concerning the Company and the Company’s
Subsidiaries to the extent permitted pursuant to a confidentiality agreement with any such Persons. Notwithstanding anything in
this Agreement to the contrary, prior to obtaining Company Stockholder Approval, the Company and its Representatives may, in response
to each (if any) Company Takeover Proposal made after the date hereof that does not result from a material breach of this Section
5.03, (y) contact the Person making such Company Takeover Proposal solely to clarify the terms and conditions thereof and (z)
if the Company Board determines in good faith, after consultation with independent financial advisors and outside legal counsel,
that such Company Takeover Proposal constitutes or is reasonably be expected to lead to a Superior Company Proposal, (1) provide
access to or furnish information with respect to the Company and the Company Subsidiaries to the Person making such Company Takeover
Proposal and its Representatives pursuant to an Acceptable Confidentiality Agreement; provided, that the Company will prior
to or concurrently with the time such information is provided to such Person provide Parent with all non-public information regarding
the Company that has not previously been provided to Parent that is provided to any Person making such Company Takeover Proposal;
and (2) conduct, engage or participate in discussions or negotiations with such Person and its Representatives making such Company
Takeover Proposal.
For purposes of this Agreement, “Acceptable
Confidentiality Agreement” means (y) a confidentiality agreement that contains provisions that are no less favorable
in the aggregate to the Company than those contained in the Confidentiality Agreement; provided that an Acceptable Confidentiality
Agreement need not contain any “standstill” or similar covenant, or (z) to the extent applicable, a confidentiality
agreement entered into prior to the date hereof.
For purposes of this Agreement, “Company
Takeover Proposal” means any inquiry, proposal or offer from any Person (other than Parent or any Parent Subsidiary)
or “group”, within the meaning of Section 13(d) of the Exchange Act, relating to, in a single transaction or series
of related transactions, any (A) acquisition of assets of the Company and the Company Subsidiaries equal to 20% or more of the
Company’s consolidated assets (as determined on a book-value basis) or to which 20% or more of the Company’s revenues
or earnings on a consolidated basis are attributable, (B) acquisition of 20% or more of the outstanding Company Common Stock, (C)
tender offer or exchange offer that if consummated would result in any Person beneficially owning 20% or more of the outstanding
Company Common Stock, (D) merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution
or similar transaction involving the Company or (E) combination of the foregoing types of transactions if the sum of the percentage
of consolidated assets, consolidated revenues or earnings and Company Common Stock involved is 20% or more, in each case, other
than the Transactions.
For purposes of this Agreement, “Superior
Company Proposal” means any bona fide written Company Takeover Proposal (except that, for purposes of this definition,
the references in the definition of “Company Takeover Proposal” to “20%” shall be replaced by “50%”)
that was not the result of a material breach by the Company of this Section 5.03 and that the Company Board has determined
in good faith, after consulting with the Company’s outside legal counsel and independent financial advisors, is reasonably
likely to be consummated in accordance with its terms and that, if consummated, would result in a transaction more favorable to
the Company’s stockholders (solely in their capacity as such) than the Transactions (including any revisions to the terms
of this Agreement proposed by Parent in response to such proposal or otherwise) taking into account all reasonably available legal,
financial, regulatory and other aspects of such Company Takeover Proposal (including the likelihood of consummation of such Company
Takeover Proposal) that the Company Board deems relevant.
(b) Except
as expressly permitted by this Section 5.03(b), neither the Company Board nor any committee thereof shall (i) (A) fail to
recommend to its stockholders that the Company Stockholder Approval be given or fail to include the Company Board’s recommendation
of the Agreement, the Merger and the other Transactions in the Joint Proxy Statement, (B) change, modify, withhold, or withdraw,
or publicly propose to change, qualify, withhold, withdraw of modify, in a manner adverse to Parent or Parent OP, the approval
of this Agreement, the Merger or any of the other Transactions, (C) take any formal action
or make any recommendation or public statement or other disclosure in connection with a tender offer or exchange offer other than
a recommendation against such offer or a temporary “stop, look and listen” communication by the Company Board pursuant
to Rule 14d-9(f) under the Exchange Act, (D) adopt, approve or recommend, or publicly propose to approve or recommend to the
stockholders of the Company any Company Takeover Proposal or agree to take any such action, or (E) fail to publicly recommend against
any Company Takeover Proposal within five (5) Business Days of the request of Parent and/or fail to reaffirm the Company Board’s
recommendation of the Agreement, the Merger and the other Transactions within five (5) Business Days of the request of Parent,
or such fewer number of days as remains prior to the Company Stockholder Meeting (any action described in this clause (i) being
referred to herein as an “Adverse Recommendation Change”) or (ii) cause or permit the Company or any of the
Company Subsidiaries to enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement,
merger agreement, joint venture agreement, partnership agreement or other similar agreement relating to a Company Takeover Proposal
(other than an Acceptable Confidentiality Agreement) (an “Alternative Acquisition Agreement”), or resolve or
agree to take any such action. Notwithstanding anything in this Agreement to the contrary, prior to obtaining Company Stockholder
Approval, but not after, the Company Board may (I) effect an Adverse Recommendation Change if (a)(1) a material development or
change in circumstances occurs or arises after the date of this Agreement that was not known by the Company Board as of the date
of this Agreement (such material development or change in circumstances being referred to herein as an “Intervening Event”),
and (2) the Company Board shall have determined, after consultation with independent financial advisors and outside legal counsel,
that, in light of such Intervening Event, failure to take such action would be inconsistent with the directors’ duties under
applicable Law, or (b) the Company receives a Company Takeover Proposal that was not the result of a breach by the Company of this
Section 5.03 in any material respect and that the Company Board determines, after consultation with independent financial
advisors and outside legal counsel, constitutes a Superior Company Proposal, and (II) enter into an Alternative Acquisition Agreement
with respect to a Company Takeover Proposal and concurrently cause the Company to terminate this Agreement pursuant to Section
8.01, if and only if, the Company receives a Company Takeover Proposal that was not the
result of a breach by the Company of this Section 5.03 in any material respect and that the Company Board determines, after
consultation with independent financial advisors and outside legal counsel, constitutes a Superior Company Proposal.
(c) The
Company Board shall not be entitled to (i) effect and Adverse Recommendation Change or (ii) terminate this Agreement pursuant to
Section 8.01 to enter into an Alternative Acquisition Agreement with respect to a Superior Company Proposal unless: (A)
the Company Board shall have determined, after consultation with independent financial advisors and outside legal counsel, that
failure to take such action would be inconsistent with the directors’ duties under applicable Law; (B) the Company Board
shall have provided at least four (4) Business Days’ prior written notice to Parent that it is prepared to effect an Adverse
Recommendation Change or terminate this Agreement pursuant to Section 8.01, which notice shall contain a reasonably detailed
description of the basis for the Adverse Recommendation Change or termination, the identity of the Person making the Superior Company
Proposal, if applicable, and the material terms and conditions of such Superior Company Proposal, if applicable (it being understood
and agreed that the delivery of such notice shall not, in and of itself, be deemed to be an Adverse Recommendation Change); (C)
the Company shall have negotiated, and shall have caused its Representatives to negotiate, in good faith with Parent during such
notice period, to the extent Parent wishes to negotiate; and (D) following the end of such notice period, the Company Board shall
have considered any proposed revisions to this Agreement proposed by Parent in writing, and shall have determined, after consultation
with its independent financial advisors and outside legal counsel, that such Superior Company Proposal would continue to constitute
a Superior Company Proposal if such revisions were to be given effect; provided, that in the event of any material change
to the material terms of such Superior Company Proposal, the Company shall, in each case, have delivered to Parent an additional
notice consistent with that described in subclause (B) above and the notice period shall have recommenced, except that the notice
period shall be at least two (2) Business Days.
(d) The
Company shall, as promptly as practicable (and in any event within twenty-four (24) hours), advise Parent of the receipt of (i)
any Company Takeover Proposal or request for information or inquiry that expressly contemplates or that the Company believes could
reasonably be expected to lead to a Company Takeover Proposal, (ii) the identity of the Person making the Company Takeover Proposal,
request or inquiry, and (iii) the material terms and conditions of such Company Takeover Proposal, request or inquiry. The Company
shall keep Parent promptly advised of all material developments (including all changes to the material terms of any Company Takeover
Proposal), discussions or negotiations regarding any Company Takeover Proposal and the status of such Company Takeover Proposal.
The Company agrees that it and the Company Subsidiaries will not enter into any confidentiality agreement with any Person subsequent
to the date hereof which prohibits it or a Company Subsidiary from providing any information required to be provided to Parent
in accordance with this Section 5.03 within the time periods contemplated hereby.
(e) Nothing
contained in this Agreement shall prohibit the Company from (i) taking and disclosing to its stockholders a position contemplated
by Rule 14d-9, Rule 14e-2(a) or Item 1012(a) of Regulation M-A promulgated under the Exchange Act or (ii) making any disclosure
to the Company’s stockholders if, the Company Board determines, after consultation with outside legal counsel, that the failure
so to disclose would be inconsistent with the duties of its members under applicable Law; provided, however, that
any disclosure other than a “stop, look and listen” letter or similar communication of the type contemplated by Rule
14d-9(f) under the Exchange Act, an accurate disclosure of factual information to the Company’s stockholders that is required
to be made to such stockholders under applicable Law or in satisfaction of the Company Board’s duties or applicable Law,
an express rejection of any applicable Company Takeover Proposal or an express reaffirmation of the Company Board’s recommendation
of the Agreement, the Merger and the other Transactions shall be deemed to be an Adverse Recommendation Change.
(f) Notwithstanding
anything in this Agreement to the contrary, at any time prior to any termination of this Agreement, the Company Board may grant
a waiver or release under, or determine not to enforce, any standstill agreement with respect to any class of equity securities
of the Company if the Company Board determines that the failure to take such action would be inconsistent with the duties of its
members under applicable Law.
Article
VI
ADDITIONAL AGREEMENTS
6.01 Preparation
of Form S-4 and Joint Proxy Statement; Stockholder Approvals.
(a) As
promptly as reasonably practicable following the date of this Agreement, (i) the Company and Parent shall jointly prepare and cause
to be filed with the SEC the Joint Proxy Statement in preliminary form relating to the Company Stockholder Meeting and the Parent
Stockholder Meeting, and (ii) Parent shall prepare (with the Company’s reasonable cooperation) and cause to be filed with
the SEC the Form S-4, which will include the Joint Proxy Statement as a prospectus, in connection with the registration under the
Securities Act of the Parent Common Stock to be issued in the Merger. Each of the Company and Parent shall use its reasonable best
efforts to (A) have the Form S-4 declared effective under the Securities Act as promptly as practicable after such filing, (B)
ensure that the Form S-4 complies in all material respects with the applicable provisions of the Exchange Act and the Securities
Act and (C) keep the Form S-4 effective for so long as necessary to complete the Merger unless this Agreement is terminated pursuant
to Section 8.01. Each of the Company and Parent shall furnish all information concerning itself, its Affiliates and the
holders of its capital stock or other equity interests to the other and provide such other assistance as may be reasonably requested
by the other in connection with the preparation, filing and distribution of the Form S-4 and the Joint Proxy Statement and shall
provide to their and each other’s counsel such representations as are reasonably necessary to render the opinions required
to be filed therewith. The Form S-4 and the Joint Proxy Statement shall include all information reasonably requested by such other
Party to be included therein. Each of the Company and Parent shall promptly notify the other upon the receipt of any comments from
the SEC or any request from the SEC for amendments or supplements to the Form S-4 or the Joint Proxy Statement, and shall, as promptly
as practicable after receipt thereof, provide the other with copies of all correspondence between it and its Representatives, on
the one hand, and the SEC, on the other hand, and all written comments with respect to the Joint Proxy Statement or the Form S-4
received from the SEC and advise the other Party of any oral comments with respect to the Joint Proxy Statement or the Form S-4
received from the SEC. Each of the Company and Parent shall use its reasonable best efforts to respond as promptly as practicable
to any comments from the SEC with respect to the Joint Proxy Statement, and Parent shall use its reasonable best efforts to respond
as promptly as practicable to any comments from the SEC with respect to the Form S-4. Notwithstanding the foregoing, prior to filing
the Form S-4 (or any amendment or supplement thereto) or mailing the Joint Proxy Statement (or any amendment or supplement thereto)
or responding to any comments from the SEC with respect thereto, each of the Company and Parent shall cooperate and provide the
other a reasonable opportunity to review and comment on such document or response (including the proposed final version of such
document or response). Parent shall advise the Company, promptly after it receives notice thereof, of the time of effectiveness
of the Form S-4, the issuance of any stop order relating thereto or the suspension of the qualification of the Parent Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction, and Parent and the Company shall use their reasonable
best efforts to have any such stop order or suspension lifted, reversed or otherwise terminated. Parent shall also take any other
action reasonably required to be taken under the Securities Act, the Exchange Act, any applicable foreign or state securities or
“blue sky” Laws and the rules and regulations thereunder in connection with the issuance of the Parent Common Stock
in the Merger, and the Company shall furnish all information concerning the Company and the holders of the Company Common Stock
as may be reasonably requested in connection with any such actions.
(b) If,
at any time prior to the receipt of the Company Stockholder Approval or the Parent Stockholder Approval, any information relating
to the Company or Parent, or any of their respective Affiliates, should be discovered by the Company or Parent which, in the reasonable
judgment of the Company or Parent, should be set forth in an amendment of, or a supplement to, either the Form S-4 or the Joint
Proxy Statement, so that such documents would not include any misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party that
discovers such information shall promptly notify Parent or the Company, as applicable, and the Company and Parent shall cooperate
in the prompt filing with the SEC of any necessary amendment of, or supplement to, the Joint Proxy Statement or the Form S-4 and,
to the extent required by Law, in disseminating the information contained in such amendment or supplement to stockholders of the
Company and the stockholders of Parent. Nothing in this Section 6.01(b) shall limit the obligations of any party under Section
6.01(a). For purposes of Section 3.06, Section 4.06 and this Section 6.01, any information concerning
or related to the Company, its Affiliates or the Company Stockholder Meeting will be deemed to have been provided by the Company,
and any information concerning or related to Parent, its Affiliates or the Parent Stockholder Meeting will be deemed to have been
provided by Parent.
(c) Unless
and until this Agreement is terminated, as promptly as practicable following the date of this Agreement, the Company shall, in
accordance with applicable Law and the Company Governing Documents, establish a record date for, duly call, give notice of, convene
and hold the Company Stockholder Meeting. The Company shall use its reasonable best efforts to cause the Joint Proxy Statement
to be mailed to the stockholders of the Company entitled to notice of, and to vote at, the Company Stockholder Meeting and to hold
the Company Stockholder Meeting as soon as practicable after the Form S-4 is declared effective under the Securities Act. The Company
shall, through the Company Board, recommend to its stockholders that they give the Company Stockholder Approval, include such recommendation
in the Joint Proxy Statement and solicit and use its reasonable best efforts to obtain the Company Stockholder Approval, except
to the extent that the Company Board shall have made an Adverse Recommendation Change as permitted by Section 5.03(b) or
effected a termination pursuant to Section 8.01. Notwithstanding the foregoing provisions of this Section 6.01(c),
if, on a date for which the Company Stockholder Meeting is scheduled, the Company has not received proxies representing a sufficient
number of shares of Company Common Stock to obtain the Company Stockholder Approval, whether or not a quorum is present, the Company
shall have the right to make one or more successive postponements or adjournments of the Company Stockholder Meeting; provided
that the Company Stockholder Meeting is not postponed or adjourned to a date that is more than three (3) Business Days prior to
the End Date. Notwithstanding any Adverse Recommendation Change, unless this Agreement is terminated in accordance with its terms,
the obligations of the parties hereunder shall continue in full force and effect and such obligations shall not be affected by
the commencement, public proposal, public disclosure or communication to Company of any Company Takeover Proposal (whether or not
a Superior Company Proposal).
(d) As
promptly as practicable following the date of this Agreement, Parent shall (through the Parent Board, as appropriate), in accordance
with applicable Law and the Parent Governing Documents, establish a record date for, duly call, give notice of, convene and hold
the Parent Stockholder Meeting. Parent shall use its reasonable best efforts to cause the Joint Proxy Statement to be mailed to
the stockholders of Parent entitled to notice of, and to vote at, the Parent Stockholder Meeting and to hold the Parent Stockholder
Meeting as soon as practicable after the Form S-4 is declared effective under the Securities Act. Parent shall, through the Parent
Board, recommend to its stockholders that they give the Parent Stockholder Approval, include such recommendation in the Joint Proxy
Statement, and solicit and use its reasonable best efforts to obtain the Parent Stockholder Approval. Notwithstanding the foregoing
provisions of this Section 6.01(d), if, on a date for which the Parent Stockholder Meeting is scheduled, Parent has not
received proxies representing a sufficient number of shares of Parent Common Stock to obtain the Parent Stockholder Approval, whether
or not a quorum is present, Parent shall have the right to make one or more successive postponements or adjournments of the Parent
Stockholder Meeting; provided that the Parent Stockholder Meeting is not postponed or adjourned to a date that is more than
three (3) Business Days prior to the End Date.
(e) Unless
and until this Agreement is terminated, the Company and Parent will use their respective reasonable best efforts to hold the Company
Stockholder Meeting and the Parent Stockholder Meeting on the same date and as soon as reasonably practicable after the date of
this Agreement.
(f) Parent
and Parent OP shall cause all shares of Company Common Stock owned by Parent, Parent OP or any of their respective Affiliates to
be voted in favor of the adoption of this Agreement and the approval of the Merger and the other Transactions.
6.02 Access
to Information; Confidentiality. From the date of this Agreement until the Effective Time or the date, if any, on which
this Agreement is terminated pursuant to Section 8.01, subject to applicable Law, and upon reasonable prior written
notice, the Company, on the one hand, and Parent, on the other hand, shall, and each shall cause each of their respective
Subsidiaries to, afford to the other parties and to the other parties’ respective Representatives reasonable access
during normal business hours to all of their and their respective Subsidiaries’ properties, offices, personnel and
books and records and, during such period, the Company, on the one hand, and Parent, on the other hand, shall, and each shall
cause each of their respective Subsidiaries to, furnish promptly to the other parties all financial, operating and other data
and information concerning its business, properties and personnel as each may reasonably request; provided, however,
that any such access shall not interfere unreasonably with the business or operations of the party granting access or
otherwise result in any unreasonable interference with the prompt and timely discharge by such party’s employees of
their normal duties. Neither the Company, nor Parent, nor any of their respective Subsidiaries shall be required to (i)
provide access to or to disclose information where such access or disclosure would reasonably be expected to jeopardize the
attorney-client, attorney work product or other legal privilege of the disclosing party (provided that the disclosing party
shall use its reasonable best efforts to allow for such access or disclosure in a manner that would not reasonably be
expected to jeopardize the attorney-client, attorney work product or other legal privilege) or contravene any Law, legal duty
or binding agreement entered into prior to the date of this Agreement (provided that the disclosing party shall use its
reasonable best efforts to make appropriate substitute arrangements to permit reasonable disclosure not in violation of any
Law, legal duty or agreement) or (ii) provide access to or to disclose such portions of documents or information relating to
pricing or other matters that are highly sensitive where such access or disclosure is reasonably likely to result in
antitrust difficulties for the disclosing party or any of its Affiliates. No investigation under this Section 6.02 or
otherwise shall affect any of the representations and warranties of the Company and the Company OP, on the one hand, or of
Parent, Parent OP, OP Merger Sub and IRT LP LLC, on the other hand, contained in this Agreement or any condition to the
obligations of the parties under this Agreement. All information exchanged pursuant to this Section 6.02 shall be
subject to the non-disclosure agreement, dated as of November 5, 2014, between the Company and Parent (or one of its upstream
Affiliates) (the “Confidentiality Agreement”).
6.03 Reasonable
Best Efforts; Notification.
(a) Upon
the terms and subject to the conditions set forth in this Agreement, each of the parties hereto agrees to use its reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary to fulfill all conditions applicable to such party pursuant to this Agreement and to consummate
and make effective, in the most expeditious manner practicable, the Merger and the other Transactions, including (i) obtaining
all necessary actions or non-actions, waivers, Consents and qualifications from Governmental Entities and making all necessary
registrations, filings and notifications and taking all reasonable steps as may be necessary to obtain an approval, clearance,
non-action letter, waiver or exemption from any Governmental Entity; (ii) obtaining all necessary Consents, qualifications,
approvals, waivers or exemptions from non-governmental third parties; (iii) defending any lawsuit or other Legal Proceeding,
whether judicial or administrative, challenging this Agreement or the consummation of the Transactions, including seeking to have
any stay or temporary restraining order entered by any court or other Governmental Entity vacated or reversed; and (iv) executing
and delivering any additional documents or instruments necessary to consummate the Transactions and to carry out this Agreement.
(b) The
parties shall reasonably cooperate with each other in connection with the making of all such filings, including furnishing to the
others such information and assistance as a party may reasonably request in connection with its preparation of any filing or submission
that is necessary or allowable under applicable competition or other Law or requested by any competition authorities. The parties
shall use their respective reasonable best efforts to furnish to each other all information required for any application or other
filing to be made pursuant to any Law (including all information required to be included in the Company’s disclosure documents)
in connection with the Transactions. To the extent permitted by applicable Law or any relevant Governmental Entity, and subject
to all applicable privileges, including the attorney-client privilege, each party hereto shall (i) give the other parties hereto
prompt notice upon obtaining knowledge of the making or commencement of any request, inquiry, investigation, action or Legal Proceeding
by or before any Governmental Entity with respect to the Merger or any of the other Transactions, (ii) keep the other parties hereto
informed as to the status of any such request, inquiry, investigation, action or Legal Proceeding and (iii) promptly inform the
other parties hereto of any material communication to or from the U.S. Federal Trade Commission, the U.S. Department of Justice,
any foreign competition authority or any other Governmental Entity regarding the Merger or any of the other Transactions. The parties
hereto will consult and reasonably cooperate with one another, and consider in good faith the views of one another, in connection
with, and provide to the other parties in advance, all analyses, appearances, presentations, memoranda, briefs, arguments, opinions
and proposals to be made or submitted by or on behalf of any party hereto, including reasonable access to any materials submitted
in connection with any proceedings under or relating to any other applicable federal, state or foreign competition, merger control,
antitrust or similar Law, including any proceeding under 16 C.F.R. § 803.20.
(c) Any
party may, as it reasonably deems advisable and necessary, designate any competitively sensitive material provided to the other
parties under this Section 6.03 as “outside counsel only.” Such materials and the information contained therein
shall be given only to the outside legal counsel of the recipient and will not be disclosed by such outside counsel to employees,
officers or directors of the recipient, unless express written permission is obtained in advance from the source of such materials.
In addition, except as may be prohibited by any Governmental Entity or by any Law, each party hereto will permit authorized Representatives
of the other parties to be present at each meeting or telephone conference of which such party shall have advance notice (other
than telephone conversations to the extent they relate to administrative matters) with representatives of any Governmental Entity
relating to any such request, inquiry, investigation, action or Legal Proceeding and to have access to and be consulted in connection
with any document, opinion or proposal made or submitted to any Governmental Entity in connection with any such request, inquiry,
investigation, action or proceeding.
(d) In
furtherance and not in limitation of the foregoing, subject to the terms and conditions of this Agreement, each of the parties
hereto shall respond to and seek to resolve as promptly as reasonably practicable any objection asserted by any Governmental Entity
with respect to the Transactions, and shall use its reasonable best efforts to defend any action, suit, dispute, litigation, proceeding,
hearing, arbitration or claim by or before any Governmental Entity, whether judicial or administrative, whether brought by private
parties or Governmental Entities or officials, challenging this Agreement or the consummation of the Transactions. Each of the
parties hereto shall use its reasonable best efforts to take such action as is reasonably necessary to ensure that no Governmental
Entity enters any order, decision, Judgment, decree, ruling, injunction (preliminary or permanent), or establishes any Law, rule,
regulation or other action preliminarily or permanently restraining, enjoining or prohibiting the consummation of the Merger or
the other Transactions, or to ensure that no Governmental Entity with the authority to clear, authorize or otherwise approve the
consummation of the Merger, fails to do so by the End Date. In the event that any action is threatened or instituted challenging
the Merger as violative of any Law, each of the parties hereto shall use its reasonable best efforts to take such action as is
reasonably necessary to avoid or resolve such action. In the event that any permanent or preliminary injunction or other order
is entered or becomes reasonably foreseeable to be entered in any proceeding that would make consummation of the transactions contemplated
hereby in accordance with the terms of this Agreement unlawful or that would restrain, enjoin or otherwise prevent or materially
delay the consummation of the Transactions, each of the parties hereto shall use its reasonable best efforts to take promptly such
steps as are reasonably necessary to vacate, modify or suspend such injunction or order so as to permit such consummation prior
to the End Date and shall cooperate with one another in connection with all proceedings related to the foregoing. The actions required
hereunder shall include, without limitation, the proposal, negotiation and acceptance by the Company or Parent prior to the End
Date of (i) any and all divestitures of the businesses or assets of it or its Subsidiaries or its Affiliates, (ii) any agreement
to hold any assets of Parent or any of the Parent Subsidiaries or of the Company or any of the Company Subsidiaries separate, (iii)
any limitation to or modification of any of the businesses, services or operations of Parent or any of the Parent Subsidiaries
or of the Company or any of the Company Subsidiaries, and (iv) any other action (including any action that limits the freedom of
action, ownership or control with respect to, or ability to retain or hold, any of the businesses, assets, properties or services
of Parent or any of the Parent Subsidiaries or of the Company or any of the Company Subsidiaries), in each case as may be required
by any applicable Governmental Entity in order to obtain approval for the Transactions; provided, however, that no
party hereto shall be required to become subject to, or consent or agree to or otherwise take any action with respect to, any order,
requirement, condition, understanding or agreement of or with a Governmental Entity to sell, to license, to hold separate or otherwise
dispose of, or to conduct, restrict, operate, or otherwise change their assets or businesses, unless such order, requirement, condition,
understanding or agreement is conditioned upon the occurrence of the Closing.
