Item
1.01 Entry into a Material Definitive Agreement.
As
previously announced, on November 5, 2021, Monmouth Real Estate Investment Corporation, a Maryland corporation (“Monmouth”),
Industrial Logistics Properties Trust, a Maryland real estate investment trust (“ILPT”), and Maple Delaware Merger Sub LLC,
a Delaware limited liability company and wholly owned subsidiary of ILPT (“Merger Sub”), entered into an Agreement and Plan
of Merger (the “Merger Agreement”) under which, subject to the terms and conditions thereof, ILPT will acquire Monmouth in
an all-cash transaction (the “Merger”). Under the terms and subject to the conditions set forth in the Merger Agreement,
Monmouth will merge with and into Merger Sub, with Merger Sub surviving as a wholly owned subsidiary of ILPT. Upon the closing of the
Merger (the “Effective Time”), each share of common stock, par value $0.01 per share, of Monmouth that is issued and outstanding
immediately prior to the Effective Time (other than shares owned by Monmouth, ILPT or Merger Sub) will be automatically converted into
the right to receive $21.00 per share in cash, without interest and subject to applicable withholding tax, and each share of 6.125% Series
C Cumulative Redeemable Preferred Stock, par value $0.01 per share, of Monmouth that is issued and outstanding immediately prior to the
Effective Time (other than shares owned by Monmouth, ILPT or Merger Sub) will be automatically converted into the right to receive an
amount in cash equal to $25.00 plus accumulated and unpaid dividends to, but not including, the date the Merger is completed.
On
February 7, 2022, Monmouth, ILPT, and Merger Sub entered into Amendment No. 1 (the “Amendment”) to the Merger Agreement,
pursuant to which, as a result of ILPT transferring all of the issued and outstanding limited liability company interests of Merger Sub
to a direct wholly owned subsidiary of ILPT and Merger Sub thereby becoming an indirect wholly owned subsidiary of ILPT, the parties
have agreed to amend certain representations and warranties of ILPT and Merger Sub.
The
foregoing description of the Amendment is qualified in its entirety by reference to the Amendment, a copy of which is filed as Exhibit
2.1 hereto and incorporated herein by reference.
Item
8.01 Other Events.
On
December 21, 2021, Monmouth filed with the Securities and Exchange Commission (the “SEC”) a definitive proxy statement (the
“Definitive Proxy Statement”) with respect to the special meeting of shareholders of Monmouth scheduled to be held on February
17, 2022 in connection with the Merger (the “Special Meeting”).
Litigation
Relating to the Merger
Beginning
on December 13, 2021, purported shareholders of Monmouth filed seven lawsuits in federal courts against Monmouth and members of Monmouth’s
board of directors, challenging disclosures related to the Merger. These lawsuits, Wang v. Monmouth Real Estate Investment Corporation,
et al., No. 1:21-cv-10632 (S.D.N.Y.), Whitfield v. Monmouth Real Estate Investment Corporation, et al., No. 1:21-cv-10854 (S.D.N.Y.),
Wallace v. Monmouth Real Estate Investment Corporation, et al., No. 1:21-cv-07088 (E.D.N.Y.), Wilson v. Monmouth Real Estate Investment
Corporation, et al., No. 3:22-cv-00074 (D.N.J.), Cohen v. Monmouth Real Estate Investment Corporation, et al., No. 1:22-cv-00184 (S.D.N.Y.),
Jones v. Monmouth Real Estate Investment Corporation, et al., No. 3:22-cv-00105 (D.N.J.), and Waterman v. Monmouth Real Estate Investment
Corporation, et al., No. 2:22-cv-00102 (E.D. Pa.), allege, among other things, that Monmouth and its directors violated Section 14(a)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 14a-9 promulgated thereunder and that Monmouth’s
directors violated Section 20(a) of the Exchange Act by causing the filing of a proxy statement relating to the Merger with the SEC that
misstates or omits certain allegedly material information.
These
lawsuits seek injunctive and other relief, including, among other things, enjoining the consummation of the Merger, rescission of the
Merger to the extent implemented (or rescissory damages), directing the defendants to disseminate a proxy statement that does not contain
any untrue statements of material fact and that states all material facts required in it or necessary to make the statements contained
therein not misleading, accounting for damages, a declaration that Monmouth and its directors violated Sections 14(a) and/or 20(a) of
the Exchange Act and Rule 14a-9 thereunder, and an award of the plaintiff’s costs, including attorneys’ and experts’
fees.
