Item 1.01 Entry into a Material Definitive Agreement.
On August 30, 2019, Reven Housing REIT, Inc., a Maryland corporation
(the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with
SOR PORT Holdings, LLC, a Maryland limited liability company (“Parent”), and SOR PORT, LLC, a Maryland limited
liability company and wholly-owned subsidiary of Parent (“Merger Sub”). Parent and Merger Sub are indirect,
wholly-owned subsidiaries of KBS Strategic Opportunity REIT, Inc., a Maryland corporation (“KBS SOR”).
The Merger
Pursuant to the Merger Agreement, upon the terms and subject
to the conditions thereof, Merger Sub will merge with and into the Company (the “Merger”), with the Company
continuing as the surviving corporation and as a wholly owned subsidiary of Parent (the “Surviving Corporation”).
The Merger will become effective upon the filing of the Articles of Merger with the State Department of Assessments and Taxation
of the State of Maryland (the “SDAT”) in accordance with the Maryland General Corporation Law, as amended (the
“MGCL”). The time at which the Merger will become effective is hereinafter referred to as the “Effective
Time”.
Merger Consideration
Common Stock
At the Effective Time, each issued and outstanding share of
common stock, par value $0.001 per share, of the Company (each, a “Share” and, collectively, the “Shares”)
(other than any Shares owned by Parent, Merger Sub or any other wholly-owned subsidiary of Parent) will be cancelled and converted
into the right to receive an amount in cash (without any interest thereon) equal to (i) the aggregate cash merger consideration
of $56,849,495.55, to be increased or decreased, as the case may be, by the difference, if any, between the amount of the Company’s
unrestricted cash available for distribution as of the closing date of the Merger, and $6,500,000, divided by (ii) the total number
of Shares outstanding immediately prior to the Effective Time (such amount per Share, the “Merger Consideration”).
Restricted Stock Awards
At the Effective Time, each unvested Company restricted stock
award that is outstanding immediately prior to the Effective Time will become fully vested and will be automatically converted
into the right to receive an amount in cash (without interest thereon) equal to the product of (x) the total number of Shares subject
to such award and (y) the Merger Consideration, subject to applicable withholding of taxes.
Parent Financing
Concurrently with the execution and delivery of the Merger Agreement,
Parent has delivered to the Company an equity commitment letter, dated as of August 30, 2019 (the “Equity Commitment Letter”),
pursuant to which KBS SOR has committed to purchase, directly or indirectly through one or more affiliated entities, equity securities
of Parent for a maximum amount equal to the sum of (i) the aggregate cash merger consideration of $56,849,495.55, plus (ii) if
applicable, the excess amount by which the Company’s unrestricted cash amount available for distribution as of the closing
date of the Merger exceeds $6,500,000, plus (iii) all costs and expenses required to be paid by Parent in connection with the Merger
and the other transactions contemplated by the Merger Agreement (such sum, the “Commitment”), which amount will
be used by Parent solely for the purpose of allowing Parent to fund, to the extent necessary, the amounts payable by Parent on
or before the Effective Time pursuant to, and in accordance with, the Merger Agreement. The Company is an intended third-party
beneficiary of Parent’s rights under the Equity Commitment Letter, solely for the purpose of seeking through an action of
specific performance of KBS SOR’s obligation to fund the Commitment in certain circumstances, subject to the terms and conditions
of the Equity Commitment Letter. The funding of the Commitment under the Equity Commitment Letter is not a condition to Parent’s
obligation to consummate the Merger.
Company Recommendation; Stockholders’ Written Consent;
Information Statement
The Board of Directors of the Company (the “Board”)
has (i) authorized the execution and delivery of the Merger Agreement, (ii) declared that the Merger and the other transactions
contemplated by the Merger Agreement are advisable, in the best interests of the Company and its stockholders, and in accordance
with the MGCL, (iii) directed that the Merger be submitted for consideration by the Company’s stockholders and (iv) recommended
that the stockholders of the Company approve the Merger in accordance with the terms of the Merger Agreement (collectively, the
“Company Recommendation”).
Pursuant to the Merger Agreement, on September 3, 2019, certain
of the Company’s stockholders holding in the aggregate at least a majority of the outstanding Shares executed and delivered
to the Company an irrevocable written consent] (the “Stockholders’ Written Consent”) approving the Merger
in accordance with the terms and subject to the conditions set forth in the Merger Agreement. The Stockholders’ Written Consent
will be effective at 11:59 pm, New York City time, on September 9, 2019, unless such date is extended as provided in the Merger
Agreement in the event that the Company receives a superior proposal prior to such date (such date, as it may be so extended, the
“Written Consent Effective Time”). The Stockholders’ Written Consent is sufficient to satisfy the stockholder
approval requirement for the Merger under the Company’s organizational documents and applicable law.