(e) In
connection with and without limiting the foregoing, the Company, the Company OP and the Company Board shall (i) take all action
necessary to ensure that no state takeover statute or similar statute or regulation is or becomes applicable to this Agreement,
the Company Voting Agreements, the Partnership Merger, the Company Merger or any of the other Transactions and (ii) if any state
takeover statute or similar statute or regulation becomes applicable to this Agreement, the Company Voting Agreements, the Partnership
Merger, the Company Merger or any of the other Transactions, take all action necessary to ensure that the Partnership Merger, the
Company Merger and the other Transactions may be consummated as promptly as practicable on the terms contemplated by this Agreement
and the Company Voting Agreements and otherwise to minimize the effect of such statute or regulation on the Partnership Merger,
the Company Merger and the other Transactions.
(f) In
connection with and without limiting the foregoing, Parent, the Parent OP, OP Merger Sub, IRT LP LLC and the Parent Board shall
(i) take all action necessary to ensure that no state takeover statute or similar statute or regulation is or becomes applicable
to this Agreement, the Parent Voting Agreements, the Partnership Merger, the Company Merger or any of the other Transactions and
(ii) if any state takeover statute or similar statute or regulation becomes applicable to this Agreement, the Parent Voting Agreements,
the Partnership Merger, the Company Merger or any of the other Transactions, take all action necessary to ensure that the Partnership
Merger, the Company Merger and the other Transactions may be consummated as promptly as practicable on the terms contemplated by
this Agreement and the Parent Voting Agreements and otherwise to minimize the effect of such statute or regulation on the Partnership
Merger, the Company Merger and the other Transactions.
(g) Each
of the Company and the Company OP, on the one hand, and Parent and Parent OP, on the other hand, shall, to the extent permitted
by applicable Law and any relevant Governmental Entity and subject to all privileges (including the attorney-client privilege),
promptly (and in any event within two (2) Business Days) notify the other party in writing of:
(i) any
notice or other communication from any Person alleging that the Consent of such Person is or may be required in connection with
the Transactions;
(ii) any
action, suit, claim, investigation or proceeding commenced or, to its Knowledge, threatened against, relating to or involving or
otherwise affecting the Company, the Company OP or any of the Company Subsidiaries or Parent or any of the Parent Subsidiaries,
as the case may be, that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to
any of the representations and warranties contained herein, or that relates to the consummation of the Transactions;
(iii) any
inaccuracy of any representation or warranty contained in this Agreement at any time during the term hereof that would reasonably
be likely to cause the conditions set forth in Article VII not to be satisfied;
(iv) any
notice or other communication from any Governmental Entity in connection with the Merger;
(v) in
the case of the Company, any Event which, either individually or in the aggregate, has had or would reasonably be likely to have
a Company Material Adverse Effect or would reasonably be likely to materially impair or delay the ability of the Company or the
Company OP to consummate the Merger;
(vi) in
the case of Parent, any Event which, either individually or in the aggregate, has had or would reasonably be likely to have a Parent
Material Adverse Effect or would reasonably be likely to materially impair or delay the ability of Parent or Parent OP to consummate
the Merger; and
(vii) any
failure of such party to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder.
6.04 Employment
of Company Personnel; Benefit Plans.
(a) Immediately
prior to the Partnership Merger Effective Time, the Company and the Company Subsidiaries shall terminate the employment of all
of their employees, with such termination in accordance with all applicable Laws, including federal and state “WARN”
Act statutes. Parent shall have no obligation to offer to employ, or to employ, any such employees.
(b) Parent
shall be responsible for perpetuating the group health plan continuation coverages pursuant to Code section 4980B and ERISA sections
601 through 609 for all employees who were employed by the Company or any Company Subsidiary and their spouses and dependents who
are M&A qualified beneficiaries with respect to the Transactions contemplated by this Agreement or whose qualifying event occurs
on or after Closing.
(c) Parent
shall, or shall cause the Surviving Company to, assume and honor the obligations of the Company and the Company Subsidiaries under
each Company Benefit Plan, in accordance with their terms, subject to the right to make amendments or modifications to the extent
permitted by such terms. Parent hereby acknowledges that (i) the Merger will constitute a “Change in Control” (or concept
of similar import) under the Company Benefit Plans and (ii) as a result of the Merger, the individuals identified in Schedule
6.04(b) will be deemed to have experienced a “Good Reason” event (or concept of similar import), as applicable,
for all purposes under the Company Benefit Plans.
(d) Nothing
in this Agreement, express or implied, shall (i) alter or limit the ability of Parent or any of its Subsidiaries (including, after
the Effective Time, the Surviving Company or any Subsidiary of the Surviving Company or the Surviving Partnership or any Subsidiary
of the Surviving Partnership) to amend, modify or terminate any of the Company Benefit Plans or any other benefit or employment
plan, program, agreement or arrangement after the Effective Time, or (ii) confer upon any current or former employee or other service
provider of the Company or the Company Subsidiaries, any right to employment or continued employment or continued service with
the Parent or any of its Affiliates or constitute or create an employment or agreement with, or modify the at-will status of, any
employee or other service provider.
6.05 Indemnification.
(a) Parent
and Parent OP agree that all rights to indemnification, exculpation and advancement of expenses from liabilities for acts or omissions
occurring at or prior to the Effective Time (including any matters arising in connection with the Transactions) in favor of the
current or former directors or officers of the Company and the Company Subsidiaries as provided in the Company Articles, the Company
Bylaws, the Company OP Limited Partnership Agreement and the respective comparable organizational documents of the Company Subsidiaries,
and any indemnification or other agreements of the Company (in each case, as in effect on the date of this Agreement) shall be
assumed by the Surviving Company or the Surviving Partnership, as applicable, in the Merger, without further action, at the Effective
Time, and shall survive the Merger and shall continue in full force and effect in accordance with their terms until the expiration
of the applicable statute of limitations with respect to any claims against such directors or officers arising out of such acts
or omissions (and until such later date as such claims and proceedings arising therefrom shall be finally disposed of), and from
and after the Effective Time Parent shall ensure that the Surviving Company and Surviving Partnership comply with and honor the
foregoing obligations.
(b) Parent
shall cause to be maintained for a period of not less than six (6) years from the Effective Time (and until such later time as
any proceedings commenced during such period shall be finally disposed of) the directors’ and officers’ insurance and
indemnification policies of the Company and the Company OP in effect on the date hereof (provided that Parent may substitute
therefor policies with reputable and financially sound carriers of at least the same coverage and amounts containing terms and
conditions that are no less favorable to the Indemnified Parties) with respect to events occurring at or prior to the Effective
Time (the “D&O Insurance”) for all Persons who are currently covered by such D&O Insurance, so long
as the annual premium therefor would not be in excess of 250% of the last annual premium paid prior to the date of this Agreement
(such 250% amount, the “Maximum Premium”); provided that (i) if the annual premiums for such D&O
Insurance exceed the Maximum Premium, Parent shall maintain the most favorable policies of directors’ and officers’
insurance obtainable for an annual premium equal to the Maximum Premium and (ii) Parent may satisfy their obligations under this
Section 6.05(b) by causing the Company and the Company OP, as applicable, to obtain, on or prior to the Closing Date, prepaid
(or “tail”) directors’ and officers’ liability insurance policy at Parent’s expense, the material
terms of which, including coverage and amount, are no less favorable to such directors and officers than the insurance coverage
otherwise required under this Section 6.05(b). Notwithstanding the foregoing, if the Company or the Company OP in its sole
discretion elects, by giving written notice to Parent at least two (2) Business Days prior to the Effective Time, then, in lieu
of the foregoing insurance, effective as of the Effective Time, the Company or the Company OP, as applicable, shall purchase a
directors’ and officers’ liability insurance “tail” or “runoff” insurance program for a period
of six (6) years after the Effective Time with respect to wrongful acts and/or omissions committed or allegedly committed at or
prior to the Effective Time (such coverage to have an aggregate coverage limit over the term of such policy in an amount not to
exceed the annual aggregate coverage limit under the Company’s or the Company OP’s, as applicable, existing directors’
and officers’ liability policy, and in all other respects to be comparable to such existing coverage).
(c) From
and after the Effective Time, to the fullest extent permitted by Law, Parent shall and shall cause the Surviving Company and any
Subsidiaries of the Surviving Company, including the Surviving Partnership, to indemnify, defend and hold harmless, and provide
advancement of expenses to, the present and former officers and directors of the Company, the Company OP or any Company Subsidiary
and any employee of the Company, the Company OP or any Company Subsidiary who acts as a fiduciary under any Company Benefit Plan
(each an “Indemnified Party”) against all losses, claims, damages, liabilities, fees and expenses (including
reasonable attorneys’ fees and disbursements), judgments, fines and amounts paid in settlement (in the case of settlements,
with the approval of the indemnifying party (which approval shall not be unreasonably withheld)) (collectively, “Losses”),
as incurred (payable monthly upon written request, which request shall include reasonable evidence of the Losses set forth therein)
to the extent arising from, relating to, or otherwise in respect of, any actual or threatened action, suit, proceeding or investigation,
in respect of actions or omissions occurring at or prior to the Effective Time in connection with such Indemnified Party’s
duties as an officer or director of the Company, the Company OP or any Company Subsidiary, including in respect of this Agreement,
the Merger and the other Transactions, or as a fiduciary under any Company Benefit Plan. If any action, suit, proceeding or investigation
is brought against any Indemnified Party in which indemnification or advancement of expenses could be sought by such Indemnified
Party under this Section 6.05(c), the Surviving Company or the Surviving Partnership shall have the right to control the
defense thereof after the Effective Time; provided, however, that neither the Surviving Company nor the Surviving
Partnership shall settle or compromise or consent to the entry of any judgment or otherwise terminate any claim, action, suit,
proceeding or investigation of an Indemnified Party for which indemnification may be sought under this Section 6.05(c)
unless such settlement, compromise, consent or termination includes an unconditional release of such Person from all liability
arising out of such claim, action, suit, proceeding or investigation or such Person otherwise consents.
(d) This
Section 6.05 is intended to be for the benefit of, and shall be enforceable by, each of the Indemnified Parties and their
respective heirs and legal representatives. The rights provided for herein shall not be deemed exclusive of any other rights to
which an Indemnified Party is entitled, whether pursuant to Law, contract or otherwise.
(e) In
the event that Parent, the Surviving Company or the Surviving Partnership or any of their respective successors or assigns (i)
consolidates with or merges into any other Person and is not the continuing or surviving company or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any Person, or if Parent dissolves
or dissolves the Surviving Company or the Surviving Partnership is dissolved then, and in each such case, Parent shall cause the
successors and assigns of Parent, the Surviving Company or the Surviving Partnership, as applicable, to assume the obligations
of Parent, the Surviving Company or the Surviving Partnership, as applicable, set forth in this Section 6.05.
(f) Parent
shall pay all reasonable expenses, including reasonable attorneys’ fees, that may be incurred by any Indemnified Party in
enforcing the indemnity, advancement and other obligations provided in this Section 6.05; provided, however,
that such Indemnified Party provides an undertaking to repay such expenses if it is determined by a final and non-appealable judgment
of a court of competent jurisdiction that such Indemnified Party is not legally entitled to indemnification under Law.
6.06 Rule
16b-3 Matters. Prior to the Partnership Merger Effective Time, the Company and Parent shall, as applicable, take all actions,
if any, as may be reasonably necessary or appropriate to ensure that any dispositions of Company Common Stock or acquisitions of
Parent Common Stock, or dispositions of Company OP Units or acquisitions of Parent OP Common Units (including in each case any
derivative securities thereof) pursuant to the Transactions by any individual who is subject to Section 16 of the Exchange
Act with respect to the Company or the Company OP are exempt under Rule 16b-3 promulgated under the Exchange Act. Upon request,
the Company shall promptly furnish Parent with all requisite information for Parent to take the actions contemplated by this Section 6.06.
6.07 Public
Announcements. The parties hereto agree that the initial press release to be issued with respect to the Merger shall be in
the form heretofore agreed upon by the parties hereto. Except in connection with an Adverse Recommendation Change, so long as this
Agreement is in effect, Parent or Parent OP, on the one hand, and the Company and the Company OP, on the other hand, shall consult
with each other before issuing, and provide each other the opportunity to review and comment upon, any press release or other public
statements with respect to the Merger and the other Transactions, and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by applicable Law, court process or obligations pursuant to the
listing rules of any national securities exchange.
6.08 Transfer
Taxes. Parent and the Company shall cooperate in the preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use, transfer, value added, stock transfer or stamp taxes,
any transfer, recording, registration and other fees and any similar taxes that become payable in connection with the transactions
contemplated by this Agreement (together with any related interests, penalties or additions to Tax, “Transfer Taxes”),
and shall cooperate in attempting to minimize the amount of Transfer Taxes. From and after the Effective Time, the Surviving
Company shall pay or cause to be paid all Transfer Taxes.
6.09 Stockholder
Litigation. The Company shall give prompt notice to Parent of and keep Parent reasonably informed on a current basis with respect
to, and Parent shall give prompt notice to the Company of and keep the Company reasonably informed on a current basis with respect
to, any claim, action, suit, charge, demand, inquiry, subpoena, proceeding, arbitration, mediation or other investigation commenced
or, to such party’s Knowledge, threatened against, relating to or involving such party or the Company OP or Parent OP, respectively,
which relate to this Agreement, the Merger or the other Transactions. The Company shall give Parent the opportunity to reasonably
participate in (but not control), subject to a customary joint defense agreement, the defense and settlement of any stockholder
litigation (including arbitration proceedings) against the Company, the Company OP or any Company Subsidiary and/or any of their
respective directors relating to this Agreement and the transactions contemplated hereby, and no such settlement shall be agreed
to without Parent’s prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed). Parent
shall give the Company the opportunity to reasonably participate in (but not control), subject to a customary joint defense agreement,
the defense and settlement of any stockholder litigation (including arbitration proceedings) against Parent, Parent OP or any Parent
Subsidiary and/or any of their respective directors relating to this Agreement and the transactions contemplated hereby, and no
such settlement shall be agreed to without the Company’s prior written consent (which consent shall not be unreasonably withheld,
conditioned or delayed).
6.10 Financing.
(a) Parent,
with the cooperation of the Company as provided in Section 6.10(c), shall use its reasonable best efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to (i) maintain in effect, from
the date hereof through the earlier of the Closing and the termination of this Agreement, the availability to Parent of the Financing
and the effectiveness of the Commitment Letter, (ii) to obtain and consummate the Financing on terms and conditions substantially
similar to the Commitment Letter, and (iii) to obtain and consummate any Alternative Financing (as defined below). Parent shall
give the Company prompt notice after becoming aware of any material breach or default (or any event or circumstance that would
reasonably be expected to result in a breach or default) of any party’s obligations under the Commitment Letter. If, notwithstanding
the use by Parent of its reasonable best efforts (with the cooperation of the Company as provided in Section 6.10(c)) to
consummate the Financing, any portion of the Financing does not become available in the manner or from the sources contemplated
in the Commitment Letter and such portion is reasonably required in order for Parent to satisfy all of Parent’s obligations
under this Agreement, including the payment of any amounts required to be paid by Parent pursuant to Article II and of all
fees and expenses required to be paid by Parent and reasonably expected to be incurred in connection herewith (the “Necessary
Financing”), Parent shall use its reasonable best efforts to arrange and obtain alternative financing from alternative
sources on terms and conditions reasonably acceptable to Parent in an amount such that the aggregate funds together with other
financial resources of Parent, including any remaining portion of the Financing and any other cash on hand, will be sufficient
to obtain the Necessary Financing and consummate the Transactions (the “Alternate Financing”), and Parent shall
provide a true, correct and complete copy of the documents relating to Alternative Financing to the Company.
(b) Notwithstanding
anything to the contrary in this Section 6.10, the provisions of Section 6.10 shall not limit in any manner the ability
of the Company or Parent to terminate this Agreement in accordance with Section 8.01(b)(i) or Section 8.01(b)(ii)
or the Company to terminate this Agreement in accordance with Section 8.01(k), in each case as a result of a Financing Failure,
and the sole remedy for any such termination described in Section 8.03(b)(iv) shall be the payment by Parent of the Parent
Termination Fee.
(c) Prior
to the Closing, the Company agrees to provide, and shall cause the Company Subsidiaries and its and their officers, directors,
employees, accountants, consultants, legal counsel, agents and other representatives to provide, all cooperation in connection
with the arrangement of the Financing contemplated by the Commitment Letter or any Alternative Financing as may be reasonably requested
by Parent, which shall include:
(i) timely
furnishing Parent and its financing sources with the Required Information;
(ii) participating
in, and assisting with, the Marketing Efforts related to the Financing;
(iii) facilitating
the pledging of collateral, including taking all actions reasonably necessary to establish bank and other accounts and blocked
account agreements in connection with the foregoing;
(iv) with
respect to the Designated Loans of the Designated Lenders set forth on Section 7.02(g)(i) of the Parent Disclosure Letter,
obtain at the request of Parent amendments to the loan documents applicable to such Designated Loan to permit (A) Parent and its
Affiliates to assume such Specified Existing Debt, (B) unrestricted offers, sales, issuances, transfers, conversions, redemptions
and repurchases of common equity or preferred equity of Parent and Parent OP, and (C) mergers, consolidations, reorganizations,
liquidations and dissolutions of Subsidiaries of the Parent and/or Parent OP into, or with, one or more of their Subsidiaries
(v) with
respect to the Designated Loans of the Designated Lenders set forth on Section 7.02(g)(i) of the Parent Disclosure Letter,
obtain at the request of Parent amendments to the loan documents applicable to such Designated Loan to permit prepayment of such
Designated Loan at any time on or before the End Date with no increase in the prepayment fee or penalty (whether or not labeled
as such);
(vi) assisting
Parent and its financing sources in obtaining the items required by Sections (xiii) through (xix) of Schedule B to the Commitment
Letter (or similar items related to an alternate debt financing);
(vii) requesting
customary payoff letters, lien terminations and instruments of discharge to be delivered at Closing to allow for the payoff, discharge
and termination in full on the Closing Date of all indebtedness and liens under the Specified Existing Debt to be extinguished
on the Closing Date;
(viii) taking
such actions as are reasonably requested by Parent or its financing sources to facilitate the satisfaction on a timely basis of
all conditions precedent to obtaining the Financing;
(ix) using
commercially reasonable efforts to cause its auditors to cooperate with the Financing; and
(x) using
its commercially reasonable efforts to ensure that the Financing benefits from the existing lending relationships of the
Company and the Company Subsidiaries;
provided that (A) such requested cooperation does not unreasonably interfere
with the ongoing operations of the Company and the Company Subsidiaries and (B) none of the Company or any of the Company
Subsidiaries shall be required to pay any commitment or other similar fee or incur any other liability in connection with the
Financing (other than its own reasonable out-of-pocket costs; provided that Parent shall, upon request by the Company,
reimburse the Company for all reasonable and documented out-of-pocket costs and expenses (including reasonable and documented
attorneys’ fees of one outside counsel) incurred by the Company and the Company Subsidiaries solely and to the extent
in connection with the cooperation of the Company and the Company Subsidiaries contemplated by this Section 6.10(c)).
The Company will provide, or cause to be provided, to Parent and its financing sources such information as may be necessary
so that the Required Information and Marketing Material is complete and correct in all material respects and does not and
will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which such statements are made, not misleading. The Company hereby
consents to the use of all of its and the Company Subsidiaries’ logos in connection with the Financing. Parent agrees
that the execution by the Company or any of the Company Subsidiaries of any documents in connection with the financing for
the transactions contemplated by this Agreement will be subject to the consummation of the transactions contemplated hereby
at the Closing and such documents will not take effect prior thereto.
6.11 Certain
Tax Matters.
(a) Each
of Parent and the Company shall use its reasonable best efforts to cause the Company Merger to qualify as a reorganization within
the meaning of Section 368(a) of the Code, including by executing and delivering the officers’ certificates referred to herein
and reporting consistently for all federal, state, and local income Tax or other purposes, provided, however, that
this sentence shall not restrict the right of Parent with respect to elections made with respect to the consideration to be provided
in the Company Merger as provided in this Agreement. Neither Parent nor the Company shall take any action, or fail to take any
action, other than actions anticipated by his Agreement, that would reasonably be expected to cause the Company Merger to fail
to qualify as a reorganization within the meaning of Section 368(a) of the Code. Provided that the tax opinions referenced in Section
7.02(e) and Section 7.03(e) have been provided, unless there has been a “determination” (within the meaning
of Section 1313(a) of the Code) to the contrary, each of Parent, the Company and the Company stockholders shall report the Company
Merger as a reorganization within the meaning of Section 368(a) of the Code, with no gain or loss recognized by the Company or
any Company stockholder for federal income tax purposes, except with respect to any cash received by or paid to the Company stockholders.
(b) Each
of Parent and the Company shall use its reasonable best efforts to cause the Partnership Merger to be treated as an “asset-over”
form of merger governed by Treasury Regulations Section 1.708-1(c)(3)(i), with Parent OP being a continuation of Company OP for
federal income tax purposes.
6.12 401(k)
Plan. The Company shall take any and all actions necessary to terminate the Company’s 401(k) Plan effective immediately
before the Closing. The Company shall provide Parent with evidence that the 401(k) Plan has been terminated (effective no later
than immediately before the Closing) pursuant to appropriate resolutions and any other necessary corporate action.
6.13 Pre-Closing
Dividends.
(a) From
and after the date of this Agreement and until the earlier of the termination of this Agreement and the Effective Time, the Company
shall not make any dividend or distribution to its stockholders, and the Company OP shall not make any dividend or distribution
to its partners, in each case without the prior written consent of Parent in its sole discretion; provided, however,
that the written consent of Parent shall not be required for the authorization and payment of (i) distributions required for the
Company to maintain its status as a REIT under the Code, (ii) quarterly distributions of up to $0.095 per share of Company
Common Stock to the holders thereof for the quarter ending June 30, 2015 and for each quarter thereafter ending prior to the Effective
Time and for each partial quarter ending on the Effective Time; provided, however, that the record date of any such
dividend must be on or before the date which is ten (10) days prior to the Closing Date, and (iii) a distribution per Company OP
Unit in the same amount as a dividend per share of Company Common Stock permitted pursuant to clauses (i) or (ii) above, with the
same record and payment dates as such dividends on shares of Company Common Stock. In the event that a distribution with respect
to shares of Company Common Stock permitted by this Section 6.13 has (x) a record date prior to the Effective Time and (y)
has not been paid as of the Effective Time, the holders of shares of Company Common Stock shall be entitled to receive such distribution
at the time such shares are exchanged pursuant to Article II of this Agreement.
(b) From
and after the date of this Agreement and until the earlier of the termination of this Agreement and the Effective Time, Parent
shall not make any dividend or distribution to its stockholders, and Parent OP shall not make any dividend or distribution to its
partners, in each case without the prior written consent of the Company in its sole discretion; provided, however,
that the written consent of the Company shall not be required for the authorization and payment of (i) distributions required for
Parent to maintain its status as a REIT under the Code, (ii) monthly distributions of up to $0.06 per share of Parent Common
Stock to the holders thereof, including for any partial month ending on the Effective Time, and (iii) monthly distributions of
up to $0.06 per Parent OP Common Unit to the holders thereof.
Article
VII
CONDITIONS
PRECEDENT
7.01 Conditions
to Each Party’s Obligation to Effect the Merger. The respective obligation of each party hereto to effect the Merger
and consummate the Transactions is subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions:
(a) Stockholder
Approvals. The Company shall have obtained the Company Stockholder Approval, and Parent shall have been obtained the Parent
Stockholder Approval.
(b) No
Injunctions or Restraints. No Judgment issued by any Governmental Entity or other Law preventing the consummation of the Merger
or the Transactions shall be in effect; provided, however, that prior to asserting this condition, each of the parties
hereto shall have complied in all material respects with Section 6.03.
(c) Form
S-4. The Form S-4 shall have been declared effective by the SEC under the Securities Act and no stop order suspending the effectiveness
of the Form S-4 shall have been issued by the SEC and no proceedings for that purposes shall have been initiated by the SEC that
have not been withdrawn.
(d) NYSE
MKT Listing. The Parent Common Stock to be issued in the Merger shall have been approved for listing on the NYSE MKT, subject
to official notice of issuance.
7.02 Additional
Conditions to Obligations of Parent and Parent OP. The obligations of Parent and Parent OP to effect the Merger and to consummate
the Transactions are subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions:
(a) Representations
and Warranties of the Company and the Company OP. (i) The representations and warranties of the Company and the Company
OP set forth in the first, second, third, fifth and sixth sentences of Section 3.02(a) (Capital Structure) shall be true
and correct in all but de minimis respects at the Closing Date as if made at and as of such time (except to the extent such representations
and warranties in Section 3.02(a) expressly relate to a specific date, in which case such representations and warranties
shall be true and correct in all respects as of such date); (ii) the representations and warranties of the Company and the Company
OP set forth in clause (i) of Section 3.07 (Absence of Certain Changes or Events) and Section 3.22 (Takeover Statutes)
shall be true and correct in all respects at the Closing Date as if made at and as of such time; (iii) the representations and
warranties of the Company and the Company OP set forth in Section 3.01 (Organization, Standing and Power), Section 3.03
(Authority; Execution and Delivery; Enforceability), Section 3.19 (Vote Required), Section 3.20 (Brokers), and Section
3.23 (Investment Company Act) (disregarding all exceptions and qualifications with regard to materiality or Company Material
Adverse Effect contained therein) shall be true and correct in all material respects at the Closing Date as if made at and as of
such time; and (iv) each other representation and warranty of the Company and the Company OP contained in this Agreement (disregarding
all exceptions and qualifications with regard to materiality or Company Material Adverse Effect contained therein) shall be true
and correct in all respects as of the Closing Date (other than representations and warranties that speak as of another date, which
shall be true and correct as of such other date), except where the failure to be true and correct does not have, and would not
reasonably be expected to have, a Company Material Adverse Effect.
(b) Performance
of Obligations of the Company and the Company OP. Except for those obligations that by their nature may not be performed until
the Closing, the Company and the Company OP shall have performed or complied with in all material respects all obligations required
to be performed or complied with by it under this Agreement at or prior to the Closing Date.
(c) Certificate.
Parent shall have received a certificate, executed by an officer of the Company, to the effect that the conditions set forth in
Sections 7.02(a) and 7.02(b) have been satisfied.