In
addition, Monmouth and members of Monmouth’s board of directors are defendants in a putative class action lawsuit filed on August
4, 2021, and amended on January 14, 2022, by a purported shareholder of Monmouth (Ross v. Conway et al., No. 24-C-21-003425CN (Md. Cir.
Ct. Balt.)) (the “Ross Complaint”) that alleges, among other things, that the defendants violated fiduciary duties by misrepresenting
or omitting allegedly material information in the Definitive Proxy Statement and that plaintiff’s counsel is entitled to attorneys’
fees and expenses in connection with disclosures related to Monmouth’s now-terminated merger agreement with Equity Commonwealth.
The Ross Complaint seeks relief including, among other things, enjoining the vote on the Merger, compensatory damages, awarding plaintiff
the costs of the action, and awarding plaintiff’s counsel attorneys’ fees and expenses.
Monmouth
believes that the claims asserted in the federal lawsuits and the Ross Complaint (the “Complaints”) are without merit and
that no further disclosure is required under applicable law. Nothing in this Current Report on Form 8-K shall be deemed an admission
of the legal necessity or materiality under applicable laws of any of the disclosures set forth herein. To the contrary, Monmouth specifically
denies all allegations in the Complaints that any additional disclosure was or is required.
Supplemental
Disclosures to Definitive Proxy Statement
This
supplemental information to the Definitive Proxy Statement should be read in conjunction with the Definitive Proxy Statement, which should
be read in its entirety. All page references in the information below are to pages in the Definitive Proxy Statement, and all terms used
but not defined below shall have the meanings set forth in the Definitive Proxy Statement.
The
following underlined language is added to the penultimate paragraph in the section of the Definitive Proxy Statement entitled “The
Merger—Background of the Merger” that appears on page 32.
Also
on November 4, 2021, Monmouth, with the approval of its board of directors, entered into an agreement with Blackwells pursuant to which
Blackwells would withdraw its proposals, support the proposed transaction and enter into various standstill, solicitation and support
arrangements. The agreement provided for Monmouth’s partial expense reimbursement to Blackwells of $3.85 million for certain
of Blackwells’s documented, actual out-of-pocket third party professional fees and expenses. Monmouth simultaneously entered
into an agreement with its former general counsel and Blackwells to settle and dismiss all claims between them in the New Jersey litigation,
which agreement provided for mutual partial reimbursement of litigation expenses, with net reimbursement payable by Monmouth to Blackwells
of $4 million.
The
following paragraph and table are added after the third paragraph in the section of the Definitive Proxy Statement entitled “The
Merger—Opinions of Monmouth’s Financial Advisors—Opinion of J.P. Morgan—Public Trading Multiples” that
appears on page 38.
The
P/2022E AFFO, P/2022E FFO and Implied Capitalization Rate for each selected company with respect to Monmouth are as follows:
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P/2022E AFFO
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P/2022E FFO
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Implied
Capitalization Rate
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STAG Industrial, Inc.
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22.3
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x
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20.4
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x
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4.7
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%
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Lexington Realty Trust
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21.5
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x
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19.4
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x
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4.8
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%
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Monmouth
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21.1
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x
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21.1
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x
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4.9
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%
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The
following underlined language is added to the fourth paragraph in the section of the Definitive Proxy Statement entitled “The
Merger—Opinions of Monmouth’s Financial Advisors—Opinion of CSCA—Selected Precedent Transactions Analysis”
that appears on page 45.
CSCA
applied the range of implied cash capitalization rates from the selected precedent transactions to Monmouth’s pro forma cash NOI,
reflecting projected CY 2022 Cash NOI as reflected in Monmouth management forecasts described under “The Merger—Summary
of Certain Monmouth Unaudited Prospective Financial Information—Monmouth Multi-Year Projected Cash Flows” and adjusted
to reflect the full year run rate effect of acquisitions under contract and expansions in-progress as provided by Monmouth’s management,
to calculate the range of implied gross real estate values. To determine the implied equity values for Monmouth, CSCA added certain
tangible assets and subtracted certain tangible liabilities, each based on information provided by Monmouth management. The following
table sets forth the results of such analyses.