The Company intends, promptly following the Written Consent
Effective Time, to prepare and file with the Securities and Exchange Commission (the “SEC”) an Information Statement
(including any amendments or supplements thereto, the “Information Statement”) containing the information specified
in Schedule 14C under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), concerning the Stockholders’
Written Consent, the Merger and the other transactions contemplated by the Merger Agreement. The Information Statement may also
include the notice of action by written consent required by the Company’s organizational documents and Section 2-505 of the
MGCL.
Series A Preferred Stock; Preferred Stock Offering
Pursuant to the Merger Agreement, the Company has agreed to
conduct an offering of up to $20 million of shares of Series A Preferred Stock (as defined below) that is exempt from the registration
requirements of Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Rule
506(c) of Regulation D promulgated under the Securities Act (the “Preferred Stock Offering”). The Preferred
Stock Offering is intended to be limited solely to the Company’s stockholders as of the date of the Merger Agreement that
are “accredited investors” (as defined in Rule 501 of Regulation D promulgated under the Securities Act). The Company
intends to commence the Preferred Stock Offering as promptly as practicable following the filing with the SEC of the Information
Statement in definitive form. The Merger Agreement contemplates that the closing of the Preferred Stock Offering will occur immediately
following the closing of the Merger.
Pursuant to the Merger Agreement, on August 30, 2019, the Board
adopted resolutions authorizing the classification and designation of a new series of Preferred Stock, par value $0.001 per share,
of the Company, designated “6.0% Series A Cumulative Convertible Redeemable Preferred Stock” (the “Series
A Preferred Stock”), having the rights, preferences, privileges and voting powers set forth in the Articles Supplementary
with respect to the Series A Preferred Stock (the “Articles Supplementary”) approved by the Board. The Articles
Supplementary will become effective upon their filing with the SDAT in accordance with the MGCL.
At the closing of the Preferred Stock Offering, the Company
will issue and sell shares of Series A Preferred Stock to each stockholder of the Company who accepts the offer to purchase shares
of Series A Preferred Stock and who is determined to be eligible to participate in the Preferred Stock Offering in accordance with
Rule 506(c) of Regulation D promulgated under the Securities Act (each, a “Preferred Investor”), upon the terms
and subject to the conditions set forth in a Preferred Securities Purchase Agreement to be entered into by and between the Company
and each of the Preferred Investors.
Representations, Warranties and Covenants
The Company, Parent and Merger Sub each made customary representations,
warranties and covenants in the Merger Agreement, including, among others, covenants by the Company to, subject to certain exceptions,
conduct its business in the ordinary course during the interim period between the execution of the Merger Agreement and the earlier
of the termination of the Merger Agreement and the Effective Time, and the Company’s obligation to mail the Information Statement
to notify its stockholders of the approval of the Merger by the Stockholders’ Written Consent.
Conditions to the Consummation of the Merger
Consummation of the Merger is subject to the satisfaction (or
waiver) of certain customary closing conditions, including (i) approval of the Merger by the holders of a majority of the outstanding
Shares entitled to vote on such matter, which approval has been obtained by the Stockholders’ Written Consent, (ii) the absence
of an injunction or law prohibiting the Merger, (iii) the mailing of the Information Statement to the Company’s stockholders,
(iv) accuracy of each party’s representations and warranties (subject to customary materiality qualifiers set forth in the
Merger Agreement), (v) each party’s performance in all material respects of its obligations and covenants contained in the
Merger Agreement, (vi) the absence of any material adverse effect occurring with respect to the Company since the date of the Merger
Agreement, (vii) the delivery of notices or the receipt of consents or waivers, in each case, required or requested by Arbor Agency
Lending, LLC, the lender under the Company’s existing loan agreements, and (viii) Parent’s receipt of an opinion of
Greenberg Traurig LLP to the effect that the Company has been organized and operated in conformity with the requirements for qualification
and taxation as a REIT under the Internal Revenue Code of 1986, as amended, for all taxable periods commencing with the Company’s
taxable year beginning January 1, 2018 and ended December 31, 2018. The consummation of the Merger is not conditioned on Parent’s
receipt of financing.
Company Non-Solicitation Covenant and Permitted Responses
to Third-Party Acquisition Proposals
Pursuant to the Merger Agreement, the Company must immediately
cease all discussions and negotiations with any person initiated and conducted prior to the date of the Merger Agreement with respect
to any third-party acquisition proposal. Additionally, from the date of the Merger Agreement until the earlier of the Effective
Time and the termination of the Merger Agreement, the Company is not permitted to (i) directly or indirectly solicit, initiate,
knowingly facilitate or encourage any inquiry, expression of interest, request for information, discussion, proposal or offer that
constitutes, or would reasonably be expected to lead to, a third-party acquisition proposal, (ii) provide any non-public information
relating to Parent or Merger Sub to any person relating to a third-party acquisition proposal or that would reasonably be expected
to lead to a third-party acquisition proposal, (iii) enter into any agreement (other than an acceptable confidentiality agreement)
with respect to a third-party acquisition proposal or requiring the Company to abandon, terminate or fail to consummate the transactions
contemplated by the Merger Agreement, (iv) otherwise knowingly facilitate any effort or attempt to make a third-party acquisition
proposal, (v) terminate, waive, amend, release or modify any provision of, grant permission under, or take any other action having
a similar effect with respect to, any standstill, confidentiality or similar agreement to which the Company is a party (except
to the extent necessary to allow a counterparty thereof to make a private third-party acquisition proposal to the Board in accordance
with the Merger Agreement), or (vi) provide any further information with respect to the Company or any third-party acquisition
proposal (and will turn off any data rooms maintained by the Company) to any persons or their representatives.
However, prior to the Written Consent Effective Time, if the
Company or its representatives receives a written third-party acquisition proposal that did not result from the Company or its
representatives’ breach of the foregoing non-solicitation provisions, the Company may contact the person making such acquisition
proposal (and such person’s representatives) solely to ascertain facts or clarify terms so that the Board may become fully
informed with respect to the terms and the conditions of such acquisition proposal and the person submitting the same.
Additionally, if the Board determines in good faith, (A) after
consultation with its financial advisor and outside legal counsel, that such acquisition proposal either constitutes or would reasonably
be expected to lead to a superior proposal (i.e., an acquisition proposal that, if consummated, would reasonably be likely
to result in a transaction more favorable to the Company’s stockholders, from a financial point of view, than the Merger
and the other transactions contemplated by the Merger Agreement, after taking into account all material aspects of such acquisition
proposal and any of Parent’s proposed changes to the Merger Agreement, and for which financing is not a closing condition)
and (B) after consultation with its outside legal counsel, that the failure to take the actions described in clause (i) or (ii)
below would reasonably be expected to be inconsistent with the duties of the Company’s directors under applicable law, the
Company may (subject to certain requirements regarding confidentiality and providing certain notifications and materials to Parent)
(i) furnish information (including non-public Company information) to the person making such acquisition proposal and (ii) engage
and participate in discussions and negotiations with the person making such acquisition proposal.
Change of Recommendation
The Board may not (i)(a) fail to make the Company Recommendation
or fail to include the Company Recommendation in the Information Statement, (b) change, qualify, withhold, withdraw or modify,
or propose publicly to change, qualify, withhold, withdraw or modify, the Company Recommendation, in a manner adverse to Parent,
(c) fail to publicly recommend to the Company’s stockholders rejection of any third-party acquisition proposal constituting
a tender or exchange offer within ten business days after the commencement thereof, or (d) adopt, approve or recommend, or propose
publicly to adopt, approve or recommend, a third-party acquisition proposal to the Company’s stockholders, or (ii) authorize,
cause or permit the Company to enter into any letter of intent, memorandum of understanding, agreement-in-principle, written commitment
or definitive agreement with respect to a third-party acquisition proposal (other than an acceptable confidentiality agreement)
(the actions described in clauses (i) and (ii) referred to, collectively, as an “Adverse Recommendation Change”).