(d) Company
Tax Opinion. The Company shall have received and delivered to Parent an opinion of Morrison & Foerster LLP, counsel to
the Company, on which Parent shall be entitled to rely, dated as of the Closing Date, that the Company, commencing with its taxable
year ended December 31, 2012 was organized and has operated in conformity with the requirements for qualification and taxation
as a REIT under Sections 856 through 860 of the Code. Such opinion shall be based upon customary assumptions and customary representations
made by the Company and the Company Subsidiaries.
(e) Section
368 Opinion. Parent shall have received an opinion of its counsel, Pepper Hamilton LLP, dated as of the Closing Date, to the
effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, the Merger will qualify
as a reorganization within the meaning of Section 368(a) of the Code. The condition set forth in this Section 7.02(e) shall
not be waivable after receipt of the Parent Stockholder Approval, unless further approval of the Parent’s stockholders is
obtained with appropriate disclosure. Parent shall have no obligation to seek such further approval.
(f) No
Material Adverse Effect. There shall not have been any event, effect, change, discovery, development, state of facts or occurrence
that, individually or together with any other event, effect, change, discovery, development, state of facts or occurrence, has
had or would reasonably be expected to have a Company Material Adverse Effect.
(g) Amendments
to Loan Documents.
(i) Each
Designated Lender set forth on Section 7.02(g)(i) of the Parent Disclosure Letter shall have agreed to amend the loan documents
applicable to its Designated Loan to permit (A) Parent and its Affiliates to assume such Designated Loan, (B) unrestricted offers,
sales, issuances, transfers, conversions, redemptions and repurchases of common equity or preferred equity of Parent and Parent
OP, and (C) mergers, consolidations, reorganizations, liquidations and dissolutions of Subsidiaries of Parent and/or Parent OP
into, or with, one or more of their Subsidiaries; provided, that in the event any Designated Lender set forth on Section
7.02(g)(i) of the Parent Disclosure Letter has not agreed to any such amendments at least ten (10) Business Days prior to the
End Date (as it may be extended pursuant to Section 8.01(b)(i)), Parent and Parent OP shall be deemed to have waived the
condition set forth in this Section 7.02(g)(i).
(ii) Each
Designated Lender set forth on Section 7.02(g)(i) of the Parent Disclosure Letter shall have agreed to amend the loan documents
applicable to its Designated Loan to permit prepayment at any time on or before the End Date with no increase in the prepayment
fee or penalty (whether or not labeled as such) from the prepayment fee or penalty for the Designated Loans identified on Section
7.02(g)(ii) of the Parent Disclosure Letter; provided, that in the event any Designated Lender set forth on Section
7.02(g)(i) of the Parent Disclosure Letter has not agreed to any such amendments at least ten (10) Business Days prior to the
End Date (as it may be extended pursuant to Section 8.01(b)(i)), Parent and Parent OP shall be deemed to have waived the
condition set forth in this Section 7.02(g)(ii).
(h) Termination
of Stockholders Agreement. Parent shall have received an instrument evidencing the termination of the Stockholders Agreement,
dated as of January 16, 2014, by and among Trade Street Residential, Inc., Senator Global Opportunity Fund LP and Senator Global
Opportunity Intermediate Fund L.P. in form and substance satisfactory to Parent, executed by each party thereto.
(i) Lock-Up
Agreements. Parent shall have received a lock-up agreement signed by each of Senator Investment Group, LP (“Senator”)
and Monarch Alternative Capital LP (“Monarch”) in favor of Parent in the form of Exhibit A hereto.
(j) 401(k)
Plan. The Company shall have delivered evidence that the Company has adopted resolutions, in form and substance satisfactory
to Parent, terminating the Company’s 401(k) Plan.
7.03 Additional
Conditions to Obligations of the Company and the Company OP. The obligations of the Company
and the Company OP to effect the Merger and to consummate the Transactions are subject to the satisfaction or waiver on or prior
to the Closing Date of the following conditions:
(a) Representations
and Warranties of Parent, Parent OP, OP Merger Sub and IRT LP LLC. (i) The representations and warranties of Parent, Parent
OP, OP Merger Sub and IRT LP LLC set forth in the first, second, third, fifth and sixth sentences of Section 4.02(a) (Capital
Structure) shall be true and correct in all but de minimis respects at the Closing Date as if made at and as of such time (except
to the extent such representations and warranties in Section 4.02(a) expressly relate to a specific date, in which case
such representations and warranties shall be true and correct in all respects as of such date); (ii) the representations and warranties
of Parent, Parent OP, OP Merger Sub and IRT LP LLC set forth in clause (i) of Section 4.07 (Absence of Certain Changes or
Events) and Section 4.22 (Takeover Statutes) shall be true and correct in all respects at the Closing Date as if made at
and as of such time; (iii) the representations and warranties of Parent, Parent OP, OP Merger Sub and IRT LP LLC set forth in Section
4.01 (Organization, Standing and Power), Section 4.03 (Authority; Execution and Delivery; Enforceability), Section
4.19 (Vote Required), Section 4.20 (Brokers), and Section 4.24 (Investment Company Act) (disregarding all exceptions
and qualifications with regard to materiality or Parent Material Adverse Effect contained therein) shall be true and correct in
all material respects at the Closing Date as if made at and as of such time; and (iv) each other representation and warranty of
Parent, Parent OP, OP Merger Sub and IRT LP LLC contained in this Agreement shall be true and correct in all respects as of the
Closing Date (other than representations and warranties that speak as of another date, which shall be true and correct as of such
other date), except where the failure to be true and correct does not have, and would not reasonably be expected to have, a Parent
Material Adverse Effect.
(b) Performance
of Obligations of Parent and Parent OP. Except for those obligations that by their nature may not be performed until the Closing,
Parent or Parent OP shall have performed or complied with in all material respects all obligations required to be performed or
complied with by it under this Agreement at or prior to the Closing Date.
(c) Certificate.
The Company shall have received a certificate, executed by an officer of Parent, to the effect that the conditions set forth in
Sections 7.03(a) and 7.03(b) have been satisfied.
(d) Parent
Tax Opinion. Parent shall have received and delivered to the Company an opinion of Pepper Hamilton LLP, counsel to Parent,
on which the Company shall be entitled to rely, dated as of the Closing Date, that Parent, commencing with its taxable year ended
December 31, 2011 was organized and has operated in conformity with the requirements for qualification and taxation as a REIT under
Sections 856 through 860 of the Code and its current and proposed method of operation will enable it to continue to qualify for
taxation as a REIT for its taxable year ending on or before December 31, 2015. Such opinion shall be based upon customary assumptions
and customary representations made by Parent and the Parent Subsidiaries.
(e) Section
368 Opinion. The Company shall have received an opinion of its counsel, Morrison & Foerster LLP, dated as of the Closing
Date, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, the
Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. The condition set forth in this Section
7.03(e) shall not be waivable after receipt of the Company Stockholder Approval, unless further approval of the Company’s
stockholder is obtained with appropriate disclosure.
(f) No
Material Adverse Effect. There shall not have been any event, effect, change, discovery, development, state of facts or occurrence
that, individually or together with any other event, effect, change, discovery, development, state of facts or occurrence, has
had or would reasonably be expected to have a Parent Material Adverse Effect.
Article
VIII
TERMINATION,
AMENDMENT AND WAIVER
8.01 Termination.
This Agreement may be terminated and the Merger and the other transactions contemplated hereby abandoned at any time prior to the
Partnership Merger Effective Time as follows (the date of any such termination, the “Termination Date”):
(a) by
mutual written consent of Parent and the Company;
(b) by
either Parent or the Company:
(i) upon
written notice to the other party, if the Merger shall not have been consummated on or before 5:00 p.m. (Eastern time) on October
15, 2015 (the “End Date”); provided, that the right to terminate this Agreement under this Section
8.01(b) shall not be available to any party (including, with respect to the Company, the Company OP, and with respect to Parent,
Parent OP) whose failure to comply with Section 6.03 or any other provision of this Agreement has been the cause of, or
resulted in, the failure of the Merger to occur on or before such date; provided, further, that (A) if ten (10) Business
Days prior to the End Date, all conditions to Closing set forth in Section 7.01 and Section 7.02 are satisfied except
for the condition in Section 7.02(g)(i) or the condition in Section 7.02(g)(ii), and (B) Parent provides the Company
with evidence that the effectiveness of the Commitment Letter has been extended until at least December 31, 2015 or has otherwise
entered into a commitment letter with respect to an Alternative Financing with that is effective until at least December 31, 2015,
then, upon the election of Parent, in its reasonable discretion, the End Date then in effect may be extended to December 31, 2015
(and in the case of any extension pursuant to this Section 8.01(b)(i), any reference to the End Date in this or any other
provision of this Agreement shall be a reference to the End Date, as extended); or
(ii) if
the conditions to Closing set forth in Section 7.01 and Section 7.02 are satisfied (other than those conditions that
by their nature are to be satisfied at the Closing, provided that such conditions are reasonably capable of being satisfied) and
Parent is unable to satisfy its obligation to effect the Closing at such time because of a Financing Failure; provided,
however, that, prior to the End Date, Parent will not be permitted to terminate this Agreement pursuant to this 8.01(b)(ii)
if Parent has materially and willfully, intentionally or knowingly breached Section 6.10;
(c) by
either Parent or the Company, upon written notice to the other party, if any Governmental Entity of competent jurisdiction has
issued or enacted any Law or taken any other action (including the failure to have taken an action), which in either such case
has become final and non-appealable, that has the effect of restraining, enjoining or otherwise prohibiting consummation of the
Merger; provided, that the right to terminate this Agreement under this Section 8.01(c) shall not be available to
any party (including, with respect to the Company, the Company OP, and with respect to Parent, Parent OP) whose failure to comply
with Section 6.03 or any other provision of this Agreement has been the cause of, or resulted in, such action;
(d) by
either Parent or the Company, upon written notice to the other party, if adoption of this Agreement fails to receive the Company
Stockholder Approval at a duly held Company Stockholder Meeting at which the Merger has been voted upon; provided, that
the right to terminate this Agreement under this Section 8.01(d) shall not be available to the Company if the failure to
obtain the Company Stockholder Approval was primarily due to the Company’s failure to perform any of its obligations under
this Agreement;
(e) by
either Parent or the Company, upon written notice to the other party, if adoption of this Agreement fails to receive the Parent
Stockholder Approval at the Parent Stockholder Meeting; provided, that the right to terminate this Agreement under this
Section 8.01(e) shall not be available to Parent if the failure to obtain the Parent Stockholder Approval was primarily
due to Parent’s failure to perform any of its obligations under this Agreement;
(f) by
the Company, upon written notice to Parent, or by Parent, upon written notice to the Company, if the Company effects an Adverse
Recommendation Change in accordance with Section 5.03(b);
(g) by
Parent, upon written notice to the Company, if the Company enters into an Alternative Acquisition Agreement;
(h) by
the Company, upon written notice to Parent, at any time prior to the receipt of the Company Stockholder Approval, if, concurrently
with such termination, the Company enters into an Alternative Acquisition Agreement in accordance with Section 5.03(b);
provided, that any purported termination by the Company pursuant to this paragraph shall be void and of no force or effect
unless the Company pays to Parent a fee of $12,000,000 (the “Company Termination Fee”) in accordance with Section 8.03(b)(iii);
(i) by
Parent, upon written notice to the Company, if a breach of any representation or warranty or failure to perform any covenant or
agreement on the part of the Company or the Company OP set forth in this Agreement has occurred that would cause any of the conditions
set forth in Section 7.01 or Section 7.02 not to be satisfied, which breach or failure to perform cannot be cured
or, if capable of cure, has not been cured by the earlier of 20 days following written notice thereof from Parent to the Company
and two (2) Business Days before the End Date; provided, that neither Parent nor Parent OP is then in breach of this Agreement
so as to cause any of the conditions set forth in Section 7.01 or Section 7.03 not to be satisfied;
(j) by
the Company, upon written notice to Parent, if a breach of any representation or warranty or failure to perform any covenant or
agreement on the part of Parent or Parent OP set forth in this Agreement has occurred that would cause the conditions set forth
in Section 7.01 or Section 7.03 not to be satisfied, which breach or failure to perform cannot be cured or,
if capable of cure, has not been cured by the earlier of 20 days following written notice thereof from the Company to Parent and
two (2) Business Days before the End Date; provided, that neither the Company nor the Company OP is then in breach of this
Agreement so as to cause any of the conditions set forth in Section 7.01 or Section 7.02 not to be satisfied;
(k) by
the Company, upon written notice to Parent, if the Closing has not occurred within two (2) Business Days after the Company has
delivered written notice to Parent that all conditions set forth in Section 7.01 and Section 7.02 have been satisfied
(other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction of such conditions
at such time) and the Company is ready, willing and able to effect the Closing;
(l) by
the Company, in the event that the Computed Stock Consideration Per Share Ratio as of the Closing Date is less than forty percent
(40.0%) or
(m) by
the Company, in the event that, during the Specified Period the Parent Stock Price Decline, if any, exceeds the RMZ Decline, if
any, by 15% or more.
8.02 Effect
of Termination. In the event of the termination of this Agreement pursuant to Section 8.01, this Agreement shall forthwith
become void, and there shall be no liability under this Agreement on the part of any party hereto or their respective Affiliates;
provided, that the last sentence of Section 6.02, this Article VIII and Article IX shall survive any
such termination. Notwithstanding anything in this Agreement to the contrary, no such termination shall relieve any party hereto
of any liability or damages resulting from or arising out of any fraud or an Intentional Breach of this Agreement. For purposes
of the foregoing, “Intentional Breach” shall mean a material breach that is a consequence of an act knowingly undertaken
by the breaching party with the intent of causing a breach of this Agreement.
8.03 Fees
and Expenses.
(a) Whether
or not the Merger is consummated, all Expenses incurred in connection with this Agreement and the Transactions shall be paid by
the party incurring such Expense; provided, however, that (i) in the event of a termination by Parent or the Company
pursuant to Section 8.01(d) or Section 8.01(f) or by the Company pursuant to Section 8.01(m), then the Company
shall pay, or cause to be paid, to Parent the Parent Expense Amount, and (ii) in the event of a termination by Parent or the Company
pursuant to Section 8.01(e), then Parent shall pay, or cause to be paid, to Company the Company Expense Amount. For purposes
of this Agreement:
(A) “Expenses”
means all reasonable out-of-pocket documented expenses (including all fees and expenses of counsel, accountants, investment bankers,
financing sources, hedging counterparties, experts and consultants to a party hereto and its Affiliates) incurred by a party or
on its behalf in connection with or related to the preparation, negotiation, execution and performance of this Agreement, the making
or obtaining of any required filings, notices or approvals of any Governmental Entities in connection therewith, the preparation,
printing, filing and mailing of the Joint Proxy Statement and the solicitation of the Company Stockholder Approval or Parent Stockholder
Approval, as applicable, and all other matters related to the closing of the Transactions.
(B) “Parent
Expense Amount” means (i) 100% of the amount of Expenses of Parent up to $2,500,000 and (ii) 50% of all Expenses
of Parent exceeding $2,500,000; provided that the aggregate Parent Expense Amount shall not exceed $5,000,000.
(C) “Company
Expense Amount” means (i) 100% of the amount of Expenses of the Company up to $2,500,000 and (ii) 50% of all Expenses
of the Company exceeding $2,500,000; provided that the aggregate Company Expense Amount shall not exceed $5,000,000.
(b) If
this Agreement is terminated:
(i) by
Parent or the Company pursuant to Section 8.01(b), Section 8.01(d) or Section 8.01(f) and (A) in the
case of a termination pursuant to Section 8.01(b), the Company Stockholder Approval shall not have been obtained prior
to such termination, and (B) in any such case (x) the condition in Section 7.01(b) has been satisfied, (y) a Company
Takeover Proposal has been publicly announced after the date hereof and not publicly withdrawn without qualification before such
termination and (z) within 12 months after the Termination Date, the Company consummates a transaction regarding, or executes a
definitive agreement with respect to, a Company Takeover Proposal (whether or not the same Company Takeover Proposal as that referred
to in clause (y)), then the Company shall pay Parent, concurrently with the earlier of the consummation of such transaction or
execution of such definitive agreement, the Company Termination Fee (less any Parent Expense Amount previously paid pursuant to
Section 8.03(a)(i) above); provided that, for purposes of this Section, “Company Takeover Proposal” shall
have the meaning assigned to such term in Section 5.03(a), except that the reference to “20%” in the definition
thereof shall be deemed to be references to “50%”.
(ii) by
Parent pursuant to Section 8.01(g), then the Company shall pay Parent, within three (3) Business Days of the Termination
Date, the Company Termination Fee;
(iii) by
the Company pursuant to Section 8.01(h), then the Company shall pay Parent, concurrently with such termination, the Company
Termination Fee;
(iv) by
Parent or the Company pursuant to Section 8.01(b)(i) or Section 8.01(b)(ii) or by the Company pursuant to Section
8.01(k), and at the time of any such termination each of the conditions set forth in Section 7.01 and Section 7.02
has been satisfied (A) other than those conditions that by their nature are to be satisfied at the Closing, provided that such
conditions are reasonably capable of being satisfied, and (B) other than the conditions set forth in Section 7.02(g)(i)
and (g)(ii)), then Parent shall pay or cause to be paid to the Company, within three (3) Business Days of the Termination
Date, a fee of $25,000,000 (the “Parent Termination Fee”).
(c) Any
payments pursuant to this Section 8.03 shall be paid by wire transfer of immediately available funds to the accounts designated
in writing by the payee. Each party acknowledges that the agreements contained in this Section 8.03 are an integral part
of the transactions contemplated by this Agreement, and that, without such agreements, the other party would not enter into this
Agreement. Accordingly, if a party fails to promptly pay an amount due pursuant to this Section 8.03 and, in order to obtain
such payment, the other party commences an action that results in a final judgment against such party for such amount or any portion
thereof, such party shall pay the other party’s reasonable costs and expenses (including court costs, attorneys’ fees
and expenses) in connection therewith, together with interest on the amount of such judgment, from the date such payment was required
to be made through the date of payment, at the U.S. Dollar prime rate of interest as reported by The Wall Street Journal in effect
on the date of such payment. Each party agrees that the payment of the amounts specified in this Section 8.03 are liquidated
damages and not a penalty, and are a reasonable amount that will compensate the parties for the efforts and resources expended
and opportunities foregone while negotiating this Agreement and relying on the expectation of the consummation of the Transactions,
which amount would otherwise be impossible to calculate with precision.
(d) Notwithstanding
anything to the contrary in this Agreement, except as contemplated by Section 8.02, in the event of the termination of this
Agreement the rights of each party pursuant to this Section 8.03 shall be the sole and exclusive remedy (at law or in equity,
on any theory of liability, including on account of punitive damages) of such party and its Subsidiaries against the other party,
its Subsidiaries and each of their former, current or future directors, officers, employees, stockholders, members, managers, partners,
agents and assigns (each, a “Related Party”) for any and all losses or damages suffered as a result of the failure
of the Transactions to be consummated, any breach of this Agreement or otherwise relating hereto or thereto, and upon payment of
the amounts contemplated by this Section 8.03, if and when due, none of such party or its Related Parties shall have any
further liability or obligation relating thereto or arising therefrom.
8.04 Amendment.
This Agreement may be amended by the parties hereto at any time before or after receipt of the Company Stockholder Approval and
Parent Stockholder Approval; provided, however, that (a) after receipt of the Company Stockholder Approval, there
shall be made no amendment or waiver that by Law requires further approval by the stockholders of the Company without the further
approval of such stockholders, (b) after receipt of the Parent Stockholder Approval, there shall be made no amendment or waiver
that by Law requires further approval by the stockholders of Parent without the further approval of such stockholders, (c) no amendment
shall be made to this Agreement after the Effective Time, and (d) Sections 8.07, 9.08, 9.09, 9.10,
9.11 and 9.13(d) and this Section 8.04 shall not be amended or otherwise modified in any way that adversely
affects the rights of any Financing Source without the prior written consent of the Financing Sources. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the parties hereto.
8.05 Extension;
Waiver. At any time prior to the Partnership Merger Effective Time, the parties hereto may, to the extent permitted by applicable
Law, (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained in this Agreement or in any document delivered pursuant to this Agreement
or (c) subject to the proviso in Section 8.04, waive compliance with any of the agreements or conditions contained in this
Agreement. Subject to the proviso in Section 8.04, no extension or waiver by the Company shall require the approval of the
stockholders of the Company and no extension or waiver by Parent shall require the approval of the stockholders of Parent. Any
agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure or delay by any party to this Agreement to assert any of its rights under this Agreement
or otherwise shall not constitute a waiver of such rights nor shall any single or partial exercise by any party to this Agreement
of any of its rights under this Agreement preclude any other or further exercise of such rights or any other rights under this
Agreement. Any waiver shall be effective only in the specific instance and for the specific purpose for which given and shall not
constitute a waiver to any subsequent or other exercise of any right, remedy, power or privilege hereunder.
8.06 Procedure
for Termination, Amendment, Extension or Waiver. A termination of this Agreement pursuant to Section 8.01, an amendment
of this Agreement pursuant to Section 8.04 or an extension or waiver pursuant to Section 8.05 shall, in order
to be effective, require in the case of Parent or the Company, action by its board of directors or the duly authorized designee
of its board of directors. Termination of this Agreement prior to the Partnership Merger Effective Time shall not require the approval
of the stockholders of the Company or the approval of the stockholders of Parent.
8.07 No
Recourse to Financing Sources. Notwithstanding anything herein to the contrary, the parties hereto agree, on behalf of themselves
and each of their former, current or future officers, directors, managers, employees, members, partners, shareholders, agents and
other representatives and Affiliates (the “Applicable Parties”), that the Financing Sources, each other lender
participating in the financing contemplated by the Commitment Letter and each of their respective former, current or future general
or limited partners, stockholders, managers, members, agents, representatives and Affiliates and each of their successors and assigns,
shall be subject to no liability or claims to the Applicable Parties in connection with financing any portion of the debt contemplated
by the Commitment Letter or in any way relating to this Agreement or any of the Transactions, whether at law, in equity, in contract,
in tort or otherwise.
Article
IX
GENERAL
PROVISIONS
9.01 Nonsurvival
of Representations and Warranties. None of the representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective Time. This Section 9.01 shall not limit
any covenant or agreement of the parties hereto that by its terms contemplates performance after the Effective Time. The Confidentiality
Agreement will survive termination of this Agreement in accordance with its terms.
9.02 Notices.
All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given
(a) upon personal delivery to the party to be notified; (b) when transmitted (providing confirmation of transmission) if sent by
facsimile transmission (provided that any notice provided by facsimile transmission on any Business Day after 5:00 p.m.
(in the time zone of the recipient) or any day other than a Business Day shall be deemed to have been received at 9:00 a.m.
on the next Business Day); (c) upon acknowledgment of receipt of such notice b the intended recipient if sent by email; or (d)
when sent, postage prepaid, by registered, certified or express mail or reputable overnight courier service, three (3) days after
mailing (one (1) Business Day in the case of express mail or overnight courier service); as follows (or at such other address for
a party as shall be specified by like notice):
| (a) | if to Parent, Parent OP, OP Merger Sub or IRT LP LLC, to |
Independence Realty Trust, Inc.
2929 Arch Street, 17th Floor
Philadelphia, PA 19104
Facsimile: (215) 405-2945
Attention: James Sebra and Jamie Reyle
Email: jsebra@raitft.com
jreyle@raitft.com
with a copy to:
Pepper Hamilton LLP
Two Logan Square
Eighteen and Arch Streets
Philadelphia, PA 19103
Facsimile: (215) 981-4750
Attention: Michael Friedman, Esq. and Matthew Greenberg,
Esq.
Email: friedmam@pepperlaw.com
greenbmm@pepperlaw.com
| (b) | if to the Company or Company OP, to |
Trade Street Residential, Inc.
19950 West Country Club Drive
Suite 800
Aventura, Florida 33180
Facsimile: (786) 248-3679
Attention: Richard Ross
Email: rross@trade-street.com
with a copy to:
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W.
Suite 6000
Washington, D.C. 20006
Facsimile: (202) 887-0763
Attention: John Good, Esq. and David P. Slotkin, Esq.
Email: jgood@mofo.com
dslotkin@mofo.com
9.03 Definitions.
(a) For
purposes of this Agreement:
“Additional Elected Cash Consideration
Per Share” means an amount of additional cash per share elected pursuant to a Parent Additional Cash Election, which
amount shall not exceed the product of Computed Merger Consideration Per Share immediately prior to any Parent Additional Cash
Election times sixty percent (60.0%), rounded down to the nearest cent, minus $3.80.
“Affiliate” of any Person
means another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common
control with, such first Person.
“Business Day” means
any day on which the principal offices of the SEC in Washington, D.C. are open to accept filings or, in the case of determining
a date when any payment is due, any day on which banks are not required or authorized by Law to close in New York, New York.
“Cash Election Adjustment Amount”
shall apply only in the event that (1) Parent makes a Parent Additional Cash Election, (2) the Computed Stock Consideration Per
Share Ratio on the Closing Date is less than forty percent (40%), and (3) the Company does not terminate this Agreement pursuant
to Section 8.01(l), in which event the Per Share Cash Amount shall be reduced to sixty percent (60.0%) of the Computed Merger Consideration
Per Share on the Closing Date rounded down to the nearest cent.
“Closing Average Parent Stock Price”
means the 20-Day VWAP of Parent Common Stock on the NYSE MKT, as reported by Bloomberg L.P. or, if not reported therein, in another
authoritative source mutually selected by the Company and Parent) for the period of twenty (20) consecutive Trading Days ending
on (and including) the Trading Day that is five (5) Trading Days prior to the Closing Date.
“Closing Date Company Merger Consideration
Value” means the sum of (i) the aggregate Share Cash Consideration, plus (ii) the product obtained by multiplying (A)
the aggregate number of shares constituting the Share Stock Consideration, and (B) the Parent Closing Stock Price.
“Company Articles” means
the charter of the Company.
“Company Bylaws” means
the Third Amended and Restated Bylaws of the Company, as amended.