The
following underlined language is added to the first paragraph in the section of the Definitive Proxy Statement entitled “The
Merger—Opinions of Monmouth’s Financial Advisors—Opinion of CSCA—Capitalization Rate Valuation Analysis”
that appears on page 45.
In
performing the capitalization rate valuation analysis with respect to Monmouth, CSCA utilized a range of property-level cash capitalization
rates selected by CSCA and informed from a variety of sources including, but not limited to, the Industrial Peer Group, precedent transactions
and industry research, among other sources, as well as based on its professional judgment. An estimated range of real estate values
was calculated by applying a range of cash capitalization rates from 4.50% to 5.25% to Monmouth’s pro forma cash NOI, as provided
by Monmouth management. To determine the implied equity values for Monmouth, CSCA added certain tangible assets and subtracted certain
tangible liabilities, each based on information provided by Monmouth management. The following table sets forth the results of such analyses.
The
following underlined language is added to, and the following stricken-through language is deleted from, the first paragraph in the section
of the Definitive Proxy Statement entitled “The Merger—Opinions of Monmouth’s Financial Advisors—Opinion of
CSCA—Discounted Cash Flow Analysis” that appears on page 47.
CSCA
performed a discounted cash flow analysis with respect to Monmouth by calculating the estimated present value as of September 30, 2021
of (i) estimates of unlevered free cash flow for Monmouth from October 1, 2021 through December 31, 2026, as reflected in Monmouth management
forecasts described under “The Merger—Summary of Certain Monmouth Unaudited Prospective Financial Information—Monmouth
Multi-Year Projected Cash Flows” and (ii) a range of terminal values of Monmouth based on annualized December 2026 EBITDA
excluding dividend and interest income and straight-line rent as of December 2026, all of which were discussed with,
and approved by, Monmouth for use by CSCA in its analysis. For purposes of its analysis, CSCA utilized a range of discount rates from
6.00% to 6.50%, which CSCA derived utilizing the capital asset pricing model which requires certain company-specific inputs, including
Monmouth’s capital structure weightings, the cost of long-term debt, and a beta for Monmouth, as well as certain financial metrics
for the United States financial markets generally. The range of estimated terminal values of approximately $4.3 billion
to $5.0 billion for Monmouth was calculated by applying a selected range of EBITDA multiples of 20.0x to 23.0x to annualized December
2026 EBITDA as described above, selected by CSCA based in part on the historical EBITDA trading multiples of the Industrial Peer
Group and in part on CSCA’s professional judgment.
The
following underlined language is added to the last paragraph in the section of the Definitive Proxy Statement entitled “The
Merger—Opinions of Monmouth’s Financial Advisors—Opinion of CSCA—General” that appears on page 48.
CSCA
is acting as non-exclusive financial advisor to Monmouth in connection with the Merger and will receive a non-contingent fee from Monmouth
for its services of $1.0 million which became payable upon the delivery of CSCA’s opinion (in addition to the $2.0 million of fees
paid to CSCA for the delivery of CSCA’s prior opinions in connection with the now-terminated transaction with EQC). In addition,
Monmouth has agreed to reimburse CSCA for certain reasonable out-of-pocket expenses and indemnify CSCA for certain liabilities that may
arise out of its engagement by Monmouth and the rendering of CSCA’s opinion. Pursuant to the terms of the engagement, CSCA may
be paid customary additional fees at CSCA’s standard hourly rates for any time incurred should CSCA be called upon to support
its findings or provide further services related to its opinion subsequent to the delivery of its opinion. CSCA will also receive a success
fee, which is contingent upon the consummation of the Merger, equal to 0.70% of the transaction value, which is estimated to be approximately
$14.5 million. The prior opinion fees paid to CSCA will be fully credited against the success fee, and the opinion fee with respect to
this transaction will be 50% credited against the success fee. Pursuant to a separate advisory agreement with Monmouth dated December
8, 2020, CSCA has received and will receive quarterly advisory fees from Monmouth until such agreement is terminated. In the two years
preceding the date of its opinion, CSCA has provided certain financial advisory services for Monmouth, having received approximately
$2.2 million for such services, including the $2.0 million of fees paid for the delivery of prior fairness opinions in connection
with the now-terminated transaction with EQC, reimbursement of approximately $0.1 million of related expenses and approximately $0.2
million of quarterly advisory fees. In the two years preceding the date of its opinion, CSCA has not provided any investment banking
or advisory services to ILPT or RMR. CSCA may in the future provide investment banking and advisory services to ILPT or RMR for which
it may receive customary fees and reimbursement of expenses.
