UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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): November 1, 2022
Bluerock Homes Trust, Inc.
(Exact Name of Registrant as Specified in Its Charter)
| Maryland | 001-41322 | 87-4211187 |
| (State or other jurisdiction of incorporation or organization) |
(Commission File Number) | (I.R.S. Employer Identification No.) |
1345 Avenue of the Americas, 32nd Floor
New York, NY 10105
(Address of principal executive offices)
(212) 843-1601
(Registrant’s telephone number, including area code)
None.
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered |
| Class A Common Stock, $0.01 par value per share | BHM | NYSE American |
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:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| ITEM 1.01 | ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT |
Managing Broker Dealer Agreement
On November 1, 2022, Bluerock Homes Trust, Inc., a Maryland corporation (the “Company”) entered into a Managing Broker Dealer Agreement (the “Managing Broker Dealer Agreement”) with Bluerock Capital Markets, LLC, a Massachusetts limited liability company and an affiliate of Bluerock Homes Trust, Inc.’s Manager, (the “Dealer Manager”), whereby the Dealer Manager will serve as the Company’s exclusive dealer manager in connection with the Company’s primary offering (the “Offering”) of up to 10,000,000 shares of Series A redeemable preferred stock of the Company (the “Series A Preferred Stock”) on a “best efforts” basis. The Series A Preferred Stock will be offered and sold pursuant to a private placement memorandum dated November 1, 2022, as may be amended or supplemented from time to time, including all attachments, schedules, annexes and exhibits thereto (the “Memorandum”). The Series A Preferred Stock will not be registered under the Securities Act of 1933, as amended (the “Securities Act”) or the securities laws of any state, and will instead be issued in transactions exempt from the registration requirements of the Securities Act in reliance on Section 4(a)(2) and Rule 506(b) of Regulation D promulgated thereunder, and corresponding provisions of state securities laws, which exempt certain transactions by an issuer not involving a public offering. The Series A Preferred Stock may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. There will be no general solicitation in connection with the offer or sale of the Series A Preferred Stock.
Under the Managing Broker Dealer Agreement, the Dealer Manager will provide certain sales, promotional and marketing services to the Company in connection with the Offering, and the Company will pay the Dealer Manager (i) selling commissions of 7.0% of the gross proceeds from sales of Series A Preferred Stock in the Offering (“Selling Commissions”), provided, that if the Dealer Manager enters into an agreement with a participating broker-dealer providing for a maximum selling commission of less than 7.0%, then the offering price per share of Series A Preferred Stock sold through such participating broker-dealer shall be reduced by an amount equal to the reduction in selling commission paid to such participating broker-dealer, and (ii) a placement fee of 2.50% of the gross proceeds from sales of Series A Preferred Stock in the Offering (the “Placement Fee”). The maximum compensation payable to members of FINRA participating in this offering will not exceed 9.50% of the aggregate gross offering proceeds from the sale of shares of Series A Preferred Stock sold in the Offering. It is anticipated that substantially all of the Selling Commissions and the Placement Fee will be reallowed by the Dealer Manager to participating broker-dealers and/or applied by the Dealer Manager in support of the Offering.
The terms of the Managing Broker Dealer Agreement were approved by the Company’s board of directors.
Pursuant to the Managing Broker Dealer Agreement, the Company has agreed to indemnify the Dealer Manager and participating broker-dealers, and the Dealer Manager has agreed to indemnify the Company, against certain losses, claims, damages and liabilities, including but not limited to those arising out of (i) untrue statements of a material fact contained in the Memorandum, or blue sky applications relating to the Offering, or (ii) the omission or alleged omission to state a material fact required to be stated in the Memorandum, or blue sky applications relating to the Offering.
The foregoing description of the Managing Broker Dealer Agreement is a summary and is qualified in its entirety by the terms of Managing Broker Dealer Agreement, a copy of which is filed as Exhibit No. 10.1 to this Current Report on Form 8-K and incorporated by reference into this Item 1.01.
Fourteenth Amendment to Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership
On December 1, 2022, in connection with the Offering, the Company entered into a Fourteenth Amendment to Second Amended and Restated Agreement of Limited Partnership (the “Fourteenth Amendment”) of its operating partnership, Bluerock Residential Holdings, L.P., a Delaware limited partnership (the “Operating Partnership”). The Fourteenth Amendment provides, among other things, for the designation of 10,000,000 new Series A Preferred Units of the Operating Partnership (the “Series A Preferred Units”), and the issuance of the Series A Preferred Units to the Company in exchange for the contribution by the Company of the net proceeds of the Offering of the Series A Preferred Stock. The Series A Preferred Units will have substantially similar rights and preferences as the Series A Preferred Stock, as described below in Item 3.03.
The foregoing description of the Fourteenth Amendment is a summary and is qualified in its entirety by the terms of the Fourteenth Amendment, a copy of which is filed as Exhibit No. 10.2 to this Current Report on Form 8-K and incorporated by reference into this Item 1.01.
| ITEM 3.03. | MATERIAL MODIFICATION TO RIGHTS OF SECURITY HOLDERS |
On December 5, 2022, the Company filed Articles Supplementary (the “Articles Supplementary”) with the Maryland State Department of Assessments and Taxation to designate 10,000,000 shares of the Company’s authorized but unissued preferred stock, $0.01 par value per share, as shares of Series A Preferred Stock, with the powers, designations, preferences and other rights as set forth therein. The Articles Supplementary became effective upon filing on December 5, 2022.
Ranking. The Series A Preferred Stock ranks (a) senior to all classes or series of common stock and to any other class or series of our capital stock issued in the future, unless the terms of that capital stock expressly provide that it ranks senior to, or on parity with, the Series A Preferred Stock; (b) on a parity with any class or series of our capital stock, the terms of which expressly provide that it ranks on parity with the Series A Preferred Stock with respect to priority of payment of dividends and other distributions or rights upon liquidation, dissolution or winding up of the affairs of the Company (the “Parity Preferred Stock”); and (c) junior to any other class or series of capital stock, the terms of which expressly provide that it ranks senior to the Series A Preferred Stock, none of which exists on the date of the Articles Supplementary, and subject to payment of or provision for our debts and other liabilities.
Dividends. The Articles Supplementary provide that, commencing on the date of original issuance, the Company will pay cumulative cash dividends on each share of the Series A Preferred Stock at an annual rate of 6.0% of the Stated Value (each, a “Series A Cash Dividend”). Series A Cash Dividends are expected to be authorized and declared on a quarterly basis, payable monthly on the 5th day of the month to holders of record on the 25th day of the prior month (or if such payment date or record date is not a business day, on the immediately preceding business day). The initial Series A Cash Dividend on each share of Series A Preferred Stock will begin accruing on, and will be cumulative from, the date of original issuance of such share of Series A Preferred Stock. Each subsequent Series A Cash Dividend will begin accruing on, and will be cumulative from, the end of the most recent Series A Cash Dividend period for which a Series A Cash Dividend has been paid on each such share of Series A Preferred Stock.
Any such Series A Cash Dividend may vary among holders of Series A Preferred Stock, and may be prorated with respect to any shares of Series A Preferred Stock that were outstanding, less than the total number of days in the Series A Cash Dividend period immediately preceding the applicable dividend payment date, with the amount of any such prorated Series A Cash Dividend being computed on the basis of the actual number of days in such dividend period during which such shares of Series A Preferred Stock were outstanding.
Redemptions. The Series A Preferred Stock is redeemable by the Company as follows:
Redemption at Option of Holders. Holders of the Series A Preferred Stock may, at their option, elect to cause the Company to redeem their shares at a redemption price equal to the Stated Value, initially $25.00 per share, less a redemption fee, plus an amount equal to any accrued but unpaid cash dividends, if any. The redemption fee shall be equal to:
| · | Beginning on the date of original issuance of the shares to be redeemed: 12% |
| · | Beginning one year from the date of original issuance of the shares to be redeemed: 9% |
| · | Beginning two years from the date of original issuance of the shares to be redeemed: 6% |
| · | Beginning three years from the date of original issuance of the shares to be redeemed: 3% |
| · | Beginning four years from the date of original issuance of the shares to be redeemed: 0% |
Optional Redemption Following Death or Qualifying Disability of a Holder. In addition, beginning on the date of original issuance, the Company will redeem shares of Series A Preferred Stock of a holder who is a natural person upon his or her death or upon his or her suffering a qualifying disability, including shares held through a revocable grantor trust, or an IRA or other retirement or profit-sharing plan, at the written request, (a) in the case of the death of a holder, the holder’s estate, the recipient of such shares through bequest or inheritance, or, with respect to shares held through a revocable grantor trust, the trustee of such trust, who will have the sole ability to request redemption on behalf of the trust, or (b) in the case of the disability of a holder, the holder or the holder’s legal representative. Only shares of Series A Preferred Stock that have been outstanding for at least one (1) year prior to redemption are eligible for redemption by the Company. The Company must receive such written request within one (1) year after the death or qualifying disability of the holder, but no sooner than one (1) year after the date of original issuance of such shares. If the holder is not a natural person, such as a trust (other than a revocable grantor trust) or a partnership, corporation or similar legal entity, the right of redemption upon death or qualifying disability shall be subject to the approval of company management in its sole discretion. Beginning one (1) year from the date of original issuance of the shares of Series A Preferred Stock to be redeemed, we will redeem such shares at a redemption price equal to 95% of the Stated Value, initially $25.00 per share, and beginning two (2) years from the date of original issuance of the shares of Series A Preferred Stock to be redeemed, we will redeem such shares at a redemption price equal to 100% of the Stated Value, in each case, plus an amount equal to any accrued but unpaid cash dividends thereon, if any, to and including the redemption date.
If a holder of Series A Preferred Stock causes the Company to redeem shares of Series A Preferred Stock, the Company has the right, in its sole discretion, to pay the redemption price in cash or in equal value of shares of its Class A Common Stock, in the Company’s sole discretion, based on the closing price per share of Class A Common Stock for the single trading day prior to the date of redemption.
The Company’s ability to redeem shares of Series A Preferred Stock in cash may be limited to the extent that the Company does not have sufficient funds available to fund such cash redemption. Further, the Company’s obligation to redeem any of the shares of Series A Preferred Stock submitted for redemption in cash may be restricted by Maryland law. No redemptions of shares of Series A Preferred Stock will be made in cash at such time as the terms and provisions of any agreement to which the Company is a party prohibits such redemption or provides that such redemption would constitute a breach thereof or a default thereunder.
Optional Redemption by the Company. On and after the second anniversary of the date of original issuance of the shares of Series A Preferred Stock to be redeemed, the Company may, at its option, redeem the Series A Preferred Stock, in whole or in part, at any time or from time to time, at a redemption price of 100% of the Stated Value, initially $25.00 per share, plus an amount equal to any accumulated but unpaid cash dividends to and including the redemption date, payable, in the Company’s sole discretion, in cash or in equal value of shares of Class A Common Stock based on the closing price per share of Class A Common Stock for the single trading day prior to the date of redemption. Any such Optional Redemption by the Company may be made conditional on such factors as determined by the board of directors and as set forth in a notice of redemption.
Change of Control Redemption by the Company. In addition, upon the occurrence of a Change of Control (as defined in the Articles Supplementary), the Company will be required to redeem all outstanding shares of the Series A Preferred Stock in whole within 60 days after the first date on which such Change of Control occurred, in cash at a redemption price of $25.00 per share, plus an amount equal to all accrued but unpaid cash dividends, if any, to and including the redemption date. If the Maryland law solvency tests prohibit us from paying the full redemption price in cash, then the Company will pay such portion as would otherwise violate the solvency tests in shares of Class A Common Stock to holders on a pro rata basis, based on the closing price per share of Class A Common Stock for the single trading day prior to the date of redemption.
Voting Rights. The Series A Preferred Stock generally has no voting rights. However, holders of shares of Series A Preferred Stock will have an exclusive voting right on any amendment to the Company’s charter that would alter only the contract rights, as expressly set forth in the charter, of the Series A Preferred Stock, with any such amendment requiring the affirmative vote or consent of holders of two-thirds of the Series A Preferred Stock issued and outstanding at the time.
In addition, holders of shares of Series A Preferred Stock and of any Parity Preferred Stock upon which like voting rights have been conferred (such Parity Preferred Stock, the “Parity Voting Preferred Stock”), voting together as a single class, will also have an exclusive right to vote on any amendment, alteration or repeal of the charter, including the terms of the Series A Preferred Stock, that would alter only the contract rights, as expressly set forth in the charter, of the Series A Preferred Stock and such Parity Voting Preferred Stock, with any such action requiring the affirmative vote or consent of the holders of shares of Series A Preferred Stock and such Parity Voting Preferred Stock entitled to cast two-thirds of all the votes entitled to be cast by such holders on such matter, with each holder of Series A Preferred Stock and such Parity Voting Preferred Stock entitled to one vote for each $25.00 in liquidation preference.
Further, holders of shares of Series A Preferred Stock will also have the right to vote to (a) authorize, create or issue, or increase the number of authorized or issued shares of, any class or series of the Company’s capital stock ranking senior to the Series A Preferred Stock with respect to dividend rights and rights upon the Company’s liquidation, dissolution or winding up (any such senior stock, the “Senior Stock”), (b) reclassify any authorized shares of the Company’s capital stock into Senior Stock, or (c) create, authorize or issue any obligation or security convertible into, or evidencing the right to purchase, Senior Stock. Any such action will require the approval of a majority of all votes collectively entitled to be cast by the holders of (i) Series A Preferred Stock, and (ii) any Parity Voting Preferred Stock, voting together as a single class, with each such holder entitled to one vote for each $25.00 in liquidation preference.
There are restrictions on ownership of the Series A Preferred Stock intended to preserve the Company’s qualification as a REIT.
The foregoing description of the Articles Supplementary is a summary and is qualified in its entirety by the terms of the Articles Supplementary, a copy of which is filed as Exhibit No. 3.1 to this Current Report on Form 8-K and incorporated by reference into this Item 3.03.
| ITEM 5.03 | AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR |
The information set forth above under Item 3.03 of this report is hereby incorporated by reference into this Item 5.03.
| ITEM 9.01 | FINANCIAL STATEMENTS AND EXHIBITS. |
| (d) | Exhibits. |
| Exhibit No. | Description | |
| 3.1 | Articles Supplementary of the Company, dated December 1, 2022 | |
| 10.1 | Managing Broker Dealer Agreement by and among Bluerock Homes Trust, Inc. and Bluerock Capital Markets, LLC, dated November 1, 2022 | |
| 10.2 | Fourteenth Amendment to the Second Amended and Restated Agreement of Limited Partnership of Bluerock Residential Holdings, L.P., dated December 1, 2022 | |
| 104 | The cover page from this Current Report on Form 8-K, formatted in inline XBRL |
SIGNATURE
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.
| BLUEROCK HOMES TRUST, INC. | ||
| Date: December 5, 2022 | By: | /s/ Christopher J. Vohs |
| Christopher J. Vohs | ||
| Chief Financial Officer and Treasurer | ||
Exhibit 3.1
BLUEROCK HOMES TRUST, INC.
ARTICLES SUPPLEMENTARY
Bluerock Homes Trust, Inc., a Maryland corporation (the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Under a power contained in Article V of the charter of the Corporation (the “Charter”) and Section 2-105 of the Maryland General Corporation Law, the Board of Directors of the Corporation (the “Board”), by duly adopted resolutions, classified 10,000,000 shares of authorized but unissued preferred stock, $0.01 par value per share, of the Corporation as shares of Series A Redeemable Preferred Stock, with the following preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms and conditions of redemption (which, upon any restatement of the Charter, may be made a part of Article V thereof, with any necessary or appropriate changes to the numeration or lettering of the sections or subsections hereof). Capitalized terms used but not defined herein shall have the meanings given to them in the Charter.