“Company Material Adverse Effect”
means any change, development, event, effect or occurrence (each, an “Event”) that (i) has a material adverse
effect on the business, assets, properties, financial condition or results of operations of the Company and the Company Subsidiaries,
taken as a whole, or (ii) will or would reasonably be expected to prevent or materially impair or delay the ability of the Company
or the Company OP to consummate the Merger; provided, however, that for purposes of clause (i) of this definition,
“Company Material Adverse Effect” shall not include any Event to the extent arising out of or resulting from: (A) any
Event generally affecting (1) the geographic regions or industry in which the Company and the Company Subsidiaries primarily operate
or (2) the economy, or financial, credit, foreign exchange, securities or capital markets (including changes in interest rates
or exchange rates), including any disruption thereof, in the United States or elsewhere in the world or (B) any of the following:
(1) changes in applicable Law or applicable accounting regulations or principles or interpretations thereof, (2) any Event directly
or indirectly attributable to the announcement or pendency of this Agreement or the anticipated consummation of the Merger and
the other Transactions (including compliance with the covenants set forth herein and the identity of Parent as the acquiror of
the Company, or any action taken, delayed or omitted to be taken by the Company at the request or with the prior consent of Parent
or Parent OP or otherwise pursuant to the terms hereof), including the impact thereof on relationships, contractual or otherwise,
with employees, customers, suppliers, tenants, or lenders, (3) national or international political conditions, any outbreak or
escalation of hostilities, insurrection or war, whether or not pursuant to declaration of a national emergency or war, acts of
terrorism, sabotage, strikes, freight embargoes or similar calamity or crisis, (4) fires, epidemics, quarantine restrictions, earthquakes,
hurricanes, tornados or other natural disasters, (5) any decline in the market price, or change in trading volume, of the capital
stock of the Company or any failure to meet publicly announced revenue or earnings projections or predictions (whether such projections
or predictions were made by the Company or independent third parties) or internal projections (it being understood and agreed that
any Event giving rise to such decline, change or failure may otherwise be taken into account in determining whether there has been
a Company Material Adverse Effect), or (6) any damage or destruction of any Company Property that is substantially covered by insurance,
which in the case of each of clauses (A)(1), (A)(2), (B)(1), and (B)(3) do not disproportionately affect the Company and the
Company Subsidiaries, taken as a whole, relative to other similarly situated participants in the industries in which the Company
and the Company Subsidiaries operate, and in the case of clause (B)(4) do not disproportionately affect the Company and the
Company Subsidiaries, taken as a whole, relative to other participants in the industries in which the Company and the Company Subsidiaries
operate in the geographic regions in which the Company and the Company Subsidiaries operate or own or lease properties.
“Company OP Limited Partnership
Agreement” means the Second Amended and Restated Agreement of Limited Partnership of the Company OP, dated March 26,
2013, as amended by Amendment No. 1 to Second Amended and Restated Agreement of Limited Partnership of Company OP, dated February
23, 2014.
“Company Permitted Liens”
means (i) Liens for Taxes not yet due and payable, that are payable without penalty and Liens for Taxes being contested in good
faith and for which there are adequate reserves on the financial statements of the Company (if such reserves are required pursuant
to GAAP); (ii) inchoate mechanics’ and materialmen’s Liens for construction in progress, arising in the ordinary course
of business of the Company or any Company Subsidiary, consistent with past practice, in each case for sums not yet due and payable
or due but not delinquent or being contested in good faith by appropriate proceedings; (iii) inchoate workmen’s, repairmen’s,
warehousemen’s and carriers’ Liens arising in the ordinary course of business of the Company or any Company Subsidiary,
consistent with past practice, in each case for sums not yet due and payable or due but not delinquent or being contested in good
faith by appropriate proceedings; (iv) Laws, including zoning regulations and restrictions, that are imposed by any Governmental
Entity having jurisdiction thereon that do not interfere materially with the present use of such property or, with respect to unimproved
or vacant real property, interfere materially with the intended use of such property; (v) any tenant leases, any title exception
disclosed in any Company Title Insurance Policy (whether material or immaterial), any matter shown on an ALTA/ASCM survey obtained
by the Company with respect to any Company Property, Liens and obligations arising under the Company Material Contracts (including
but not limited to any Lien securing mortgage debt that is a Designated Loan) all of which individually or in the aggregate do
not materially and adversely affect the use of any Company Property; (vi) with respect to real property, easements, rights of way,
restrictive covenants, declarations and agreements affecting use or occupancy, or reservations of an interest in title which individually
or in the aggregate do not materially and adversely affect the use of any Company Property; (vii) Liens imposed or promulgated
by law or any Governmental Entity; (viii) Liens included in any Company or Company Subsidiary space lease with respect to real
property provided that they do not materially adversely affect the use of any Company Property; and (vii) other Liens being contested
in the ordinary course of business and consistent with past practice, in good faith, provided an appropriate reserve has been established
therefor on the Company’s balance sheet.
“Company Stockholder Approval”
means the affirmative vote of the holders of at least a majority of the outstanding shares of Company Common Stock entitled to
vote at the Company Stockholder Meeting on the Company Merger and the other Transactions.
“Company Stockholder Meeting”
means the meeting of the holders of shares of Company Common Stock for the purpose of seeking the Company Stockholder Approval,
including any postponement or adjournment thereof.
“Company Subsidiaries”
means the Company OP and any Subsidiary of the Company or the Company OP.
“Computed Cash Consideration Per
Share” means $3.80 plus any Additional Elected Cash Consideration Per Share.
“Computed Merger Consideration
Per Share” means, at each relevant time under this Agreement, the sum of (i) the Computed Cash Consideration Per Share,
plus (ii) the Computed Stock Consideration Per Share.
“Computed Stock Consideration Per
Share” means, at each relevant time under this Agreement, $3.80, times a fraction the numerator of which is the Parent
Closing Stock Price at the time of such computation and the denominator of which is $9.25 (with the result being rounded down to
the nearest cent), minus any Additional Elected Cash Consideration Per Share.
“Computed Stock Consideration Per
Share Ratio” means, at each relevant time under this Agreement, the Computed Stock Consideration Per Share divided by
the Computed Merger Consideration Per Share, expressed as a percentage and rounded down to the nearest percent.
“Designated Lender” means
each of the lenders set forth on Section 7.02(g)(i) of the Parent Disclosure Letter.
“Designated Loan” means,
in respect of each Designated Lender, the loan made by such Designated Lender and identified on Section 7.02(g)(ii) of the
Parent Disclosure Letter.
“Environmental Law” means
any Law (including common law) relating to the pollution or protection of the environment (including air, surface water, groundwater,
land surface or subsurface land), or human health or safety (as such matters relate to Hazardous Substances), including Laws relating
to the use, handling, presence, transportation, treatment, storage, disposal, release or discharge of Hazardous Substances.
“Exchange Ratio” means
a number equal to the quotient determined by dividing (i) $7.60 less the Per Share Cash Amount, by (ii) $9.25, and rounding
the result to the nearest 1/10,000.
“Financing Failure” means
a refusal or other failure, for any reason, on the part of any Person (other than Parent or its Affiliates) that has executed the
Commitment Letter or any definitive financing document relating to any of the Financing, or on the part of any other Person obligated
or expected at any time to provide any portion of such Financing.
“Financing Source” means
each Person that is party to, and agrees to provide or arrange all or any portion of the Necessary Financing (or any Alternate
Financing).
“Form S-4” means a registration
statement on Form S-4 pursuant to which the offer and sale of shares of Parent Common Stock in the Merger will be registered pursuant
to the Securities Act and in which the Joint Proxy Statement will be included as a prospectus, together with any amendments or
supplements thereto.
“Hazardous Substances”
means (i) those substances defined in or regulated under the following United States federal statutes and their state counterparts,
as each has been amended from time to time, and all regulations thereunder, including the Resource Conservation and Recovery Act,
the Comprehensive Environmental Response, Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water Act, the
Atomic Energy Act and the Clean Air Act, (ii) petroleum and petroleum products, including crude oil and any fractions thereof,
(iii) polychlorinated biphenyls, mold, methane, asbestos and radon, and (iv) any other contaminant, substance, material
or waste regulated by any Governmental Entity pursuant to any Environmental Law.
“Intellectual Property”
means all United States and foreign (i) patents, patent applications, invention disclosures, and all related continuations,
continuations-in-part, divisionals, reissues, re-examinations, substitutions and extensions thereof, (ii) trademarks, service
marks, trade dress, logos, trade names, corporate names, Internet domain names, design rights and other source identifiers,
together with the goodwill symbolized by any of the foregoing, (iii) copyrightable works and copyrights, (iv) confidential
and proprietary information, including trade secrets, know-how, ideas, formulae, models and methodologies, (v) all rights
in the foregoing and in other similar intangible assets, and (vi) all applications and registrations for the foregoing.
“Joint Proxy Statement”
means a joint proxy statement/prospectus in preliminary and definitive form relating to the Company Stockholder Meeting and the
Parent Stockholder Meeting, together with any amendments or supplements thereto.
“Knowledge” means, with
respect to any matter in question, (i) as to the Company, the actual knowledge of the Persons listed on Schedule 9.03(b)(i),
and (ii) as to Parent, the actual knowledge of the Persons listed on Schedule 9.03(b)(ii).
“Legal Proceeding” means
any private or governmental action, inquiry, claim, charge, complaint, demand, proceeding, suit, hearing, litigation, arbitration,
mediation, audit or investigation, in each case whether civil, criminal, administrative, judicial or investigative, or any appeal
therefrom.
“Marketing Efforts” means
all activity undertaken (or proposed to be undertaken) in connection with the syndication or other marketing of the Financing,
including (a) the direct participation by the Company’s senior management team in (i) the preparation of the Marketing Material
and due diligence sessions related thereto and (ii) road shows and meetings with prospective lenders and debt investors, and (b)
the delivery of customary authorization letters, confirmations and undertakings in connection with the Marketing Material (including
with respect to presence or absence of material non-public information and accuracy of the information contained therein).
“Marketing Material”
means each of the following: (a) customary bank books, information memoranda and other information packages regarding the business,
operations, financial condition, projections and prospects of the Company and the Subsidiaries of the Company, including all information
relating to the transactions contemplated hereunder, and (b) all other marketing material contemplated by the Financing documents
(as in effect on the date hereof, or the corresponding provision of any amendment, restatement, amendment and restatement, supplement,
modification or replacement thereof) or reasonably requested by the Parent or its financing sources in connection with the syndication
or other marketing of the Financing.
“Merger Consideration”
means collectively, the Share Merger Consideration and the Unit Merger Consideration.
“Outside Limited Partners”
means the limited partners of the Company OP other than the Company and the Company Subsidiaries.
“Parent Additional Cash Election”
means an election by Parent, delivered by written notice to the Company at least two (2) Business Days prior to the date of the
Company Stockholder Meeting, to increase the Per Share Cash Amount from $3.80 to an amount that, at the time of such election,
does not exceed sixty percent (60.0%) of the Computed Merger Consideration Per Share computed immediately prior to making such
Parent Additional Cash Election.
“Parent Closing Stock Price”
means the closing price per share of Parent Common Stock on the NYSE MKT on the last trading day immediately prior to a relevant
determination date under this Agreement.
“Parent Common Stock”
means shares of common stock, par value $0.01 per share, of Parent.
“Parent Material Adverse Effect”
means any Event that (i) has a material adverse effect on the business, assets, properties, financial condition or results of operations
of Parent and the Parent Subsidiaries, taken as a whole, or (ii) will or would reasonably expected to prevent or materially impair
or delay the ability of Parent, Parent OP, OP Merger Sub or IRT LP LLC to consummate the Merger; provided, however,
that for purposes of clause (i) of this definition, “Parent Material Adverse Effect” shall not include any Event to
the extent arising out of or resulting from: (A) any Event generally affecting (1) the geographic regions or industry in which
Parent and the Parent Subsidiaries primarily operate or (2) the economy, or financial, credit, foreign exchange, securities or
capital markets (including changes in interest rates or exchange rates), including any disruption thereof, in the United States
or elsewhere in the world or (B) any of the following: (1) changes in applicable Law or applicable accounting regulations or principles
or interpretations thereof, (2) any Event directly or indirectly attributable to the announcement or pendency of this Agreement
or the anticipated consummation of the Merger and the other Transactions (including compliance with the covenants set forth herein
and the identity of Parent as the acquiror of the Company, or any action taken, delayed or omitted to be taken by Parent at the
request or with the prior consent of the Company or Company OP or otherwise pursuant to the terms hereof), including the impact
thereof on relationships, contractual or otherwise, with employees, customers, suppliers, tenants, or lenders, (3) national or
international political conditions, any outbreak or escalation of hostilities, insurrection or war, whether or not pursuant to
declaration of a national emergency or war, acts of terrorism, sabotage, strikes, freight embargoes or similar calamity or crisis,
(4) fires, epidemics, quarantine restrictions, earthquakes, hurricanes, tornados or other natural disasters, (5) any decline in
the market price, or change in trading volume, of the capital stock of Parent or any failure to meet publicly announced revenue
or earnings projections or predictions (whether such projections or predictions were made by Parent or independent third parties)
or internal projections (it being understood and agreed that any Event giving rise to such decline, change or failure may otherwise
be taken into account in determining whether there has been a Parent Adverse Effect), or (6) any damage or destruction of any Parent
Property that is substantially covered by insurance, which in the case of each of clauses (A)(1), (A)(2), (B)(1), and (B)(3) do
not disproportionately affect Parent and the Parent Subsidiaries, taken as a whole, relative to other similarly situated participants
in the industries in which Parent and the Parent Subsidiaries operate, and in the case of clause (B)(4) do not disproportionately
affect Parent and the Parent Subsidiaries, taken as a whole, relative to other participants in the industries in which Parent and
the Parent Subsidiaries operate in the geographic regions in which Parent and the Parent Subsidiaries operate or own or lease properties.
“Parent OP Common Units”
means common units of limited partnership interests in Parent OP.
“Parent Permitted Liens”
means (i) Liens for Taxes not yet due and payable, that are payable without penalty and Liens for Taxes being contested in good
faith and for which there are adequate reserves on the financial statements of Parent (if such reserves are required pursuant to
GAAP); (ii) inchoate mechanics’ and materialmen’s Liens for construction in progress, arising in the ordinary course
of business of Parent or any Parent Subsidiary, consistent with past practice, in each case for sums not yet due and payable or
due but not delinquent or being contested in good faith by appropriate proceedings; (iii) inchoate workmen’s, repairmen’s,
warehousemen’s and carriers’ Liens arising in the ordinary course of business of Parent or any Parent Subsidiary, consistent
with past practice, in each case for sums not yet due and payable or due but not delinquent or being contested in good faith by
appropriate proceedings; (iv) Laws, including zoning regulations and restrictions, that are imposed by any Governmental Entity
having jurisdiction thereon that do not interfere materially with the present use of such property or, with respect to unimproved
or vacant real property, interfere materially with the intended use of such property; (v) any tenant leases, any title exception
disclosed in any Parent Title Insurance Policy (whether material or immaterial), any matter shown on an ALTA/ASCM survey obtained
by Parent with respect to any Parent Property, Liens and obligations arising under the Parent Material Contracts (including but
not limited to any Lien securing mortgage debt that is a Designated Loan) all of which individually or in the aggregate do not
materially and adversely affect the use of any Parent Property; (vi) with respect to real property, easements, rights of way, restrictive
covenants, declarations and agreements affecting use or occupancy, or reservations of an interest in title which individually or
in the aggregate do not materially and adversely affect the use of any Parent Property; (vii) Liens imposed or promulgated by law
or any Governmental Entity; (viii) Liens included in any Parent or Parent Subsidiary space lease with respect to real property
provided that they do not materially adversely affect the use of any Parent Property; and (ix) other Liens being contested in the
ordinary course of business and consistent with past practice, in good faith, provided an appropriate reserve has been established
therefor on the Parent’s balance sheet.
“Parent Stock Price Decline”
means, in the event the Closing Average Parent Stock Price is less than the Signing Average Parent Stock Price, the percentage
equal to the quotient obtained by dividing (i) the Signing Average Parent Stock Price, less the Closing Average Parent Stock Price,
divided by (ii) the Signing Average Parent Stock Price.
“Parent Stockholder Approval”
means the affirmative vote of a majority of the votes cast by the holders of the outstanding Parent Common Stock entitled to vote
at the Parent Stockholder Meeting on the issuance of Parent Common Stock in the Company Merger (including Parent Common Stock issuable
upon redemption of Parent OP Common Units issued in the Partnership Merger) as contemplated by this Agreement.
“Parent Stockholder Meeting”
means the meeting of the holders of Parent Common Stock for the purpose of seeking the Parent Stockholder Approval, including any
postponement or adjournment thereof.
“Parent Subsidiaries”
means any Subsidiary of Parent.
“Person” means any individual,
firm, corporation, partnership, company, limited liability company, trust, joint venture, association, Governmental Entity or other
entity.
“Per Share Cash Amount”
means $3.80 plus any Additional Elected Cash Consideration Per Share; provided that, if the Cash Election Adjustment Amount applies,
as provided for in the definition of the term “Cash Election Adjustment Amount” then the Per Share Cash Amount shall
be equal to sixty percent (60.0%) of the Computed Merger Consideration Per Share on the Closing Date rounded down to the nearest
cent.
“Representatives” means,
with respect to any Person, any officer, director or employee of, or any investment banker, attorney, accountant, consultant or
other advisor or representative of such Person.
“Required Information”
means (a) all financial statements, pro forma financial information and data regarding the Company and the Company Subsidiaries
required to satisfy the conditions set forth in the Financing documents (as in effect on the date hereof, or the corresponding
provision of any amendment, restatement, amendment and restatement, supplement, modification or replacement thereof), including
any financial information and data of the Company and the Company Subsidiaries reasonably requested by Parent to prepare, or be
included in, such pro forma financial statements and (b) all business and financial information and data with respect to the Company
and the Company Subsidiaries and their businesses and industries as are reasonably required or requested by the financing sources
in respect of the Financing or Parent for preparation of, or are customarily included in, Marketing Materials for the Financing,
in the type and form necessary for or customarily included in such Marketing Materials (including all information contemplated
by Financing documents (as in effect on the date hereof, or the corresponding provision of any amendment, restatement, amendment
and restatement, supplement, modification or replacement thereof)).
“RMZ Decline” means,
in the event the average closing value of the MSCI US REIT Index (“RMZ”) for the period of twenty (20) consecutive
Trading Days ending on the date five days prior to the Closing Date (the “Closing RMZ Average”), as reported
by Bloomberg L.P. or, if not reported therein, in another authoritative source mutually selected by the Company and Parent, is
less than the average closing value of the RMZ for the period of twenty (20) consecutive Trading Days ending on (and including)
the Trading Day that is immediately prior to the date of this Agreement (the “Signing RMZ Average”), the percentage
equal to the quotient obtained by dividing (i) the Signing RMZ Average, less the Closing RMZ Average, divided by (ii) the Signing
RMZ Average.
“Signing Average Parent Stock Price”
means the 20-Day VWAP of Parent Common Stock on the NYSE MKT, as reported by Bloomberg L.P. or, if not reported therein, in another
authoritative source mutually selected by the Company and Parent) for the period of twenty (20 consecutive Trading Days ending
on (and including) the Trading Day that is immediately prior to the date of this Agreement.
“Specified Period” means
the period commencing on the date of this Agreement and ending on the date five (5) days prior to the Closing Date.
A “Subsidiary” means
with respect to any Person, any corporation, limited liability company, partnership, REIT or other organization, whether incorporated
or unincorporated, of which at least a majority of the outstanding shares of capital stock of, or other equity interests, having
by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly owned or controlled by such Person or by any one or
more of its Subsidiaries, or by such Person and one or more of its Subsidiaries.
“Taxes” means any and
all taxes and other similar charges, fees, levies and assessments of any kind, including income, gross receipts, excise, property,
sales, franchise, transfer and recording taxes, including estimated taxes (together with any and all interest, penalties, additions
to tax and additional amounts imposed with respect thereto), imposed by any Taxing Authority.
“Tax Protection Agreements”
means any agreement to which the Company or any Company Subsidiary is a party pursuant to which the Company or any Company Subsidiary
has agreed to (i) maintain a minimum level of debt or continue a particular debt or allocate a certain amount of debt to a particular
owner, (ii) retain or not dispose of assets for a period of time that has not since expired, (iii) make or refrain from making
Tax elections, and/or (iv) only dispose of assets in a particular manner, in each case for Tax reasons.
“Trading Day” shall mean
a day on which shares of Parent Common Stock are traded on the NYSE MKT.
“20-Day VWAP” shall mean
the number mathematically computed by (A) multiplying (i) the closing price of the Parent Common Stock on the NYSE MKT for each
of the twenty (20) Trading Days prior to the applicable measurement date by (ii) the trading volume of the Parent Common Stock
reported by the NYSE MKT for each such Trading Day; (B) determining the sum of the product of (A) above for such 20-day period;
and (C) dividing such sum by the cumulative trading volume of the Parent Common Stock reported by the NYSE MKT for such 20-day
period.
(b) The
following terms shall have the respective meanings set forth in the Section set forth opposite such term:
Acceptable Confidentiality Agreement |
Section 5.03(a) |
Adverse Recommendation Change |
Section 5.03(b) |
Agreement |
Preamble |
Alternate Financing |
Section 6.10 |
Alternative Acquisition Agreement |
Section 5.03(b) |
Applicable Parties |
Section 8.07 |
Book-Entry Shares |
Section 2.03(c)(i) |
Bankruptcy and Equity Exception |
Section 3.03(a) |
Cancelled Shares |
Section 2.01(b) |
Capital Expenditures |
Section 5.01(m) |
Certificates |
Section 2.03 (c)(i) |
Closing |
Section 1.03 |
Closing Date |
Section 1.03 |
Code |
Recitals |
Commitment Letter |
Section 4.23(a) |
Company |
Preamble |
Company Benefit Plans |
Section 3.10(a) |
Company Board |
Recitals |
Company Capital Stock |
Section 3.02(a) |
Company Common Stock |
Section 2.01(a)(i) |
Company Disclosure Letter |
Article III |
Company ERISA Affiliate |
Section 3.10(j) |
Company Expense Amount |
Section 8.03(a)(C) |
Company Intellectual Property |
Section 3.15 |
Company Lease |
Section 3.14(d) |
Company Material Contract |
Section 3.16(a) |
Company Merger |
Recitals |
Company OP |
Preamble |
Company OP GP |
Recitals |
Company OP GP Approval |
Section 3.03(c) |
Company OP Unit |
Section 2.02(a)(i) |
Company Preferred Stock |
Section 3.02(a) |
Company Properties |
Section 3.14(a) |
Company Real Property Leases |
Section 3.14(i) |
Company Restricted Stock |
Section 2.05 |
Company SEC Documents |
Section 3.05(a) |
Company Specified Action |
Section 3.11 |
Company Takeover Proposal |
Section 5.03(a) |
Company Termination Fee |
Section 8.01(h) |
Company Title Insurance Policy |
Section 3.14(f) |
Company Voting Agreements |
Recitals |
Confidentiality Agreement |
Section 6.02 |
Consent |
Section 3.04(b) |
Contract |
Section 3.04(a) |
D&O Insurance |
Section 6.05(b) |
DLLCA |
Recitals |
DRULPA |
Recitals |
Effective Time |
Section 1.04(b) |
End Date |
Section 8.01(b) |
Environmental Permits |
Section 3.13(a) |
ERISA |
Section 3.10(a) |
Exchange Act |
Section 3.04(b) |
Exchange Fund |
Section 2.03(b) |
Exchanged OP Units |
Section 2.02(b) |
Expenses |
Section 8.03(a)(A) |
Filed Company SEC Documents |
Article III |
Filed Parent SEC Documents |
Article IV |
Financing |
Section 4.23(a) |
GAAP |
Section 3.05(c) |
Governmental Entity |
Section 3.04(b) |
Indemnified Party |
Section 6.05(c) |
Intervening Event |
Section 5.03(b) |
IRS |
Section 3.08(a) |
IRT LP LLC |
Preamble |
Judgment |
Section 3.04(a) |
Law |
Section 3.04(a) |
Leased Company Properties |
Section 3.14(a) |
Leased Company Property |
Section 3.14(a) |
Leased Parent Properties |
Section 4.14(a) |
Leased Parent Property |
Section 4.14(a) |
Letter of Transmittal |
Section 2.03(c)(i) |
Liens |
Section 3.02(c) |
Losses |
Section 6.05(c) |
Maryland Court |
Section 9.09 |
Maximum Premium |
Section 6.05(b) |
Measurement Date |
Section 3.02(a) |
Merger |
Recitals |
MGCL |
Recitals |
Monarch |
Section 7.02(h) |
Necessary Financing |
Section 6.10 |
NYSE MKT |
Section 2.08 |
OP Merger Sub |
Preamble |
Owned Company Properties |
Section 3.14(a) |
Owned Company Property |
Section 3.14(a) |
Owned Parent Properties |
Section 4.14(a) |
Owned Parent Property |
Section 4.14(a) |
Parent |
Preamble |
Parent Benefit Plans |
Section 4.10(b) |
Parent Board |
Recitals |
Parent Capital Stock |
Section 4.02(a) |
Parent Disclosure Letter |
Article IV |
Parent ERISA Affiliate |
Section 4.10(f) |
Parent Expense Amount |
Section 8.03(a)(B) |
Parent Intellectual Property |
Section 4.15 |
Parent Lease |
Section 4.14(d) |
Parent Material Contract |
Section 4.16(a) |
Parent OP |
Preamble |
Parent OP GP Approval |
Section 4.03(c) |
Parent Preferred Stock |
Section 4.02(a) |
Parent Properties |
Section 4.14(a) |
Parent Real Property Leases |
Section 4.14(i) |
Parent SEC Documents |
Section 4.05(a) |
Parent Specified Action |
Section 4.11 |
Parent Termination Fee |
Section 8.03(b)(iv) |
Parent Title Insurance Policy |
Section 4.14(f) |
Parent Voting Agreements |
Recitals |
Partnership Certificate of Merger |
Section 1.04(a) |
Partnership Merger |
Recitals |
Partnership Merger Effective Time |
Section 1.04(a) |
Paying Agent |
Section 2.03(a) |
Paying Agent Agreement |
Section 2.03(a) |
Permit |
Section 3.12 |
REIT |
Section 3.08(b) |
Related Party |
Section 8.03(d) |
SDAT |
Section 1.04(b) |
SEC |
Article III |
Securities Act |
Section 3.16(a)(i) |
Senator |
Section 7.02(h) |
Share |
Section 2.01(a)(i) |
Share Cash Consideration |
Section 2.01(a)(i)(1) |
Share Merger Consideration |
Section 2.01(a)(i) |
Share Stock Consideration |
Section 2.01(a)(i)(2) |
SOS |
Section 1.04(a) |
Superior Company Proposal |
Section 5.03(a) |
Surviving Company |
Section 1.01(b)(ii) |
Surviving Partnership |
Section 1.01(a) |
Tax Returns |
Section 3.08(a) |
Termination Date |
Section 8.01 |
Transactions |
Recitals |
Transfer Taxes |
Section 6.08 |
Unit Cash Consideration |
Section 2.02(a)(i)(1) |
Unit Merger Consideration |
Section 2.02(a)(i) |
Unit Ownership Consideration |
Section 2.02(a)(i)(2) |
Voting Company Debt |
Section 3.02(a) |
Voting Parent Debt |
Section 4.02(a) |
9.04 Interpretation;
Exhibits and Disclosure Letters. The table of contents and headings contained in this Agreement or in any Exhibit hereto, the
Company Disclosure Letter or the Parent Disclosure Letter are for reference purposes only and shall not affect the meaning or interpretation
of this Agreement. Any capitalized terms used in any Exhibit, the Company Disclosure Letter or the Parent Disclosure Letter, but
not otherwise defined therein, shall have the meaning as defined in this Agreement. When a reference is made in this Agreement
to an Article, Section or Exhibit, such reference shall be to a Section or Article of, or an Exhibit to, this Agreement unless
otherwise indicated. Whenever the words “include”, “includes” or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without limitation”. The words “hereof”, “hereto”,
“hereby”, “herein” and “hereunder” and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The term “or” has the
inclusive meaning frequently identified with the phrase “and/or”. The word “extent” in the phrase “to
the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if”.
