Item 1.01. Entry into a Material
Definitive Agreement.
On October 16, 2015, Campus Crest Communities,
Inc., a Maryland corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”)
with HSRE Quad Merger Parent, LLC, a Delaware limited liability company (“Parent”), HSRE Quad Merger Sub, LLC, a Maryland
limited liability company and a wholly owned Subsidiary of Parent (“Merger Sub”) and CCGSR, Inc., a Delaware corporation
(the “Stockholders’ Representative”). Pursuant to the terms of the Merger Agreement, the Company will be merged
with and into Merger Sub (the "Merger"), with Merger Sub surviving the Merger as a wholly owned subsidiary of Parent
(the “Surviving Entity”). Parent is an affiliate of Harrison Street Real Estate Capital, LLC (“HSRE”).
The Merger Agreement was unanimously approved
by the Company’s Board of Directors (the “Board”), based on the recommendation of an independent Transaction
Committee of the Board formed to, among other things, review, evaluate and negotiate any potential transaction with any potentially
interested party.
As contemplated by the Merger Agreement,
the Company also entered into an agreement (the “Montreal Sale Agreement”) to sell its interests in its evo Montreal
joint venture (the “Montreal JV”) to its joint venture partner, with a closing currently expected to occur by October
30, 2015. Assuming the sale of the Montreal JV occurs upon the terms and conditions set forth in the Montreal Sale Agreement, at
the time that the Merger becomes effective (the “Effective Time”) each issued and outstanding share of common stock
of the Company, par value $0.01 per share (the “Common Stock”), other than certain excluded shares owned, directly
or indirectly, by Parent, Merger Sub or the Company, will be converted automatically into the right to receive (i) a cash amount
currently estimated to be $6.90 (the “Cash Consideration”), plus (ii) a pro-rata portion of the net proceeds from the
sale of the Montreal JV interests (the “Contingent Consideration”, and together with the Cash Consideration, the “Merger
Consideration”). If the sale of the Montreal JV interests closes on the terms contemplated by the Montreal Sale Agreement,
the Contingent Consideration is currently estimated to be $0.13 per share, and the total Merger Consideration payable to the Company’s
stockholders at the Effective Time would be an estimated $7.03 per share. The Cash Consideration and the Contingent Consideration
are subject to change if the Company is unable to sell its Montreal JV interests prior to the Effective Time, or if it sells the
interests on terms other than those currently provided in the Montreal Sale Agreement, as follows:
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If the Company sells its Montreal JV interests prior to the Effective Time but for a lower or higher
price than is currently provided for in the Montreal Sale Agreement, then the amount of the Contingent Consideration would be based
on the actual net proceeds, after repaying debt on the Montreal properties and certain operating expenses, taxes and transaction
costs, which could be lower or higher than the currently estimated $0.13 per share. If the sale price of the Montreal JV interests
is insufficient to fully satisfy the outstanding debt on the Montreal properties owned by the Montreal JV, then the Company would
be obligated to contribute to the repayment of the deficiency in accordance with its outstanding guaranty of such indebtedness
(the “Montreal Guaranty”). In such event, the Cash Consideration per share would be reduced by a pro-rata portion of
the amount paid by the Company to discharge its obligations under the Montreal Guaranty. Based on the current balance of the indebtedness,
the Company’s obligation under the Montreal Guaranty today is approximately CAD$56.0 million, which equates to approximately
$0.67 per share of Common Stock (based upon current exchange rates).
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If the Company is unable to sell its Montreal JV interests prior to the Effective Time then, subject
to the terms of the Merger Agreement, Parent would be obligated to deposit an amount (the “Montreal Guaranty Amount”)
sufficient to fully satisfy the Montreal Guaranty into an escrow account, and that amount (converted to US Dollars at the then-current
exchange rate) would be deducted from the Cash Consideration payable to stockholders at the Effective Time. In such event, the
Cash Consideration would be reduced to approximately $6.23 (based on current exchange rates). The Company would deposit its Montreal
JV interests into the escrow account, and the Stockholders’ Representative would have responsibility for seeking to sell
the Montreal JV interests. In such event, the entire Contingent Consideration per share payable to stockholders would be represented
by a non-transferable contingent value right (“CVR”), with each CVR entitled to a pro-rata share of the net proceeds
of any sale of the Montreal JV interests after the Effective Time (after taking into account certain operating expenses, taxes
and transaction costs), plus a pro-rata portion of the Montreal Guaranty Amount, if any, that is not required to satisfy the Montreal
Guaranty.
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The Merger Agreement provides that, immediately
prior to the Effective Time, any outstanding Company restricted stock will become fully vested and free of restrictions, and will
be automatically converted into the right to receive the Merger Consideration.
The Merger Agreement further provides that,
at the Effective Time, each share of the Company’s 8.00% Series A Cumulative Redeemable Preferred Stock, $0.01 par value
per share (the “Series A Preferred Stock”), will be redeemed by the Company in accordance with the terms of the Series
A Preferred Stock, or, in the alternative, the Company will set aside sufficient funds for the redemption of each share of Series
A Preferred Stock in trust for the benefit of the holders of the Series A Preferred Stock in accordance with the terms the Series
A Preferred Stock.
Following the Merger, the Surviving Entity
will enter into a merger agreement with Campus Crest Communities Operating Partnership, LP (the “Company Operating Partnership”)
and a wholly owned subsidiary of the Surviving Entity (the “OP Merger Agreement”), pursuant to which (i) such wholly
owned subsidiary of the Surviving Entity and the Company Operating Partnership will merge (the “OP Merger”). Upon the
consummation of the OP Merger in accordance with the OP Merger Agreement, each limited partner of the Company Operating Partnership
will be entitled to receive for each limited partnership unit in the Company Operating Partnership an amount equal to the Merger
Consideration.