1. Designation and Number. A series of Preferred Shares, designated the Series A Redeemable Preferred Stock (the “Series A Preferred Stock”), is hereby established. The number of authorized shares of Series A Preferred Stock shall be 10,000,000.
2. Definitions. In addition to the capitalized terms elsewhere defined herein, the following terms, when used herein, shall have the meanings indicated:
(a) A “Change of Control” is when, after the original issuance of the Series A Preferred Stock, any of the following has occurred and is continuing:
(i) a “person” or “group” within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than the Corporation, its subsidiaries and its and their employee benefit plans, has become the direct or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of common equity of the Corporation representing more than 50% of the total voting power of all outstanding shares of Voting Stock (as defined below) of the Corporation; provided that, notwithstanding the foregoing, such a transaction shall not be deemed to involve a Change of Control if (A)(1) the Corporation becomes a direct or indirect wholly owned subsidiary of a holding company and (2) the direct or indirect holders of the Voting Stock of such holding company immediately following that transaction are substantially the same as the holders of the Voting Stock of the Corporation immediately prior to that transaction or (B) such person or group becomes the direct or indirect beneficial owner of common equity of the Corporation representing more than 50% of the total voting power of all outstanding shares of Voting Stock of the Corporation as a result of the exercise of the Common Unit Redemption Right (as defined in Section 8.04(a) of the Second Amended and Restated Agreement of Limited Partnership of Bluerock Residential Holdings, L.P., a Delaware limited partnership, as amended);
(ii) consummation of any share exchange, consolidation or merger of the Corporation or any other transaction or series of transactions pursuant to which the Class A Common Stock will be converted into cash, securities or other property, (1) other than any such transaction where the Class A Common Stock outstanding immediately prior to such transaction constitutes, or is converted into or exchanged for, a majority of the common stock of the surviving person or any direct or indirect parent company of the surviving person immediately after giving effect to such transaction and (2) expressly excluding any such transaction preceded by the Corporation’s acquisition of the capital stock of another company for cash, securities or other property, whether directly or indirectly through one of our subsidiaries; or
(iii) Continuing Directors (as defined below) cease to constitute at least a majority of the Board.
(b) “Continuing Director” shall mean a director who either was a member of the Board on October 6, 2022 or who becomes a member of the Board subsequent to that date and whose appointment, election or nomination for election by the stockholders of the Corporation was duly approved by a majority of the Continuing Directors on the Board at the time of such approval, either by a specific vote or by approval of the proxy statement issued by the Corporation on behalf of the Board in which such individual is named as a nominee for director.
(c) “NYSE American” shall mean the NYSE American stock exchange or any successor exchange or automated quotation service upon which the Class A Common Stock is listed.
(d) “Stated Value” shall mean $25.00, subject to appropriate adjustment in relation to any recapitalizations, stock dividends, stock splits, stock combinations, reclassifications or other similar events which affect the Series A Preferred Stock.
(e) “Trading Day” shall mean, (i) if the Class A Common Stock is listed or admitted to trading on the NYSE American, a day on which the NYSE American is open for the transaction of business, (ii) if the Class A Common Stock is not listed or admitted to trading on the NYSE American but is listed or admitted to trading on another national securities exchange or automated quotation system, a day on which the principal national securities exchange or automated quotation system, as the case may be, on which the Class A Common Stock is listed or admitted to trading is open for the transaction of business, or (iii) if the Class A Common Stock is not listed or admitted to trading on any national securities exchange or automated quotation system, any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.
(f) “Voting Stock” shall mean common equity that is entitled to vote generally in the election of directors.
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3. Rank. The Series A Preferred Stock, with respect to priority of payment of dividends and other distributions and rights upon voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, will rank (a) senior to all classes or series of Common Shares and to any other class or series of capital stock of the Corporation issued in the future, unless the terms of such stock expressly provide that it ranks senior to, or on parity with, the Series A Preferred Stock with respect to priority of payment of dividends and other distributions or rights upon voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation (together with the Common Shares, the “Junior Stock”); (b) on parity with any class or series of capital stock of the Corporation, the terms of which expressly provide that it ranks on parity with the Series A Preferred Stock with respect to priority of payment of dividends and other distributions or rights upon voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation (the “Parity Preferred Stock”); and (c) junior to any class or series of capital stock of the Corporation, the terms of which expressly provide that it ranks senior to the Series A Preferred Stock with respect to priority of payment of dividends and other distributions or rights upon voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation (the “Senior Stock”), and to all existing and future debt obligations of the Corporation. The term “capital stock” does not include convertible or exchangeable debt securities. The Series A Preferred Stock will also rank junior in right to payment to the Corporation’s existing and future indebtedness.
4. Dividends.
(a) Subject to the preferential rights of the holders of any class or series of capital stock of the Corporation ranking senior to the Series A Preferred Stock with respect to priority of dividend payments, holders of each share of Series A Preferred Stock are entitled to receive, when and as authorized by the Board and declared by the Corporation, out of funds legally available for the payment of dividends, cumulative cash dividends on such share of Series A Preferred Stock at the rate of 6.0% per annum of the Stated Value (each, a “Cash Dividend”). The initial Cash Dividend on each share of Series A Preferred Stock shall accrue and be cumulative from (and including) the date of original issuance (the “Original Issue Date”) of such share of Series A Preferred Stock. Each subsequent Cash Dividend shall accrue and be cumulative from (and including) the end of the most recent Dividend Period (as defined below) for which a Cash Dividend has been paid on each such share of Series A Preferred Stock. Cash Dividends shall be payable monthly in arrears on the fifth day of each month or, if such date is not a Business Day (as defined below), on the immediately preceding Business Day, with the same force and effect as if paid on such date (each, a “Dividend Payment Date”), provided, however, that any such Cash Dividend may vary among holders of Series A Preferred Stock and may be prorated with respect to any shares of Series A Preferred Stock that were outstanding less than the total number of days in the Dividend Period immediately preceding the applicable Dividend Payment Date, with the amount of any such prorated dividend being computed on the basis of the actual number of days in such Dividend Period during which such shares of Series A Preferred Stock were outstanding. A “Dividend Period” is the respective period commencing on and including the first day of each month and ending on and including the day preceding the first day of the next succeeding Dividend Period (other than the initial Dividend Period and the Dividend Period during which any shares of Series A Preferred Stock shall be redeemed or otherwise acquired by the Corporation). Cash Dividends will be payable to holders of record of the Series A Preferred Stock as they appear in the stock records of the Corporation at the close of business on the 25th day of the month preceding the applicable Dividend Payment Date or, if such date is not a Business Day, on the immediately preceding Business Day (each, a “Dividend Record Date”). The term “Business Day” shall mean each day, other than a Saturday or Sunday, which is not a day on which banks in the State of New York are required to close. Any dividend payable on the Series A Preferred Stock for any Dividend Period will be computed on the basis of a 360-day year consisting of twelve 30-day months.
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(b) No dividends on shares of Series A Preferred Stock shall be authorized by the Board or declared by the Corporation or paid or set apart for payment by the Corporation at such time as the terms and provisions of any agreement of the Corporation, including any agreement relating to its indebtedness, prohibits such authorization, declaration, payment or setting apart for payment or provides that such authorization, declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such authorization, declaration, payment or setting apart for payment shall be restricted or prohibited by law.
(c) Notwithstanding the foregoing Section 4(b), dividends on the Series A Preferred Stock will accrue whether or not the Corporation has earnings, whether there are funds legally available for the payment of such dividends and whether or not such dividends are authorized by the Board or declared by the Corporation. No interest, or sum of money in lieu of interest, will be payable in respect of any dividend payment or payments on the Series A Preferred Stock which may be in arrears. When dividends are not paid in full (or a sum sufficient for such full payment is not so set apart) upon the Series A Preferred Stock and the shares of any class or series of Parity Preferred Stock, all dividends declared upon the Series A Preferred Stock and any class or series of Parity Preferred Stock shall be declared pro rata so that the amount of dividends declared per share of Series A Preferred Stock and such class or series of Parity Preferred Stock shall in all cases bear to each other the same ratio that accumulated dividends per share on the Series A Preferred Stock and such class or series of Parity Preferred Stock (which shall not include any accrual in respect of unpaid dividends for prior dividend periods if such Parity Preferred Stock does not have a cumulative dividend) bear to each other.
(d) Except as provided in the immediately preceding paragraph, unless full cumulative dividends on the Series A Preferred Stock have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof in full is set apart for payment for all past Dividend Periods that have ended, no dividends (other than dividends or other distributions in shares of Junior Stock or in options, warrants or rights to subscribe for or purchase any such shares of Junior Stock) shall be declared and paid or declared and set apart for payment nor shall any other distribution be declared and made upon the Junior Stock or the Parity Preferred Stock, nor shall any shares of Junior Stock or Parity Preferred Stock be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Class A Common Stock made for purposes of an equity incentive or benefit plan of the Corporation) for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any shares of any such stock), directly or indirectly, by the Corporation (except by conversion into or exchange for shares of Junior Stock, or options, warrants or rights to subscribe for or purchase shares of Junior Stock).
(e) Notwithstanding anything to the contrary set forth above, the Corporation shall not be prohibited from (i) declaring or paying or setting apart for payment any dividend or other distribution on any shares of Junior Stock or Parity Preferred Stock, or (ii) redeeming, purchasing or otherwise acquiring any Junior Stock or Parity Preferred Stock, in each case, if such declaration, payment, setting apart for payment, redemption, purchase or other acquisition is necessary in order to qualify or maintain the qualification of the Corporation as a REIT for U.S. federal income tax purposes.
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5. Liquidation Preference. Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of shares of Series A Preferred Stock are entitled to be paid out of the assets of the Corporation legally available for distribution to its stockholders, after payment of or provision for the Corporation’s debts and other liabilities, a liquidation preference equal to the Stated Value per share, plus an amount equal to any accrued and unpaid cash dividends (whether or not authorized or declared) thereon to and including the date of payment, but without interest, before any distribution of assets is made to holders of Junior Stock. If the assets of the Corporation legally available for distribution to stockholders are insufficient to pay in full the liquidation preference on the Series A Preferred Stock and the liquidation preference on the shares of any class or series of Parity Preferred Stock, all assets distributed to the holders of the Series A Preferred Stock and any class or series of Parity Preferred Stock shall be distributed pro rata so that the amount of assets distributed per share of Series A Preferred Stock and such class or series of Parity Preferred Stock shall in all cases bear to each other the same ratio that the liquidation preference per share on the Series A Preferred Stock and such class or series of Parity Preferred Stock bear to each other. Written notice of any distribution in connection with any such liquidation, dissolution or winding up of the affairs of the Corporation, stating the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable, shall be given by first class mail, postage pre-paid, not less than 30 nor more than 60 days prior to the payment date stated therein, to each record holder of the Series A Preferred Stock at the respective addresses of such holders as the same shall appear on the stock transfer records of the Corporation.
After payment of the full amount of the liquidation distributions to which they are entitled, the holders of Series A Preferred Stock will have no right or claim to any of the remaining assets of the Corporation. The consolidation or merger of the Corporation with or into another entity, a consolidation or merger of another entity with or into the Corporation, a statutory share exchange by the Corporation or a sale, lease, transfer or conveyance of all or substantially all of the Corporation’s property or business shall not be deemed to constitute a liquidation, dissolution or winding up of the affairs of the Corporation.
In determining whether a distribution (other than upon voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation) by dividend, redemption or other acquisition of shares of stock of the Corporation or otherwise is permitted under the Maryland General Corporation Law, no effect shall be given to amounts that would be needed, if the Corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of holders of the Series A Preferred Stock.
6. Redemption at Option of Holders.
(a) Each holder of shares of Series A Preferred Stock shall have the right, at such holder’s option, to require the Corporation to redeem any or all of such holder’s shares of Series A Preferred Stock at a redemption price per share of Series A Preferred Stock (the “Holder Redemption Price”) equal to the Stated Value, minus the Redemption Fee, plus an amount equal to all accrued but unpaid cash dividends, if any, to and including the date fixed for redemption (the “Holder Redemption Date”). The Redemption Fee shall be an amount equal to (i) 12.0% of the Stated Value beginning on the Original Issue Date of the shares of Series A Preferred Stock to be redeemed; (ii) 9.0% of the Stated Value beginning one year after the Original Issue Date of the shares of Series A Preferred Stock to be redeemed; (iii) 6.0% of the Stated Value beginning two years after the Original Issue Date of the shares of Series A Preferred Stock to be redeemed; (iv) 3.0% of the Stated Value beginning three years after the Original Issue Date of the shares of Series A Preferred Stock to be redeemed; and (v) 0% of the Stated Value beginning four years after the Original Issue Date of the shares of Series A Preferred Stock to be redeemed (the “Redemption Fee”).
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(b) The Corporation has the right, in its sole discretion, to pay the Holder Redemption Price in cash or in equal value of shares of Class A Common Stock, calculated based on the closing price per share of the Class A Common Stock for the single Trading Day prior to the Holder Redemption Date.
(c) Redemption of the Series A Preferred Stock shall be made at the option of the holder thereof, upon:
(i) delivery to the Corporation’s transfer agent, in its capacity as redemption and paying agent (the “Redemption and Paying Agent”) by such holder of a duly completed notice (the “Holder Redemption Notice”) in compliance with the required procedures including those of the Corporation’s transfer agent and of The Depository Trust Company (“DTC”) for tendering interests in global certificates (the “Stated Transfer Procedures”), and specifying the number of shares of Series A Preferred Stock to be redeemed that are held by such holder as of the date of such Holder Redemption Notice, prior to the close of business on the Business Day immediately preceding the Holder Redemption Date; and
(ii) transfer of the Series A Preferred Stock in compliance with the Stated Transfer Procedures, such transfer being a condition to receipt by the holder of the Holder Redemption Price therefor.
(d) Prior to 11:00 a.m. (local time in the City of New York) on the Holder Redemption Date, the Corporation must deposit with the Redemption and Paying Agent in trust sufficient funds (in immediately available funds if deposited on such Business Day) to pay the Holder Redemption Price of all the shares of Series A Preferred Stock that are to be redeemed in cash as of the Holder Redemption Date. If the Redemption and Paying Agent holds funds sufficient to pay the Holder Redemption Price of the Series A Preferred Stock for which a Holder Redemption Notice has been tendered, then as of such Holder Redemption Date, (i) such shares of Series A Preferred Stock shall cease to be outstanding and dividends shall cease to accrue thereon (whether or not transfer of such shares of Series A Preferred Stock is made) and (ii) all other rights of the holders in respect thereof shall terminate (other than the right to receive the Holder Redemption Price, in cash or in shares of Class A Common Stock, as applicable, upon transfer of such shares of Series A Preferred Stock). To the extent that the aggregate amount of cash deposited by the Corporation to satisfy the Holder Redemption Price exceeds the aggregate Holder Redemption Price of the shares of Series A Preferred Stock that the Corporation has elected to redeem in cash as of the Holder Redemption Date, then, following the Holder Redemption Date, the Redemption and Paying Agent must promptly return any such excess to the Corporation.
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(e) Notwithstanding any provision of this Section 6, no redemptions of shares of Series A Preferred Stock shall be made by the Corporation if such redemption shall be restricted or prohibited by law. Further, no redemptions of shares of Series A Preferred Stock shall be made by the Corporation in cash at such time as the terms and provisions of any agreement of the Corporation prohibits such redemption or provides that such redemption would constitute a breach thereof or a default thereunder.