The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms. Any item
disclosed in any Section of the Company Disclosure Letter or the Parent Disclosure Letter whose relevance or applicability to any
representation or warranty made elsewhere in this Agreement is reasonably apparent from the text of the disclosure made shall be
deemed to be disclosed with respect to such Sections of such Company Disclosure Letter or Parent Disclosure Letter, as applicable,
relating to such representation or warranty, notwithstanding the omission of a reference or cross-reference thereto. Any agreement
or instrument defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement or
instrument as from time to time amended, modified or supplemented. References to a Person are also to its permitted successors
and assigns. References to matters disclosed in the Filed Company SEC Documents or the Filed Parent SEC Documents are made without
giving effect to any amendment to any such Filed Company SEC Document or Filed Parent SEC Document that is filed on or after the
date hereof and exclude any disclosures set forth in any risk factor section, sections relating to forward looking statements and
any other disclosures included in such Filed Company SEC Documents or Filed Parent SEC Documents that constitute predictive, cautionary
or forward-looking statements.
9.05 Severability.
If any term or other provision of this Agreement is determined to be invalid, illegal or incapable of being enforced by any rule
or Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original intent of the parties hereto as closely as possible
in an acceptable manner to the end that Transactions are fulfilled to the extent possible.
9.06 Counterparts.
This Agreement may be executed (including by facsimile or email of a .pdf attachment) in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and the same instrument, it being understood that all
parties need not sign the same counterpart. It shall not be necessary in making proof of this Agreement to produce or account for
more than one such counterpart. The parties hereto may deliver this Agreement and the other Transaction Documents by facsimile
or email of a .pdf attachment, and each party shall be permitted to rely upon the signatures so transmitted to the same extent
and effect as if they were original signatures.
9.07 Entire
Agreement; No Third Party Beneficiaries. This Agreement, taken together with the Exhibits hereto, the Company Disclosure Letter,
the Parent Disclosure Letter and the Confidentiality Agreement, (a) constitute the entire agreement, and supersede all prior
agreements and understandings, both written and oral, among the parties hereto with respect to the Transactions and (b) except
for (i) Section 6.05, (ii) only with respect to holders of record of the Company Common Stock immediately prior to
the Effective Time, and only after the Effective Time, for the provisions set forth in Article II, (iii) only with respect
to holders of Company Restricted Stock immediately prior to the Effective Time, and only at and after the Effective Time, for the
provisions set forth in Section 2.05, and (iv) only with respect to holders of record of the Company OP Units immediately
prior to the Partnership Merger Effective Time, and only after the Partnership Merger Effective Time, for the provisions set forth
in Article II, are not intended to confer upon any Person other than the parties hereto any rights or remedies, whether
as third-party beneficiaries or otherwise; provided, however, that the Company shall be entitled to pursue damages
on behalf of its stockholders as provided in Section 9.13(b). Notwithstanding the immediately preceding sentence, following
the Effective Time, the Financing Sources are express third party beneficiaries of, and may enforce, the provisions of Sections
8.04, 8.07, 9.08, 9.09, 9.10, 9.11 and 9.13(d) and this Section 9.07.
9.08 Governing
Law. This Agreement shall be governed by, and construed in accordance with, the Laws of the State of Maryland, without giving
effect to any choice or conflict of Laws provision or rule (whether of the State of Maryland or any other jurisdiction) that
would cause the application of the Laws of any jurisdiction other than the State of Maryland; provided, however,
that the (i) Partnership Merger and the Company Merger shall be governed by the Laws of the State of Delaware and (ii) all disputes
or controversies arising out of or relating to this Agreement or the Transactions (whether in law, contract, tort, equity or otherwise),
in each case, to the extent relating to the Commitment Letter or the Financing Sources shall be governed by, and construed in accordance
with, the Laws of the State of New York.
9.09 Jurisdiction;
Venue. All proceedings arising out of or relating to this Agreement shall be heard and determined exclusively in the Circuit
Court for Baltimore City (Maryland), or, if under applicable Law exclusive jurisdiction over the matter is vested in the federal
courts, any federal court located in the State of Maryland (the “Maryland Court”). Each of the Parties
hereby irrevocably and unconditionally agrees to request and/or consent to the assignment of any such proceeding to the Maryland
Court’s Business and Technology Case Management Program. Each of the Parties hereby irrevocably and unconditionally (a) consents
and submits to the exclusive jurisdiction of the Maryland Court for the purpose of any proceeding brought by any party arising
out of or relating to this Agreement, (b) agrees not to commence any such action or proceeding except in the Maryland Court,
(c) irrevocably submits itself to the personal jurisdiction of the Maryland Court in any proceeding arising out of or relating
to this Agreement, (d) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court, (e) waives, to the fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to venue of any such action or proceeding in the Maryland Court, and (f) waives, to the fullest extent
permitted by Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in the Maryland Court.
Each Party irrevocably consents to service of process in the manner provided for notices in Section 9.02. Nothing
in this Agreement will affect the right of any Party to serve process in any other manner permitted by Law. Notwithstanding the
foregoing, with respect to any disputes or controversies arising out of or relating to this Agreement or the Transactions (whether
in law, contract, tort, equity or otherwise), in each case, to the extent relating to the Commitment Letter or the Financing Sources,
each of the parties hereto (a) consents to submit itself to the personal jurisdiction of any Federal court located in the
State of New York or, if such Federal courts do not have subject matter jurisdiction, of any New York state court in the case of
any such dispute or controversy, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court, (c) agrees that it will not bring any action relating to any such matter in
any court other than any Federal court sitting in the State of New York or any New York state court, and (d) waives any right
to trial by jury with respect to any action related to or arising out of any such matter.
9.10 WAIVER
OF JURY TRIAL. EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE OUT OF OR RELATING
TO THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE), DIRECTLY OR INDIRECTLY, ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS, OR THE ACTIONS OF THE PARTIES HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT
THEREOF. EACH OF THE PARTIES HERETO CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH
SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.10.
9.11 Assignment.
Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part,
by operation of Law or otherwise by any of the parties hereto without the prior written consent of the other parties hereto. Any
purported assignment without such consent shall be void. Notwithstanding the foregoing, Parent shall be permitted, without the
consent of any other party hereto, to make a collateral assignment to any of any Lender or other Financing Source in connection
with obtaining the Necessary Financing (or any Alternate Financing); provided, that no such assignment shall (i) relieve
Parent of its obligations under this Agreement, or (ii) enlarge, alter or change any obligation of any other party hereto. Subject
to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties hereto
and their respective successors and assigns.
9.12 Consents
and Approvals. For any matter under this Agreement requiring the consent or approval of any party to be valid and binding on
the parties hereto, such consent or approval must be in writing and executed and delivered to the other parties hereto by a Person
duly authorized by such party to do so.
9.13 Enforcement.
(a) The
parties hereto agree that irreparable damage for which monetary and other legal damages, even if available, would not be an adequate
remedy would occur in the event that the parties hereto do not perform their obligations under the provisions of this Agreement
(including failing to take such actions as are required of them hereunder to consummate the Merger and the other Transactions)
in accordance with its specified terms or otherwise breach any such provisions; provided, however, that in the event
of a termination of this Agreement under circumstances in which the Parent Termination Fee is paid, the Company will not be entitled
to seek or obtain a decree or order of specific performance to enforce the observance or performance of, and will not be entitled
to seek or obtain an injunction restraining the breach of, or to seek or obtain damages or any other remedy at law or in equity
relating to any breach of, any covenant or obligation of any of Parent, Parent OP, OP Merger Sub or IRT LP LLC other than with
respect to the payment of the Parent Termination Fee. The parties shall be entitled to an injunction or injunctions, specific performance
or other equitable relief to prevent any breach or threatened breach of any of the covenants or obligations under this Agreement
and to enforce specifically the terms and provisions hereof, without proof of damages or otherwise. The parties hereto agree that
such rights of specific enforcement are an integral part of the Transactions and that, without such rights, none of the parties
hereto would have entered into this Agreement.
(b) Notwithstanding
anything to the contrary contained herein, prior to a valid termination of this Agreement
pursuant to Article VIII, (i) the Company shall be entitled to seek and obtain an injunction, specific performance and other
equitable relief to prevent any breaches or threatened breaches of this Agreement by Parent or Parent OP and to enforce specifically
the terms and provisions hereof, including Parent’s and Parent OP’s obligations to consummate the Merger and the other
Transactions, and (ii) Parent shall be entitled to seek and obtain an injunction, specific performance and other equitable relief
to prevent any breaches or threatened breaches of this Agreement by the Company or Company OP and to enforce specifically the terms
and provisions hereof, including the Company’s and Company OP’s obligations to consummate the Merger and the other
Transactions. Neither the commencement of any Legal Proceeding pursuant to this Section 9.13 nor anything else in this
Section 9.13 shall restrict or limit the Company’s or Parent’s right to terminate this Agreement in accordance
with the terms of Article VIII or (before or after any termination) to pursue any other remedies under this Agreement, and
nothing in this Section 9.13 or elsewhere in this Agreement shall require the Company or Parent to institute any proceedings
for specific performance prior to or as a condition to exercising any other right or remedy hereunder. Without limiting the generality
of the foregoing, any and all remedies herein conferred upon the Company or Parent are cumulative and not exclusive of any other
remedy conferred hereby, or by law or equity upon the Company or Parent, and the exercise by the Company or Parent of any one remedy
will not preclude the exercise of any other remedy.
(c) Each
party hereto further agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief
on the basis that the other parties hereto have an adequate remedy at law or an award of specific performance is not an appropriate
remedy for any reason at law or in equity. The parties hereto acknowledge and agree that any party seeking an injunction or injunctions
to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement shall not be required
to provide any bond or other security in connection with any such order or injunction.
(d) Nothing
contained in this Agreement shall require or otherwise obligate Parent or any of its Affiliates to enforce specifically the terms
and provisions of the Commitment Letter.
IN WITNESS WHEREOF, Parent, Parent OP, OP
Merger Sub, IRT LP LLC, the Company and Company OP have duly executed this Agreement as of the date first written above.
INDEPENDENCE REALTY TRUST, INC.
by: |
/s/ James J. Sebra |
|
|
Name: |
James J. Sebra |
|
|
Title: |
Chief Financial Officer |
|
INDEPENDENCE REALTY OPERATING PARTNERSHIP, LP
By: INDEPENDENCE REALTY TRUST, INC., |
|
its General Partner |
|
|
|
by: |
/s/ James J. Sebra |
|
|
Name: |
James J. Sebra |
|
|
Title: |
Chief Financial Officer |
|
ADVENTURE MERGER SUB LLC
By: INDEPENDENCE REALTY OPERATING PARTNERSHIP, LP,
its Sole Member
By: INDEPENDENCE REALTY TRUST, INC., |
|
its General Partner |
|
|
|
|
by: |
/s/ James J. Sebra |
|
|
Name: |
James J. Sebra |
|
|
Title: |
Chief Financial Officer |
|
[Signature Page to Agreement and Plan
of Merger]
IRT LIMITED PARTNER, LLC
By: INDEPENDENCE REALTY TRUST, INC., |
|
its Sole Member |
|
|
|
|
by: |
/s/ James J. Sebra |
|
|
Name: |
James J. Sebra |
|
|
Title: |
Chief Financial Officer |
|
[Signature Page to Agreement and Plan
of Merger]
TRADE STREET RESIDENTIAL, INC. |
|
|
|
by: |
/s/ Richard H. Ross |
|
|
Name: |
Richard Ross |
|
|
Title: |
Chief Executive Officer |
|
TRADE STREET OPERATING PARTNERSHIP, LP. |
|
|
|
By: Trade Street OP GP, LLC, |
|
its General Partner |
|
|
|
By: TRADE STREET RESIDENTIAL, INC., |
|
its Sole Member |
|
|
|
|
by: |
/s/ Richard H. Ross |
|
|
Name: |
Richard Ross |
|
|
Title: |
Chief Executive Officer |
|
[Signature Page to Agreement and Plan
of Merger]
Exhibit 10.1
VOTING AGREEMENT
This Voting Agreement (this “Agreement”)
is made and entered into as of May 11, 2015, by and between Trade Street Residential, Inc., a Maryland corporation (the “Company”)
and the undersigned stockholder (the “Stockholder”) of Independence Realty Trust, Inc., a Maryland corporation
(“Parent”).
RECITALS
A. Concurrently
with the execution of this Agreement, Parent, Independence Realty Operating Partnership, LP, a Delaware limited partnership (“Parent
OP”), Adventure Merger Sub LLC, a Delaware limited liability company and direct wholly owned subsidiary of Parent OP
(“OP Merger Sub”), IRT Limited Partner, LLC, a Delaware limited liability company and a direct wholly owned
subsidiary of Parent OP (“Parent LLC”), the Company and Trade Street Operating Partnership, LP, a Delaware limited
partnership (the “Company OP”), have entered into an Agreement and Plan of Merger (the “Merger Agreement”)
which provides for (i) the merger (the “Partnership Merger”) of OP Merger Sub with and into the Company OP with
the Company OP being the surviving entity and (ii) the merger of Parent LLC with and into the Company with the Company being the
surviving entity (the “Company Merger” and, together with the Partnership Merger, the “Merger”).
B. As
a condition and an inducement to the Company’s willingness to enter into the Merger Agreement, the Company has required that
the Stockholder, and the Stockholder has agreed, to enter into this Agreement with respect to all shares of common stock, par value
$0.01 per share, of Parent (“Parent Common Stock”) that the Stockholder now or hereafter owns beneficially (as
defined for purposes of this Agreement in Rule 13d-3 under the Exchange Act) or of record.
C. The
Stockholder is the current beneficial or record owner, and has either sole or shared voting power over, 7,269,719 shares of Parent
Common Stock (the “Parent Shares”).
D. The
Company desires the Stockholder to agree, and the Stockholder is willing to agree, subject to the limitations herein, not to Transfer
(as defined below) any of the Parent Shares and New Parent Shares (as defined below), and to vote the Parent Shares and New Parent
Shares in a manner so as to facilitate consummation of the Merger.
NOW, THEREFORE, in consideration of the foregoing
and the respective representations, warranties, covenants and agreements set forth below and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree
as follows:
1. Definitions.
Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Merger
Agreement. When used in this Agreement, the following terms in all of their tenses, cases and correlative forms shall have the
meanings assigned to them in this Section 1 or elsewhere in this Agreement.
“control” (including,
with correlative meanings, the terms “controlled by” and “controlling”), when used with respect
to any Person, means the power to direct or cause the direction of the management or policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.
“Expiration Date”
shall mean the earlier to occur of (i) the Effective Time, (ii) such date and time as the Merger Agreement shall be terminated
pursuant to Article VIII thereof, (iii) the date of any modification, waiver, change or amendment to the Merger Agreement that
is an Adverse Amendment, or (iv) the End Date (as such term is defined in the Merger Agreement).
“Permitted Transfer”
shall mean, in each case, so long as such Transfer is in accordance with applicable Law and the Stockholder is and at all times
has been in compliance with this Agreement, any Transfer to any Person, so long as such Person, in connection with such Transfer,
executes a joinder to this Agreement pursuant to which such Person agrees to become a party to this Agreement and be subject to
the restrictions applicable to the Stockholder and otherwise become a party for all purposes of this Agreement; provided,
that no such Transfer shall relieve the transferring Stockholder from its obligations under this Agreement with respect to the
portion of the Company Common Stock that the Stockholder continues to beneficially own after such Transfer.
“Transfer” shall
mean (i) any direct or indirect offer, sale, assignment, encumbrance, pledge, hypothecation, disposition, loan or other transfer
(by operation of Law or otherwise), either voluntary or involuntary, or entry into any contract, option or other arrangement or
understanding with respect to any offer, sale, assignment, encumbrance, pledge, hypothecation, disposition, loan or other transfer
(by operation of Law or otherwise), of any capital stock (or any security convertible or exchangeable into capital stock) or interest
in any capital stock, provided, however, that the foregoing shall not include any encumbrance created by this Agreement or restrictions
on transfer under the Securities Act of 1933, as amended, or (ii) entering into any swap or any other agreement, transaction or
series of transactions that hedges or transfers, in whole or in part, directly or indirectly, the economic consequence of ownership
of such capital stock or interest in capital stock, whether any such swap, agreement, transaction or series of transactions is
to be settled by delivery of securities, in cash or otherwise; provided, that any transaction described in these clauses
(i) or (ii) shall not constitute a Transfer so long as such transaction does not in any way limit the ability of Stockholder to
vote its Parent Shares or New Parent Shares in accordance with the terms of this Agreement.
2. Agreement
to Retain Parent Shares.
2.1 Transfer
and Encumbrance of Parent Shares. Other than a Permitted Transfer, until the Expiration Date, the Stockholder shall not (i)
Transfer any of the Parent Shares or New Parent Shares, (ii) deposit any Parent Shares, or New Parent Shares into a voting trust
or enter into a voting agreement or arrangement with respect to such Parent Shares or New Parent Shares or grant any proxy (except
as otherwise provided herein) or power of attorney with respect thereto, or (iii) commit or agree to take any of the foregoing
actions.
2.2 Additional
Purchases. The Stockholder agrees that any shares of Parent Common Stock that the Stockholder purchases or otherwise acquires
(including, without limitation, by way of stock-split, stock dividend, conversion of securities or distribution or similar event)
or with respect to which the Stockholder otherwise acquires sole or shared voting power after the execution of this Agreement and
prior to the Expiration Date (the “New Parent Shares”) shall, in each case, be subject to the terms and conditions
of this Agreement to the same extent as if they constituted Parent Shares.
2.3 Unpermitted
Transfers. Any Transfer or attempted Transfer of any of the Parent Shares or New Parent Shares in violation of Section 2.1
shall, to the fullest extent permitted by Law, be null and void ab initio, and Parent shall not, and shall instruct its
transfer agent and other third parties not to, record or recognize any such purported Transfer on the share register of Parent.
3. Agreement
to Vote and Approve; Irrevocable Proxy.
3.1 Parent
Shares. Hereafter until the Expiration Date, at every meeting of the stockholders of Parent called with respect to any of the
following matters, and at every adjournment or postponement thereof, and on every action or approval by written consent of the
stockholders of Parent with respect to any of the following matters (any such meeting or other circumstance, a “Stockholders’
Meeting”), the Stockholder shall, or shall cause the holder of record of any Parent Shares or New Parent Shares on any
applicable record date (a “Record Date”) to (including via proxy), (i) appear at such Stockholders’ Meeting
or otherwise cause the Parent Shares or New Parent Shares to be counted as present thereat for purposes of calculating a quorum
and (ii) except as expressly provided herein, vote, or cause to be voted, the Parent Shares and any New Parent Shares: (a) in favor
of the issuance of Parent Common Stock in connection with the Merger, (b) in favor of any other matter that is reasonably required
to facilitate the consummation of the Merger and the other Transactions, (c) in favor of any proposal to adjourn a Stockholders’
Meeting to solicit additional proxies in favor of the approval of the issuance of the Parent Common Stock in connection with the
Merger, and (d) against (I) any action or agreement that would reasonably be expected to result in any condition to
the consummation of the Merger set forth in Article VII of the Merger Agreement not being fulfilled, and (II) any action which
would reasonably be expected to materially impede, interfere with, materially delay, materially postpone or adversely affect consummation
of the Transactions, in each case to the extent that the stockholders of Parent are entitled to consider and vote on such matters(s)
at a Stockholders’ Meeting. Notwithstanding the previous sentence, the Stockholder shall not be required to vote any Parent
Shares or New Parent Shares in accordance with the previous sentence of this Section 3.1, if, either, (i) the Parent Board changes
its recommendation that the stockholders of Parent approve the Merger prior to obtaining Parent Stockholder Approval, or (ii) the
Merger Agreement or any of the transactions contemplated thereby has been amended or is proposed to be amended in a manner that
is materially adverse to the Stockholder (such amendment, an “Adverse Amendment”)
3.2 Irrevocable
Proxy. By execution of this Agreement, the Stockholder does hereby appoint and constitute the Company and any one or more other
individuals designated by the Company, and each of them individually, until the Expiration Date (at which time this proxy shall
automatically be revoked), with full power of substitution and resubstitution, as the Stockholder’s true and lawful attorneys-in-fact
and irrevocable proxies, to the fullest extent of the Stockholder’s rights with respect to the Parent Shares and New Parent
Shares, to vote each of the Parent Shares and New Parent Shares solely with respect to the matters set forth in Section 3.1 hereof,
to the extent that the Stockholder is required to vote in accordance with the first sentence of Section 3.1; provided, however,
that the foregoing shall only be effective if the Parent Shares and the New Parent Shares, to the extent such Parent Shares and
New Parent Shares are held by Stockholder at the close of business on the Record Date, fail to be counted as present or to be voted,
as applicable, in accordance with Section 3 above. The Stockholder intends this proxy to be irrevocable and coupled with an interest
hereafter until the Expiration Date for all purposes, including without limitation Section 2-507(d) of the Maryland General Corporation
Law, and hereby revokes any proxy previously granted by the Stockholder with respect to the Parent Shares or New Parent Shares.
The Stockholder hereby ratifies and confirms all actions that the proxies authorized hereunder may lawfully do or cause to be done
in accordance with this Agreement. The proxy granted by Stockholder pursuant to this Section is granted in order to secure Stockholder’s
performance under this Agreement and also in consideration of the Company entering into the Merger Agreement.
4. Ownership
Interest. Nothing contained in this Agreement shall be deemed to vest in the Company, Parent or any other Person any direct
or indirect ownership or incidence of ownership of or with respect to, or pecuniary interest in, any of the Parent Shares or New
Parent Shares. All rights, ownership and economic benefits of and relating to, and pecuniary interest in, the Parent Shares and
New Parent Shares shall remain vested in and belong to the Stockholder, and neither the Company, Parent, nor any other Person shall
have any power or authority to direct the Stockholder in the voting or disposition of any of the Parent Shares or New Parent Shares,
except as otherwise expressly provided in this Agreement. Except as set forth in Section 3.1, the Stockholder shall remain free
to vote (or execute consents or proxies with respect to) the Parent Shares and New Parent Shares in any manner such Stockholder
deems appropriate, including in connection with the election of directors.
5. Representations,
Warranties and Covenants of the Stockholder. The Stockholder hereby represents and warrants to the Company as follows:
5.1 Due
Authority. The Stockholder has the legal capacity and full power and authority to make, enter into and carry out the terms
of this Agreement and to grant the irrevocable proxy as set forth in Section 3.2 hereof. This Agreement has been duly and validly
executed and delivered by the Stockholder and constitutes a valid and binding agreement of the Stockholder enforceable against
it in accordance with its terms, except to the extent enforceability may be limited by the effect of applicable bankruptcy, reorganization,
insolvency, moratorium or other Laws affecting the enforcement of creditors’ rights generally and the effect of general principles
of equity, regardless of whether such enforceability is considered in a proceeding at law or in equity.
5.2 Organization,
Standing and Corporate Power. The Stockholder is duly organized, validly existing and in good standing under the Laws of the
jurisdiction in which it is formed.
5.3 Ownership
of Parent Shares. As of the date hereof, the Stockholder (i) is the beneficial or record owner of the Parent Shares, free and
clear of any and all Liens, other than those Liens created by this Agreement and (ii) has either sole or shared voting power over
all of the Parent Shares. As of the date hereof, the Stockholder does not own, beneficially or of record, any capital stock or
other securities of Parent or any Parent Subsidiary other than the Parent Shares. As of the date hereof, the Stockholder does not
own, beneficially or of record, any rights to purchase or acquire any shares of capital stock or other securities of Parent or
any Parent Subsidiary.
5.4 No
Conflict; Consents.
(a) The
execution and delivery of this Agreement by the Stockholder do not, and the performance by the Stockholder of the obligations under
this Agreement and the compliance by the Stockholder with any provisions hereof do not and will not: (i) conflict with or violate
in any material respect any Laws applicable to the Stockholder or the Parent Shares or (ii) to the knowledge of Stockholder, result
in any material breach of or constitute a material default (or an event that with notice or lapse of time or both would become
a material default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a Lien on any of the Parent Shares pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the Stockholder is a party or by which the Stockholder or
the Parent Shares are bound, except in each case of clauses (i) and (ii) above, for such conflicts, violations, breaches, defaults,
rights or Liens which would not, in the aggregate, reasonably be expected to impair or adversely affect the ability of the Stockholder
to perform the Stockholder’s obligations hereunder or to consummate the transactions contemplated hereby on a timely basis.