However, prior to the Written Consent Effective Time, in connection
with any third-party acquisition proposal that did not result from a material breach of the foregoing non-solicitation provisions,
the Board may make an Adverse Recommendation Change and terminate the Merger Agreement if it determines, in good faith, after consultation
with outside legal counsel and its financial advisor, that such acquisition proposal constitutes a superior proposal. However,
such an Adverse Recommendation Change or termination of the Merger Agreement may not be made unless and until (i) after the fourth
business day following Parent’s receipt of the Company’s written notice advising that the Board intends to take such
action and, if applicable, contemporaneously providing all of the relevant proposed transaction agreements and other material documents
provided by, or material correspondences with, the party making such superior proposal, and (ii) prior to taking such action, (a)
the Company has negotiated in good faith with Parent during such four-business-day period, to the extent Parent has notified the
Company that it desires to so negotiate, to enable Parent to submit to the Company, prior to the expiration of such four-business-day
period, a proposed definitive amendment to the Merger Agreement in such form that, if approved by the Board and entered into, would
constitute a binding definitive agreement among the Company, Parent and Merger Sub, and (b) if Parent has submitted such proposed
definitive amendment to the Merger Agreement prior to the expiration of such four-business-day period, the Board has determined
in good faith, after consultation with outside legal counsel and its financial advisor, that after giving effect to such proposed
amendments and entering into the aforementioned definitive amendment to the Merger Agreement proposed by Parent, the third-party
acquisition proposal would continue to constitute a superior proposal.
Termination; Termination Fee
The Merger Agreement contains certain customary termination
rights for Parent and the Company, including, (i) with respect to each of the Company and Parent, if the Merger is not consummated
on or before December 31, 2019 (such date, subject to extension as provided in the Merger Agreement, the “Outside Date”),
(ii) with respect to either party, if the other party has breached the Merger Agreement such that certain closing conditions to
the consummation of the Merger would fail to be satisfied, and such breach is not cured within the earlier of the Outside Date
or 30 days after the non-breaching party’s written notice, in which case the non-breaching party may terminate the Merger
Agreement, (iii) with respect to the Company, (1) prior to the Written Consent Effective Time, to accept a superior proposal in
accordance with the Merger Agreement or (2) if the closing conditions have been satisfied (or waived), the Company delivered written
notice to Parent that the Company is ready, willing and able to consummate the Merger, and Parent fails to consummate the Merger
within the earlier of one business day before the Outside Date and five business days after delivery of such notice, or (iv) with
respect to Parent, (1) if the Stockholders’ Written Consent has not been delivered to Parent within three business days after
the date of the Merger Agreement or (2) prior to obtaining stockholder approval of the Merger, if the Board makes an Adverse Recommendation
Change.
The Merger Agreement provides that if the Merger Agreement has
been terminated in certain circumstances, the Company will be required to pay to Parent a cash termination fee equal to $2.0 million.
* * *
The foregoing description of the Merger Agreement is only a
summary and is qualified in its entirety by reference to the complete text of the Merger Agreement, which is filed as Exhibit 2.1
to this Current Report on Form 8-K and incorporated herein by reference.
A copy of the Merger Agreement has been included as an exhibit
to this Current Report on Form 8-K to provide investors with information regarding its terms. It is not intended to provide any
other factual information about the Company, Parent, Merger Sub or any of their respective subsidiaries or affiliates. The representations,
warranties and covenants contained in the Merger Agreement were made only for purposes of that agreement and as of specific dates;
were made solely for the benefit of the parties to the Merger Agreement; may be subject to limitations agreed upon by the contracting
parties, including being qualified by confidential disclosures; may not have been intended to be statements of fact, but rather,
as a method of allocating contractual risk and governing the contractual rights and relationships between the parties to the Merger
Agreement; and may be subject to standards of materiality applicable to contracting parties that differ from those applicable to
investors. 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, Parent, Merger Sub or any of their respective subsidiaries or affiliates.
Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date
of the Merger Agreement, which subsequent information may or may not be fully reflected in the Company’s or KBS SOR’s
public disclosures.
Amendment of Chad M. Carpenter’s Employment Agreement
As an inducement for Parent to consummate the Merger and the
other transactions contemplated by the Merger Agreement, on August 30, 2019, the Company and Chad M. Carpenter, the Chief Executive
Officer of the Company, entered into an amendment (the “Carpenter Employment Agreement Amendment”) to the Amended
and Restated Employment Agreement, effective as of August 14, 2018, by and between the Company and Mr. Carpenter. Pursuant to the
Carpenter Employment Agreement Amendment, Mr. Carpenter has agreed not to compete with the Company for a period of one year after
the Effective Time. The Carpenter Employment Agreement Amendment will become effective at, and conditioned upon the occurrence
of, the Effective Time. If the Merger is not consummated in accordance with the Merger Agreement for any reason, the Carpenter
Employment Agreement Amendment, and the terms and conditions thereof, will not become effective and will be of no force and effect.
The foregoing description of the Carpenter Employment Agreement
Amendment is only a summary and is qualified in its entirety by reference to the complete text of the Carpenter Employment Agreement
Amendment, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.