7. Optional Redemption by the Corporation.
(a) Beginning on the second anniversary of each Original Issue Date of shares of Series A Preferred Stock, such shares of Series A Preferred Stock shall be redeemable by the Corporation, at the Corporation’s option, in whole or in part, at any time or from time to time (the “Corporation Redemption Right”), at a redemption price per share of Series A Preferred Stock (the “Corporation Redemption Price”) equal to the Stated Value plus an amount equal to any accrued but unpaid cash dividends, if any, to and including the date fixed for redemption (the “Corporation Redemption Date”).
(b) If fewer than all of the outstanding shares of Series A Preferred Stock issued on such Original Issue Date are to be redeemed, the shares of Series A Preferred Stock to be redeemed shall be redeemed pro rata (as nearly as may be practicable without creating fractional shares) by lot or by any other equitable method that the Corporation determines will not violate the Series A Ownership Limit (as defined in Section 10 below). If redemption is to be by lot and, as a result, any holder of shares of Series A Preferred Stock, other than a holder of shares of Series A Preferred Stock that has received an exemption from the Series A Ownership Limit, would have actual ownership or Constructive Ownership of more than 9.8% of the issued and outstanding shares of Series A Preferred Stock by value or number of shares, whichever is more restrictive, because such holder’s shares of Series A Preferred Stock were not redeemed, or were only redeemed in part, then, except as otherwise provided in the Charter, the Corporation shall redeem the requisite number of shares of Series A Preferred Stock of such holder such that no holder will own Series A Preferred Stock in excess of the Series A Ownership Limit, subsequent to such redemption. Holders of Series A Preferred Stock to be redeemed shall surrender such Series A Preferred Stock at the place, or in accordance with the procedures, designated in such notice and shall be entitled to the Corporation Redemption Price payable upon such redemption following such surrender. If (i) notice of redemption of any shares of Series A Preferred Stock has been given (in the case of a redemption of the Series A Preferred Stock other than to qualify or maintain the qualification of the Corporation as a REIT for U.S. federal income tax purposes), (ii) the funds necessary for such redemption have been set apart by the Corporation in trust for the benefit of the holders of any shares of Series A Preferred Stock so called for redemption and (iii) irrevocable instructions have been given to pay the Corporation Redemption Price, then from and after the Corporation Redemption Date, dividends shall cease to accrue on such shares of Series A Preferred Stock, such shares of Series A Preferred Stock shall no longer be deemed outstanding, and all rights of the holders of such shares of Series A Preferred Stock shall terminate, except the right to receive the Corporation Redemption Price in cash or in shares of Class A Common Stock, as applicable, upon transfer of such shares of Series A Preferred Stock. The Corporation has the right, in its sole discretion, to pay the Corporation Redemption Price in cash or in equal value of shares of Class A Common Stock, calculated based on the closing price per share of the Class A Common Stock for the single Trading Day prior to the Corporation Redemption Date.
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(c) Unless full cumulative dividends on the Series A Preferred Stock for all past Dividend Periods that have ended shall have been or contemporaneously are declared and paid in cash or declared and a sum sufficient for the payment thereof is set apart for payment, no shares of Series A Preferred Stock shall be redeemed pursuant to the Corporation Redemption Right unless all outstanding shares of Series A Preferred Stock are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire directly or indirectly any shares of Series A Preferred Stock or any class or series of Junior Stock or Parity Preferred Stock (except (i) by conversion into or exchange for Junior Stock, (ii) the purchase of shares of Junior Stock or Parity Preferred Stock pursuant to the Charter to the extent necessary to ensure that the Corporation meets the requirements to qualify or maintain the qualification of the Corporation as a REIT for U.S. federal income tax purposes or (iii) the purchase or other acquisition of shares of Series A Preferred Stock or Parity Preferred Stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series A Preferred Stock).
(d) Notice of redemption pursuant to the Corporation Redemption Right shall be mailed by the Corporation, postage prepaid, no less than seven days prior to the Corporation Redemption Date, addressed to the respective holders of record of all, but not less than all, of the Series A Preferred Stock to be redeemed at their respective addresses as they appear on the transfer records maintained by the Corporation’s transfer agent. No failure to give such notice or defect therein shall affect the validity of the proceedings for the redemption of any Series A Preferred Stock except as to the holder to whom such notice was defective or not given; provided that notice given to the last address of record shall be deemed to be valid notice. In addition to any information required by law or by the applicable rules of any exchange upon which the Series A Preferred Stock may be listed or admitted to trading, each such notice shall state: (i) the Corporation Redemption Date; (ii) the Corporation Redemption Price; (iii) the CUSIP number(s) of the shares of Series A Preferred Stock to be redeemed; (iv) the Stated Transfer Procedures for transfer of shares of Series A Preferred Stock for payment of the Corporation Redemption Price; (v) that dividends on the shares of Series A Preferred Stock to be redeemed will cease to accrue on the Corporation Redemption Date; and (vi) that payment of the Corporation Redemption Price will be made upon transfer of such Series A Preferred Stock in compliance with Stated Transfer Procedures. If fewer than all of the shares of Series A Preferred Stock held by any holder are to be redeemed, the notice mailed to such holder shall also specify the number of shares of Series A Preferred Stock held by such holder to be redeemed or the method for determining such number. Any such redemption may be made conditional on such factors as may be determined by the Board of Directors and as set forth in the notice of redemption. The Corporation reserves the right to suspend any redemption pursuant to the Corporation Redemption Right after the Corporation has issued the notice of redemption. Notwithstanding anything else to the contrary herein, the Corporation shall not be required to provide notice to the holder of Series A Preferred Stock in the event such holder’s Series A Preferred Stock is redeemed in order for the Corporation to qualify or maintain the qualification of the Corporation as a REIT for U.S. federal income tax purposes.
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(e) If a Corporation Redemption Date falls after a Dividend Record Date and on or prior to the Dividend Payment Date, each holder of Series A Preferred Stock at the close of business on such Dividend Record Date shall be entitled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemption of such shares on or prior to such Dividend Payment Date, and each holder of Series A Preferred Stock that surrenders its shares on the Corporation Redemption Date shall be entitled to an amount equal to the dividends accruing after the end of the Dividend Period to which such Dividend Payment Date relates, up to, but not including, the Corporation Redemption Date. Except as provided herein, the Corporation shall make no payment or allowance for unpaid dividends, whether or not in arrears, on Series A Preferred Stock for which a notice of redemption pursuant to the Corporation Redemption Right has been given.
8. Optional Redemption Following Death or Qualifying Disability of a Holder.
(a) Subject to Section 8(c), the Corporation shall redeem shares of Series A Preferred Stock held by a natural person upon his or her death or upon his or her suffering a qualifying disability, including shares of Series A Preferred Stock held through a revocable grantor trust, or an individual retirement account or other retirement or profit-sharing plan, at the written request of (i) in the case of the death of a holder, the holder’s estate, the recipient of such shares of Series A Preferred Stock through bequest or inheritance, or, with respect to shares of Series A Preferred Stock held through a revocable grantor trust, the trustee of such trust, who shall have the sole ability to request redemption on behalf of the trust, or (ii) in the case of the disability of a holder, the holder or the holder’s legal representative. If spouses are joint registered holders of shares of Series A Preferred Stock, the written request to redeem such shares of Series A Preferred Stock may be made upon the death or qualifying disability of either spouse. If the holder of shares of Series A Preferred Stock is not a natural person, such as a trust (other than a revocable grantor trust) or a partnership, corporation or similar legal entity, the right of redemption upon death or qualifying disability of a beneficiary of such trust or the holder of an ownership interest in such partnership, corporation or similar legal entity shall be subject to the approval of the management of the Corporation in its sole discretion. Shares of Series A Preferred Stock redeemed pursuant to this Section 8 shall be redeemed at a redemption price per share of Series A Preferred Stock (the “Estate Redemption Price”) equal to (A) beginning one year from the Original Issue Date of the shares of Series A Preferred Stock to be redeemed, 95% of the Stated Value and (B) beginning two years from the Original Issue Date of the shares of Series A Preferred Stock to be redeemed, 100% of the Stated Value, in each case plus an amount equal to accrued but unpaid cash dividends thereon, if any, to and including the date fixed for redemption (the “Estate Redemption Date”).
(b) In order for the Corporation to redeem shares of Series A Preferred Stock upon the death or qualifying disability of a holder thereof, the following conditions must be met: (i) the deceased or disabled holder must be the sole holder of the shares of Series A Preferred Stock to be redeemed or the beneficiary of a trust or an individual retirement account or other retirement or profit-sharing plan that is a holder or, in the case of shares of Series A Preferred Stock owned by spouses who are joint registered holders (or holders by tenants in the entirety), one of the joint holders; (ii) the redemption request must be received by the Corporation within one year after the death or qualifying disability of the holder but no sooner than one year after the date of original issuance of the shares of Series A Preferred Stock to be redeemed; (iii) the redemption request must be made by (A) in the case of the death of a holder, a recipient of the shares of Series A Preferred Stock through bequest or inheritance, (B) in the case of the death of a beneficiary of a trust, the trustee of the trust, or (C) in the case of the death of a holder of shares of Series A Preferred Stock owned by spouses who are joint registered holders (or holders by tenants in the entirety), the surviving spouse; and (iv) in the case of the disability of a holder, (A) such disability must meet the requirements of Section 72(m)(7) of the Code (i.e., the individual must be unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or to be of a long continued and indefinite duration), (B) a determination of disability must be made by the U.S. governmental agency responsible for reviewing the disability retirement benefits that the holder could be eligible to receive, (C) the condition causing the disability shall have occurred after the date that the holder became a holder of shares of Series A Preferred Stock and (D) the condition causing the disability shall have occurred before the holder reached full retirement age, which is the age at which workers can claim full Social Security retired-worker benefits.
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(c) The Corporation has the right, in its sole discretion, to pay the Estate Redemption Price in cash or in equal value of shares of Class A Common Stock, calculated on the closing price per share of the Class A Common Stock for the single Trading Day prior to the Estate Redemption Date.
(d) Notwithstanding any provision of this Section 8, no redemptions of shares of Series A Preferred Stock shall be made by the Corporation if such redemption shall be restricted or prohibited by law. Further, no redemptions of shares of Series A Preferred Stock shall be made by the Corporation in cash at such time as the terms and provisions of any agreement of the Corporation prohibits such redemption or provides that such redemption would constitute a breach thereof or a default thereunder.
9. Mandatory Redemption by Corporation Upon a Change of Control.
(a) If a Change of Control occurs at any time the Series A Preferred Stock is outstanding, the Corporation shall redeem for cash all shares of Series A Preferred Stock issued and outstanding, on a date (the “Change of Control Redemption Date”) specified by the Corporation that can be no later than 60 calendar days after the first date on which such Change of Control occurred, at a redemption price equal to 100% of the Stated Value per share, plus an amount equal to all accrued but unpaid cash dividends thereon (whether or not authorized or declared) to and including the Change of Control Redemption Date (such price, the “Change of Control Redemption Price”); provided, however, if the assets of the Corporation legally available for redemption of the Series A Preferred Stock pursuant to this Section 9 are insufficient to pay in full the Change of Control Redemption Price for all issued and outstanding shares of Series A Preferred Stock, then such portion of the Change of Control Redemption Price as would not be legally available shall be paid in shares of Class A Common Stock to holders of Series A Preferred Stock on a pro rata basis, based on the closing price per share of the Class A Common Stock for the single Trading Day prior to the Change of Control Redemption Date.
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(b) Notice of redemption pursuant to a Change of Control (the “Change of Control Redemption Notice”) shall be mailed by the Corporation, postage prepaid, no fewer than seven days prior to the Change of Control Redemption Date, addressed to the respective holders of record of all, but not less than all, of the Series A Preferred Stock at their respective addresses as they appear on the transfer records maintained by the Corporation’s transfer agent. No failure to give such notice or defect therein shall affect the validity of the proceedings for the redemption of any Series A Preferred Stock except as to the holder to whom such notice was defective or not given; provided, that notice given to the last address of record shall be deemed to be valid notice. In addition to any information required by law or by the applicable rules of any exchange upon which the Series A Preferred Stock may be listed or admitted to trading, each Change of Control Redemption Notice shall state: (i) the Change of Control Redemption Date; (ii) the Change of Control Redemption Price; (iii) the number of shares of Series A Preferred Stock to be redeemed; (iv) the Stated Transfer Procedures for transfer of shares of Series A Preferred Stock for payment of the Change of Control Redemption Price; (v) that dividends on the shares of Series A Preferred Stock to be redeemed will cease to accrue on the Change of Control Redemption Date; (vi) that payment of the Change of Control Redemption Price will be made upon transfer of such Series A Preferred Stock in compliance with Stated Transfer Procedures; and (vii) that the Series A Preferred Stock is being redeemed pursuant to the Corporation’s mandatory redemption in connection with the occurrence of a Change of Control and a brief description of the transaction or transactions constituting such Change of Control.
(c) If (i) a Change of Control Redemption Notice has been given, (ii) the funds necessary for such redemption have been set apart by the Corporation in trust for the benefit of the holders of any shares of Series A Preferred Stock so called for redemption and (iii) irrevocable instructions have been given to pay the Change of Control Redemption Price, then from and after the Change of Control Redemption Date, dividends shall cease to accrue on such shares of Series A Preferred Stock, such shares of Series A Preferred Stock shall no longer be deemed outstanding, and all rights of the holders of such shares of Series A Preferred Stock shall terminate, except the right to receive the Change of Control Redemption Price in cash, without interest, or, as provided in Section 9(a) above, in shares of Class A Common Stock, as applicable, upon transfer of such shares of Series A Preferred Stock.
(d) If a Change of Control Redemption Date falls after a Dividend Record Date and on or prior to the corresponding Dividend Payment Date, each holder of Series A Preferred Stock at the close of business on such Dividend Record Date shall be entitled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemption of such shares on or prior to such Dividend Payment Date, and each holder of Series A Preferred Stock that surrenders its shares on the Change of Control Redemption Date shall be entitled to an amount equal to the dividends accruing after the end of the Dividend Period to which such Dividend Payment Date relates, up to, but not including, the Change of Control Redemption Date. Except as provided herein, the Corporation shall make no payment or allowance for unpaid dividends, whether or not in arrears, on Series A Preferred Stock for which a Change of Control Redemption Notice has been given.
10. Restrictions on Ownership and Transfer.
(a) As used herein, the following terms shall have the following meanings:
(i) “Prohibited Series A Owner” shall mean, with respect to any purported Transfer or Non-Transfer Event, any Person who, but for the provisions of Section 10(c), would beneficially own (determined under the principles of Section 856(a)(5) of the Code), Beneficially Own or Constructively Own shares of Series A Preferred Stock and, if appropriate in the context, shall also mean any Person who would have been the record owner of shares of Series A Preferred Stock that the Prohibited Owner would have so owned.
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(ii) “Series A Beneficiary” shall mean one or more beneficiaries of the Series A Trust as determined pursuant to Section 10(i), provided that each such organization must be described in Section 501(c)(3) of the Code and contributions to each such organization must be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.
(iii) “Series A Excepted Holder” shall mean a holder of Series A Preferred Stock for whom a Series A Excepted Holder Limit is created by the Board pursuant to Section 10(n).
(iv) “Series A Excepted Holder Limit” shall mean, provided that the affected Series A Excepted Holder agrees to comply with the requirements established by the Board pursuant to Section 10(n) and subject to adjustment pursuant to Section 10(n), the percentage limit established by the Board pursuant to Section 10(n).
(v) “Series A Ownership Limit” shall mean 9.8% (in value or in number of shares, whichever is more restrictive) of the aggregate of the outstanding shares of Series A Preferred Stock or such other percentage determined by the Board in accordance with Section 10(n).