Stockholder’s Parent Shares are not, with respect to the voting of, subject to any other agreement, including, any voting
agreement, stockholders agreement, irrevocable proxy or voting trust.
(b) Other
than the disclosure and filing of this Agreement with the SEC, no consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity or any other Person, is required by or with respect to the Stockholder in connection
with the execution and delivery of this Agreement or the consummation by the Stockholder of the transactions contemplated hereby.
5.5 Absence
of Litigation. There is no Legal Proceeding pending against, or, to the knowledge of the Stockholder, threatened against or
affecting, the Stockholder or any of its Affiliates that the Stockholder can control or any of their respective properties or assets
(including the Parent Shares) at Law or in equity that would reasonably be expected to impair or adversely affect the ability of
the Stockholder to perform the Stockholder’s obligations hereunder or to consummate the transactions contemplated hereby
on a timely basis.
6. Representations,
Warranties and Covenants of the Company. The Company hereby represents, warrants and covenants to the Stockholder as follows:
6.1 Due
Authority. The Company has the legal capacity and full power and authority to make, enter into and carry out the terms of this
Agreement. This Agreement has been duly and validly executed and delivered by the Company and constitutes a valid and binding agreement
of the Company enforceable against it in accordance with its terms, except to the extent enforceability may be limited by the effect
of applicable bankruptcy, reorganization, insolvency, moratorium or other Laws affecting the enforcement of creditors’ rights
generally and the effect of general principles of equity, regardless of whether such enforceability is considered in a proceeding
at law or in equity.
6.2 Organization,
Standing and Corporate Power. The Company is duly organized, validly existing and in good standing under the Laws of the jurisdiction
in which it is formed and has all requisite power and authority to carry on its business as now being conducted.
6.3 No
Conflict; Consents. The execution and delivery of this Agreement by the Company do not, and the performance by the Company
of the obligations under this Agreement and the compliance by the Company with any provisions hereof do not and will not: (i) conflict
with or violate in any material respect any Laws applicable to the Company or the Company Common Stock or (ii) result in any material
breach of or constitute a material default (or an event that with notice or lapse of time or both would become a material default)
under, or give to others any rights of termination, amendment, acceleration or cancellation of, or pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company
is a party or by which the Company is bound, except in each case of clauses (i) and (ii) above, for such conflicts, violations,
breaches, defaults or rights which would not, in the aggregate, reasonably be expected to impair or adversely affect the ability
of the Company to perform the Company's obligations hereunder or to consummate the transactions contemplated hereby on a timely
basis.
6.4 Absence
of Litigation. There is no Legal Proceeding pending against, or, to the knowledge of the Company, threatened against or affecting,
the Company or any of its Affiliates that the Company can control or any of their respective properties or assets at Law or in
equity that would reasonably be expected to impair or adversely affect the ability of the Company to perform the Company's obligations
hereunder or to consummate the transactions contemplated hereby on a timely basis.
7. Further
Assurances. From time to time, at the request of the Company and without further consideration, the Stockholder shall take
such further action as may reasonably be requested by the Company to carry out the intent of this Agreement.
8. Termination.
This Agreement shall terminate automatically and shall have no further force or effect on or after the Expiration Date.
9. Notice
of Certain Events. The Stockholder shall notify the Company promptly of (a) any fact, event or circumstance that would cause,
or reasonably be expected to cause or constitute, a breach in any material respect of the representations and warranties of the
Stockholder under this Agreement and (b) the receipt by the Stockholder of any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with this Agreement; provided, however, that
the delivery of any notice pursuant to this Section 9 shall not limit or otherwise affect the remedies available to any party.
10. Miscellaneous.
10.1 Severability.
If any term or other provision of this Agreement is determined to be invalid, illegal or incapable of being enforced by any rule
or Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original intent of the parties hereto as closely as possible
in an acceptable manner to the end that Transactions are fulfilled to the extent possible.
10.2 Binding
Effect; Assignment; Third Party Beneficiaries. This Agreement and all of the provisions hereof shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and permitted assigns. Neither party to this Agreement may
assign any of its rights or obligations under this Agreement without the prior written consent of the other party. Any attempted
assignment contrary to the provisions of this Section 10.2 shall be null, void and of no legal force or effect. Parent shall be
an express third party beneficiary of the agreements of the Stockholder contained in this Agreement.
10.3 Amendments
and Modifications. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery
of a written agreement executed by the parties hereto.
10.4 Specific
Performance; Injunctive Relief. The parties hereto agree that irreparable damage would occur in the event any provision of
this Agreement was not performed in accordance with the terms hereof or was otherwise breached. It is accordingly agreed that the
parties shall be entitled to specific relief hereunder, including, without limitation, an injunction or injunctions to prevent
and enjoin breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, in addition
to any other remedy to which they may be entitled at Law or in equity. Any requirements for the securing or posting of any bond
with respect to any such remedy are hereby waived.
10.5 Notices.
All notices, requests, claims, consents, demands and other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally, sent by overnight courier (providing proof of delivery) to the parties or sent by facsimile
or e-mail of a pdf attachment (providing confirmation of transmission) at the following addresses or facsimile numbers (or at such
other address or facsimile number for a party as shall be specified by like notice):
(a) if to the Company to:
Trade Street Residential, Inc.
19950 West Country Club Drive
Aventura, Florida 33180
Facsimile: (786) 248-3679
Attention: Richard Ross
Email: rross@trade-street.com
with a copy to:
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W.
Suite 6000
Washington, D.C. 20006
Facsimile: (202) 887-0763
Attention: John Good, Esq. and David P. Slotkin, Esq.
Email: jgood@mofo.com
dslotkin@mofo.com
(b) if to the Stockholder:
RAIT Financial Trust
2929 Arch Street, 17th Floor
Philadelphia, PA 19104
Facsimile: (215) 405-2945
Attention: James Sebra and Jamie Reyle
Email: jsebra@raitft.com
jreyle@raitft.com
with a copy to:
Pepper Hamilton LLP
Two Logan Square
Eighteen and Arch Streets
Philadelphia, PA 19103
Facsimile: (215) 981-4750
Attention: Michael Friedman, Esq. and Matthew Greenberg, Esq.
Email: friedmam@pepperlaw.com
greenbmm@pepperlaw.com
Or to such other address as any party may have furnished to the
other in writing in accordance herewith, except that notices of change of address shall be effective upon receipt.
10.6 Governing
Law; Jurisdiction and Venue. This Agreement shall be governed by, and construed in accordance with, the Laws of the State of
Maryland, without giving effect to any choice or conflict of Laws provision or rule (whether of the State of Maryland or any
other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of Maryland. All proceedings
arising out of or relating to this Agreement shall be heard and determined exclusively in the Circuit Court for Baltimore City
(Maryland), or, if under applicable Law exclusive jurisdiction over the matter is vested in the federal courts, any federal court
located in the State of Maryland (the “Maryland Court”). Each of the Parties hereby irrevocably and unconditionally
agrees to request and/or consent to the assignment of any such proceeding to the Maryland Court’s Business and Technology
Case Management Program.
10.7 WAIVER
OF JURY TRIAL. EACH OF THE COMPANY AND THE STOCKHOLDER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHTS TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF THE COMPANY OR THE STOCKHOLDER IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT.
10.8 Entire
Agreement. This Agreement contains the entire understanding of the parties in respect of the subject matter hereof, and supersedes
all prior negotiations and understandings between the parties with respect to such subject matter.
10.9 Counterparts.
This Agreement may be executed (including by facsimile or email of a .pdf attachment) in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and the same instrument, it being understood that all
parties need not sign the same counterpart. It shall not be necessary in making proof of this Agreement to produce or account for
more than one such counterpart. The parties hereto may deliver this Agreement by facsimile or email of a .pdf attachment, and each
party shall be permitted to rely upon the signatures so transmitted to the same extent and effect as if they were original signatures.
10.10 Effect
of Headings. The section headings herein are for convenience only and shall not affect the construction of interpretation of
this Agreement.
10.11 No
Agreement Until Executed. Irrespective of negotiations among the parties or the exchanging of drafts of this Agreement, this
Agreement shall not constitute or be deemed to evidence a contract, agreement, arrangement or understanding between the parties
hereto unless and until (i) the Merger Agreement is executed by all parties thereto, and (ii) this Agreement is executed by
all parties hereto.
10.12 Legal
Representation. This Agreement was negotiated by the parties with the benefit of legal representation and any rule of construction
or interpretation otherwise requiring this Agreement to be construed or interpreted against any party shall not apply to any construction
or interpretation thereof.
10.13 Expenses.
All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense, whether
or not the Merger is consummated.
10.14 Documentation
and Information. The Stockholder consents to and authorizes the publication and disclosure by the Company and Parent of the
Stockholder’s identity and holdings of the Parent Shares, and the nature of the Stockholder’s commitments, arrangements
and understandings under this Agreement, in any press release or any other disclosure document required in connection with the
Merger or any other transaction contemplated by the Merger Agreement. As promptly as practicable, the Stockholder shall notify
the Company of any required corrections with respect to any written information supplied by such Stockholder specifically for use
in any such disclosure document, if and to the extent such Stockholder becomes aware that any have become false or misleading in
any material respect.
10.15 Stockholders
Capacity. The Stockholder is signing this Agreement solely in the Stockholder’s capacity as an owner of its Parent Shares
and nothing herein shall limit, prohibit, prevent or affect any actions taken by any director of the Company or the Parent nominated
by such Stockholder in his or her capacity as a director.
10.16 Other
Agreements. The Company hereby represents and warrants and covenants and agrees that any agreement entered into by the Company
with any Person with respect to agreements similar to those set forth in this Agreement will be in form and substance identical
to this Agreement.
[Signature Pages Follow]
IN WITNESS WHEREOF, the parties have caused
this Agreement to be duly executed on the date and year first above written.
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COMPANY: |
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TRADE STREET RESIDENTIAL, INC. |
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By: |
/s/ Richard H. Ross |
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Name: Richard H. Ross |
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Title: CEO |
[Signature Page to Voting Agreement]
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RAIT FINANCIAL TRUST |
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By: |
/s/ James J. Sebra |
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Name: James J. Sebra |
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Title: Chief Financial Officer |
[Signature Page to Voting Agreement]
Exhibit 99.1
![](tlogo1.jpg)
Trade
Street RESIDENTIAL ANNOUNCES first QUARTER 2015 RESULTS
–
Previously Announced Agreement to Merge with Independence Realty Trust –
–
Same Store NOI Increases 9.0% for First Quarter –
–
Same Store Average Rent Increases 3.7% to $991 for First Quarter –
– Core FFO
Increases to $0.10 Per Share for First Quarter –
AVENTURA, FL, May 11, 2015 – Trade
Street Residential, Inc. (NASDAQ: TSRE) (the “Company”), a vertically integrated and self-managed real estate investment
trust ("REIT") focused on acquiring, owning, operating and managing high-quality, conveniently located, apartment communities
in mid-sized cities and suburban submarkets of larger cities primarily in the southeastern United States and Texas, today announced
consolidated results for the first quarter ended March 31, 2015.
Operational and
Financial Highlights for First Quarter 2015
| · | Reported Core FFO of $3.7 million, or
$0.10 per diluted share. |
| · | Same store net operating income, or same
store NOI, increased 9.0% compared to the same period last year. Over the same period, same store revenues increased 3.7% and same
store expenses decreased 2.7%. |
| · | Same store average occupancy was 96.0%
at quarter end, an improvement of 70 basis points over the same period last year. Stabilized non same store average occupancy was
94.5% at quarter end. |
| · | Same store average rent was $991 per unit,
an increase of 3.7% compared to the same period last year. Stabilized non same store average rent was $1,108 per unit at quarter
end. |
“We are pleased
with the strong results delivered in the first quarter 2015, which were driven by our sharp focus on growing rents and capturing
improving efficiencies across our expanded platform,” stated Richard Ross, Chief Executive Officer of Trade Street Residential.
“During the quarter we met or exceeded our expectations across all of our key metrics, driven by the quality of our portfolio
and the continuing strength of the fundamentals in our markets. Our strong performance is due to the hard work and dedication of
our entire organization and I would like to thank all of our employees for their contributions to our success."
Financial Results
for the Three Months Ended March 31, 2015
Net loss attributable to common stockholders
for the first quarter of 2015 was ($0.4) million compared to a net loss of ($15.2) million in the prior year period. The decrease
in net loss was primarily the result of higher revenues and a reduction in expenses, which includes $9.0 million of management
transition expenses in the prior year period.
![](tlogo1.jpg)
Funds from Operations, or FFO, for the first
quarter of 2015 was $3.5 million, or $0.09 per diluted share, as compared to a deficit of ($11.4) million, or ($0.33) per diluted
share in the prior year period. The increase in FFO is largely attributable to a full quarter of results from the six new operating
properties added during the first four months of 2014 and the $9.0 million of management transition expenses incurred in the prior
year period. Core FFO for the first quarter of 2015 was $3.7 million, or $0.10 per diluted share, as compared to $1.0 million,
or $0.03 per diluted share, in the prior year period. Adjusted FFO, which additionally deducts recurring and non-recurring capital
expenditures, for the first quarter of 2015 was $2.9 million, or $0.07 per diluted share, as compared to $0.7 million, or $0.02
per diluted share, in the prior year period.
Portfolio Performance
Same store NOI for the first quarter of 2015
increased 9.0% to $5.6 million as compared to $5.1 million in the prior year period. This improvement in same store NOI was driven
by a 3.7% increase in same store revenue and a 2.7% decrease in same store property expenses compared to the prior year period.
The increase in same store revenue was primarily attributable to a 70 basis point increase in average occupancy to 96.0%, and a
3.7% increase in average rent to $991 per month. The decrease in same store property operating expenses was primarily attributable
to a decrease in advertising and marketing expenses due to stable occupancies within the portfolio and a reduction in insurance
costs as a result of aggregating all properties under one common policy.
On a sequential quarter basis, first quarter
2015 same store revenue increased 0.6% compared to the fourth quarter of 2014, while same store property expenses decreased 3.9%
resulting in a same store NOI increase of 4.2%.
Dividend
On March 19, 2015,
Trade Street Residential’s Board of Directors announced a dividend of $0.095 per share and unit, payable to holders of record
of common stock and common units of the operating partnership as of March 31, 2015, which was paid on April 15, 2015.
Transaction Announcement
Earlier today, the
Company and Independence Realty Trust, Inc. (NYSE: IRT) jointly announced the entry into an Agreement and Plan of Merger pursuant
to which the Company and its operating partnership subsidiary will merge with and into subsidiaries of IRT (the “Merger”).
Details regarding the Merger can be found in the joint press release distributed earlier today.
Conference Call
and Webcast
As a result of today's
announcement that the Company has agreed to merge with IRT, the Company will no longer host its previously scheduled conference
call and webcast. Supplemental financial information is available in the Investor Relations section of the Company’s website
under Quarterly Results.
![](tlogo1.jpg)
About Trade Street
Residential, Inc.
Trade Street Residential,
Inc. is a vertically integrated and self-managed real estate investment trust focused on acquiring, owning, operating and managing
conveniently located, garden-style and mid-rise apartment communities in mid-sized cities and suburban submarkets of larger cities
primarily in the southeastern United States and Texas.
Forward-Looking
Statements
This press release
contains forward-looking statements within the meaning of the federal securities laws, including statements related to the offering
and the expected use of the net proceeds therefrom, which are based on current expectations, forecasts and assumptions that involve
risks and uncertainties that could cause actual outcomes and results to differ materially. Forward looking statements relate to
expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning
matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking
terminology such as "may," "will," "should," "expects," "intends," "plans,"
"anticipates," "believes," "estimates," "predicts," or "potential" or the negative
of these words and phrases or similar words or phrases, which are predictions of or indicate future events or trends and which
do not relate solely to historical matters. While forward-looking statements reflect the Company's good faith beliefs, assumptions
and expectations, they are not guarantees of future performance. Furthermore, the Company disclaims any obligation to publicly
update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data
or methods, future events or other changes, except as may be required by law. For a further discussion of these and other factors
that could impact the Company's future results, performance or transactions, see the section entitled "Risk Factors"
in the Company's Annual Report on Form 10-K for the year ended December 31, 2014, which the Company filed with the Securities and
Exchange Commission (the “SEC”) on March 13, 2015, and the other document the Company files with the SEC.
Important Information
for Investors and Stockholders
This communication
does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any securities or a solicitation of
any vote or approval. This communication relates to the proposed Merger. In connection with the Merger, TRSE and/or IRT may file
one or more proxy statements, registration statements, proxy statement/prospectus or other documents with the SEC. This communication
is not a substitute for any proxy statement, registration statement, proxy statement/prospectus or other document TRSE and/or IRT
may file with the SEC in connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS OF TRSE AND IRT ARE URGED TO
READ THE PROXY STATEMENT(S), REGISTRATION STATEMENT(S), PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS THAT MAY BE FILED WITH THE
SEC CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Any definitive
proxy statement(s) (if and when available) will be mailed to stockholders of TRSE and/or IRT, as applicable. Investors and security
holders will be able to obtain free copies of these documents (if and when available) and other documents filed with the SEC by
TRSE and/or IRT through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with the SEC by
TRSE will be available free of charge on TRSE’s internet website at http://www.tradestreetresidential.com or by contacting
TRSE’s Investor Relations Department by email at ir@trade-street.com or by phone at +1-786-248-6099. Copies of the documents
filed with the SEC by IRT will be available free of charge on IRT’s internet website at http://www.irtreit.com or by contacting
IRT’s Investor Relations Department by email at aviroslav@irtreit.com or by phone at +1-215-243-9000.
![](tlogo1.jpg)
Participants in
Solicitation
TRSE, IRT, their respective
directors and certain of their respective executive officers may be considered participants in the solicitation of proxies in connection
with the proposed Merger. Information about the directors and executive officers of TRSE is set forth in its Annual Report on Form
10-K/A for the year ended December 31, 2014, which was filed with the SEC on March 25, 2015. Information about the directors and
executive officers of IRT is set forth in its Annual Report on Form 10-K for the year ended December 31, 2014, which was filed
with the SEC on March 16, 2015, and its proxy statement for its 2015 annual meeting of stockholders, which was filed with the SEC
on April 7, 2015. These documents can be obtained free of charge from the sources indicated above. Additional information regarding
the participants in the proxy solicitations and a description of their direct and indirect interests, by security holdings or otherwise,
will be contained in the proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available.
Non-GAAP Financial
Measures
As defined by the
National Association of Real Estate Investment Trusts, FFO represents net income (loss) (computed in accordance with U.S. generally
accepted accounting principles ("GAAP")), excluding gains (or losses) from sales of property, bargain purchase gains,
and recognized impairment of real estate assets, plus real estate-related depreciation and amortization and after adjustments for
unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated
to reflect FFO on the same basis. The Company presents FFO attributable to common stockholders because management considers it
to be an important supplemental measure of the Company’s operating performance, believes it assists in the comparison of
the Company’s operating performance between periods to that of different REITs and believes it is frequently used by securities
analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their operating
results. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which
assumes that the value of real estate diminishes ratably over time. Historically, however, real estate values have risen or fallen
with market conditions. Because FFO excludes depreciation and amortization unique to real estate, gains and losses from property
dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact
to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing
perspective not immediately apparent from net income.
The Company also uses
core funds from operations, or Core FFO, as an operating measure. Core FFO includes adjustments to exclude the impact of straight-line
adjustments for ground leases, gains and losses from extinguishment of debt, transaction costs related to acquisitions and recapitalization,
management transition costs and certain other non-cash or non-comparable items. The Company believes that these adjustments are
appropriate in determining Core FFO as they are not indicative of the operating performance of the Company’s assets. In addition,
the Company believes that Core FFO is a useful supplemental measure for the investing community to use in comparing the Company
to other REITs as most REITs provide some form of adjusted or modified FFO.
The Company also uses
adjusted funds from operations, or AFFO, as an operating measure, which is defined as FFO or, alternatively, Core FFO, depending
on the existence of any non-cash, non-comparable items as described above, less recurring and non-recurring capital expenditures.
The Company believes that AFFO is a relevant operating measure as it provides an indication as to whether a REIT can fund from
its operating performance the capital expenditures necessary to maintain the condition of its operating real estate assets.
Management believes that net operating income
(“NOI”) is a useful measure of our operating performance. We define NOI as total property revenues less total property
operating expenses, excluding depreciation and amortization. Other REITs may use different methodologies for calculating NOI, and
accordingly, our NOI may not be comparable to other REITs. We believe that this measure provides an operating perspective not immediately
apparent from GAAP operating income or net income. We use NOI to evaluate our performance on a same store and non-same store basis.
NOI allows us to evaluate the operating performance of our properties because it measures the core operations of property performance
by excluding corporate level expenses and other items not related to property operating performance and captures trends in rental
housing and property operating expenses.
The Company defines
same store communities as communities owned and stabilized for the entirety of both periods presented, excluding properties held
for sale. Reconciliations of net loss attributable to common stockholders to FFO, Core FFO, AFFO, NOI, and same store NOI are included
in the Supplemental Information posted on the Company’s website.
Investor Relations:
Stephen Swett
786-248-6099
ir@trade-street.com
Media Contact:
Jason Chudoba, ICR for Trade Street
646-277-1249
Jason.Chudoba@icrinc.com
Exhibit 99.2
![](tlogo.jpg)
First Quarter 2015
Supplemental Operating and Financial Data
![](tpg1.jpg)
Talison Row
at Daniel Island
Daniel Island, SC
Trade Street Residential, Inc.
19950 W. Country Club Drive, Suite 800
Aventura, Florida 33180
786-248-5200
www.tradestreetresidential.com
Trade Street Residential,
Inc. |
|
First
Quarter 2015 |
Supplemental
Financial Information |
Table
of Contents |
Page |
|
|
Earnings Release |
3 |
|
|
Operating Results |
8 |
|
|
Funds From Operations (“FFO”),
Core FFO and Adjusted FFO |
9 |
|
|
Consolidated Balance Sheets |
10 |
|
|
Operating Properties Table |
11 |
|
|
Same Store Comparisons |
12 |
|
|
Acquisitions and Land Held for Sale |
14 |
|
|
NOI, Average Occupancy and Average Monthly
Rent Summary |
15 |
|
|
Debt Summary |
16 |
|
|
Capitalized Costs Summary |
17 |
|
|
Non-GAAP Financial Measures and Reconciliations
|
18 |
|
|
NOI Bridge |
20 |
Trade
Street RESIDENTIAL ANNOUNCES first QUARTER 2015 RESULTS
–
Previously Announced Agreement to Merge with Independence Realty Trust –
–
Same Store NOI Increases 9.0% for First Quarter –
–
Same Store Average Rent Increases 3.7% to $991 for First Quarter –
– Core
FFO Increases to $0.10 Per Share for First Quarter –
AVENTURA, FL, May 11, 2015 – Trade
Street Residential, Inc. (NASDAQ: TSRE) (the “Company”), a vertically integrated and self-managed real estate investment
trust ("REIT") focused on acquiring, owning, operating and managing high-quality, conveniently located, apartment communities
in mid-sized cities and suburban submarkets of larger cities primarily in the southeastern United States and Texas, today announced
consolidated results for the first quarter ended March 31, 2015.
Operational
and Financial Highlights for First Quarter 2015
| · | Reported
Core FFO of $3.7 million, or $0.10 per diluted share. |
| · | Same
store net operating income, or same store NOI, increased 9.0% compared to the same period
last year. Over the same period, same store revenues increased 3.7% and same store expenses
decreased 2.7%. |
| · | Same
store average occupancy was 96.0% at quarter end, an improvement of 70 basis points over
the same period last year. Stabilized non same store average occupancy was 94.5% at quarter
end. |
| · | Same
store average rent was $991 per unit, an increase of 3.7% compared to the same period
last year. Stabilized non same store average rent was $1,108 per unit at quarter end.
|
“We are
pleased with the strong results delivered in the first quarter 2015, which were driven by our sharp focus on growing rents and
capturing improving efficiencies across our expanded platform,” stated Richard Ross, Chief Executive Officer of Trade Street
Residential. “During the quarter we met or exceeded our expectations across all of our key metrics, driven by the quality
of our portfolio and the continuing strength of the fundamentals in our markets. Our strong performance is due to the hard work
and dedication of our entire organization and I would like to thank all of our employees for their contributions to our success."
Financial
Results for the Three Months Ended March 31, 2015
Net loss attributable to common stockholders
for the first quarter of 2015 was ($0.4) million compared to a net loss of ($15.2) million in the prior year period. The decrease
in net loss was primarily the result of higher revenues and a reduction in expenses, which includes $9.0 million of management
transition expenses in the prior year period.
Funds from Operations, or FFO, for the
first quarter of 2015 was $3.5 million, or $0.09 per diluted share, as compared to a deficit of ($11.4) million, or ($0.33) per
diluted share in the prior year period. The increase in FFO is largely attributable to a full quarter of results from the six
new operating properties added during the first four months of 2014 and the $9.0 million of management transition expenses incurred
in the prior year period. Core FFO for the first quarter of 2015 was $3.7 million, or $0.10 per diluted share, as compared to
$1.0 million, or $0.03 per diluted share, in the prior year period. Adjusted FFO, which additionally deducts recurring and non-recurring
capital expenditures, for the first quarter of 2015 was $2.9 million, or $0.07 per diluted share, as compared to $0.7 million,
or $0.02 per diluted share, in the prior year period.
Portfolio
Performance
Same store NOI for the first quarter of
2015 increased 9.0% to $5.6 million as compared to $5.1 million in the prior year period. This improvement in same store NOI was
driven by a 3.7% increase in same store revenue and a 2.7% decrease in same store property expenses compared to the prior year
period. The increase in same store revenue was primarily attributable to a 70 basis point increase in average occupancy to 96.0%,
and a 3.7% increase in average rent to $991 per month. The decrease in same store property operating expenses was primarily attributable
to a decrease in advertising and marketing expenses due to stable occupancies within the portfolio and a reduction in insurance
costs as a result of aggregating all properties under one common policy.