Stockholders of the Company will be asked
to vote on the adoption of the Merger Agreement and the approval of the Merger at a special stockholders’ meeting (the “Stockholders’
Meeting”) that will be held on a date to be determined and announced in accordance with the terms of the Merger Agreement.
Completion of the Merger is subject to various closing conditions, including, among others, (a) the affirmative vote of at least
a majority of the outstanding shares of Common Stock entitled to vote at the Stockholders’ Meeting in favor of adopting the
Merger Agreement and approving the Merger (the “Stockholder Approval”), (b) the absence of any law, injunction, judgment,
order, decree or ruling restraining or prohibiting consummation of the Merger, (c) the parties shall have received consents from
third parties relating to certain indebtedness of the Company and its subsidiaries that will be assumed by the Surviving Entity
relating to at least eighty five percent (85%) of the outstanding principal balance of such assumed indebtedness, (d) the transactions
contemplated by the Purchase, Sale and Redemption Agreement dated as of October 16, 2015, by and among Harrison Street Real Estate,
LLC and the other parties signatory thereto have been closed, conditioned only upon the occurrence of the closing of the Merger,
and (e) in the event that the Company’s Form 10-K for the fiscal year ended December 31, 2015 (the “the 2015 10-K”)
shall have become due under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (without giving effect
to any extensions permitted thereunder), the Company will have filed the 2015 10-K with the SEC. Each party’s obligation
to consummate the Merger is also subject to certain additional conditions, which include the accuracy of the other party’s
representations and warranties and the other party’s compliance with its covenants and obligations in all material respects
(in each case, as contained and more fully described in the Merger Agreement). The Merger Agreement does not contain a financing
condition.
The Merger Agreement contains customary
representations and warranties by each of the Company, Parent and Merger Sub, and also contains customary covenants and agreements,
including, among others, agreements by the Company to (i) carry on its business in the ordinary course consistent with past practice
and (ii) refrain from undertaking a number of actions without the prior written consent of Parent (not to be unreasonably withheld),
including, but not limited to, incurring indebtedness, settling claims or actions, certain matters related to capital expenditures,
the declaration of dividends, the issuance or sale of equity interests, and amending material contracts (in each case, during the
period from the date of the Merger Agreement to the Effective Time). In addition, Parent has agreed to maintain in effect the Company’s
current directors’ and officers’ liability insurance for a period of six years following the Effective Time. The Merger
Agreement provides that each of the parties shall use its respective reasonable best efforts to take all actions necessary to cause
the conditions to the closing of the Merger and the other transactions contemplated by the Merger Agreement to be satisfied as
promptly as practicable and to obtain all required regulatory approvals and consents.
The Company is subject to customary non-solicitation
restrictions on its ability to solicit, initiate, or knowingly encourage or take any actions to facilitate or encourage alternative
acquisition proposals. However, subject to certain limitations set forth in the Merger Agreement, the Company may furnish non-public
information to and negotiate with third parties who submit unsolicited alternative acquisition proposals at any time prior to receipt
of the Stockholder Approval if the Board determines in good faith after consultation with the Company’s legal counsel and
financial advisor, that the alternative proposal constitutes or would reasonably be expected to result in a Superior Proposal (as
defined in the Merger Agreement). Additionally, subject to certain limitations set forth in the Merger Agreement, at any time prior
to receipt of the Stockholder Approval, the Board may make a Company Adverse Recommendation Change (as defined in the Merger Agreement)
if the Board determines in good faith after consultation with the Company’s legal advisors and financial advisor, that (i)
failure to take such action would be reasonably likely to violate the directors’ fiduciary duties under applicable law, and
(ii) such proposal constitutes a Superior Proposal.
Upon a termination of the Merger Agreement
under specified circumstances set forth therein, the Company will be required to pay Parent a termination fee equal to $5,000,000.
The Merger Agreement also provides that upon a termination of the Merger Agreement under certain circumstances set forth in the
Merger Agreement, Parent will be required to pay the Company a reverse termination fee equal to $10,000,000. In the event that
the Stockholder Approval is not received, the Company will also be required to reimburse Parent’s expenses in an amount up
to $1,000,000, which reimbursement would reduce any termination fee subsequently payable by the Company on a dollar-for-dollar
basis. Subject to certain limitations set forth in the Merger Agreement, either party may terminate the Merger Agreement if the
Merger is not consummated by March 31, 2016.
The foregoing description of the Merger
Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety
by, the full text of the Merger Agreement, attached as Exhibit 2.1 to this Current Report on Form 8-K, which is incorporated herein
by this reference.
The Merger Agreement has been included
as an exhibit to this filing to provide investors with information regarding its terms. It is not intended to provide any other
factual information about the Company. In particular, the representations and warranties contained in the Merger Agreement were
made only for the purposes of the Merger Agreement as of the specific dates therein, and were solely for the benefit of the parties
to the Merger Agreement. The representations and warranties contained in the Merger Agreement may be subject to limitations agreed
upon by the parties to the Merger Agreement and have been qualified by confidential disclosures made to Parent and Merger Sub in
connection with the Merger Agreement. These confidential disclosures contain information that modifies, qualifies and creates exceptions
to the representations and warranties set forth in the Merger Agreement. Moreover, certain representations and warranties in the
Merger Agreement may be subject to a standard of materiality provided for in the Merger Agreement and have been used for the purpose
of allocating risk among the parties, rather than establishing matters of fact. Investors should not rely on the representations,
warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company
or any of its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties
may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Company’s
public disclosures.