(vi) “Series A Trust” shall mean any trust provided for in Section 10(d).
(vii) “Series A Trustee” shall mean the Person unaffiliated with the Corporation and any Prohibited Series A Owner that is a “United States person” within the meaning of Section 7701(a)(30) of the Code and is appointed by the Corporation to serve as trustee of the Series A Trust. Until another Series A Trustee is otherwise appointed by the Corporation, the initial Series A Trustee shall be Kaplan Voekler Cunningham & Frank, PLC.
(b) Prior to the Restriction Termination Date but subject to Section 10(q), (i) no Person, other than a Series A Excepted Holder, shall Beneficially Own or Constructively Own shares of Series A Preferred Stock in excess of the Series A Ownership Limit and (ii) no Series A Excepted Holder shall Beneficially Own or Constructively Own shares of Series A Preferred Stock in excess of the Series A Excepted Holder Limit for such Series A Excepted Holder.
(c) If any Transfer or Non-Transfer Event occurs which, if effective or otherwise, would result in any Person Beneficially Owning or Constructively Owning shares of Series A Preferred Stock in violation of Section 10(b), (i) then that number of shares of Series A Preferred Stock the Beneficial Ownership or Constructive Ownership of which otherwise would cause such Person to violate Section 10(b) (rounded up to the nearest whole share) shall be automatically transferred to a Series A Trust for the benefit of a Series A Beneficiary, as described in Section 10(d) through (i) below, effective as of the close of business on the Business Day prior to the date of such Transfer or Non-Transfer Event, and such Person (or, if different, the direct or Beneficial Owner of such shares) shall acquire no rights in such shares (or shall be divested of its rights in such shares) or (ii) if the Transfer to the Series A Trust described in clause (i) of this sentence would not be effective for any reason to prevent the violation of Section 10(b), then the Transfer of that number of shares of Series A Preferred Stock that otherwise would cause any Person to violate Section 10(b) shall be void ab initio, and the intended transferee shall acquire no rights in such shares.
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(d) Upon any purported Transfer or Non-Transfer Event described in Section 10(c) that would result in a Transfer of shares of Series A Preferred Stock to a Series A Trust, such shares shall be deemed to have been Transferred to the Series A Trustee as trustee of a Series A Trust for the exclusive benefit of one or more Series A Beneficiaries. Such Transfer to the Series A Trustee shall be deemed to be effective as of the close of business on the Business Day prior to the purported Transfer or Non-Transfer Event that results in the Transfer to the Series A Trust pursuant to Section 10(c). The Series A Trustee shall be appointed by the Corporation and shall be a Person unaffiliated with the Corporation and any Prohibited Series A Owner. Each Series A Beneficiary shall be designated by the Corporation as provided in Section 10(i) below. To the extent that, upon a transfer of shares of Series A Preferred Stock pursuant to Section 10(c), a violation of Section 10(b) would nonetheless be continuing, then the shares of Series A Preferred Stock shall be transfers to that number of Series A Trusts, each having a distinct Series A Trustee and a Series A Beneficiary or Beneficiaries that are distinct from those of each other Series A Trust, such that there is not a violation of Section 10(b).
(e) Shares of Series A Preferred Stock held by the Series A Trustee shall continue to be issued and outstanding shares. The Prohibited Series A Owner shall have no rights in the shares of Series A Preferred Stock held by the Series A Trustee. The Prohibited Series A Owner shall not benefit economically from ownership of any shares of Series A Preferred Stock held in trust by the Series A Trustee, shall have no rights to dividends or other Distributions on such shares and shall not possess any rights to vote or other rights attributable to such shares.
(f) The Series A Trustee shall have all voting rights and rights to dividends or other Distributions with respect to shares of Series A Preferred Stock held in the Series A Trust, which rights shall be exercised for the exclusive benefit of the Series A Beneficiary. Any dividend or other Distribution paid prior to the discovery by the Corporation that shares of Series A Preferred Stock have been Transferred to the Series A Trustee shall be paid with respect to such shares to the Series A Trustee upon demand and any dividend or other Distribution authorized but unpaid shall be paid when due to the Series A Trustee. Any dividends or other Distributions so paid over to the Series A Trustee shall be held in trust for the Series A Beneficiary. The Prohibited Series A Owner shall have no voting rights with respect to shares of Series A Preferred Stock held in the Series A Trust and, subject to Maryland law, effective as of the date that Shares have been Transferred to the Series A Trust, the Series A Trustee shall have the authority (at the Series A Trustee’s sole and absolute discretion) (i) to rescind as void any vote cast by a Prohibited Series A Owner prior to the discovery by the Corporation that shares of Series A Preferred Stock have been Transferred to the Series A Trustee and (ii) to recast such vote in accordance with the desires of the Series A Trustee acting for the benefit of the Series A Beneficiary; provided, however, that if the Corporation has already taken irreversible corporate action, then the Series A Trustee shall not have the authority to rescind and recast such vote. Notwithstanding the provisions of this Section 10, until the Corporation has received notification that shares of Series A Preferred Stock have been Transferred into a Series A Trust, the Corporation shall be entitled to rely on its share transfer and other stockholder records for purposes of preparing lists of holders of Series A Preferred Stock entitled to vote at meetings, determining the validity and authority of proxies and otherwise conducting votes of holders of Series A Preferred Stock.
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(g) As soon as reasonably practicable after receiving notice from the Corporation that shares of Series A Preferred Stock have been Transferred to the Series A Trust (and no later than 20 days after receiving notice in the case of shares of Series A Preferred Stock that are listed or admitted to trading on any national securities exchange), the Series A Trustee shall sell the shares held in the Series A Trust to a Person, designated by the Series A Trustee, whose ownership of the shares will not violate Section 10(b). Upon such sale, the interest of the Series A Beneficiary in the shares sold shall terminate and the Series A Trustee shall distribute the net proceeds of the sale to the Prohibited Series A Owner and to the Series A Beneficiary as provided in this Section 10(g). The Prohibited Series A Owner shall receive the lesser of (i) the price paid by the Prohibited Series A Owner for the shares or, if the Prohibited Series A Owner did not give value for the shares in connection with the event causing the shares to be held in the Series A Trust (e.g., in the case of a gift, devise or other such transaction), the Market Price of the shares on the day of the event causing the shares to be held in the Series A Trust and (ii) the sales proceeds received by the Series A Trustee (net of any commissions and other expenses of sale) from the sale or other disposition of the shares held in the Series A Trust. The Series A Trustee may reduce the amount payable to the Prohibited Series A Owner by the amount of dividends and other Distributions which have been paid to the Prohibited Series A Owner and are owed by the Prohibited Series A Owner to the Series A Trustee pursuant to Section 10(f). Any net sales proceeds in excess of the amount payable to the Prohibited Series A Owner shall be immediately paid to the Series A Beneficiary. If, prior to the discovery by the Corporation that shares of Series A Preferred Stock have been Transferred to the Series A Trustee, such shares are sold by a Prohibited Series A Owner, then (x) such shares shall be deemed to have been sold on behalf of the Series A Trust and (y) to the extent that the Prohibited Series A Owner received an amount for such shares that exceeds the amount that such Prohibited Series A Owner was entitled to receive pursuant to this Section 10(g), such excess shall be paid to the Series A Trustee upon demand.
(h) Shares of Series A Preferred Stock Transferred to the Series A Trustee shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such Transfer to the Series A Trust (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation may reduce the amount payable to the Prohibited Series A Owner by the amount of dividends and other Distributions which have been paid to the Prohibited Series A Owner and are owed by the Prohibited Series A Owner to the Series A Trustee pursuant to Section 10(f). The Corporation may pay the amount of such reduction to the Series A Trustee for the benefit of the Series A Beneficiary. The Corporation shall have the right to accept such offer until the Series A Trustee has sold the shares held in the Series A Trust pursuant to Section 10(g). Upon such a sale to the Corporation, the interest of the Series A Beneficiary in the shares sold shall terminate and the Series A Trustee shall distribute the net proceeds of the sale to the Prohibited Series A Owner.
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(i) By written notice to the Series A Trustee, the Corporation may change the Series A Beneficiary by designating one or more nonprofit organizations to be the Series A Beneficiary of the interest in the Series A Trust such that (i) shares of Series A Preferred Stock held in the Series A Trust would not violate Section 10(b) in the hands of such Series A Beneficiary and (ii) each such organization must be described in Section 501(c)(3) of the Code and contributions to each such organization must be eligible for deduction under each of Sections l70(b)(1)(A) (other than clauses (vii) and (viii) thereof), 2055 and 2522 of the Code. Neither the failure of the Corporation to make such designation nor the failure of the Corporation to appoint the Series A Trustee before the automatic transfer provided for in Section 10(c) shall make such transfer ineffective, provided that the Corporation thereafter makes such designation and appointment. The designation of a nonprofit organization as a Series A Beneficiary shall not entitle such nonprofit organization to serve in such capacity and the Corporation may, in its sole discretion, designate a different nonprofit organization as the Series A Beneficiary at any time and for any or no reason. Any determination by the Corporation with respect to the application of this Section 10 shall be binding on each Series A Beneficiary.
(j) If the Board or its designee (including any duly authorized committee of the Board) shall at any time determine in good faith that a Transfer or Non-Transfer Event has taken place that results in a violation of Section 10(b) or that a Person intends to acquire or has attempted to acquire Beneficial Ownership, Constructive Ownership or beneficial ownership (determined under the principles of Section 856(a)(5) of the Code) of any shares of Series A Preferred Stock in violation of Section 10(b) (whether or not such violation is intended), the Board or its designee shall take such action as it deems advisable to refuse to give effect to or to prevent such Transfer or Non-Transfer Event or otherwise prevent such violation, including, without limitation, causing the Corporation to redeem shares of Series A Preferred Stock, refusing to give effect to such Transfer on the books of the Corporation or instituting proceedings to enjoin such Transfer or Non-Transfer Event; provided, however, that any Transfers or attempted Transfers in violation of Section 10(b) (or Non-Transfer Event that results in a violation of Section 10(b)) shall automatically result in the Transfer to the Series A Trust described above, or, if applicable, shall be void ab initio as provided above irrespective of any action (or non-action) by the Board or its designee.
(k) Any Person who acquires or attempts or intends to acquire Beneficial Ownership, Constructive Ownership or beneficial ownership (determined under the principles of Section 856(a)(5) of the Code) of shares of Series A Preferred Stock that will or may violate Section 10(b), or any Person who held or would have owned shares of Series A Preferred Stock that resulted in a Transfer to the Series A Trust pursuant to Section 10(c), shall immediately give written notice to the Corporation of such event, or in the case of such a proposed or attempted transaction, give at least 15 days prior written notice, and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer on the Corporation’s qualification as a REIT.
(l) Subject to Section 10(q), nothing contained in this Section 10 shall limit the authority of the Board to take such other action as it deems necessary or advisable to protect the Corporation and the interests of the Stockholders in preserving the Corporation’s qualification as a REIT.
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(m) The Board shall have the power to determine the application of any provisions of this Section 10 and any definition in Section 10(a), including in the case of an ambiguity in the application of any provisions of this Section 10 or any such definition, with respect to any situation based on the facts known to it. In the event this Section 10 requires an action by the Board and the Charter fails to provide specific guidance with respect to such action, the Board shall have the power to determine the action to be taken so long as such action is not contrary to the provisions of Article V of the Charter or this Section 10.
(n) Subject to clause (ii) below, the Board, in its sole discretion, may exempt (prospectively or retroactively) a Person from the Series A Ownership Limit and establish or increase a Series A Excepted Holder Limit for such Person if (i) the Board obtains such representations and undertakings from such Person as are reasonably necessary to ascertain that such Person’s Beneficial Ownership or Constructive Ownership of shares of Series A Preferred Stock in excess of the Series A Ownership Limit will not now or in the future jeopardize the Corporation’s ability to qualify as a REIT under the Code and (ii) such Person agrees that any violation or attempted violation of such representations or undertakings (or other action which is contrary to the restrictions contained in this Section 10) will result in such shares being automatically Transferred to a Series A Trust in accordance with Section 10(d) through (i) above. Prior to granting any exception or waiver or creating or increasing any Series A Excepted Holder Limit pursuant to this Section 10(n), the Board may require a ruling from the Internal Revenue Service, or an opinion of counsel, in either case in form and substance satisfactory to the Board in its sole and absolute discretion, as it may deem necessary or advisable in order to determine or ensure the Corporation’s qualification as a REIT. Notwithstanding the receipt of any ruling or opinion, the Board may impose such conditions or restrictions as it deems appropriate in connection with granting such exemption or waiver or creating or increasing any Series A Excepted Holder Limit. The Board may only revoke or reduce the Series A Excepted Holder Limit for a Series A Excepted Holder (x) with the written consent of such Series A Excepted Holder at any time, (y) unless the terms and conditions of the agreements and undertakings entered into with such Series A Excepted Holder in connection with the establishment of the Series A Excepted Holder Limit for that Series A Excepted Holder provide otherwise, at any time after the Series A Excepted Holder no longer Beneficially Owns or Constructively Owns shares of Series A Preferred Stock in excess of the Series A Ownership Limit, or (z) pursuant to the terms and conditions of the agreements and undertakings entered into with such Series A Excepted Holder in connection with the establishment of the Series A Excepted Holder Limit for that Series A Excepted Holder. The Board may from time to time increase the Series A Ownership Limit for one or more Persons and decrease the Series A Ownership Limit for all other Persons; provided, however, that any such decreased Series A Ownership Limit will not be effective for any Person whose percentage ownership in shares of Series A Preferred Stock is in excess of the decreased Series A Ownership Limit until such time as such Person’s percentage of shares of Series A Preferred Stock equals or falls below the decreased Series A Ownership Limit, but any further acquisition of shares of Series A Preferred Stock in excess of such percentage ownership of shares will be in violation of the Series A Ownership Limit; and provided, further, that the new Series A Ownership Limit would not result in the Corporation being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) if five unrelated individuals were to Beneficially Own the five largest amounts of shares of Series A Preferred Stock permitted to be Beneficially Owned under such new Series A Ownership Limits, taking into account the immediately preceding proviso permitting ownership in excess of decreased Series A Ownership Limits in certain cases.
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(o) Subject to Section 6.1.1(a)(iii) of the Charter, an underwriter, placement agent or initial purchaser in a Rule 144A transaction that participates in a public offering, private placement or other private offering of Series A Preferred Stock may Beneficially Own and Constructively Own shares of Series A Preferred Stock in excess of the Series A Ownership Limit, but only to the extent (i) necessary to facilitate such public offering, private placement or other private offering and (ii) such Beneficial Ownership or Constructive Ownership does not cause the Corporation to fail to satisfy the requirements of Section 856(a)(6) of the Code or cause a violation of Section 6.1.1(a)(iii) or (iv) of the Charter.
(p) Each certificate representing shares of Series A Preferred Stock, if certificated, shall bear a legend that substantially describes the foregoing restrictions on transfer and ownership or, instead of such legend, the certificate, if any, may state that the Corporation will furnish a full statement about certain restrictions on transferability to a stockholder on request and without charge.
(q) Nothing in this Section 10 shall preclude the settlement of any transaction entered into through the facilities of the NYSE American or any other national securities exchange or automated inter-dealer quotation system. The fact that the settlement of any transaction occurs shall not negate the effect of any other provision of this Section 10 and any transferee in such a transaction shall be subject to all of the provisions and limitations set forth in this Section 10.
11. Voting Rights.
(a) Holders of the Series A Preferred Stock shall not have any voting rights except as set forth below.
(b) So long as any shares of Series A Preferred Stock remain outstanding, the holders of shares of Series A Preferred Stock shall have the exclusive right to vote on any amendment, alteration or repeal of the Charter, including the terms of the Series A Preferred Stock, that would alter only the contract rights, as expressly set forth in the Charter, of the Series A Preferred Stock, and the holders of any other classes or series of capital stock of the Corporation shall not be entitled to vote on any such amendment, alteration or repeal. Any such amendment, alteration or repeal shall require the affirmative vote or consent of the holders of two-thirds of the shares of Series A Preferred Stock issued and outstanding at the time. With respect to any amendment, alteration or repeal of the Charter, including the terms of the Series A Preferred Stock, that equally affects the terms of the Series A Preferred Stock and any Parity Preferred Stock upon which like voting rights have been conferred (“Parity Voting Preferred Stock”), the holders of shares of Series A Preferred Stock and such Parity Voting Preferred Stock (voting together as a single class) shall have the exclusive right to vote on any amendment, alteration or repeal of the Charter, including the terms of the Series A Preferred Stock, that would alter only the contract rights, as expressly set forth in the Charter, of the Series A Preferred Stock and such Parity Voting Preferred Stock, and the holders of any other classes or series of capital stock of the Corporation shall not be entitled to vote on any such amendment, alteration or repeal. Any such amendment, alteration or repeal shall require the affirmative vote or consent of the holders of shares of Series A Preferred Stock and such Parity Voting Preferred Stock entitled to cast two-thirds of all the votes entitled to be cast collectively by such holders on such matter, with each holder of Series A Preferred Stock and such Parity Voting Preferred Stock entitled to one vote for each $25.00 in liquidation preference.
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(c) So long as any shares of Series A Preferred Stock remain outstanding, in addition to any other vote or consent of stockholders required by the Charter, the affirmative vote or consent of the holders of Series A Preferred Stock and Parity Voting Preferred Stock entitled to cast a majority of all the votes entitled to be cast collectively by the holders of the outstanding shares of Series A Preferred Stock and Parity Voting Preferred Stock (voting together as a single class) shall be required to authorize, create or issue, or increase the number of authorized or issued shares of, any class or series of Senior Stock or reclassify any authorized shares of capital stock of the Corporation into Senior Stock, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase Senior Stock.
(d) Holders of shares of Series A Preferred Stock shall not be entitled to vote with respect to (i) any issuance or increase in the total number of authorized Common Shares or Preferred Shares, (ii) any issuance or increase in the number of authorized shares of Series A Preferred Stock or the creation or issuance of any other class or series of capital stock, or (iii) any increase in the number of authorized shares of any other class or series of capital stock, in each case referred to in clause (i), (ii) or (iii) of this Section 11(d) constituting Parity Preferred Stock or Junior Stock, and in the case of the creation of Parity Preferred Stock that requires such Parity Preferred Stock to vote together with the Series A Preferred Stock as a single class. Except as set forth herein, holders of Series A Preferred Stock shall not have any voting rights with respect to, and the consent of the holders of Series A Preferred Stock shall not be required for, the taking of any corporate action regardless of the effect that such corporate action may have upon the powers, preferences, voting power or other rights or privileges of the Series A Preferred Stock.
(e) The foregoing voting provisions of this Section 11 shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of Series A Preferred Stock shall have been redeemed or called for redemption upon proper notice pursuant hereto and sufficient funds, in cash, shall have been deposited in trust to effect such redemption.
(f) In any matter in which the Series A Preferred Stock may vote (as expressly provided herein), each share of Series A Preferred Stock shall be entitled to one vote per $25.00 of liquidation preference.
12. Conversion. The Series A Preferred Stock is not convertible into or exchangeable for any other property or securities of the Corporation.
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13. Term. The Series A Preferred Stock has no stated maturity date and shall not be subject to any sinking fund and, except as otherwise set forth herein, is not subject to mandatory redemption. The Corporation shall not be required to set aside funds to redeem the Series A Preferred Stock.
14. Status of Redeemed or Repurchased Series A Preferred Stock. All shares of Series A Preferred Stock redeemed, repurchased or otherwise acquired in any manner by the Corporation shall be retired and shall be restored to the status of authorized but unissued shares of Series A Preferred Stock.
SECOND: The shares of Series A Preferred Stock have been classified and designated by the Board under the authority contained in the Charter.
THIRD: These Articles Supplementary have been approved by the Board in the manner and by the vote required by law.
FOURTH: The undersigned acknowledges these Articles Supplementary to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned acknowledges that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.
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IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be signed in its name and on its behalf by its Chief Executive Officer and attested to by its Chief Legal Officer and Secretary on this 1st day of December, 2022.
| ATTEST: | BLUEROCK HOMES TRUST, INC. | |||
| /s/ Jason Emala | By: | /s/ R. Ramin Kamfar | (SEAL) | |
| Name: Jason Emala | Name: R. Ramin Kamfar | |||
| Title: Chief Legal Officer and Secretary | Title: Chief Executive Officer | |||
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Exhibit 10.1
BLUEROCK Homes Trust, INC.
MANAGING BROKER DEALER AGREEMENT
As of November 1, 2022 (the “Effective Date”), this MANAGING BROKER DEALER AGREEMENT (the “Agreement”) is made by and between Bluerock Homes Trust, Inc., a Maryland corporation (the “Issuer”), and Bluerock Capital Markets, LLC, a Massachusetts limited liability company (the “Managing Broker Dealer”), in connection with the offering and sale by the Issuer of its (A) 6.0% Series A Redeemable Preferred Stock (the “Series A Preferred Stock”) for a maximum offering of up to $250,000,000 (the “Offering”). In connection with the Offering, the Issuer has prepared a Confidential Private Placement Memorandum, dated November 1, 2022, which may be supplemented or amended from time to time (as so supplemented or amended, the “Memorandum”).
1. Appointment of the Managing Broker Dealer.
1.1 On the basis of the representations, warranties, and covenants herein contained, but subject to the terms and conditions herein set forth, the Managing Broker Dealer is hereby appointed and agrees to sell the Securities on a “best efforts” basis and to solicit purchasers for the Securities at the price to be paid and otherwise upon the terms and conditions set forth in the Memorandum. The Managing Broker Dealer shall solicit purchasers for the Securities through a private, limited offering exempt from registration pursuant to: (i) Rule 506(b) of Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”), and (ii) applicable state blue sky exemptions.
1.2 The Managing Broker Dealer is authorized to enlist other members of the Financial Industry Regulatory Authority, Inc. (“FINRA”) acceptable to the Issuer (each, a “Selling Group Member,” and collectively, the “Selling Group Members”) to solicit qualified investors (each, an “Investor,” and collectively, the “Investors”) for the Securities. The Issuer may also enter into agreements for the sale of the Interests to certain Investors with non-FINRA registered investment advisers (“Registered Investment Advisers”), and the Managing Broker Dealer shall assist in the administration of such arrangements.
1.3 The Securities in the Offering will be offered during a period commencing on November 1, 2022 and continuing until the Offering is terminated by the Issuer (in such case, the “Offering Termination Date,” with such interval defining the “Offering Period” for the Offering). There is no minimum amount of gross proceeds that the Issuer must raise in the Offering to begin accepting subscriptions and issuing Securities.
1.4 Subject to the performance by the Issuer of all the obligations to be performed hereunder and to the completeness and accuracy of all the Issuer’s representations and warranties contained herein, the Managing Broker Dealer hereby accepts such agency and agrees on the terms and conditions herein set forth to use its best efforts during the Offering Period to find qualified Investors for the Securities in the Offering.
2. Representations and Warranties of the Issuer. The Issuer hereby represents and warrants to the Managing Broker Dealer and each of the Selling Group Members that:
2.1 The Issuer is duly organized and validly exists as a corporation in good standing under the laws of the State of Maryland, has all requisite power and authority to enter into this Agreement, and has all requisite power and authority to conduct its business as described in the Memorandum.
2.2 No consent, approval, authorization, or other order of any governmental authority is required in connection with the execution or delivery by the Issuer of this Agreement or the issuance and sale by the Issuer of the Securities, except such as may be required under the Securities Act or applicable state securities laws.
2.3 No defaults exist in the due performance or observance of any material obligation, term, covenant, or condition of any agreement or instrument to which the Issuer is a party or by which it is bound.
2.4 This Agreement, when executed by the Issuer, will have been duly authorized and will be a valid and binding agreement of the Issuer, enforceable in accordance with its terms.
2.5 At the time of the issuance of the Securities, the Securities will have been duly authorized and validly issued, and upon payment therefor, will be fully paid and non-assessable and will conform to the description thereof contained in the Memorandum.
2.6 Subject to the performance of the Issuer’s obligations hereunder, the holders of the Securities will have the rights described in the Memorandum and associated transaction documents.
2.7 Subject to Section 3.2, the Memorandum does not include, nor will it include through and on the Offering Termination Date, any untrue statement of a material fact, nor does it or will it omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.
2.8 As of the Effective Date and at the time of any sale of the Securities (collectively, the “Applicable Date”), none of the Issuer, its executive officers, directors, general partners, managing members or officers participating in the Offering or persons who own 20% or more of the Issuer:
2.8.1 Has been convicted, within ten (10) years of any Applicable Date, of any felony or misdemeanor that was:
(a) In connection with the purchase or sale of any security;
(b) Involving or making of any false filing with the Securities and Exchange Commission (the “SEC”); or
(c) Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser, or paid solicitor of purchasers of securities.
2.8.2 Is subject to any order, judgment, or decree of any court of competent jurisdiction, entered within five (5) years before any Applicable Date, that, as of such Applicable Date, restrains or enjoins such person from engaging or continuing in any conduct or practice:
(a) In connection with the purchase or sale of any security;
(b) Involving the making of any false filing with the SEC; or
(c) Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of purchasers of securities.
2.8.3 Is subject to a final order of a state securities commission (or an agency or officer of a state performing like functions), a state authority that supervises or examines banks, savings associations or credit unions, a state insurance commission (or an agency or officer of a state performing like functions), an appropriate federal banking agency, the U.S. Commodity Futures Trading Commission or the National Credit Union Administration that:
(a) As of any Applicable Date, bars the person from:
(i) Association with an entity regulated by such commission, authority, agency or officer;
(ii) Engaging in the business of securities, insurance or banking; or
(iii) Engaging in savings association or credit union activities; or
(b) Constitutes a final order based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct entered within ten (10) years before any Applicable Date.
2.8.4 Is subject to an order of the SEC pursuant to Sections 15(b) or 15B(c) of the Securities Exchange Act of 1934 (the “Exchange Act”) or Section 203(e) or (f) of the Investment Advisers Act of 1940 (the “Investment Advisers Act”) that, as of any Applicable Date:
(a) Suspends or revokes such person’s registration as a broker, dealer, municipal securities dealer or investment adviser;
(b) Places limitations on the activities, functions or operations of such person; or
(c) Bars such person from being associated with any entity or from participating in the offering of any penny stock.
2.8.5 Is subject to any order of the SEC entered within five (5) years before any Applicable Date, that, as of such Applicable Date, orders the person to cease and desist from committing or causing a violation or future violation of:
(a) Any scienter-based anti-fraud provisions of the federal securities laws including, without limitation, Section 17(a)(1) of the Securities Act, Section 10(b) of the Exchange Act and 17 CFR 240.10b-5, Section 15(c)(1) of the Exchange Act, and Section 206(1) of the Investment Advisers Act, or any other rule or regulation thereunder; or
(b) Section 5 of the Securities Act.
2.8.6 Is suspended or expelled from membership in, or suspended or barred from association with, a member of a registered national securities exchange or a registered national or affiliated securities association for any act or omission to act constituting conduct inconsistent with just and equitable principles of trade.
2.8.7 Has filed (as a registrant or issuer), or was or was named as an underwriter in, any registration statement or Regulation A offering statement filed with the SEC that, within five (5) years of the Applicable Date, was the subject of a refusal order, stop order, or order suspending the Regulation A exemption or, is, as of any Applicable Date, the subject of an investigation or proceeding to determine whether a stop order or suspension order should be issued.
2.8.8 Is subject to a United States Postal Service false representation order entered within five (5) years before any Applicable Date, or is, as of any Applicable Date, subject to a temporary restraining order or preliminary injunction with respect to conduct alleged by the United States Postal Service to constitute a scheme or device for obtaining money or property through the mail by means of false representations.
2.8.9 The Issuer agrees to immediately notify the Managing Broker Dealer if there is a violation or potential violation of the representations set forth in this Section 2.8 during the Offering Period.
2.9 The representations and warranties made in this Section 2 are made as of the date hereof and shall be continuing representations and warranties throughout the Offering Period. In the event that any of these representations or warranties becomes untrue, the Issuer will immediately notify the Managing Broker Dealer in writing of the fact which makes the representation or warranty untrue.
3. Duties and Obligations of the Issuer.
3.1 The Issuer will comply with all requirements imposed upon it by the rules and regulations of the SEC, and by all applicable state securities laws and regulations, to permit the continuance of offers and sales of the Securities, in accordance with the provisions of this Agreement and in the Memorandum, and will amend or supplement the Memorandum in order to make the Memorandum comply with the requirements of federal and applicable state securities laws and regulations.
3.2 If, at any time, any event occurs as a result of which the Memorandum would include an untrue statement of a material fact or, in view of the circumstances under which it was made, omit to state any material fact necessary to make the statements therein not misleading, the Issuer will notify the Managing Broker Dealer thereof, effect the preparation of an amendment or supplement to the Memorandum which will correct such statement or omission, and deliver to the Managing Broker Dealer such numbers of copies of such amendment or supplement to the Memorandum as the Managing Broker Dealer may reasonably request.
3.3 The Issuer shall not make any written or oral representations or statements to Investors that contradict or are inconsistent with the statements made in the Memorandum, as amended or supplemented.
3.4 Subject to the Managing Broker Dealer’s actions and the actions of others in connection with the Offering, the Issuer will comply with all requirements imposed upon it by Rule 506(b) of Regulation D, the regulations thereunder, and applicable state securities laws. The Issuer will file in a timely manner a Form D relating to the Offering with the SEC under Regulation D of the Securities Act and with the applicable state securities regulatory authorities. Upon request, the Issuer will furnish to the Managing Broker Dealer a copy of such papers filed by the Issuer in connection with any such exemption.
3.5 The Issuer will apply the net proceeds from the Offering received by it in the manner set forth in the Memorandum.
3.6 The Issuer will deliver to the Managing Broker Dealer such numbers of copies of the Memorandum and any amendment(s) or supplement(s) thereto, with all appendices thereto, and such numbers of copies of printed sales literature or other materials as the Managing Broker Dealer may reasonably request in connection with the Offering or for the purposes contemplated by federal and applicable state securities laws.
3.7 The Issuer will furnish the holders of the Securities with all reports described in the Memorandum and applicable Issuer governing documents and will deliver to the Managing Broker Dealer, and make available, upon request, to each Selling Group Member and Registered Investment Adviser, one copy of each such report at the time that such reports are furnished to the holders of the Securities, and any other such other information concerning the Issuer, as may reasonably be requested.
3.8 Any officer, director, employee, or affiliate of the Issuer who buys any Securities in connection with the Offering shall do so for investment purposes only and not with the intention of resale or distribution.
4. Representations and Warranties of the Managing Broker Dealer. The Managing Broker Dealer represents and warrants to the Issuer and the Selling Group Members that:
4.1 The Managing Broker Dealer is duly organized and validly exists as a limited liability company in good standing under the laws of the State of Massachusetts and has all requisite power and authority to enter into this Agreement.
4.2 This Agreement, when executed by the Managing Broker Dealer, will have been duly authorized and will be a valid and binding agreement of the Managing Broker Dealer, enforceable in accordance with its terms.
4.3 The consummation of the transactions contemplated herein and those contemplated by the Memorandum will not result in a breach or violation of any order, rule, or regulation directed to the Managing Broker Dealer by any court, any federal or state regulatory body, FINRA, or any administrative agency having jurisdiction over the Managing Broker Dealer or its affiliates.
4.4 The Managing Broker Dealer is, and during the term of this Agreement will be, duly registered as a broker dealer pursuant to the provisions of the Exchange Act, a member in good standing with FINRA, and duly registered as a broker dealer in any state where offers are made by the Managing Broker Dealer. The Managing Broker Dealer will comply with all applicable laws, regulations, and requirements of the Securities Act, the Exchange Act, applicable state securities law, the published rules and regulations thereunder, and FINRA rules. The Managing Broker Dealer has all required licenses and permits.
4.5 The Managing Broker Dealer has reasonable grounds to believe, based on information made available to it by the Issuer, that all material facts are adequately and accurately disclosed in the Memorandum and provide an adequate basis for evaluating an investment in the Securities.
4.6 No agreement will be made by the Managing Broker Dealer with any person permitting the resale, repurchase or distribution of the Securities purchased by such person.
4.7 This Agreement, or any supplement or amendment hereto, may be filed by the Issuer with the SEC or FINRA, if such filing should be required, and may be filed with and may be subject to the approval of applicable federal and applicable state securities regulatory agencies, if required.
4.8 The Managing Broker Dealer has established and implemented anti-money laundering compliance programs, in accordance with FINRA Rule 3310 and Section 352 of the Money Laundering Abatement Act and Section 326 of the Patriot Act of 2001.
4.9 As of any Applicable Date, none of the Managing Broker Dealer, its executive officers, directors, general partners, managing members, or officers participating in the Offering or any of its employees receiving a commission with respect to the Offering:
4.9.1 Has been convicted, within ten (10) years of any Applicable Date of any felony or misdemeanor that was:
(a) In connection with the purchase or sale of any security;
(b) Involving or making of any false filing with the SEC; or
(c) Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser, or paid solicitor of purchasers of securities.
4.9.2 Is subject to any order, judgment, or decree of any court of competent jurisdiction, entered within five (5) years before any Applicable Date, that, as of such Applicable Date, restrains or enjoins such person from engaging or continuing in any conduct or practice:
(a) In connection with the purchase or sale of any security;
(b) Involving the making of any false filing with the SEC; or
(c) Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of purchasers of securities.
4.9.3 Is subject to a final order of a state securities commission (or an agency or officer of a state performing like functions), a state authority that supervises or examines banks, savings associations or credit unions, a state insurance commission (or an agency or officer of a state performing like functions), an appropriate federal banking agency, the U.S. Commodity Futures Trading Commission or the National Credit Union Administration that:
(a) As of any Applicable Date, bars the person from:
(i) Association with an entity regulated by such commission, authority, agency, or officer;
(ii) Engaging in the business of securities, insurance or banking; or
(iii) Engaging in savings association or credit union activities; or
(b) Constitutes a final order based on a violation of any law or regulation that prohibits fraudulent, manipulative or deceptive conduct entered within ten (10) years before any Applicable Date.
4.9.4 Is subject to an order of the SEC pursuant to sections 15(b) or 15B(c) of the Exchange Act or Section 203(e) or (f) of the Investment Advisers Act, as of any Applicable Date:
(a) Suspends or revokes such person’s registration as a broker, dealer, municipal securities dealer or investment adviser;
(b) Places limitations on the activities, functions or operations of such person; or
(c) Bars such person from being associated with any entity or from participating in the offering of any penny stock.
4.9.5 Is subject to any order of the SEC entered within five (5) years before any Applicable Date, that, as of such Applicable Date, orders the person to cease and desist from committing or causing a violation or future violation of:
(a) Any scienter-based anti-fraud provisions of the federal securities laws including, without limitation, Section 17(a)(1) of the Securities Act, Section 10(b) of the Exchange Act and 17 CFR 240.10b-5, Section 15(c)(1) of the Exchange Act, and Section 206(1) of the Investment Advisers Act, or any other rule or regulation thereunder; or
(b) Section 5 of the Securities Act.
4.9.6 Is suspended or expelled from membership in, or suspended or barred from association with, a member of a registered national securities exchange or a registered national or affiliated securities association for any act or omission to act constituting conduct inconsistent with just and equitable principles of trade.
4.9.7 Has filed (as a registrant or issuer), or was or was named as an underwriter in, any registration statement or Regulation A offering statement filed with the SEC that, within five (5) years of any Applicable Date, was the subject of a refusal order, stop order, or order suspending the Regulation A exemption or, is, as of any Applicable Date, the subject of an investigation or proceeding to determine whether a stop order or suspension order should be issued.
4.9.8 Is subject to a United States Postal Service false representation order entered within five (5) years before any Applicable Date, or is, as of any Applicable Date, subject to a temporary restraining order or preliminary injunction with respect to conduct alleged by the United States Postal Service to constitute a scheme or device for obtaining money or property through the mail by means of false representations.
4.9.9 The Managing Broker Dealer agrees to immediately notify the Issuer if there is a violation or potential violation of the representations set forth in this Section 4.9 during the Offering Period.
4.9.10 The representations and warranties made in this Section 4 are and shall be continuing representations and warranties throughout the Offering Period. In the event that any of these representations or warranties becomes untrue, the Managing Broker Dealer will immediately notify the Issuer in writing of the fact which makes the representation or warranty untrue.
5. Duties and Obligations of the Managing Broker Dealer.
5.1 All actions, direct or indirect, by the Managing Broker Dealer, its respective agents, members, employees, and affiliates, shall conform to (i) requirements applicable to broker dealers under federal and applicable state securities laws, rules, and regulations, and (ii) applicable requirements and rules of FINRA.
5.2 The Managing Broker Dealer will serve in a “best efforts” capacity in the offering, sale, and distribution of the Securities. The Managing Broker Dealer may offer the Securities as an agent, but all sales shall be made by the Issuer, acting through the Managing Broker Dealer as an agent, and not by the Managing Broker Dealer as a principal. The Managing Broker Dealer shall have no authority to appoint any person or other entity as an agent or sub-agent of the Managing Broker Dealer or the Issuer, except to appoint Selling Group Members acceptable to the Issuer in its sole discretion.
5.3 All engagements of the Selling Group Members will be evidenced by a Soliciting Dealer Agreement substantially in the form attached hereto as Exhibit A. All engagements with the Registered Investment Advisers will be evidenced by an RIA Introduction Agreement substantially in the form attached hereto as Exhibit B. When Selling Group Members and/or Registered Investment Advisers are engaged in the Offering, the Managing Broker Dealer will use commercially reasonable efforts to cause such Selling Group Members and/or Registered Investment Advisers to comply with all respective obligations pursuant to both this Agreement as well as the respective Soliciting Dealer Agreement or RIA Introduction Agreement.
5.4 The Managing Broker Dealer, its employees, officers, or other agents shall make no representations to any prospective Investor other than those contained in the Memorandum and will not allow any other written materials to be used to describe the potential investment to prospective Investors other than the Memorandum or supplemental sales literature furnished to the Managing Broker Dealer by the Issuer.
5.5 The Managing Broker Dealer will immediately bring to the attention of the Issuer any circumstance or fact which causes the Managing Broker Dealer to believe the Memorandum, or any other literature distributed pursuant to the Offering, or any information supplied by prospective Investors in their subscription materials, may be inaccurate or misleading.
5.6 The Managing Broker Dealer shall complete all steps necessary to permit the Managing Broker Dealer to offer the Securities pursuant to exemptions available under applicable federal law and applicable state laws. The Managing Broker Dealer shall conduct all of its solicitation and sales efforts in conformity with Rule 506(b) (including the limitation on general solicitation) and Regulation D under the Securities Act and exemptions available under applicable state law and shall promptly notify the Issuer of subscriptions for the Securities it receives so that the Issuer may make any required Form D filings.
5.7 The Managing Broker Dealer will comply in all respects with the subscription procedures and plan of distribution set forth in the Memorandum, and obtain from each prospective Investor fully complete and duly executed Subscription Agreements.
5.8 The Managing Broker Dealer will not engage in any activities hereunder in any state other than those for which the Managing Broker Dealer is a broker or dealer duly registered in such state, or exempt therefrom, and permission has been granted by the Issuer to conduct offer and sale activity in such state.
5.9 It is understood that no sale shall be regarded as effective unless and until accepted by the Issuer. The Issuer reserves the right in its sole discretion to accept or reject any subscription for Securities in whole or in part for a period of 30 days after receipt of the subscription for Securities. Any subscription for Securities not accepted within 30 days of receipt shall be deemed rejected.
5.10 The Managing Broker Dealer shall not knowingly execute any transaction in which an Investor invests in the Securities in a discretionary account without prior written approval of the transaction by the Investor.
5.11 In the event the Managing Broker Dealer receives any customer funds for the Securities, the Managing Broker Dealer will transmit such customer funds, not later than noon of the next business day following receipt of such funds for the Securities, to the escrow or bank account for the Offering as set forth in the Memorandum.
5.12 In the event the Issuer has paid the Managing Broker Dealer compensation as set forth in Section 6 hereof, the Managing Broker Dealer shall be obligated to pay Selling Group Members from such funds or direct the payment of such funds, if applicable.
5.13 The Managing Broker Dealer will furnish to the Issuer upon request a complete list of all persons who have been offered the Securities (including the corresponding number of the Memorandum delivered to such persons) and such persons’ places of residence, as provided by the Selling Group Members.
5.14 The Managing Broker Dealer will terminate any Offering upon request of the Issuer at any time and will resume such Offering upon subsequent request of the Issuer.
6. Compensation.
6.1 As compensation for services rendered by the Managing Broker Dealer under this Agreement, the Managing Broker Dealer will be entitled to receive from the Issuer the following compensation, a portion or all of which may be re-allowed to Selling Group Members or other associated persons eligible to receive such compensation:
6.1.1 A selling commission (the “Selling Commission”) of up to 7.0% of the purchase price of the Securities sold by the Managing Broker Dealer (the “Total Sales”), which it will re-allow to the Selling Group Members; provided, however, that this amount will be reduced to the extent a lower commission rate is negotiated with a Selling Group Member and the commission rate will be the lower agreed upon rate;
6.1.2 A placement fee (the “Placement Fee”) equal to 2.5% of the Total Sales, a portion of which may be reallocated to Selling Group Members at the discretion of the Managing Broker Dealer.
6.2 Notwithstanding the foregoing provisions of this Section 6, the Issuer reserves the right, in its sole discretion, to refuse to accept any or all Subscription Agreements tendered by the Managing Broker Dealer at any time during an Offering, and/or to terminate such Offering, in either case, in its sole discretion. Selling Commissions and fees earned prior to such termination remain payable to the applicable parties.
7. Offering. The Securities shall be offered at the price and upon the terms and conditions set forth in the Memorandum and the exhibits and appendices thereto and any amendments or supplements thereto.
7.1 No selling commissions, allowances, expense reimbursements or other compensation will be payable with respect to any Subscription Agreements that are rejected by the Issuer, or if the Issuer terminates an Offering for any reason whatsoever. No selling commissions, allowances, expense reimbursements or other compensation will be payable to the Managing Broker Dealer with respect to any sale of the Securities by the Managing Broker Dealer unless and until such time as the Issuer has received the total proceeds of any such sale.
7.2 Except as provided in Section 14, all other expenses incurred by the Managing Broker Dealer in the performance of the Managing Broker Dealer’s obligations hereunder, including, but not limited to, expenses related to an Offering and any attorneys’ fees, shall be at the Managing Broker Dealer’s sole cost and expense, and the foregoing shall apply notwithstanding the fact that the Offering is not consummated for any reason.
8. Indemnification by the Issuer.
8.1 Subject to the conditions set forth below, the Issuer, with respect to the Offering, agrees to indemnify and hold harmless the Managing Broker Dealer, the Selling Group Members, Registered Investment Advisers, and their respective owners, managers, members, partners, directors, and officers (the “Selling Parties”), against any and all loss, liability, claim, damage and expense (“Loss”) arising out of or based upon (A) any untrue statement or alleged untrue statement of a material fact contained in the Memorandum (as amended and supplemented from time to time) or in any application or other document filed in any jurisdiction in order to qualify the Securities under, or exempt the Offering from, the registration or qualification requirements of the securities laws thereof (each a “Securities Filing”) or (B) the omission or alleged omission from the Memorandum (as amended and supplemented from time to time) or a Securities Filing of a material fact required to be stated therein or necessary to make the statement therein not misleading;
8.2 If any action is brought against any of the Selling Parties in respect of which indemnity may be sought hereunder, such Selling Party shall promptly notify the party or parties against whom indemnification is to be sought in writing of the institution of such action, and the Issuer shall assume the defense of such action; provided, however, that the failure to notify the Issuer shall not affect the provisions in this Section 8 except to the extent such failure to notify the Issuer has a material and adverse effect on the defense of such claims. The affected Selling Parties shall have the right to employ counsel in any such case. The reasonable fees and expenses of such counsel shall be at the Issuer’s expense and authorized in writing by the Issuer.
8.3 The Issuer agrees to promptly notify the Managing Broker Dealer of the commencement of any litigation or proceedings against the Issuer or any of its respective officers, directors, members, managers, partners, employees, attorneys, accountants or agents in connection with an Offering or in connection with the Memorandum.
8.4 The indemnity provided to the Managing Broker Dealer pursuant to this Section 8 shall not apply to the extent that any Loss arises out of or is based upon (i) any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Issuer by the Managing Broker Dealer specifically for use in the preparation of the Memorandum (or any amendment or supplement thereto) or a Securities Filing, (ii) the failure to qualify the offer and sale of Securities for an exemption from registration under the Securities Act and applicable state securities laws, rules or regulations caused by an action or omission of the Managing Broker Dealer, or (iii) the breach by the Managing Broker Dealer of its representations, warranties or obligations hereunder.
8.5 The indemnity provided to the Selling Group Member and Registered Investment Advisers pursuant to this Section 8 shall not apply to the extent that any Loss arises out of or is based upon (i) any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Issuer by the Selling Group Member or Registered Investment Adviser specifically for use in the preparation of the Memorandum (or any amendment or supplement thereto) or a Securities Filing, (ii) the failure to qualify the offer and sale of Securities for an exemption from registration under the Securities Act and applicable state securities laws, rules or regulations caused by an action or omission of the Selling Group Member or Registered Investment Adviser, (iii) the offer or sale by the Selling Group Member or Registered Investment Adviser to a person who fails to meet the standards regarding suitability under any applicable federal, state, or FINRA laws, rules, and regulations, (iv) the breach by the Selling Group Member of its representations, warranties, or obligations under its Soliciting Dealer Agreement with the Managing Broker Dealer relating to the Offering, or (v) the breach by the Registered Investment Adviser of its representations, warranties, or obligations under its RIA Introduction Agreement.
9. Indemnification by the Managing Broker Dealer.
9.1 Subject to the conditions set forth below, the Managing Broker Dealer agrees to indemnify and hold harmless the Issuer, its affiliates and their respective stockholders, partners, directors, officers, and each controlling person (“Issuer Parties”), against any and all Loss arising out of or based upon:
9.1.1 The Managing Broker Dealer’s failure to comply with any of the applicable provisions of the Securities Act, the regulations thereunder, applicable requirements and rules of FINRA, or any applicable federal or state securities laws and regulations, other than any failure to comply which directly results from acts of the Issuer;
9.1.2 The breach by the Managing Broker Dealer of any term, condition, representation, warranty, or covenant in this Agreement;
9.1.3 Any untrue statement or alleged untrue statement of a material fact contained in the Memorandum (as from time to time it is amended and supplemented) or a Securities Filing, but only to the extent, that the untrue statement or alleged untrue statement of material fact was made in reliance on and in conformity with written information furnished to the Issuer by the Managing Broker Dealer specifically for the purpose of inclusion in such document; or
9.1.4 The omission or alleged omission from the Memorandum (as from time to time it is amended and supplemented) or a Securities Filing of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, but only to the extent, that the omission or alleged omission of material fact was the result of written information furnished to the Issuer by the Managing Broker Dealer specifically for the purpose of inclusion in such document.
9.2 Subject to the conditions set forth below, the Managing Broker Dealer agrees to indemnify and hold harmless each Selling Group Member, its affiliates and their respective stockholders, partners, directors, officers, and each controlling person (“SGM Parties”), against any and all Loss arising out of or based upon:
9.2.1 The Managing Broker Dealer’s failure to comply with any of the applicable provisions of the Securities Act, the regulations thereunder, applicable requirements and rules of FINRA, or any applicable federal or state securities laws and regulations, other than any failure to comply which directly results from acts of a Selling Group Member.
9.2.2 The breach by the Managing Broker Dealer of any term, condition, representation, warranty or covenant contained in the Soliciting Dealer Agreement between the Managing Broker Dealer and such Selling Group Member.
9.3 If any action is brought against any of the Issuer Parties in respect of which indemnity may be sought hereunder, the Issuer shall promptly notify the Managing Broker Dealer in writing of the institution of such action, and the Managing Broker Dealer shall assume the defense of such action; provided, however, that the failure to notify the Managing Broker Dealer shall not affect the provisions in this Section 9 except to the extent such failure to notify the Managing Broker Dealer has a material and adverse effect on the defense of such claims. The Issuer Parties shall have the right to employ counsel in any such case. The reasonable fees and expenses of such counsel shall be at the Managing Broker Dealer’s expense, provided that the Managing Broker Dealer will not be obligated to pay for legal fees and expenses for more than one law firm in connection with the defense of similar claims arising out of the same alleged acts or omissions.
9.4 The Managing Broker Dealer agrees to promptly notify the Issuer of the commencement of any litigation or proceedings against the Managing Broker Dealer in connection with an Offering or in connection with the Memorandum.
10. Indemnification by the Selling Group Members.
10.1 Subject to the conditions set forth below, each Selling Group Member agrees to indemnify and hold harmless the Issuer and the Managing Broker Dealer and their respective stockholders, partners, directors, officers, and each controlling person (the “CMBD Parties”), against any and all Loss arising out of or based upon:
10.1.1 Such Selling Group Member’s failure to comply with any of the applicable provisions of the Securities Act, the regulations thereunder, applicable requirements and rules of FINRA, or any applicable federal or state securities laws and regulations, other than any failure to comply which directly results from acts of the Managing Broker Dealer;
10.1.2 Any untrue statement or alleged untrue statement of a material fact contained in the Memorandum (as from time to time it is amended and supplemented) or a Securities Filing, but only to the extent, that the untrue statement or alleged untrue statement of material fact was made in reliance on and in conformity with written information furnished to the Issuer by such Selling Group Member specifically for the purpose of inclusion in such document; or
10.1.3 The omission or alleged omission from the Memorandum (as from time to time it is amended and supplemented) or a Securities Filing of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, but only to the extent, that the omission or alleged omission of material fact was the result of written information furnished to the Issuer by such Selling Group Member specifically for the purpose of inclusion in such document.
10.1.4 The breach by such Selling Group Member of any term, condition, representation, warranty, or covenant contained in the Soliciting Dealer Agreement between the Managing Broker Dealer and such Selling Group Member; or
10.1.5 The failure by such Selling Group Member to take reasonable steps to verify that each Investor in an Offering complies with the suitability requirements set forth in the section captioned “Who May Invest” in the Memorandum.
10.2 Notwithstanding the foregoing, the CMBD Parties will not be indemnified or held harmless against indirect, special, incidental, exemplary, punitive, or consequential damages, whether foreseeable or otherwise, resulting from, or otherwise arising out of, such a breach. The Selling Group Member will not provide indemnification for any liability or loss suffered by the CMBD Parties, nor will it provide that the CMBD Parties be held harmless for any liability suffered by the CMBD Parties unless all of the following conditions are met: (i) the liability or loss suffered is related to the Selling Group Member’s actions undertaken pursuant to its Soliciting Dealer Agreement with the Managing Broker Dealer, and (ii) such liability or loss was not the result of negligence or misconduct on the part of the party seeking indemnification or the CMBD Parties. In no case will the Selling Group Member be liable under this Section 10 with respect to any Action made against the CMBD Parties unless the Selling Group Member has been notified in writing (in the manner provided in Section 10.3 below) of the nature of the Action within a reasonable time after the assertion thereof; provided, that the Selling Group Member will be relieved of its duty to indemnify and hold harmless under this Section 10 if a failure to timely notify the Selling Group Member materially impairs its ability to defend against the Action; but the failure to so notify the Selling Group Member will not relieve the Selling Group Member from any liability that it would have incurred otherwise than on account of this Section 10.
10.3 If any action is brought against any of the CMBD Parties in respect of which indemnity may be sought hereunder, the Issuer or the Managing Broker Dealer shall promptly notify the applicable Selling Group Member in writing of the institution of such action, and the Selling Group Member shall assume the defense of such action; provided, however, that the failure to notify the Selling Group Member shall not affect the provisions in this Section 10 except to the extent such failure to notify the Selling Group Member has a material and adverse effect on the defense of such claims. The affected CMBD Parties shall have the right to employ counsel in any such case. The reasonable fees and expenses of such counsel shall be at such Selling Group Member’s expense and authorized in writing by such Selling Group Member, provided that such Selling Group Member will not be obligated to pay for legal fees and expenses for more than one law firm in connection with the defense of similar claims arising out of the same alleged acts or omissions.
10.4 The Selling Group Member agrees to promptly notify the Issuer and the Managing Broker Dealer of the commencement of any litigation or proceedings against the Selling Group Member or any of the Selling Group Member’s managers, members, officers, directors, partners, employees, affiliates, attorneys, accountants, or agents in connection with the Offering.
10.5 The indemnity provided to the Managing Broker Dealer pursuant to this Section 10 shall not apply to the extent that any Loss arises out of or is based upon any untrue statement or alleged untrue statement of material fact made by the Managing Broker Dealer or any agent of the Managing Broker Dealer, or any omission or alleged omission of a material fact required to be disclosed by the Managing Broker Dealer or any agent of the Managing Broker Dealer.
10.6 The indemnity provided to the Issuer pursuant to this Section 10 shall not apply to the extent that any Loss arises out of or is based upon any untrue statement or alleged untrue statement of material fact made by the Issuer or any agent of the Issuer (other than the Managing Broker Dealer), or any omission or alleged omission of a material fact required to be disclosed by the Issuer or any agent of the Issuer (other than the Managing Broker Dealer).
10.7 The indemnification provisions provided in this Section 10 are further limited to the extent that no such indemnification will be permitted under this Agreement for or arising out of an alleged violation of federal or state securities laws unless one or more of the following conditions are met: (i) there has been a successful adjudication on the merits of each count involving alleged securities law violations by the party against whom indemnification is sought; (ii) such claims against the party against whom indemnification is sought have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee; or (iii) a court of competent jurisdiction approves a settlement of the claims against the party against whom indemnification is sought.
11. Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnification provided pursuant to Sections 8, 9, and 10 is for any reason held to be unavailable from the Issuer, the Managing Broker Dealer, or the Selling Group Members, or Registered Investment Advisers, as the case may be, the parties shall contribute to the aggregate Loss, liabilities, claims, damages and expenses (including any amount paid in settlement of any action, suit, or proceeding or any claims asserted) in such amounts as a court of competent jurisdiction may determine (or in the case of settlement, in such amounts as may be agreed upon by the parties) in such proportion to reflect the relative fault of the each party in connection with the events described in Sections 8, 9, and 10 as the case may be, which resulted in such Loss, liabilities, claims damages or expenses, as well as any other equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether any untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuer, the Managing Broker Dealer, the Selling Group Members, and Registered Investment Advisers and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such omission or statement. The Selling Parties, the Issuer Parties, and any person who controls the Managing Broker Dealer shall also have rights to contribution pursuant to this Section.
12. Privacy Act.
12.1 To protect Customer Information (as defined below) and to comply as may be necessary with the requirements of the Gramm-Leach-Bliley Act, the relevant state and federal regulations pursuant thereto and state privacy laws, the parties wish to include the confidentiality and non-disclosure obligations set forth herein.
12.2 “Customer Information” means any information contained on a customer’s application or other form and all nonpublic personal information about a customer that a party receives from the other party. Customer Information shall include, but not be limited to, name, address, telephone number, social security number, health information, and personal financial information (which may include consumer account number).
12.3 The parties understand and acknowledge that they may be financial institutions subject to applicable federal and state customer and consumer privacy laws and regulations, including Title V of the Gramm-Leach-Bliley Act (15 U.S.C. 6801, et seq.) and regulations promulgated thereunder (collectively, the “Privacy Laws”), and any Customer Information that one party receives from the other party is received with limitations on its use and disclosure. The parties agree that they are prohibited from using the Customer Information received from the other party other than (i) as required by law, regulation or rule, or (ii) to carry out the purposes for which one party discloses Customer Information to the other party pursuant to the Agreement, as permitted under the use in the ordinary course of business exception to the Privacy Laws.
12.4 The parties shall establish and maintain safeguards against the unauthorized access, destruction, loss, or alteration of Customer Information in their control which are no less rigorous than those maintained by a party for its own information of a similar nature. In the event of any improper disclosure of any Customer Information, the party responsible for the disclosure will immediately notify the other party.
13. Representations and Agreements to Survive Sale and Payment. Except as the context otherwise requires, all representations, warranties, and agreements contained in this Agreement shall be deemed to be representations, warranties, and agreements at and as of the Offering Termination Date, and such representations, warranties, and agreements by the Managing Broker Dealer or the Issuer, including the indemnity and contribution agreements contained in Sections 8, 9, and 10 shall remain operative and in full force and effect regardless of any investigation made by the Managing Broker Dealer, the Issuer, and/or any controlling person, and shall survive the sale of, and payment for, the Securities.
14. Costs of the Offering. Except for the compensation payable to the Managing Broker Dealer described in Section 6 and the allowances and reimbursements described in Section 7, which are the sole obligations of the Issuer or its affiliates, the Managing Broker Dealer will pay all of its own costs and expenses, including, but not limited to, all expenses necessary for the Managing Broker Dealer to remain in compliance with any applicable federal, state or FINRA laws, rules or regulations in order to participate in an Offering as a broker-dealer, and the fees and costs of the Managing Broker Dealer’s counsel. The Issuer agrees to pay all expenses incident to the performance of its obligations hereunder, including all expenses incident to marketing the Offering and submitting filings with federal and state regulatory authorities and to the exemption of the Securities under federal and state securities laws, including fees and disbursements of the Issuer’s counsel, and all costs of reproduction and distribution of the Memorandum and any amendment or supplement thereto. The Issuer agrees to pay all costs and expenses incident to the Offering, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated. Furthermore, the Issuer shall reimburse the Managing Broker Dealer for such expenses incurred in connection with the Offering by the Managing Broker Dealer as mutually agreed to by the Issuer and the Managing-Broker Dealer.
15. Confirmation. The Issuer agrees to confirm all orders for purchase of Securities that are accepted by the Issuer and provide such confirmation to the Managing Broker Dealer and the Selling Group Members.
16. Termination. This Agreement is terminable by any party for any reason whatsoever or for no reason at any time upon written notice to the other parties. Such termination shall not affect the obligations set forth in Sections 6, 8, 9, 10, 11, and 12
17. Governing Law. This Agreement shall be governed by, subject to and construed in accordance with, the laws of the State of New York without regard to conflict of law provisions and any dispute between the parties concerning this Agreement shall come within the jurisdiction of the courts of New York.
18. Venue. Any action relating to or arising out of this Agreement shall be brought only in a court of competent jurisdiction located in New York County, NY.
19. Severability. If any portion of this Agreement shall be held invalid or inoperative, then so far as is reasonable and possible (a) the remainder of this Agreement shall be considered valid and operative and (b) effect shall be given to the intent manifested by the portion held invalid or inoperative.
20. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, and together which shall constitute one and the same instrument.
21. Modification or Amendment. This Agreement may not be modified or amended except by written agreement executed by the both the Issuer and the Managing Broker Dealer.
22. Notices. All communications hereunder, except as herein otherwise specifically provided, shall be in writing and, if sent to the Managing Broker Dealer, shall be mailed or delivered to:
Bluerock Capital Markets, LLC
4100 Newport Place, Suite 650
Newport Beach, CA 92660
or if sent to the Issuer shall be mailed or delivered to:
Bluerock Homes Trust, Inc.
1345 Avenue of the Americas, 32nd Floor
New York, NY 10105
The notice shall be deemed to be received on the date of its actual receipt by the party entitled thereto.
23. Parties. This Agreement shall be binding upon and inure solely to the benefit of the parties hereto, the parties referred to in Sections 8, 9, and 10 and their respective successors, legal representatives, heirs and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under, in respect of, or by virtue of, this Agreement or any provision herein contained.
24. Delay. Neither the failure nor any delay on the part of any party to this Agreement to exercise any right, remedy, power, or privilege under this Agreement shall operate as a waiver thereof, nor shall a waiver of any right, remedy, power, or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power, or privilege with respect to any subsequent occurrence.
25. Recovery of Costs. If any legal action or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party shall be entitled to recover reasonable attorneys’ fees and other costs incurred in that action or proceeding (and any additional proceeding for the enforcement of a judgment) in addition to any other relief to which it or they may be entitled.
26. Entire Agreement. This Agreement contains the entire understanding between the parties hereto and supersedes any prior understandings or written or oral agreements between them respecting the subject matter hereof.
27. Due Diligence. The Issuer will authorize a collection of information regarding the Offering (the “Due Diligence Information”), which collection the Issuer may amend and supplement from time to time, to be delivered by the Managing Broker Dealer to the Selling Group Members (or their agents performing due diligence) in connection with their due diligence review of the Offering. In the event a Selling Group Member (or its agent performing due diligence) requests access to additional information or otherwise wishes to conduct additional due diligence regarding the Offering, the Issuer and the Managing Broker Dealer will reasonably cooperate with such Selling Group Member to accommodate such request. All Due Diligence Information received by the Managing Broker Dealer and/or the Selling Group Members in connection with their due diligence review of the Offering are confidential and shall be maintained as confidential and not disclosed by the Managing Broker Dealer or the Selling Group Members except to the extent such information is disclosed in the Memorandum.
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IN WITNESS WHEREOF, this Agreement has been executed as of the Effective Date.
| ISSUER: | ||
| Bluerock Homes Trust, Inc., | ||
| a Maryland corporation | ||
| By: | /s/ Jordan Ruddy | |
| Name: Jordan Ruddy | ||
| Title: President | ||
| MANAGING BROKER DEALER: | ||
| Bluerock Capital Markets, LLC, | ||
| a Massachusetts limited liability company | ||
| By: | /s/ Paul Dunn | |
| Name: Paul Dunn | ||
| Title: Executive Vice President | ||
EXHIBIT A
SOLICITING DEALER AGREEMENT
EXHIBIT B
RIA INTRODUCTION AGREEMENT
Exhibit 10.2
FOURTEENTH AMENDMENT TO THE
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
BLUEROCK RESIDENTIAL HOLDINGS, L.P.
DESIGNATION OF NEW 6.0% SERIES A
REDEEMABLE PREFERRED UNITS
DECEMBER 1, 2022
Pursuant to Section 4.02 and Article XI of the Second Amended and Restated Agreement of Limited Partnership of Bluerock Residential Holdings, L.P., as amended, (the “Partnership Agreement”), the General Partner hereby amends the Partnership Agreement as follows in connection with the offer and sale of up to 10,000,000 shares of a new 6.0% Series A Redeemable Preferred Stock (the “Series A Preferred Stock”) of the General Partner and the issuance to the General Partner of new Series A Preferred Units (as defined below) in exchange for the contribution by the General Partner of the net proceeds from the issuance and sale of the Series A Preferred Stock as set forth in this Fourteenth Amendment to the Partnership Agreement (this “Amendment”):
1. Defined Terms.
(a) Capitalized terms used herein and not otherwise defined shall have the meanings given to such terms in the Partnership Agreement.
(b) The following defined terms are hereby added to Article I of the Partnership Agreement:
“Articles Supplementary” means the Articles Supplementary of the General Partner filed with the State Department of Assessments and Taxation of the State of Maryland on December 1, 2022, designating the terms, rights and preferences of the Series A Preferred Stock.
“Junior Units” shall have the meaning provided in Section 16.03.
“Original Issue Date” shall have the meaning provided in 16.04(a).
“Parity Preferred Units” shall have the meaning provided in Section 16.03.
“Series A Cash Distribution” shall have the meaning provided in Section 16.04(a).
“Series A Preferred Distribution Payment Date” shall have the meaning provided in Section 16.04(a).
“Series A Preferred Distribution Period” shall have the meaning provided in Section 16.04(a).
“Series A Preferred Distribution Record Date” shall have the meaning provided in Section 16.04(a).
“Series A Preferred Return” shall have the meaning provided in Section 16.04(a).
“Series A Preferred Stock ” shall mean shares of 6.0% Series A Redeemable Preferred Stock of the General Partner.
“Series A Preferred Units” shall have the meaning provided in Section 16.01.
“Stated Value” shall mean $25.00, subject to appropriate adjustment in relation to any recapitalizations, distributions, unit splits, unit combinations, reclassifications or other similar events which affect the Series A Preferred Units.
2. Minimum Gain Chargeback. Section 5.01(c) of the Partnership Agreement is hereby deleted in its entirety and the following new Section 5.01(c) is inserted in its place:
(c) Minimum Gain Chargeback. Notwithstanding any provision to the contrary, (i) any expense of the Partnership that is a “nonrecourse deduction” within the meaning of Regulations Section 1.704-2(b)(1) shall be allocated in accordance with the Partners’ proportionate share of the “excess nonrecourse liabilities” of the Partnership as set forth in Section 5.01(l), (ii) any expense of the Partnership that is a “partner nonrecourse deduction” within the meaning of Regulations Section 1.704-2(i)(2) shall be allocated to the Partner that bears the “economic risk of loss” of such deduction in accordance with Regulations Section 1.704-2(i)(1), (iii) if there is a net decrease in Partnership Minimum Gain within the meaning of Regulations Section 1.704-2(f)(1) for any Partnership taxable year, then, subject to the exceptions set forth in Regulations Section 1.704-2(f)(2),(3), (4) and (5), items of gain and income shall be allocated among the Partners in accordance with Regulations Section 1.704-2(f) and the ordering rules contained in Regulations Section 1.704-2(j), and (iv) if there is a net decrease in Partner Nonrecourse Debt Minimum Gain within the meaning of Regulations Section 1.704-2(i)(4) for any Partnership taxable year, then, subject to the exceptions set forth in Regulations Section 1.704-2(g), items of gain and income shall be allocated among the Partners in accordance with Regulations Section 1.704-2(i)(4) and the ordering rules contained in Regulations Section 1.704-2(j).
3. Allocation of Profits and Losses. Article V of the Partnership Agreement is hereby amended to include the following as Sections 5.01(k) and 5.01(l) of the Partnership Agreement.
(k) Preferred Units. After giving effect to the allocations set forth in Sections 5.01(c), (d), and (e) hereof, but before giving effect to the allocations set forth in Sections 5.01(a) and (b), Net Operating Income shall be allocated to the General Partner until the aggregate amount of Net Operating Income allocated to the General Partner under this Section 5.01(k) for the current and all prior years equals the aggregate amount of the Series A Preferred Cash Distribution paid to the General Partner for the current and all prior years; provided, however, that the General Partner may, in its discretion, allocate Net Operating Income based on accrued Series A Preferred Cash Distribution with respect to the January Series A Preferred Cash Distribution Payment Date if the General Partner sets the Distribution Record Date for such Series A Preferred Cash Distribution Payment Date on or prior to December 31 of the previous year. For purposes of this Section 5.01(k), “Net Operating Income” means the excess, if any, of the Partnership’s gross income over its expenses (but not taking into account depreciation, amortization, or any other noncash expenses of the Partnership), calculated in accordance with the principles of Section 5.01(g). The General Partner shall amend this agreement from time to time to reflect the allocation of profit and loss in connection with priority distributions on any other Preferred Units of limited partnership issued by the Partnership.
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(l) Excess Nonrecourse Liabilities. The Partners’ proportionate shares of the “excess nonrecourse liabilities” of the Partnership, within the meaning of Treasury Regulation 1.752-3(a)(3), shall be in accordance with a Partner’s Percentage Interest or any other method selected by the General Partner and permissible under the Regulations, including, but not limited to, the alternative method set forth in Regulations Section 1.752-3(a)(3).
4. Series A Preferred Units. The Partnership Agreement is hereby amended to include the following as Article XVI of the Partnership Agreement:
Article XVI
Series A Preferred Units
16.01 Designation and Number. A new series of Preferred Units (as defined below), designated as the Series A Preferred Units (the “Series A Preferred Units”), is hereby established. The number of authorized Series A Preferred Units shall be 10,000,000.
16.02 Maturity. The Series A Preferred Units have no stated maturity and will not be subject to any sinking fund or mandatory redemption.
16.03 Rank. The Series A Preferred Units will, with respect to distribution rights and rights upon liquidation, dissolution or winding up of the Partnership, rank (a) senior to all classes or series of Common Units of the Partnership and any class or series of Preferred Units expressly designated as ranking junior to the Series A Preferred Units as to distribution rights and rights upon liquidation, dissolution or winding up of the Partnership (together with the Common Units, the “Junior Units”); (b) on a parity with any class or series of Preferred Units issued by the Partnership expressly designated as ranking on a parity with the Series A Preferred Units as to distribution rights and rights upon liquidation, dissolution or winding up of the Partnership (the “Parity Preferred Units”); and (c) junior to any class or series of Preferred Units issued by the Partnership expressly designated as ranking senior to the Series A Preferred Units with respect to distribution rights and rights upon liquidation, dissolution or winding up of the Partnership. The term “Preferred Units” does not include convertible or exchangeable debt securities of the Partnership, which will rank senior to the Series A Preferred Units prior to conversion or exchange. The Series A Preferred Units will also rank junior in right to payment to the Partnership’s existing and future indebtedness.
16.04 Distributions.
(a) Subject to the preferential rights of holders of any class or series of Preferred Units of the Partnership expressly designated as ranking senior to the Series A Preferred Units as to distributions, the holders of Series A Preferred Units shall be entitled to receive, when, as and if authorized by the General Partner and declared by the Partnership, out of funds of the Partnership legally available for payment of distributions, from the date of original issue of each Series A Preferred Unit (the “Original Issue Date”), cumulative cash distributions on each such Series A Preferred Unit at the rate of 6.0% per annum of the Stated Value per Series A Preferred Unit (equivalent to a fixed annual amount of $1.50 per unit) (the “Series A Preferred Return,” and each such distribution, a “Series A Cash Distribution”). Series A Cash Distributions shall be payable monthly in arrears on such dates as the Board of Directions determines corresponding distributions are to be made with respect to the Series A Preferred Stock (each, a “Series A Preferred Distribution Payment Date”). If the Board of Directors authorizes, in its sole discretion, and the General Partner declares payment of accrued dividends on the Series A Preferred Stock, then the General Partner shall authorize, and the Partnership shall declare, payment of the corresponding accrued Series A Preferred Return as a Series A Cash Distribution to holders of record of the Series A Preferred Units as they appear on the records of the Partnership at the close of business on the record date or dates for the payment of dividends on the Series A Preferred Stock, which shall be each day of the Series A Preferred Distribution Period (as defined below) immediately preceding the applicable Series A Preferred Distribution Payment Date or such other date or dates designated by the Board of Directors for the determination of holders of Series A Preferred Units entitled to receive Series A Cash Distributions that is or are within the Series A Preferred Distribution Period immediately preceding such Series A Preferred Distribution Payment Date (each, a “Series A Preferred Distribution Record Date”). A “Series A Preferred Distribution Period” is the respective period commencing on and including the first day of each month and ending on and including the day preceding the first day of the next succeeding Series A Preferred Distribution Period (other than the initial Series A Preferred Distribution Period and the Series A Preferred Distribution Period during which any Series A Preferred Units shall be redeemed or otherwise acquired by the Partnership). Any Series A Cash Distribution or Series A Cash Distribution payable for any Series A Preferred Distribution Period shall be computed on a daily basis.
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(b) The amount of any distribution payable on the Series A Preferred Units for any Series A Preferred Cash Distribution Period will be computed on the basis of twelve 30-day months and a 360-day year.
(c) No distributions on the Series A Preferred Units shall be authorized by the General Partner or declared, paid or set apart for payment by the Partnership at such time as the terms and provisions of any agreement of the General Partner or the Partnership, including any agreement relating to the indebtedness of either of them, prohibits such authorization, declaration, payment or setting apart for payment or provides that such declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such declaration or payment shall be restricted or prohibited by law.
(d) Notwithstanding anything to the contrary contained herein, distributions on the Series A Preferred Units will accrue whether or not the restrictions referred to in Section 16.04(c) exist, whether or not the Partnership has earnings, whether or not there are funds legally available for the payment of such distributions and whether or not such distributions are authorized or declared. No interest, or sum of money in lieu of interest, will be payable in respect of any distribution on the Series A Preferred Units which may be in arrears. When distributions are not paid in full upon the Series A Preferred Units and any Parity Preferred Units (or a sum sufficient for such full payment is not so set apart), all distributions declared upon the Series A Preferred Units and any Parity Preferred Units shall be declared pro rata so that the amount of distributions declared per Series A Preferred Unit and such Parity Preferred Units shall in all cases bear to each other the same ratio that accumulated distributions per Series A Preferred Unit and such Parity Preferred Units (which shall not include any accrual in respect of unpaid distributions for prior distributions periods if such Parity Preferred Units do not have a cumulative distribution) bear to each other.
(e) Except as provided in the immediately preceding paragraph, unless full cumulative distributions on the Series A Preferred Units have been or contemporaneously are declared and paid in cash or declared and a sum sufficient for the payment thereof is set apart for payment for all past Series A Preferred Cash Distribution Periods that have ended, no distributions (other than a distribution in Junior Units or in options, warrants or rights to subscribe for or purchase any such Junior Units) shall be declared and paid or declared and set apart for payment nor shall any other distribution be declared and made upon the Junior Units or the Parity Preferred Units, nor shall any Junior Units or Parity Preferred Units be redeemed, purchased or otherwise acquired for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any such Units) by the Partnership (except by conversion into or exchange for options, warrants or rights to subscribe for or purchase Junior Units).
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(f) Notwithstanding anything to the contrary set forth above, the Partnership shall not be prohibited from (i) declaring or paying or setting apart for payment any distribution on Junior Units or Series A Preferred Units, or (ii) redeeming, purchasing or otherwise acquiring any Junior Units or Parity Preferred Units, in each case, if such declaration, payment, setting apart for payment, redemption, purchase or other acquisition is necessary in order to maintain the continued qualification of the General Partner as a REIT under Section 856 of the Code.
(g) For the avoidance of doubt, in determining whether a distribution (other than upon voluntary or involuntary liquidation) by distribution, redemption or other acquisition of the Partnership Units is permitted under Delaware law, no effect shall be given to the amounts that would be needed, if the Partnership were to be dissolved at the time of the distribution, to satisfy the preferential rights upon distribution of holders of Partnership Units whose preferential rights are superior to those receiving the distribution.
16.05 Liquidation Preference. Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Partnership, the holders of Series A Preferred Units are entitled to be paid out of the assets of the Partnership legally available for distribution to its partners, after payment of or provision for the Partnership’s debts and other liabilities, a liquidation preference equal to the Stated Value per Series A Preferred Unit, plus an amount equal to any accrued and unpaid Series A Preferred Cash Distributions (whether or not authorized or declared) thereon to and including the date of payment, but without interest, before any distribution of assets is made to holders of Junior Units. If the assets of the Partnership legally available for distribution to partners are insufficient to pay in full the liquidation preference on the Series A Preferred Units and the liquidation preference on any Parity Preferred Units, all assets distributed to the holders of the Series A Preferred Units and any Parity Preferred Units shall be distributed pro rata so that the amount of assets distributed per Series A Preferred Units and such Parity Preferred Units shall in all cases bear to each other the same ratio that the liquidation preference per Series A Preferred Unit and such Parity Preferred Units bear to each other. Written notice of any distribution in connection with any such liquidation, dissolution or winding up of the affairs of the Partnership, stating the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable, shall be given by first class mail, postage pre-paid, not less than 30 nor more than 60 days prior to the payment date stated therein, to each record holder of the Series A Preferred Units at the respective addresses of such holders as the same shall appear on the records of the Partnership. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Series A Preferred Units will have no right or claim to any of the remaining assets of the Partnership. The consolidation or merger of the Partnership with or into another entity, a consolidation or merger of another entity with or into the Partnership, a statutory exchange by the Partnership or a sale, lease, transfer or conveyance of all or substantially all of the Partnership’s property or business shall not be deemed to constitute a liquidation, dissolution or winding up of the affairs of the Partnership.
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16.06 Redemption. In connection with any redemption by the General Partner of any shares of Series A Preferred Stock pursuant to Sections 6, 7, 8 or 9 of the Articles Supplementary, the Partnership shall redeem, on the date of such redemption, an equal number of Series A Preferred Units held by the General Partner. As consideration for the redemption of such Series A Preferred Units, the Partnership shall deliver to the General Partner (i) an amount of cash equal to the amount of cash, if any, paid by the General Partner to the holder of such shares of Series A Preferred Stock in connection with the redemption thereof and (ii) a number of Common Units equal to the number of shares of Common Stock, if any, issued by the General Partner to the holder of such shares of Series A Preferred Stock in connection with the redemption thereof.
16.07 Voting Rights. Holders of the Series A Preferred Units will not have any voting rights.
16.08 Conversion. The Series A Preferred Units are not convertible or exchangeable for any other property or securities, except as provided herein.
4. Except as modified herein, all terms and conditions of the Partnership Agreement shall remain in full force and effect, which terms and conditions the General Partner hereby ratifies and confirms.
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IN WITNESS WHEREOF, the undersigned has executed this Amendment as of the date first set forth above.
| GENERAL PARTNER: | ||
| BLUEROCK HOMES TRUST, INC., | ||
| a Maryland corporation | ||
| By: | /s/ Jordan Ruddy | |
| Name: | Jordan Ruddy | |
| Title: | President | |
[Signature page for Fourteenth Amendment re: Series A Preferred Units –
December 1, 2022]