On a sequential quarter basis, first quarter
2015 same store revenue increased 0.6% compared to the fourth quarter of 2014, while same store property expenses decreased 3.9%
resulting in a same store NOI increase of 4.2%.
Dividend
On March 19,
2015, Trade Street Residential’s Board of Directors announced a dividend of $0.095 per share and unit, payable to holders
of record of common stock and common units of the operating partnership as of March 31, 2015, which was paid on April 15, 2015.
Transaction
Announcement
Earlier today,
the Company and Independence Realty Trust, Inc. (NYSE: IRT) jointly announced the entry into an Agreement and Plan of Merger pursuant
to which the Company and its operating partnership subsidiary will merge with and into subsidiaries of IRT (the “Merger”).
Details regarding the Merger can be found in the joint press release distributed earlier today.
Conference
Call and Webcast
As a result of
today's announcement that the Company has agreed to merge with IRT, the Company will no longer host its previously scheduled conference
call and webcast. Supplemental financial information is available in the Investor Relations section of the Company’s website
under Quarterly Results.
About Trade
Street Residential, Inc.
Trade Street
Residential, Inc. is a vertically integrated and self-managed real estate investment trust focused on acquiring, owning, operating
and managing conveniently located, garden-style and mid-rise apartment communities in mid-sized cities and suburban submarkets
of larger cities primarily in the southeastern United States and Texas.
Forward-Looking
Statements
This press release
contains forward-looking statements within the meaning of the federal securities laws, including statements related to the offering
and the expected use of the net proceeds therefrom, which are based on current expectations, forecasts and assumptions that involve
risks and uncertainties that could cause actual outcomes and results to differ materially. Forward looking statements relate to
expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning
matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking
terminology such as "may," "will," "should," "expects," "intends," "plans,"
"anticipates," "believes," "estimates," "predicts," or "potential" or the negative
of these words and phrases or similar words or phrases, which are predictions of or indicate future events or trends and which
do not relate solely to historical matters. While forward-looking statements reflect the Company's good faith beliefs, assumptions
and expectations, they are not guarantees of future performance. Furthermore, the Company disclaims any obligation to publicly
update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data
or methods, future events or other changes, except as may be required by law. For a further discussion of these and other factors
that could impact the Company's future results, performance or transactions, see the section entitled "Risk Factors"
in the Company's Annual Report on Form 10-K for the year ended December 31, 2014, which the Company filed with the Securities
and Exchange Commission (the “SEC”) on March 13, 2015, and the other document the Company files with the SEC.
Important
Information for Investors and Stockholders
This communication
does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any securities or a solicitation of
any vote or approval. This communication relates to the proposed Merger. In connection with the Merger, TRSE and/or IRT may file
one or more proxy statements, registration statements, proxy statement/prospectus or other documents with the SEC. This communication
is not a substitute for any proxy statement, registration statement, proxy statement/prospectus or other document TRSE and/or
IRT may file with the SEC in connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS OF TRSE AND IRT ARE URGED
TO READ THE PROXY STATEMENT(S), REGISTRATION STATEMENT(S), PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS THAT MAY BE FILED WITH
THE SEC CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Any
definitive proxy statement(s) (if and when available) will be mailed to stockholders of TRSE and/or IRT, as applicable. Investors
and security holders will be able to obtain free copies of these documents (if and when available) and other documents filed with
the SEC by TRSE and/or IRT through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with
the SEC by TRSE will be available free of charge on TRSE’s internet website at http://www.tradestreetresidential.com or
by contacting TRSE’s Investor Relations Department by email at ir@trade-street.com or by phone at +1-786-248-6099. Copies
of the documents filed with the SEC by IRT will be available free of charge on IRT’s internet website at http://www.irtreit.com
or by contacting IRT’s Investor Relations Department by email at aviroslav@irtreit.com or by phone at +1-215-243-9000.
Participants
in Solicitation
TRSE, IRT, their
respective directors and certain of their respective executive officers may be considered participants in the solicitation of
proxies in connection with the proposed Merger. Information about the directors and executive officers of TRSE is set forth in
its Annual Report on Form 10-K/A for the year ended December 31, 2014, which was filed with the SEC on March 25, 2015. Information
about the directors and executive officers of IRT is set forth in its Annual Report on Form 10-K for the year ended December 31,
2014, which was filed with the SEC on March 16, 2015, and its proxy statement for its 2015 annual meeting of stockholders, which
was filed with the SEC on April 7, 2015. These documents can be obtained free of charge from the sources indicated above. Additional
information regarding the participants in the proxy solicitations and a description of their direct and indirect interests, by
security holdings or otherwise, will be contained in the proxy statement/prospectus and other relevant materials to be filed with
the SEC when they become available.
Non-GAAP Financial
Measures
As defined by
the National Association of Real Estate Investment Trusts, FFO represents net income (loss) (computed in accordance with U.S.
generally accepted accounting principles ("GAAP")), excluding gains (or losses) from sales of property, bargain purchase
gains, and recognized impairment of real estate assets, plus real estate-related depreciation and amortization and after adjustments
for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated
to reflect FFO on the same basis. The Company presents FFO attributable to common stockholders because management considers it
to be an important supplemental measure of the Company’s operating performance, believes it assists in the comparison of
the Company’s operating performance between periods to that of different REITs and believes it is frequently used by securities
analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their operating
results. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which
assumes that the value of real estate diminishes ratably over time. Historically, however, real estate values have risen or fallen
with market conditions. Because FFO excludes depreciation and amortization unique to real estate, gains and losses from property
dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact
to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing
perspective not immediately apparent from net income.
The Company also
uses core funds from operations, or Core FFO, as an operating measure. Core FFO includes adjustments to exclude the impact of
straight-line adjustments for ground leases, gains and losses from extinguishment of debt, transaction costs related to acquisitions
and recapitalization, management transition costs and certain other non-cash or non-comparable items. The Company believes that
these adjustments are appropriate in determining Core FFO as they are not indicative of the operating performance of the Company’s
assets. In addition, the Company believes that Core FFO is a useful supplemental measure for the investing community to use in
comparing the Company to other REITs as most REITs provide some form of adjusted or modified FFO.
The Company also
uses adjusted funds from operations, or AFFO, as an operating measure, which is defined as FFO or, alternatively, Core FFO, depending
on the existence of any non-cash, non-comparable items as described above, less recurring and non-recurring capital expenditures.
The Company believes that AFFO is a relevant operating measure as it provides an indication as to whether a REIT can fund from
its operating performance the capital expenditures necessary to maintain the condition of its operating real estate assets.
Management believes that net operating
income (“NOI”) is a useful measure of our operating performance. We define NOI as total property revenues less total
property operating expenses, excluding depreciation and amortization. Other REITs may use different methodologies for calculating
NOI, and accordingly, our NOI may not be comparable to other REITs. We believe that this measure provides an operating perspective
not immediately apparent from GAAP operating income or net income. We use NOI to evaluate our performance on a same store and
non-same store basis. NOI allows us to evaluate the operating performance of our properties because it measures the core operations
of property performance by excluding corporate level expenses and other items not related to property operating performance and
captures trends in rental housing and property operating expenses.
The Company defines
same store communities as communities owned and stabilized for the entirety of both periods presented, excluding properties held
for sale. Reconciliations of net loss attributable to common stockholders to FFO, Core FFO, AFFO, NOI, and same store NOI are
included in the Supplemental Information posted on the Company’s website.
Investor Relations:
Stephen Swett
786-248-6099
ir@trade-street.com
Media Contact:
Jason Chudoba, ICR for Trade Street
646-277-1249
Jason.Chudoba@icrinc.com
Trade Street Residential,
Inc. |
|
1st
Quarter 2015 |
Operating Results |
(Unaudited) |
|
| |
Three Months Ended March 31, | |
in thousands, except per share data | |
2015 | | |
2014 | |
| |
| | |
| |
Property revenues | |
| | | |
| | |
Rental revenue | |
$ | 14,113 | | |
$ | 10,266 | |
Other property revenues | |
| 1,516 | | |
| 1,144 | |
Total property revenues | |
| 15,629 | | |
| 11,410 | |
| |
| | | |
| | |
Property expenses | |
| | | |
| | |
Property operations and maintenance | |
| 3,916 | | |
| 3,370 | |
Real estate taxes and insurance | |
| 2,437 | | |
| 1,931 | |
Total property expenses | |
| 6,353 | | |
| 5,301 | |
| |
| | | |
| | |
Other expenses | |
| | | |
| | |
General and administrative | |
| 2,088 | | |
| 2,095 | |
Management transition expenses | |
| - | | |
| 9,041 | |
Interest expense | |
| 3,394 | | |
| 2,873 | |
Depreciation and amortization | |
| 3,884 | | |
| 4,720 | |
Development and pursuit costs | |
| 3 | | |
| 45 | |
Acquisition and recapitalization costs | |
| 153 | | |
| 1,505 | |
Amortization of deferred financing cost | |
| 229 | | |
| 316 | |
Loss on early extinguishment of debt | |
| - | | |
| 1,629 | |
Total other expenses | |
| 9,751 | | |
| 22,224 | |
| |
| | | |
| | |
Other income | |
| - | | |
| 43 | |
Loss from unconsolidated joint venture | |
| - | | |
| (9 | ) |
| |
| | | |
| | |
NET LOSS | |
| (475 | ) | |
| (16,081 | ) |
Net loss allocated to noncontrolling interest | |
| 29 | | |
| 1,099 | |
Dividends declared and accreted on preferred stock | |
| - | | |
| (228 | ) |
Adjustments attributable to participating securities | |
| - | | |
| 16 | |
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | |
$ | (446 | ) | |
$ | (15,194 | ) |
| |
| | | |
| | |
Loss per common share - basic and diluted per share from continuing operations attributable to common stockholders | |
$ | (0.01 | ) | |
$ | (0.48 | ) |
| |
| | | |
| | |
Weighted average number of shares - basic and diluted | |
| 36,519 | | |
| 31,746 | |
| |
| | | |
| | |
Dividends declared per common share | |
$ | 0.095 | | |
$ | 0.095 | |
Trade Street Residential,
Inc. |
1st
Quarter 2015 |
Funds From Operations ("FFO"), Core FFO and Adjusted FFO |
(Unaudited) |
|
| |
Three Months Ended March 31, | |
in
thousands, except per share data | |
2015 | | |
2014 | |
| |
| | |
| |
Net loss attributable to common stockholders | |
$ | (446 | ) | |
$ | (15,194 | ) |
| |
| | | |
| | |
Net loss allocated to noncontrolling interest | |
| (29 | ) | |
| (1,099 | ) |
Adjustments related to earnings per share computation | |
| - | | |
| (16 | ) |
Real estate depreciation and amortization - continuing operations | |
| 3,959 | | |
| 4,808 | |
Real estate depreciation and amortization - unconsolidated joint venture | |
| - | | |
| 100 | |
| |
| | | |
| | |
Funds from operations (1) | |
$ | 3,484 | | |
$ | (11,401 | ) |
| |
| | | |
| | |
Management transition expenses | |
| - | | |
| 9,041 | |
Acquisition and recapitalization costs | |
| 153 | | |
| 1,505 | |
Loss on early extinguishment of debt | |
| - | | |
| 1,629 | |
Non-cash stock awards | |
| 92 | | |
| 29 | |
Non-cash accretion of preferred stock | |
| - | | |
| 152 | |
| |
| | | |
| | |
Core funds from operations (1) | |
$ | 3,729 | | |
$ | 955 | |
| |
| | | |
| | |
Recurring capital expenditures | |
| (319 | ) | |
| (162 | ) |
Non-recurring capital expenditures | |
| (515 | ) | |
| (98 | ) |
| |
| | | |
| | |
Adjusted funds from operations (1) | |
$ | 2,895 | | |
$ | 695 | |
| |
| | | |
| | |
Per share data | |
| | | |
| | |
Funds from operations - diluted | |
$ | 0.09 | | |
$ | (0.33 | ) |
Core funds from operations - diluted | |
$ | 0.10 | | |
$ | 0.03 | |
Adjusted funds from operations - diluted | |
$ | 0.07 | | |
$ | 0.02 | |
| |
| | | |
| | |
Weighted average common shares outstanding - diluted(2) | |
| 36,699 | | |
| 31,947 | |
Weighted average common OP units outstanding - diluted | |
| 2,344 | | |
| 2,344 | |
Weighted average common shares and common OP units outstanding - diluted(2) | |
| 39,043 | | |
| 34,291 | |
(1) See page 18 for the Company's definition of
these non-GAAP measures.
(2) Includes non-vested portion of restricted
stock awards.
Trade Street Residential,
Inc. |
|
1st
Quarter 2015 |
Consolidated Balance Sheets |
(Unaudited) |
|
in thousands | |
March 31, 2015 | | |
December 31, 2014 | |
| |
| | |
| |
ASSETS | |
| | | |
| | |
Real estate assets | |
| | | |
| | |
Land and improvements | |
$ | 91,043 | | |
$ | 88,766 | |
Buildings and improvements | |
| 476,871 | | |
| 464,002 | |
Furniture, fixtures, and equipment | |
| 16,103 | | |
| 15,774 | |
| |
| 584,017 | | |
| 568,542 | |
Less accumulated depreciation | |
| (31,197 | ) | |
| (27,475 | ) |
Net investment in operating properties | |
| 552,820 | | |
| 541,067 | |
Real estate assets held for sale | |
| 3,492 | | |
| 3,492 | |
Net real estate assets | |
| 556,312 | | |
| 544,559 | |
| |
| | | |
| | |
Cash and cash equivalents | |
| 10,468 | | |
| 13,308 | |
Restricted cash and lender reserves | |
| 2,763 | | |
| 2,590 | |
Deferred financing costs, net | |
| 4,369 | | |
| 4,599 | |
Intangible assets, net | |
| 514 | | |
| 588 | |
Prepaid expenses and other assets | |
| 1,115 | | |
| 2,475 | |
Assets related to real estate assets held for sale | |
| 549 | | |
| 549 | |
| |
| 19,778 | | |
| 24,109 | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 576,090 | | |
$ | 568,668 | |
| |
| | | |
| | |
LIABILITIES | |
| | | |
| | |
Indebtedness | |
$ | 359,589 | | |
$ | 344,756 | |
Accrued interest payable | |
| 876 | | |
| 887 | |
Accounts payable and accrued expenses | |
| 4,255 | | |
| 7,531 | |
Dividends payable | |
| 3,709 | | |
| 3,709 | |
Security deposits, deferred rent and other liabilities | |
| 1,829 | | |
| 1,783 | |
TOTAL LIABILITIES | |
| 370,258 | | |
| 358,666 | |
| |
| | | |
| | |
| |
| | | |
| | |
STOCKHOLDERS' EQUITY | |
| | | |
| | |
Class A preferred stock; $0.01 par value; 423 shares authorized, at both March 31, 2015 and December 31, 2014 | |
| - | | |
| - | |
Common stock, $0.01 par value per share; 1,000,000 authorized; 36,699 shares issued and outstanding at both March 31, 2015 and December 31, 2014 | |
| 367 | | |
| 367 | |
Additional paid-in capital | |
| 271,261 | | |
| 274,733 | |
Accumulated deficit | |
| (80,863 | ) | |
| (80,417 | ) |
TOTAL STOCKHOLDERS' EQUITY - TRADE STREET RESIDENTIAL, INC. | |
| 190,765 | | |
| 194,683 | |
Noncontrolling interest | |
| 15,067 | | |
| 15,319 | |
TOTAL STOCKHOLDERS' EQUITY | |
| 205,832 | | |
| 210,002 | |
| |
| | | |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | |
$ | 576,090 | | |
$ | 568,668 | |
Trade Street Residential,
Inc. |
|
1st
Quarter 2015 |
Operating Properties Table |
(Unaudited) |
|
| |
Property Name | |
Location | |
Year Built/ Renovated (1) | |
Date Acquired | |
Number of Units | | |
Average Unit Size (Sq. Ft.) | | |
Average Physical Occupancy (2) | |
| |
| |
| |
| |
| |
| | | |
| | | |
| | |
(3) | |
The Pointe at Canyon Ridge | |
Sandy Springs, GA | |
1986/2007 | |
09/18/08 | |
| 494 | | |
| 920 | | |
| 95.4 | % |
| |
Arbors River Oaks | |
Memphis, TN | |
1990/2010 | |
06/09/10 | |
| 191 | | |
| 1,136 | | |
| 92.9 | % |
| |
Lakeshore on the Hill | |
Chattanooga, TN | |
1969/2005 | |
12/14/10 | |
| 123 | | |
| 1,168 | | |
| 96.7 | % |
| |
The Trails of Signal Mountain | |
Chattanooga, TN | |
1975 | |
05/26/11 | |
| 172 | | |
| 1,185 | | |
| 96.9 | % |
| |
Mercé Apartments | |
Addison, TX | |
1991/2007 | |
10/31/11 | |
| 114 | | |
| 653 | | |
| 95.0 | % |
| |
Fox Trails | |
Plano, TX | |
1981 | |
12/06/11 | |
| 286 | | |
| 960 | | |
| 95.5 | % |
| |
Millenia 700 | |
Orlando, FL | |
2012 | |
12/03/12 | |
| 297 | | |
| 952 | | |
| 97.0 | % |
| |
Westmont Commons | |
Asheville, NC | |
2003&2008 | |
12/12/12 | |
| 252 | | |
| 1,009 | | |
| 97.6 | % |
| |
Bridge Pointe | |
Huntsville, AL | |
2002 | |
03/04/13 | |
| 178 | | |
| 1,047 | | |
| 97.1 | % |
| |
St. James at Goose Creek | |
Goose Creek, SC | |
2009 | |
05/16/13 | |
| 244 | | |
| 976 | | |
| 94.8 | % |
| |
Creekstone at RTP | |
Durham, NC | |
2013 | |
05/17/13 | |
| 256 | | |
| 1,043 | | |
| 96.3 | % |
| |
Talison Row at Daniel Island | |
Charleston, SC | |
2013 | |
08/26/13 | |
| 274 | | |
| 989 | | |
| 95.6 | % |
| |
Fountains Southend | |
Charlotte, NC | |
2013 | |
09/24/13 | |
| 208 | | |
| 844 | | |
| 97.9 | % |
| |
The Estates at Wake Forest | |
Wake Forest, NC | |
2013 | |
01/21/14 | |
| 288 | | |
| 1,047 | | |
| 88.4 | % |
| |
Miller Creek at Germantown | |
Memphis, TN | |
2012/2013 | |
01/21/14 | |
| 330 | | |
| 1,049 | | |
| 97.9 | % |
| |
The Aventine Greenville | |
Greenville, SC | |
2013 | |
02/06/14 | |
| 346 | | |
| 961 | | |
| 95.6 | % |
| |
Waterstone at Brier Creek | |
Raleigh, NC | |
2013/2014 | |
03/10/14 | |
| 232 | | |
| 1,137 | | |
| 92.9 | % |
| |
Avenues at Craig Ranch | |
McKinney, TX | |
2013 | |
03/18/14 | |
| 334 | | |
| 1,006 | | |
| 93.3 | % |
(4) | |
Waterstone at Big Creek | |
Alpharetta, GA | |
2013/2015 | |
04/07/14 | |
| 370 | | |
| 1,143 | | |
| 98.4 | % |
| |
| |
| |
| |
| |
| | | |
| | | |
| | |
| |
Total / Weighted average | |
| |
| |
| |
| 4,989 | | |
| 1,011 | | |
| 95.5 | % |
| |
Three Months Ended | |
| |
March 31, | |
| |
| |
Total operating properties (end of period) | |
| 19 | |
Total operating apartment units (end of period) | |
| 4,989 | |
Total operating apartment units (weighted average) | |
| 4,889 | |
| (1) | The extent of the renovations included within the term
“renovated” depends on the individual apartment community, but “renovated” generally refers to the replacement
of siding, roof, wood, windows or boilers, updating of gutter systems, renovation of leasing centers and interior rehabilitation,
including updated appliances, countertops, vinyl plank flooring, fixtures, fans and lighting, or some combination thereof. |
| (2) | Average physical occupancy for the three months ended March
31, 2015 represents the average occupancy of the total number of units occupied at each apartment community during the period
divided by the total number of units at each apartment community. |
| (3) | On November 22, 2014, a 20-unit building at this community
was destroyed by fire. The Company maintains insurance coverage on all of its properties and subsequently filed an insurance claim
that is expected to cover the re-construction cost of this building, less the Company’s loss deductible, as well as loss
of rents under a business interruption provision in the applicable insurance policy. Accordingly, for the three months ended March
31, 2015, a recovery of lost rents relating to the 20 impacted units was recorded as additional rental income for this property.