Item 9.01 Financial Statements and Exhibits.
(d)
Exhibits
Additional
Information and Where to Find It
In
connection with the Special Meeting, Monmouth filed the Definitive Proxy Statement with the SEC on December 21, 2021 and commenced mailing
of the Definitive Proxy Statement to the common shareholders of Monmouth. Monmouth may also file other relevant documents with the SEC
regarding the Merger. This document is not a substitute for the Definitive Proxy Statement or any other document that Monmouth has filed
or may file with the SEC. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS
THAT HAS BEEN OR MAY BE FILED WITH THE SEC OR OTHERWISE BECOME AVAILABLE, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS
CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT MONMOUTH,
ILPT, AND THE PROPOSED MERGER. Investors and security holders are able to obtain free copies of the Definitive Proxy Statement and other
documents filed with the SEC by Monmouth (in the case of such other documents, when they become available) through the website maintained
by the SEC at www.sec.gov. In addition, investors and security holders are able to obtain free copies of the Definitive Proxy Statement
and other documents filed with the SEC (in the case of such other documents, when they become available) on Monmouth’s website
at www.mreic.reit.
Participants
in the Solicitation
Monmouth
and certain of its directors and executive officers and other employees may be deemed to be participants in a solicitation of proxies
from Monmouth’s shareholders under the rules of the SEC. Investors may obtain information regarding the names, affiliations and
interests of directors and executive officers of Monmouth in Monmouth’s definitive proxy statement on Schedule 14A for its 2021
annual meeting of shareholders, which was filed with the SEC on November 15, 2021. Other information regarding the participants in the
proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, is contained in the Definitive
Proxy Statement and other relevant materials to be filed with the SEC in respect of the proposed Merger.
Forward-Looking
Statements
Some
of the statements contained in this Current Report on Form 8-K constitute forward-looking statements within the meaning of the federal
securities laws, including, but not limited to, statements regarding consummating the Merger. Any forward-looking statements contained
in this Current Report on Form 8-K are intended to be made pursuant to the safe harbor provisions of Section 21E of the Exchange Act.
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,” “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. You can also identify forward-looking statements by discussions of strategy, plans
or intentions.
The
forward-looking statements contained in this communication reflect Monmouth’s current views about future events and are subject
to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause actual results to differ
significantly from those expressed in any forward-looking statement, including, without limitation, (i) inability to complete the proposed
Merger because, among other reasons, one or more conditions to the closing of the proposed Merger may not be satisfied or waived; (ii)
uncertainty as to the timing of completion of the proposed Merger; (iii) potential adverse effects or changes to relationships with tenants,
employees, service providers or other parties resulting from the announcement or completion of the proposed Merger; (iv) the outcome
of any legal proceedings instituted against the parties and others related to the proposed Merger; (v) possible disruptions from the
proposed Merger that could harm Monmouth’s business, including current plans and operations; (vi) unexpected costs, charges or
expenses resulting from the proposed Merger; (vii) legislative, regulatory and economic developments; and (viii) unpredictability and
severity of catastrophic events, including, but not limited to, acts of terrorism, outbreak of war or hostilities and epidemics and pandemics,
including COVID-19, as well as management’s response to any of the aforementioned factors. Monmouth does not guarantee that the
proposed Merger and events described will happen as described (or that they will happen at all). For a further discussion of other factors
that could cause Monmouth’s future results to differ materially from any forward-looking statements, see the section entitled “Risk
Factors” in Monmouth’s most recent Annual Report on Form 10-K and in its Quarterly Reports on Form 10-Q for subsequent quarters
and the section entitled “Cautionary Statement Regarding Forward-Looking Statements” in Monmouth’s Definitive Proxy
Statement.
While
forward-looking statements reflect Monmouth’s good faith beliefs, they are not guarantees of future performance. Monmouth 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.
