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): July 19, 2019

 

Medalist Diversified REIT, Inc.
(Exact Name of Registrant as Specified in Its Charter)

 

Maryland   001-38719   47-5201540
(State or other jurisdiction of incorporation
or organization) 		 

(Commission File Number)

 

(I.R.S. Employer

Identification No.)

 

11 S. 12th Street, Suite 401

Richmond, Virginia 23219

(Address of principal executive offices)
 
(804) 344-4435
(Registrant’s telephone number, including area code)
 
None
(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ 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 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

 

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. ¨

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Ticker symbol(s) Name of each exchange on which
registered
Common Stock, $0.01 par value MDRR Nasdaq Capital Market

 

 

 

 

 

 

ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT. 

 

As previously disclosed in the Current Report on Form 8-K of Medalist Diversified REIT, Inc. (the “Company”) filed on June 27, 2019 with the Securities and Exchange Commission (the “Commission”), the Company, through its operating partnership, Medalist Diversified Holdings, L.P. (the “Operating Partnership”), terminated that certain Purchase and Sale Agreement (the “Original PSA”), on June 21, 2019 in connection with its planned acquisition of a 148-room hotel in Clemson, South Carolina commonly referred to as the Best Western Plus University Inn & Conference Center Clemson (the “Clemson Best Western”) from Heri AUM LLC, a South Carolina limited liability company (“Best Western Seller”), an unaffiliated seller.

 

On July 19, 2019, the Company, through its Operating Partnership, entered into that certain Reinstatement of and First Amendment to Purchase and Sale Agreement, a copy of which is filed hereto as Exhibit 10.1, to reinstate the terms of the PSA with such amendments as described below (the “PSA”):

 

· The purchase price for the Clemson Best Western shall be $9,750,000, subject to seller credits to the purchase price in the aggregate amount of $37,750 which shall be applied at the closing of the acquisition (the “Closing”);
· The Company’s $50,000 earnest money deposit to Best Western Seller shall become non-refundable on August 19, 2019, subject to the right of the Company to extend such date for an additional ten (10) days, if the Company does not terminate the PSA prior to such date; and
· Best Western Seller shall only be liable for its breach of any representation or warranty made in the PSA for a period of twelve months following the Closing (the “Survival Period”) and shall not be liable to the Company unless the Company’s losses resulting from such breach exceed $20,000, in which event Best Western Seller shall be liable for each dollar of damages resulting from such breach up to (i) $500,000 if such breach occurs within the first five months of the Survival Period and (ii) $250,000 if such breach occurs within the last seven months of the Survival Period.

 

Several conditions to closing on the acquisition remain to be satisfied, and there can be no assurance that the Company will complete the transaction on the general terms described above or at all.

 

A description of the Original PSA is set forth under “Item 1.01. Entry into a Material Definitive Agreement” in the Company’s Current Report on Form 8-K filed with the Commission on May 29, 2019 and is incorporated by reference in this Item 1.01.

 

Certain statements included in this Current Report on Form 8-K are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements above include, but are not limited to, matters identified as expectations and matters with respect to the future acquisition of the Clemson Best Western. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For more information regarding risks and uncertainties that may affect the Company’s future results, review the Company’s filings with the Securities and Exchange Commission.

 

ITEM 9.01

FINANCIAL STATEMENTS AND EXHIBITS.

 

(d)       Exhibits

 

Exhibit No.   Description
     
10.1   Reinstatement of and First Amendment to Purchase and Sale Agreement, dated July 19, 2019, by and between HERI AUM LLC and Medalist Diversified Holdings, L.P.

 

 

 

 

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.

 

  MEDALIST DIVERSIFIED REIT, INC.
     
Dated: July 23, 2019 By: /s/ Thomas E. Messier
    Thomas E. Messier
   

Chief Executive Officer, Chairman of the Board,

Treasurer and Secretary

 

 

 

Exhibit 10.1

 

REINSTATEMENT OF AND FIRST AMENDMENT TO

PURCHASE AND SALE AGREEMENT

 

This REINSTATEMENT OF AND FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT (this “ First Amendment ”), is made as of this 19 th day of July, 2019 (the “ Effective Date ”), by and between HERI AUM LLC , a South Carolina limited liability company (the “ Seller ”); and MEDALIST DIVERSIFIED HOLDINGS, L.P. , a Delaware limited partnership (the “ Purchaser ”).

 

RECITALS

 

A.           Seller and Purchaser entered into that certain Purchase and Sale Agreement (the “ Agreement ”) effective as of May 24, 2019, regarding the purchase of the Property, which is more particularly described in the Agreement.

 

B.           The Purchaser terminated the Agreement by letter from Purchaser’s counsel dated as of June 21, 2019 (the “ Termination Letter ”).

 

C.           The parties have agreed to modify and amend the Agreement as more particularly set forth in this First Amendment.

 

AMENDMENT

 

NOW, THEREFORE, in consideration of the mutual promises herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties, the parties agree as follows:

 

1.           Definitions . All capitalized terms used this in this First Amendment but not otherwise defined shall have their same meanings as set forth in the Agreement.

 

2.           Reinstatement of Agreement . The Agreement is hereby reinstated as modified by this First Amendment. The Purchaser’s Termination Letter shall, upon full execution of this First Amendment, be deemed rescinded.

 

3.           Purchase Price .

 

a.           The initial sentence of Section 3.1 of the Agreement is hereby deleted in its entirety and the following substituted therefor:

 

“The Purchase Price for the Property shall be Nine Million Seven Hundred Fifty Thousand and 00/100 Dollars ($9,750,000.00).”

 

b.           The last sentence of Section 3.1 of the Agreement is hereby deleted in its entirety.

 

 

 

 

4.           Inspection Date . The Inspection Date is hereby extended until August 19, 2019. All references to the Inspection Date shall hereafter refer to August 19, 2019, as the same may be extended pursuant to Section 5.1 of the Agreement.

 

5.           Equipment Lease . At Closing, Seller shall deliver assignments of the leases and financing agreements (the “ Equipment Agreements ”) listed on Exhibit A to this First Amendment to Purchaser, which assignments shall include written consents to such assignments executed the lenders and lessors under the Equipment Agreements in accordance with the terms thereof. Seller’s obligations under this paragraph shall be considered a condition to Purchaser’s obligation to close to which the provisions of Section 7.3 of the Agreement shall apply. In the event Seller is unable to obtain the assignments and consents required by this paragraph for one or more of the Equipment Agreements, Seller shall pay the full amount due under such Equipment Agreements and obtain a discharge under any lien or security interests on the equipment subject to such Equipment Agreements, whereupon such equipment shall be added to the bill of sale to be delivered pursuant to Section 7.2.2 of the Agreement.

 

6.           Payment of Reaffiliation Fee . The Agreement is hereby amended by adding the following Section 7.4.4 thereto:

 

“7.4.4 Notwithstanding any provision of Section 2.3 to the contrary, at Closing the Purchaser shall receive credits to the Purchase Price from Seller on the settlement statement (a) in the amount of Thirty-Four Thousand and 00/100 Dollars ($34,000.00) as partial payment of the reaffiliation fee due to the Franchisor under the Existing Best Western Franchise Documents, and (b) in the amount of Three Thousand Seven Hundred Fifty and 00/100 Dollars ($3,750.00) as partial payment for the preparation of an inventory report for the Personal Property.”

 

7.           Survival of Seller’s Representations and Warranties . The second sentence of Section 6.1.19 of the Agreement is hereby deleted in its entirety and the following substituted therefor:

 

Notwithstanding anything to the contrary contained in this Section 6.1.19 , Seller shall have no liability to Purchaser for the breach of any representation or warranty made in this Agreement unless the loss resulting from Seller’s breach of its representations and warranties exceeds, in the aggregate, Twenty Thousand and No/100 Dollars ($20,000.00), in which event Seller shall be liable for each dollar of damages resulting from the breach or breaches of its representations and warranties; provided, however, in no event shall Seller’s total liability for any such breach or breaches exceed, in the aggregate, (i) Five Hundred Thousand and 00/100 Dollars ($500,000.00) for any breach for which Purchaser delivers notice thereof to Seller during the first five (5) months of the Survival Period, and (ii) Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) for any breach for which Purchaser delivers notice thereof to Seller during the last seven (7) months of the Survival Period.

 

 

 

 

 

8.           Ratification . The parties hereby ratify and affirm the Agreement, which Agreement shall remain in full force and effect, except as specifically modified by this First Amendment.

 

9.           Counterpart Signatures . This First Amendment may be signed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall constitute one and the same instrument.

 

10.          Facsimile and PDF Signatures . Handwritten signatures to this First Amendment transmitted by telecopy or electronic mail (for example, through use of a Portable Document Format or “PDF” file) shall be valid and effective to bind the party so signing. Each party to this First Amendment shall be bound by its own telecopied or electronically transmitted handwritten signature and shall accept the telecopied or electronically transmitted handwritten signature of the other party to this First Amendment.

 

[ Remainder of page intentionally left blank; signatures to follow on next pages. ]

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of the date first written above.

 

  SELLER:
   
  HERI AUM LLC ,
  a South Carolina limited liability company

 

  By: /s/ Hiten Patel
  Name: Hiten Patel
  Title: Member

 

  PURCHASER:
   
  MEDALIST DIVERSIFIED HOLDINGS, L.P. ,
  a Delaware limited partnership

 

  By: /s/ William R. Elliott
    William R. Elliott, Authorized Signatory