The Company anticipates that re-construction of this 20-unit building will be completed by the end of 2015. |
| (4) | On March 26, 2015 we purchased three additional recently-constructed
residential buildings consisting of 100 vacant units on a land parcel adjacent to our Waterstone at Big Creek community located
in Alpharetta, Georgia. Accordingly, these units were excluded from the calculation of average physical occupancy for the three
months ended March 31, 2015. |
Trade Street Residential,
Inc. |
|
1st
Quarter 2015 |
Same Store NOI Comparisons(1) |
(Unaudited) |
|
| |
Quarter to Quarter Comparisons | |
| |
Three Months Ended March 31, | |
| |
2015 | | |
2014 | | |
% Change | |
| |
| | |
| | |
| |
Revenues | |
$ | 9,636 | | |
$ | 9,289 | | |
| 3.7 | % |
Expenses | |
| 4,076 | | |
| 4,187 | | |
| (2.7 | )% |
Net operating income (NOI) (2) | |
$ | 5,560 | | |
$ | 5,102 | | |
| 9.0 | % |
| |
| | | |
| | | |
| | |
Average physical occupancy (3) | |
| 96.0 | % | |
| 95.3 | % | |
| 0.7 | % |
| |
| | | |
| | | |
| | |
Average monthly rental rate (4) | |
$ | 991 | | |
$ | 956 | | |
| 3.7 | % |
| |
Sequential Quarter Comparisons | |
| |
Three Months Ended | |
| |
March 31, 2015 | | |
December 31, 2014 | | |
% Change | |
| |
| | |
| | |
| |
Revenues | |
$ | 9,636 | | |
$ | 9,577 | | |
| 0.6 | % |
Expenses | |
| 4,076 | | |
| 4,241 | | |
| (3.9 | )% |
Net operating income (NOI) (2) | |
$ | 5,560 | | |
$ | 5,336 | | |
| 4.2 | % |
| |
| | | |
| | | |
| | |
Average physical occupancy (3) | |
| 96.0 | % | |
| 96.3 | % | |
| (0.3 | )% |
| |
| | | |
| | | |
| | |
Average monthly rental rate (4) | |
$ | 991 | | |
$ | 984 | | |
| 0.7 | % |
| (1) | The Company defines “Same Store” as properties
owned and stabilized since January 1, 2014 through March 31, 2015. For newly constructed or lease-up properties or properties
undergoing significant redevelopment, we consider a property to be stabilized at the earlier of (i) attainment of 90% physical
occupancy or (ii) the one-year anniversary of completion of development or redevelopment. No properties owned since January 1,
2013 were under construction or undergoing redevelopment and, as a result, no properties owned since January 1, 2014 were excluded
from the same store portfolio. For the periods presented, "Same Store" properties are comprised of: The Pointe at Canyon
Ridge, Arbor River Oaks, Lakeshore on the Hill, The Trails of Signal Mountain, Mercé Apartments, Fox Trails, Millenia 700,
Westmont Commons, Bridge Pointe, St James at Goose Creek, Creekstone at RTP, Talison Row at Daniel Island and Fountains Southend. |
| (2) | See page 18 for the Company's definition of this non-GAAP
measure and page 20 for a reconciliation of this non-GAAP measure to net loss attributable to common stockholders. |
| (3) | Average physical occupancy for the periods presented represent
the average of the total number of units occupied at each apartment community during the respective period divided by the total
number of units at each apartment community. |
| (4) | Average monthly rental rates for the periods presented
are the Company’s market rents after “loss to lease” and concessions, but before vacancy, discounted employee
units, model units, and bad debt for the respective periods. |
Trade Street Residential,
Inc. |
|
1st
Quarter 2015 |
Same Store Operating Expense Comparisons |
(Unaudited) |
|
| |
Quarter to Quarter Comparisons | |
| |
Three Months Ended March 31, | |
| |
2015 | | |
2014 | | |
$ Change | | |
% Change | | |
% of 2015 Actual | |
| |
| | |
| | |
| | |
| | |
| |
Property taxes | |
$ | 1,281 | | |
$ | 1,230 | | |
$ | 51 | | |
| 4.1 | % | |
| 31.4 | % |
Salaries and benefits for on-site employees | |
| 1,002 | | |
| 1,065 | | |
| (63 | ) | |
| (5.9 | )% | |
| 24.6 | % |
Utilities | |
| 715 | | |
| 709 | | |
| 6 | | |
| 0.8 | % | |
| 17.5 | % |
Repairs and maintenance | |
| 206 | | |
| 165 | | |
| 41 | | |
| 24.8 | % | |
| 5.1 | % |
Make ready/turnover | |
| 165 | | |
| 163 | | |
| 2 | | |
| 1.2 | % | |
| 4.0 | % |
Property insurance | |
| 215 | | |
| 258 | | |
| (43 | ) | |
| (16.7 | )% | |
| 5.3 | % |
Other | |
| 492 | | |
| 597 | | |
| (105 | ) | |
| (17.6 | )% | |
| 12.1 | % |
Total same store | |
$ | 4,076 | | |
$ | 4,187 | | |
$ | (111 | ) | |
| (2.7 | )% | |
| 100.0 | % |
| |
Sequential Quarter Comparisons | |
| |
Three Months Ended | |
| |
March 31, 2015 | | |
December 31, 2014 | | |
$ Change | | |
% Change | | |
% of 2015 Actual | |
| |
| | |
| | |
| | |
| | |
| |
Property taxes | |
$ | 1,281 | | |
$ | 1,235 | | |
$ | 46 | | |
| 3.7 | % | |
| 31.4 | % |
Salaries and benefits for on-site employees | |
| 1,002 | | |
| 964 | | |
| 38 | | |
| 3.9 | % | |
| 24.6 | % |
Utilities | |
| 715 | | |
| 737 | | |
| (22 | ) | |
| (3.0 | )% | |
| 17.5 | % |
Repairs and maintenance | |
| 206 | | |
| 299 | | |
| (93 | ) | |
| (31.1 | )% | |
| 5.1 | % |
Make Ready/turnover | |
| 165 | | |
| 261 | | |
| (96 | ) | |
| (36.8 | )% | |
| 4.0 | % |
Property insurance | |
| 215 | | |
| 186 | | |
| 29 | | |
| 15.6 | % | |
| 5.3 | % |
Other | |
| 492 | | |
| 559 | | |
| (67 | ) | |
| (12.0 | )% | |
| 12.1 | % |
Total same store | |
$ | 4,076 | | |
$ | 4,241 | | |
$ | (165 | ) | |
| (3.9 | )% | |
| 100.0 | % |
Trade Street Residential,
Inc. |
|
1st
Quarter 2015 |
Acquisitions and Land Held for Sale |
(Unaudited) |
|
in thousands, except unit data | |
| |
| | |
| | |
| |
| | |
| |
| |
| |
| | |
| | |
| |
| | |
| |
Acquisitions: | |
| |
| | |
Percent Leased at | | |
Date | |
Gross | | |
Debt Balance at | |
Property | |
Location | |
Units | | |
March 31, 2015 | | |
Acquired | |
Purchase Price | | |
March 31, 2015 | |
| |
| |
| | |
| | |
| |
| | |
| |
Waterstone at Big Creek, Phase II | |
Alpharetta, GA | |
| 100 | | |
| 0.0 | % | |
3/26/2015 | |
$ | 15,000 | | |
| Line of Credit | |
Total acquisitions three months ended March 31 | |
| |
| 100 | | |
| | | |
| |
$ | 15,000 | | |
$ | - | |
Land held for sale: | |
| |
| | |
| | |
Carrying | |
| |
| |
Planned | | |
| | |
Value as of | |
Project | |
Location | |
Units | | |
Acreage | | |
March 31, 2015 | |
| |
| |
| | |
| | |
| |
Midlothian Town Center - East | |
Midlothian, VA | |
| 238 | | |
| 8.4 | | |
$ | 3,492 | |
Total land held for sale | |
| |
| 238 | | |
| 8.4 | | |
$ | 3,492 | |
Trade Street Residential,
Inc. |
|
1st
Quarter 2015 |
NOI, Average Occupancy and Average Monthly Rent Summary |
(Unaudited) |
|
in thousands, except unit data | |
| | |
| | |
| | |
| | |
| |
| |
| | |
| | |
| | |
| | |
| |
Multifamily communities: | |
| | |
| | |
| | |
| | |
| |
as of March 31, 2015 | |
| | |
| | |
| | |
| | |
| |
| |
| | |
| | |
| | |
| | |
| |
| |
| | |
| | |
NOI | | |
Avg Physical | | |
Avg Monthly | |
| |
Units | | |
Communities | | |
Quarter Ended | | |
Occupancy (1) | | |
Rent/Unit | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Same Store Communities (2) | |
| 3,089 | | |
| 13 | | |
$ | 5,560 | | |
| 96.0 | % | |
$ | 991 | |
Stabilized non-same store communities (3) | |
| 1,800 | | |
| 6 | | |
| 3,716 | | |
| 94.5 | % | |
| 1,108 | |
Other (4) | |
| 100 | | |
| - | | |
| - | | |
| - | | |
| - | |
Total multifamily communities | |
| 4,989 | | |
| 19 | | |
$ | 9,276 | | |
| 95.5 | % | |
$ | 1,034 | |
| (1) | Average physical occupancy for the three months ended March 31, 2015 represents the average occupancy of the total number of
units occupied at each apartment community during the period divided by the total number of units at each apartment community. |
| (2) | For 2015 "Same Store" properties are comprised of: The Pointe at Canyon Ridge, Arbor River Oaks, Lakeshore on the
Hill, The Trails of Signal Mountain, Mercé Apartments, Park at Fox Trails, Millenia 700, Westmont Commons, Bridge
Pointe, St James at Goose Creek, Creekstone at RTP, Talison Row at Daniel Island, Fountains Southend. |
| (3) | Communities that were stabilized for the quarter ended March 31, 2015, but do not meet the criteria for "Same Store"
properties. These include: Miller Creek at Germantown, Waterstone at Big Creek, The Aventine Greenville, Avenues at Craig Ranch,
Waterstone at Brier Creek, and The Estates at Wake Forest. |
| (4) | On March 26, 2015 we purchased three additional recently-constructed residential buildings consisting of 100 vacant units on
a land parcel adjacent to our Waterstone at Big Creek community located in Alpharetta, Georgia. Accordingly, these units were excluded
from the calculation of average physical occupancy for the three months ended March 31, 2015. |
Trade Street Residential,
Inc. |
|
1st
Quarter 2015 |
Debt Summary |
(Unaudited) |
|
in thousands | |
| | |
| | |
| | |
| |
Debt Maturities as of March 31, 2015: | |
| | |
| | |
| | |
| |
| |
| | |
| | |
| | |
| |
| |
Scheduled Repayments | | |
% of | |
Year | |
Amortization | | |
Maturities | | |
Total | | |
Total | |
| |
| | |
| | |
| | |
| |
Remainder of 2015 | |
$ | 973 | | |
$ | - | | |
$ | 973 | | |
| 0.3 | % |
2016 | |
| 1,902 | | |
| - | | |
| 1,902 | | |
| 0.5 | % |
2017 | |
| 3,300 | | |
| 68,273 | | |
| 71,573 | | |
| 19.9 | % |
2018 | |
| 3,684 | | |
| 7,685 | | |
| 11,369 | | |
| 3.2 | % |
2019 | |
| 4,175 | | |
| - | | |
| 4,175 | | |
| 1.2 | % |
Thereafter | |
| 15,411 | | |
| 254,186 | | |
| 269,597 | | |
| 74.9 | % |
Total | |
$ | 29,445 | | |
$ | 330,144 | | |
$ | 359,589 | | |
| 100.0 | % |
Floating vs. Fixed Rate Debt: | |
| | |
| | |
Weighted Average | |
| |
Balance at | | |
% of | | |
Interest | | |
Years to | |
| |
March 31, 2015 | | |
Total | | |
Rate | | |
Maturity | |
| |
| | |
| | |
| | |
| |
Fixed rate debt | |
$ | 297,589 | | |
| 82.8 | % | |
| 4.03 | % | |
| 7.50 | |
Floating rate debt (1) | |
| 62,000 | | |
| 17.2 | % | |
| 2.71 | % | |
| 1.83 | |
Total | |
$ | 359,589 | | |
| 100.0 | % | |
| 3.80 | % | |
| 6.52 | |
| (1) | At March 31, 2015, our only floating rate loan is our revolving credit facility which bears interest at one-month LIBOR plus
a spread of 2.5%. As a result of the $15 million draw on March 26, 2015 that was used to purchase an additional 100 vacant units
at our Waterstone at Big Creek community, effective April 1, 2015, the spread for this revolving credit facility was increased
to 2.75%. |
Trade Street Residential,
Inc. |
|
1st
Quarter 2015 |
Capitalized Costs Summary |
(Unaudited) |
|
| |
Three Months Ended March 31, | |
in thousands, except per unit data | |
2015 | | |
2014 | |
| |
Total | | |
Per Unit | | |
Total | | |
Per Unit | |
Recurring capital expenditures: | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Flooring | |
$ | 155 | | |
$ | 32 | | |
$ | 129 | | |
$ | 32 | |
Appliances & Fixtures | |
| 137 | | |
| 29 | | |
| 25 | | |
| 6 | |
HVAC | |
| 10 | | |
| 2 | | |
| 6 | | |
| 2 | |
Other | |
| 17 | | |
| 3 | | |
| 2 | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Total recurring capital expenditures | |
$ | 319 | | |
$ | 66 | | |
$ | 162 | | |
$ | 40 | |
| |
| | | |
| | | |
| | | |
| | |
Non-recurring capital expenditures: | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Building & Structures | |
$ | 374 | | |
$ | 76 | | |
$ | 2 | | |
$ | 1 | |
Land Improvements | |
| 67 | | |
| 14 | | |
| 20 | | |
| 5 | |
Furniture & Equipment | |
| 50 | | |
| 11 | | |
| 19 | | |
| 5 | |
Other | |
| 24 | | |
| 6 | | |
| 57 | | |
| 14 | |
| |
| | | |
| | | |
| | | |
| | |
Total non-recurring capital expenditures | |
$ | 515 | | |
$ | 107 | | |
$ | 98 | | |
$ | 25 | |
| |
| | | |
| | | |
| | | |
| | |
Total recurring/non-recurring capital expenditures | |
$ | 834 | | |
$ | 173 | | |
$ | 260 | | |
$ | 65 | |
| |
| | | |
| | | |
| | | |
| | |
Revenue generating capital expenditures: | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Flooring | |
$ | 37 | | |
$ | 8 | | |
$ | 24 | | |
$ | 6 | |
Resurfacing | |
| 9 | | |
| 2 | | |
| 10 | | |
| 2 | |
Appliances & Fixtures | |
| 54 | | |
| 11 | | |
| 36 | | |
| 9 | |
Other | |
| 28 | | |
| 6 | | |
| 21 | | |
| 6 | |
| |
| | | |
| | | |
| | | |
| | |
Total revenue generating capital expenditures | |
$ | 128 | | |
$ | 27 | | |
$ | 91 | | |
$ | 23 | |
| |
| | | |
| | | |
| | | |
| | |
Change in balance sheet accounts: | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Construction in process | |
$ | (323 | ) | |
$ | - | | |
$ | 139 | | |
$ | - | |
Other | |
| 16 | | |
| - | | |
| 274 | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Total capital expenditures per cash flow statements | |
$ | 655 | | |
$ | 200 | | |
$ | 764 | | |
$ | 88 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average units - continuing operations(1) | |
| | | |
| 4,889 | | |
| | | |
| 3,995 | |
(1) On March 26, 2015, we purchased three additional recently-constructed
residential buildings consisting of 100 vacant units on a land parcel adjacent to our Waterstone at Big Creek community located
in Alpharetta, Georgia. Accordingly, these units were excluded from the weighted average units - continuing operations for the
three months ended March 31, 2015.
Trade Street Residential, Inc. |
|
1st Quarter 2015 |
Non-GAAP Financial
Measures and Reconciliations |
(Unaudited) |
|
The supplemental financial data contained in this document contains
certain non-GAAP financial measures management believes are useful in understanding our business and evaluating our performance.
Our definitions and calculations of these non-GAAP financial measures may differ from those of other equity REITs, and thus may
not be comparable to other REITs. The non-GAAP financial measures should not be considered as an alternative to net income as
an indication of our operating performance, or to net cash provided by operating activities as a measure of our liquidity.
Funds from Operations ("FFO")
As defined by the National Association
of Real Estate Investment Trusts, FFO represents net income (loss) (computed in accordance with U.S. generally accepted accounting
principles ("GAAP")), excluding gains (or losses) from sales of property, bargain purchase gains, and recognized impairment
of real estate assets, plus real estate-related depreciation and amortization and after adjustments for unconsolidated partnerships
and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same
basis. The Company presents FFO because management considers it to be an important supplemental measure of the Company’s
operating performance, believes it assists in the comparison of the Company’s operating performance between periods and
to that of different REITs and believes it is frequently used by securities analysts, investors and other interested parties in
the evaluation of REITs, many of which present FFO when reporting their operating results. FFO is intended to exclude GAAP historical
cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate diminishes ratably
over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation
and amortization unique to real estate, gains and losses from property dispositions and extraordinary items, it provides a performance
measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating
costs, development activities and interest costs, providing perspective not immediately apparent from net income.
Core Funds from Operations ("Core FFO")
The Company also uses core funds from operations, or Core FFO,
as an operating measure. Core FFO includes adjustments to exclude the impact gains and losses from extinguishment of debt, transaction
costs related to acquisitions and recapitalization, management transition costs and certain other non-cash or non-comparable items.
The Company believes that these adjustments are appropriate in determining Core FFO as they are not indicative of the operating
performance of the Company’s assets. In addition, the Company believes that Core FFO is a useful supplemental measure for
the investing community to use in comparing the Company to other REITs as most REITs provide some form of adjusted or modified
FFO.
Adjusted Funds from Operations (“AFFO”)
Management also uses Adjusted FFO or AFFO as an operating measure,
which is defined as FFO or, alternatively, Core FFO, depending on the existence of any non-cash, non-comparable items as described
above, less recurring and non-recurring capital expenditures. Management believes that AFFO is a relevant operating measure as
it provides an indication as to whether a REIT can fund from its operating performance the capital expenditures necessary to maintain
the condition of its operating real estate assets.
Net Operating Income ("NOI")
Management believes that net operating income (“NOI”)
is a useful measure of our operating performance. We define NOI as total property revenues less total property operating expenses,
excluding depreciation and amortization. Other REITs may use different methodologies for calculating NOI, and accordingly, our
NOI may not be comparable to other REITs. We believe that this measure provides an operating perspective not immediately apparent
from GAAP operating income or net income. We use NOI to evaluate our performance on a same store and non-same store basis. NOI
allows us to evaluate the operating performance of our properties because it measures the core operations of property performance
by excluding corporate level expenses and other items not related to property operating performance and captures trends in rental
housing and property operating expenses.
The Company defines same store communities as communities owned
and stabilized for the entirety of both periods presented, excluding properties held for sale. Reconciliations of net income attributable
to common stockholders to FFO, Core FFO, AFFO, NOI, and same store NOI are included in the Supplemental Information posted on
the Company’s website.
The following table reflects same store and non-same store contributions
to consolidated NOI together with a reconciliation of NOI to net loss attributable to common stockholders, as computed in accordance
with GAAP:
Trade Street Residential,
Inc. |
|
1st
Quarter 2015 |
NOI
Bridge |
(Unaudited) |
|
| |
Three Months Ended March 31, | |
in thousands | |
2015 | | |
2014 | |
Property Revenues (1) | |
| | | |
| | |
Same Store (13 properties) | |
$ | 9,636 | | |
$ | 9,289 | |
Non Same Store (6 properties) | |
| 5,993 | | |
| 1,822 | |
Other (1 property)(2) | |
| - | | |
| 299 | |
Total property revenues | |
$ | 15,629 | | |
$ | 11,410 | |
| |
| | | |
| | |
Property Expenses (1) | |
| | | |
| | |
Same Store (13 properties) | |
$ | 4,076 | | |
$ | 4,187 | |
Non Same Store (6 properties) | |
| 2,277 | | |
| 953 | |
Other (1 property)(2) | |
| - | | |
| 161 | |
Total property expenses | |
$ | 6,353 | | |
$ | 5,301 | |
| |
| | | |
| | |
Net Operating Income (1)(3) | |
| | | |
| | |
Same Store (13 properties) | |
$ | 5,560 | | |
$ | 5,102 | |
Non Same Store (6 properties) | |
| 3,716 | | |
| 869 | |
Other (1 property)(2) | |
| - | | |
| 138 | |
Total property net operating income | |
$ | 9,276 | | |
$ | 6,109 | |
| |
| | | |
| | |
Reconciliation of NOI to GAAP Net Loss | |
| | | |
| | |
| |
| | | |
| | |
Total property net operating income | |
$ | 9,276 | | |
$ | 6,109 | |
Other income | |
| - | | |
| 43 | |
Depreciation and amortization | |
| (3,884 | ) | |
| (4,720 | ) |
Development and pursuit costs | |
| (3 | ) | |
| (45 | ) |
Interest expense | |
| (3,394 | ) | |
| (2,873 | ) |
Amortization of deferred financing cost | |
| (229 | ) | |
| (316 | ) |
Loss on early extinguishment of debt | |
| - | | |
| (1,629 | ) |
General and administrative | |
| (2,088 | ) | |
| (2,095 | ) |
Management transition expenses | |
| - | | |
| (9,041 | ) |
Acquisition and recapitalization costs | |
| (153 | ) | |
| (1,505 | ) |
Loss from unconsolidated joint venture | |
| - | | |
| (9 | ) |
Net loss | |
| (475 | ) | |
| (16,081 | ) |
Net loss allocated to noncontrolling interest | |
| 29 | | |
| 1,099 | |
Adjustments related to earnings per share computation (4) | |
| - | | |
| (212 | ) |
Net loss attributable to common stockholders | |
$ | (446 | ) | |
$ | (15,194 | ) |
| (1) | The Company defines “Same Store” as properties owned and stabilized since January 1, 2014 through March 31, 2015
excluding properties held for sale. For newly constructed or lease-up properties or properties undergoing significant redevelopment,
we consider a property to be stabilized at the earlier of (i) attainment of 90% physical occupancy or (ii) the one-year anniversary
of completion of development or redevelopment. No properties owned since January 1, 2014 were under construction or undergoing
redevelopment and, as a result, no properties owned since January 1, 2014 were excluded from the same store portfolio. |
| (2) | Includes one community sold during 2014. |
| (3) | See page 18 for the Company's definition of this non-GAAP measure. |
| (4) | See notes B and G to consolidated financial statements as filed in our Annual Report on Form 10-K for the year ended December
31, 2014. |
Exhibit
99.3
Independence
Realty Trust ANNOUNCES DEFINITIVE MERGER AGREEMENT to Acquire TRADE STREET RESIDENTIAL
PHILADELPHIA, PA
and AVENTURA, FL, May 11, 2015 – Independence Realty Trust, Inc. (“IRT”) (NYSE MKT: IRT) and Trade Street
Residential, Inc. (“Trade Street”) (NASDAQ: TSRE) jointly announced that IRT and TSRE have signed a definitive merger
agreement pursuant to which IRT has agreed to acquire all of the outstanding common stock of Trade Street for a mix of cash and
stock, creating a leading, regional market focused, multifamily REIT.
Under the terms of
the definitive merger agreement, IRT will pay each Trade Street stockholder $3.80 in cash and 0.4108 of newly issued IRT common
stock, subject to adjustment as described below. Based on the agreed upon “Reference Price” of $9.25 for IRT shares,
this offer represents the equivalent of $7.60 in value to Trade Street stockholders. The transaction is expected to close in the
third quarter of 2015, subject to customary closing conditions including the approval of both IRT and Trade Street stockholders.
Upon consummation
of the merger, IRT will significantly increase its scale and improve the quality of its portfolio while accelerating its market
penetration in key regional markets and realizing immediate financial benefits.
| · | Increased scale – IRT’s number of properties will increase from 31 to 50*
resulting in a 55% increase in units to 14,044*. The combined scale will provide an enhanced platform to continue to pursue accretive
acquisitions and transformational opportunities. |
| · | Improved portfolio quality – the addition of Trade’s Street’s high-quality
Class A apartment communities will reduce IRT’s average property age from 25 years to 20 years while improving average base
rents, occupancy levels and operating margins on the expanded platform. |
| · | Accelerates market penetration – the addition of Trade Street’s highly-complementary portfolio will expand
IRT’s geographic diversity into targeted regions in eight new markets, and also enhance IRT’s presence in three existing
markets, to create a leading non-gateway multifamily platform in select regional markets in the United States. |
| · | Immediate financial benefits – the transaction is expected to be accretive to 2016 Core FFO and AFFO per share,
with meaningful identified run-rate cost savings and NOI upside from value-add capex. Additionally, with a stronger balance sheet
and lower cost of capital, IRT will be better positioned to drive future growth and increase its current quarterly dividend. |
* Pro forma for IRT’s acquisition of 236-unit multifamily
property in Indianapolis, Indiana on May 1, 2015.
Upon completion of
the transaction, Scott Schaeffer will continue to serve as Chairman and CEO of IRT. Mack Pridgen, Chairman of Trade Street, and
Richard Ross, CEO of Trade Street, will join IRT’s board of directors, which will be expanded from five members to seven
members.
Scott Schaeffer, Chairman
and CEO of IRT, stated, “We are pleased to announce the acquisition of Trade Street, which will accelerate our expansion
strategy and significantly strengthen our position as a leading regional multifamily operator across select target markets in the
United States. This high quality portfolio of luxury, class A apartment communities will immediately increase our average occupancy
levels and average base rents, and we have additional value-creating opportunities in progress to drive further improvement in
our operating results. We also expect to generate increased operating efficiencies and achieve synergies on our larger platform
which should result in stronger margins and cash flows. Upon completion of the deal, our expanded business will be even better
situated to continue to pursue accretive acquisitions and transformational opportunities to create additional shareholder value.”
Richard Ross, CEO
of Trade Street, commented, "Building on our successful accomplishments since our IPO in May 2013, we are also pleased to
have reached this agreement with IRT. We believe our combined business will be better positioned to further expand our modern portfolio
of well-located apartment communities and capitalize on the improving fundamentals in our attractive markets across the Southeast
and Texas.”
The transaction has
been approved by the board of directors of both IRT and Trade Street. In addition, in connection with the merger agreement, RAIT
Financial Trust (NYSE: RAS), which, with is affiliates and subsidiaries, collectively own approximately 23% of IRT’s commons
stock, has entered into a voting agreement pursuant to which it has committed to support the transaction. Also in connection with
the merger agreement, certain affiliates of Senator Investment Group LP and Monarch Alternative Capital LP, which own approximately
25.4% and 23.0%, respectively, of Trade Street’s common stock, have entered into voting agreements pursuant to which they
have committed to support the transaction. Under the definitive merger agreement, IRT’s shares of common stock have been
valued at the Reference Price of $9.25 per share, representing a fixed exchange ratio of 0.4108 shares of IRT’s common stock
for each share of Trade Street common stock. The Reference Price represents a 1% premium to the 45-day VWAP of IRT’s stock
price. Based on the Reference Price, IRT expects to issue approximately 16.1 million shares of IRT common stock and OP units to
Trade Street common stockholders and unit holders.
IRT has secured $500 million of committed financing for this transaction.
IRT has the option
to increase the cash portion of the consideration from $3.80 per share of Trade Street common stock up to $4.56 per share of Trade
Street common stock with a corresponding decrease in the stock portion of the merger consideration as provided for under the terms
of the merger agreement, in which case the exchange ratio will be adjusted to reflect the new consideration mix.
Upon completion of the merger, the company will retain the Independence
Realty Trust name and will trade under the ticker symbol IRT (NYSE MKT). Following the close of the transaction, the combined company's
corporate headquarters will be located in Philadelphia, PA.
Deutsche Bank acted as exclusive financial advisor, and Pepper Hamilton
acted as legal advisor to Independence Realty Trust. JP Morgan acted as exclusive financial advisor and Morrison & Foerster
LLP and Venable LLP acted as legal advisors to Trade Street Residential.
About Independence
Realty Trust, Inc.
Independence Realty
Trust, Inc. (NYSE MKT: IRT) is a real estate investment trust that seeks to own well-located apartment properties in non-gateway
markets that support strong occupancy and the potential for growth in rental rates. IRT seeks to provide stockholders with attractive
risk-adjusted returns, with an emphasis on distributions and capital appreciation. Subsidiaries of RAIT Financial Trust (NYSE:
RAS) serve as IRT’s external advisor and property manager and RAIT affiliates collectively own approximately 23% of IRT’s
outstanding common stock.
About Trade Street
Residential, Inc.
Trade Street Residential,
Inc. is a vertically integrated and self-managed real estate investment trust focused on acquiring, owning, operating and managing
conveniently located, garden-style and mid-rise apartment communities in mid-sized cities and suburban submarkets of larger cities
primarily in the southeastern United States, including Texas.
Important Information
Will be Filed with the SEC
IRT plans to file
with the SEC a Registration Statement on Form S-4 in connection with the transaction. IRT and Trade Street plan to file with the
SEC and mail to their respective stockholders a Joint Proxy Statement/Prospectus in connection with the transaction. The Registration
Statement and the Joint Proxy Statement/Prospectus will contain important information about IRT, Trade Street, the transaction
and related matters. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND THE JOINT PROXY STATEMENT/PROSPECTUS
CAREFULLY WHEN THEY ARE AVAILABLE.
Investors and security
holders will be able to obtain free copies of the Registration Statement and the Joint Proxy Statement/Prospectus and other documents
filed with the SEC by IRT and Trade Street through the web site maintained by the SEC at www.sec.gov or by phone, email or written
request by contacting the investor relations department of IRT or Trade Street at the following:
IRT |
|
Trade Street |
Cira Centre |
|
19950 W. Country Club Drive |
2929 Arch Street, 17th Floor |
|
Suite 800 |
Philadelphia, PA 19104 |
|
Aventura, Florida 33180 |
Attention: Investor Relations |
|
Attention: Investor Relations |
215-243-9000 |
|
786-248-6099 |
aviroslav@irtreit.com |
|
ir@trade-street.com |
IRT and Trade Street,
and their respective directors and executive officers, may be deemed to be participants in the solicitation of proxies in respect
of the transactions contemplated by the merger agreement. Information regarding the directors and executive officers of IRT is
contained in IRT's Form 10-K for the year ended December 31, 2014 and its proxy statement filed on April 7, 2015, which are filed
with the SEC. Information regarding Trade Street’s directors and executive officers is contained in Trade Street's Form 10-K/A
for the year ended December 31, 2014, which is filed with the SEC. A more complete description will be available in the Registration
Statement and the Joint Proxy Statement/Prospectus.
This communication
shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities,
nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except
by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Forward-Looking
Statements
This press release
may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements can generally be identified by
our use of forward-looking terminology such as "may," “trend”, "will," "expect," "intend,"
"anticipate," "estimate," "believe," "continue," “seek” or other similar words.
Because such statements include risks, uncertainties and contingencies, actual results may differ materially from the expectations,
intentions, beliefs, plans or predictions of the future expressed or implied by such forward-looking statements. These risks, uncertainties
and contingencies include, but are not limited to, those disclosed in IRT’s filings with the Securities and Exchange Commission.
IRT undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date hereof
or to reflect the occurrence of unanticipated events, except as may be required by law.
Independence Realty Trust, Inc.
Investor Relations
Andres Viroslav
215-243-9000
aviroslav@irtreit.com
Trade Street Residential, Inc.
Investor Relations
Stephen Swett
786-248-6099
ir@trade-street.com
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