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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Monmouth
Real Estate Investment Corporation
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Dated:
February 7, 2022
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By:
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/s/
Kevin S. Miller
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Kevin
S. Miller
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Chief
Financial Officer, its principal financial officer and principal accounting officer
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Exhibit
2.1
AMENDMENT
NO. 1 TO AGREEMENT AND PLAN OF MERGER
This
Amendment No. 1 to agreement and plan of merger (this
“Amendment”) is made and entered into as of February 7, 2022, by and among Industrial Logistics Properties Trust,
a Maryland real estate investment trust (“Parent”), Maple Delaware Merger Sub LLC, a Delaware limited liability company
and a wholly owned subsidiary of Parent (“Merger Sub”), and Monmouth Real Estate Investment Corporation, a Maryland
corporation (the “Company” and, together with Parent and Merger Sub, each a “party” and collectively,
the “parties”). Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Agreement
(as defined below).
RECITALS
WHEREAS,
the parties entered into that certain Agreement and Plan of Merger, dated as of November 5, 2021 (the “Agreement”);
WHEREAS,
Parent desires to transfer all of the issued and outstanding limited liability company interests of Merger Sub to a direct wholly owned
Maryland real estate investment trust subsidiary of Parent, and after such transfer, Merger Sub will be an indirect wholly owned subsidiary
of Parent; and
WHEREAS,
in accordance with Section 9.9 of the Agreement, the Parties wish to amend the Agreement as set forth herein.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual promises contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1.
The Amendment
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1.1
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Amendment
to Section 4.5. Section 4.5 (Capitalization; Interim Operations of Merger Sub) of the Agreement is hereby amended by deleting
the last sentence of that Section 4.5 in its entirety and restating such sentence in its entirety to read as follows:
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“All
of the issued and outstanding limited liability company interests of Merger Sub are owned directly or indirectly by Parent. On or prior
to February 7, 2022, the Subsidiary of Parent that directly owns all of the issued and outstanding limited liability company interests
of Merger Sub, in its capacity as the sole member of Merger Sub, (i) approved and declared it advisable, and in the best interests of
Merger Sub to enter into this Agreement providing for the Merger, upon the terms and subject to the conditions set forth herein, and
(ii) approved the execution, delivery and performance by Merger Sub of this Agreement and the consummation of the transactions to which
Merger Sub is a party contemplated hereby, upon the terms and subject to the conditions set forth herein.”
2. Miscellaneous Provisions
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2.1
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Effect
of Amendment. This Amendment shall be effective as of the date first written above. For the avoidance of doubt, all references
(a) in the Agreement to “this Agreement” and (b) to the Agreement in any other agreements, exhibits, schedules and disclosures
schedules referred to in the Agreement, will in each case be deemed to reference the Agreement as amended by this Amendment. This
Amendment is limited precisely as written and except to the extent specifically amended herein or supplemented hereby, the Agreement
remains unchanged and in full force and effect.
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2.2
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Counterparts.
This Amendment may be executed and delivered in two (2) or more counterparts, including by facsimile or other form of electronic
transmission, each of which shall be deemed to be an original but all of which shall constitute one and the same instrument. This
Agreement shall become effective when each party has received counterparts thereof signed and delivered (by electronic communication,
facsimile or otherwise) by all of the other parties.
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2.3
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Governing
Law. This Amendment and any disputes or controversies arising out of or relating to this Amendment or the transactions contemplated
hereby (whether in contract, tort or otherwise) shall be governed by and construed in accordance with Section 9.11 (Governing
Law and Venue; Waiver of Jury Trial) of the Agreement.
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(The
remainder of this page is left blank.)
IN
WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this Amendment to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
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INDUSTRIAL
LOGISTICS PROPERTIES TRUST
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By:
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/s/
John G. Murray
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Name:
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John
G. Murray
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Title:
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President
and Chief Executive Officer
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MAPLE
DELAWARE MERGER SUB LLC
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By:
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/s/
John G. Murray
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Name:
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John
G. Murray
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Title:
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President
and Chief Executive Officer
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MONMOUTH
REAL ESTATE INVESTMENT CORPORATION
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By:
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/s/
Michael Landy
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Name:
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Michael
Landy
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Title:
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President
and CEO
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[SIGNATURE PAGE TO AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER]