Execution Version
SALES AGREEMENT
February 27, 2019
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Jefferies LLC
520 Madison Avenue
New York, New York 10022
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KeyBanc Capital Markets Inc.
127 Public Square
Cleveland, Ohio 44114
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Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
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Morgan Stanley & Co. LLC
1585 Broadway
New York, New York 10036
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BMO Capital Markets Corp.
3 Times Square
25
th
Floor
New York, New York 10036
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SunTrust Robinson Humphrey Inc.
3333 Peachtree Road NE
Atlanta, Georgia 30326
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BTIG, LLC
825 Third Avenue, 6th Floor
New York, New York 10022
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Wells Fargo Securities, LLC
375 Park Avenue, 4th Floor
New York, New York 10152
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As Agents
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Jefferies LLC
520 Madison Avenue
New York, New York 10022
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Morgan Stanley & Co. LLC
1585 Broadway
New York, New York 10036
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Bank of Montreal
c/o BMO Capital Markets Corp.
250 Yonge Street, 10
th
Floor
Toronto, Ontario MSB 2L7
Canada
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Wells Fargo Bank, National Association
375 Park Avenue, 4th Floor
New York, New York 10152
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KeyBanc Capital Markets Inc.
127 Public Square
Cleveland, Ohio 44114
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As Forward Purchasers
Ladies and Gentlemen:
National Storage Affiliates Trust, a Maryland real estate investment trust (the “
Company
”), and NSA OP, LP, a Delaware limited partnership and direct subsidiary of the Company (the “
Operating Partnership
”), each confirms its agreement with each of (i) Jefferies LLC, Robert W. Baird & Co. Incorporated, BMO Capital Markets Corp., BTIG, LLC, KeyBanc Capital Markets Inc., Morgan Stanley & Co. LLC, SunTrust Robinson Humphrey Inc. and Wells Fargo Securities, LLC, as sales agent, forward seller and/or principal (in any such capacity, each, an “
Agent
” and collectively, the “
Agents
”), and (ii) Jefferies LLC, Bank of Montreal, KeyBanc Capital Markets Inc., Morgan Stanley & Co. LLC and Wells Fargo Bank, National Association, as forward purchasers (in such capacity, each, a “
Forward Purchaser
” and collectively, the “
Forward Purchasers
”), in each case, on the terms set forth in this Sales Agreement (this “
Agreement
”). For purposes of clarity, it is understood and agreed by the parties hereto that, if Forward Hedge Shares (as defined below) are offered or sold by the Agent acting as forward seller for the Forward Purchaser, then the Agent, as forward seller, shall be acting as sales agent for the Forward Purchaser with respect to the offering and sale of such Forward Hedge Shares, and, except in cases where this Agreement expressly refers to the Agent acting as sales agent for the Company or unless otherwise expressly stated or the context otherwise requires, references in this Agreement to the Agent acting as sales agent shall also be deemed to apply to the Agent when acting as forward seller for the Forward Purchaser,
mutatis mutandis
. Unless the context requires otherwise, references herein to “related”, “relevant” or “applicable” Forward Purchaser mean, with respect to any Agent, the affiliate of such Agent that is acting as a Forward Purchaser or, as the case may be, such Agent acting as a Forward Purchaser.
The Company and the Operating Partnership each agrees that, if and when the Company determines to sell Primary Shares (as defined below) directly to any Agent as principal, the Company and the Operating Partnership will enter into one or more separate agreements (each a “
Terms Agreement
”), in substantially the form of Exhibit A hereto relating to such sale, with such changes to such form as the parties thereto may agree.
The Company may also enter into one or more forward share purchase transactions (each, a “
Forward
”) with one or more Forward Purchasers, as set forth in one or more separate letter agreements (each, a “
Confirmation
” and, collectively, the “
Confirmations
”), substantially in the form of Exhibit G hereto, relating to the applicable Forward. Under each Confirmation, the Company will, on the terms and subject to the conditions set forth in such Confirmation and herein, deliver to the applicable Forward Purchaser, or an affiliate thereof (including the applicable Agent), up to the maximum number of Common Shares (as defined below) as may be sold in accordance with this Agreement in connection with such Confirmation. In connection therewith, it is contemplated that, at the Company’s direction, such Forward Purchaser will offer and sell through the applicable Agent, acting as forward seller and sales agent on behalf of such Forward Purchaser, on the terms set forth in Section 3 of this Agreement, Forward Hedge Shares to be borrowed by such Forward Purchaser.
The Company proposes to (i) issue, offer and sell from time to time to or through any Agent, acting as sales agent on behalf of the Company and/or acting as principal, common shares of beneficial interest, par value $0.01 per share ( “
Common Shares
”) of the Company and 6.000% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest, $0.01 par value per share (“
Series A Preferred Shares
”), and (ii) instruct any Agent, acting as forward seller, to offer and sell Common Shares borrowed by the applicable Forward Purchaser (any such Common Shares, “
Forward Hedge Shares
”, in each case, on the terms and subject to the conditions set forth in this Agreement, any Confirmation and any Terms Agreement, as applicable. For avoidance of doubt, references herein to “Shares” and “Primary Shares” shall not include Series A Preferred Shares when used in reference to any Forward or related Confirmation with any Forward Purchaser. Any Common Shares and/or Series A Preferred Shares issued, offered and sold by the Company from time to time to or through any Agent, acting as sales agent for the Company and/or acting as principal, pursuant to this Agreement and, if applicable, any Terms Agreements, as described in (i) above, are hereinafter sometimes referred to as “
Primary Shares
.” Any Common Shares to be delivered by the Company to any Forward Purchaser in settlement of all or any portion of the Company’s obligations under any Confirmation are hereinafter sometimes referred to as “
Confirmation Shares
.” “
Shares
” means (i) the Primary Shares issued, offered and sold from time to time to or through any Agent, acting as sales agent on behalf of the Company and/or acting as principal, pursuant to this Agreement or any Terms Agreement and (ii) Forward Hedge Shares offered or sold by an Agent acting as a forward seller on behalf of the applicable Forward Purchaser, but excludes Confirmation Shares.
The aggregate Sales Price (as defined herein) of the Shares that may be sold pursuant to this Agreement shall not exceed the Maximum Program Amount (as defined herein). All references to “gross sale price” or “gross proceeds” from the sale of any Shares (and any similar references) shall be deemed to mean, in the case of any Shares sold to any Agent pursuant to a Terms Agreement, the public offering price of such Shares.
The Company has prepared and filed with the Securities and Exchange Commission (the “
Commission
”) a shelf registration statement on Form S-3 (File No. 333-223654), including a base prospectus (the “
Base Prospectus
”), relating to certain securities, including the Common Shares and Series A the Preferred Shares, to be used in connection with the offer and sale of the Shares. Such registration statement, as amended, including the financial statements, exhibits and schedules thereto, in the form in which it became effective under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (collectively, the “
Securities Act
”), including all documents incorporated or deemed to be incorporated by reference therein and any information deemed to be a part thereof at the time of effectiveness pursuant to Rule 430A or 430B under the Securities Act, is called the “
Registration Statement
.” Any registration statement filed by the Company pursuant to Rule 462(b) under the Securities Act in connection with the offer and sale of the Shares is called the “
Rule 462(b) Registration Statement
,” and from and after the date and time of filing of any such Rule 462(b) Registration Statement the term “Registration Statement” shall include the Rule 462(b) Registration Statement. The prospectus supplement dated February 27, 2019 (the
“Prospectus Supplement
”) describing the Shares and offer and sale thereof, together with the Base Prospectus, in each case, as amended or supplemented (if applicable), or, a new prospectus supplement related to the Shares, is called the “
Prospectus
”;
provided
that, when used
with respect to any offering of Primary Shares by an Agent as principal pursuant to a Terms Agreement, the term “
Prospectus
” means (A) the Prospectus Supplement, together with the Base Prospectus, in each case, as amended or supplemented (if applicable), and (B) the pricing supplement (as defined herein) relating to such offering of Primary Shares by any Agent as principal pursuant to a Terms Agreement. As used herein “
preliminary prospectus
” means, with respect to any offering of Primary Shares by any Agent as principal pursuant to a Terms Agreement, (A) the Prospectus Supplement, together with the Base Prospectus, in each case, as amended and supplemented (if applicable), and (B) the preliminary pricing supplement (as defined herein) relating to such offering of Primary Shares by any Agent as principal pursuant to a Terms Agreement. As used herein, “
free writing prospectus
” has the meaning set forth in Rule 405 under the Securities Act, and “
Time of Sale Prospectus
” means (A) either (1) as of any Time of Sale relating to an offering of Shares through an Agent as sales agent or forward seller, the Prospectus, as amended and supplemented as of such Time of Sale or (2) as of any Time of Sale relating to an offering of Primary Shares by an Agent as principal pursuant to a Terms Agreement, the preliminary prospectus prepared in connection with such offering, as amended and supplemented (if applicable) as of such Time of Sale, and (B) each free writing prospectus (other than a road show that is a free writing prospectus but is not required to be filed under Rule 433 under the Securities Act) filed or used by the Company on or before such Time of Sale, taken together (collectively, and, with respect to any Shares, including the public offering price of such Shares).
All references in this Agreement to the Registration Statement, any preliminary prospectus, the Base Prospectus, the Time of Sale Prospectus and the Prospectus shall include the documents incorporated or deemed to be incorporated by reference therein. All references in this Agreement to financial statements and supporting schedules, statements of revenue and certain expenses and other information that is “contained,” “included” or “stated” in, or “part of” the Registration Statement, the Rule 462(b) Registration Statement, any preliminary prospectus, the Time of Sale Prospectus, the Base Prospectus or the Prospectus, and all other references of like import, shall be deemed to mean and include all such financial statements and schedules, statements of revenue and certain expenses and other information that is or is deemed to be incorporated by reference in the Registration Statement, the Rule 462(b) Registration Statement, any preliminary prospectus, the Time of Sale Prospectus, the Base Prospectus or the Prospectus, as the case may be. All references in this Agreement to amendments or supplements to the Registration Statement, any preliminary prospectus, the Time of Sale Prospectus, the Base Prospectus or the Prospectus shall be deemed to mean and include the filing of any document under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (collectively, the “
Exchange Act
”) that is or is deemed to be incorporated by reference in the Registration Statement, any preliminary prospectus, the Time of Sale Prospectus, the Base Prospectus or the Prospectus, as the case may be. All references to the Registration Statement, any preliminary prospectus, the Time of Sale Prospectus, the Base Prospectus or the Prospectus, or any amendments or supplements to any of the foregoing, or any free writing prospectus, shall include any copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System (“
EDGAR
”). Any reference to the date of any preliminary prospectus means the date of the applicable preliminary prospectus supplement. Any reference to the date of the Prospectus means the date of the Prospectus Supplement or, in the case of any offering of Primary Shares by an Agent as principal pursuant to a Terms Agreement, the date of the applicable pricing supplement.
Section 1.
CERTAIN DEFINITIONS
For purposes of this Agreement, capitalized terms used herein and not otherwise defined shall have the following respective meanings:
“
Agency Period
” means the period commencing on the date of this Agreement and expiring on the earliest to occur of (x) the date on which the Agents shall have placed or sold as sales agents under this Agreement or as principals under one or more Terms Agreements the Maximum Program Amount and (y) the date this Agreement is terminated pursuant to Section 7.
“
Floor Price
” means the minimum price for each of the Common Shares and the Series A Preferred Shares set by the Company in the Instruction Notice or the Forward Instruction Notice, as applicable, below which an Agent acting as the sales agent or as forward seller shall not sell Common Shares or Series A Preferred Shares, as the case may be, during the applicable Selling Period, which may be adjusted by the Company at any time during the Selling Period by delivering written notice of such change to the Agent.
“
Forward Hedge Selling Period
” has the meaning set forth in Section 3(b).
“
Forward Instruction Notice
” has the meaning set forth in Section 3(b).
“
Instruction Date
” means any Trading Day during the Agency Period that an Instruction Notice is delivered on or a Forward Instruction Notice is accepted on by the parties thereto, in each case, pursuant to Section 3(b)(i).
“
Instruction Notice
” has the meaning set forth in Section 3(b).
“
Marketing Materials
” means any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Shares, including any road show or investor presentations made to investors by the Company (whether in person or electronically).
“
Maximum Program Amount
” means $250,000,000.
“
preliminary pricing supplement
” means any preliminary prospectus supplement to the Prospectus relating to an offering of Primary Shares by any Agent as principal pursuant to a Terms Agreement in the form filed by the Company with the Commission pursuant to Rule 424(b) under the Securities Act.
“
pricing supplement
” means any prospectus supplement to the Prospectus relating to an offering of Primary Shares by any Agent as principal pursuant to a Terms Agreement in the form filed by the Company with the Commission pursuant to Rule 424(b) under the Securities Act.
“
Principal Market
” means the New York Stock Exchange or such other national securities exchange on which the Common Shares or Series A Preferred Shares, including any Shares, as applicable, are then listed.
“
Road Show
” means a “road show” (as defined in Rule 433 under the Securities Act) relating to the offering of the Primary Shares pursuant to a Terms Agreement that is a “written communication” (as defined in Rule 405 under the Securities Act).
“
Sales Price
” means the actual gross sale execution price of each Share sold by an Agent (acting as sales agent, forward seller or principal) pursuant to this Agreement.
“
Selling Commission
” means a rate mutually agreed to by the Company and an Agent or a Forward Purchaser, as applicable, in connection with the issuance by the Company of an Instruction Notice or a Forward Instruction Notice; provided that in no event shall such rate exceed two percent (2.0%) of the Sales Price per Share sold pursuant to such Instruction Notice or Forward Instruction Notice;
provided
that the compensation payable to an Agent, acting as forward seller on behalf of the relevant Forward Purchaser, for sales of Forward Hedge Shares shall be reflected in a reduction to the volume-weighted average price at which sales of Forward Hedge Shares are executed on behalf of the relevant Forward Purchaser, as set forth opposite the caption “Initial Forward Price” in the applicable Confirmation, not to exceed two percent (2.0%).
“
Selling Period
” means (i) in relation to a sale of the Primary Shares through an Agent on an agency basis, the period of one (1) to twenty (20) consecutive Trading Days (as determined by the Company in the Company’s sole discretion and specified in the applicable Instruction Notice) including the Trading Day on which an Instruction Notice is delivered pursuant to Section 3(b)(i), if such notice is delivered prior to 3:00 p.m. (New York City time) and otherwise, following the Trading Day on which an Instruction Notice is delivered pursuant to Section 3(b)(i), and (ii) in relation to a sale of the Forward Hedge Shares in connection with a Forward, the Forward Hedge Selling Period (as defined below).
“
Settlement Date
” means the second business day that is also a Trading Day following each Trading Day during the Selling Period on which Shares are sold pursuant to this Agreement or any Terms Agreement to which an Agent is a party (unless another date shall be agreed to by the Company, the Agent and, if applicable, the relevant Forward Purchaser), when the Company or the relevant Forward Purchaser, as applicable, shall deliver to the Agent the amount of Shares sold on such Trading Day and, simultaneously with such delivery, the Agent shall deliver to the Company or the Forward Purchaser, as applicable, the Net Proceeds; provided that, notwithstanding the foregoing, settlement for any Additional Securities (as defined in Exhibit A hereto) that are to be purchased by the Agent pursuant to any Terms Agreement will occur on the date or dates specified pursuant to such Terms Agreement and the term “Settlement Date,” as used in this Agreement and any Terms Agreement with respect to such Additional Securities, shall be deemed to include any such date on which any such Additional Securities are to be purchased by the Agent pursuant to a Terms Agreement.
“
Time of Sale
” means, with respect to any offer and sale of Shares, the first time that a purchaser shall agree to purchase such Shares through an Agent, acting as sales agent or forward seller, or from an Agent, acting as principal, pursuant to this Agreement or pursuant to a relevant Terms Agreement, or such other time as agreed by the Company and an Agent.
“
Trading Day
” has the meaning set forth in Section 3(b).
Section 2.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Each of the Company and the Operating Partnership hereby represents, warrants and covenants to each Agent and Forward Purchaser that as of (1) the date of this Agreement, (2) each Instruction Date, (3) each Settlement Date, (4) each Triggering Event Date and (5) as of each Time of Sale:
(a)
Compliance with Registration Requirements
. The Registration Statement has become effective under the Securities Act. The Registration Statement is an automatic shelf registration statement under Rule 405 and the Shares have been and remain eligible for registration by the Company on such automatic shelf registration statement. The Company has complied to the Commission’s satisfaction with all requests of the Commission for additional or supplemental information, if any. No stop order suspending the effectiveness of the Registration Statement is in effect and no proceedings for such purpose have been instituted or are pending or, to the best knowledge of the Company, are contemplated or threatened by the Commission.
At the time the Registration Statement was originally filed with the Commission, the Company met the then-applicable requirements for use of Form S-3 under the Securities Act. The documents incorporated or deemed to be incorporated by reference in the Registration Statement, the Time of Sale Prospectus, and the Prospectus, at the time they were or hereafter are filed with the Commission, or became effective under the Exchange Act, as the case may be, complied and will comply at the time of such filing or effectiveness, as the case may be, in all material respects with the requirements of the Exchange Act.
(b)
Disclosure
. Each preliminary prospectus, if any, and the Prospectus when filed complied and will comply in all material respects with the Securities Act and, if filed by electronic transmission pursuant to EDGAR, was identical (except as may be permitted by Regulation S‑T under the Securities Act) to the copy thereof delivered to an Agent for use in connection with the offer and sale of the Shares. Each of the Registration Statement, and any post-effective amendment thereto, at the time it became or becomes effective and as of each deemed effective date with respect to an Agent pursuant to Rule 430B(f)(2) under the Securities Act, complied and will comply in all material respects with the Securities Act and did not and will not, at the time of effectiveness or any deemed effective date, as the case may be, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Time of Sale Prospectus did not and will not, as of any Time of Sale, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Prospectus did not and will not, as of its date or any Settlement Date, as the case may be, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties set forth in the three immediately preceding sentences do not apply to statements in or omissions from the Registration Statement, or any post-effective amendment thereto, or the Prospectus or the Time of Sale Prospectus, or any amendments or supplements thereto, made in reliance upon and in conformity with written information relating to any Agent and any Forward Purchaser furnished to the Company in writing by or on behalf of such Agent and such Forward Purchaser expressly for use therein, it being
understood and agreed that the only such information consists of the information described in Section 6(b) below. There are no contracts or other documents required to be described in the Time of Sale Prospectus or the Prospectus or to be filed as an exhibit to the Registration Statement which have not been described or filed as required.
(c)
Well-Known Seasoned Issuer
. (A) At the original effectiveness of the Registration Statement, (b) at the time of the most recent amendment thereto for the purposes of complying with Section 10(a)(3) of the 1933 Act (whether such amendment was by post-effective amendment, incorporated report filed pursuant to Section 13 or 15(d) of the 1934 Act or form of prospectus), (c) at the time the Company or any person acting on its behalf (within the meaning, for this clause only, of Rule 163(c)) made any offer relating to the Shares in reliance on the exemption of Rule 163, (D) at the date of this Agreement, any Terms Agreement and any Confirmation, and (E) at each Time of Sale, the Company was and is a “well-known seasoned issuer,” as defined in Rule 405.
(d)
Ineligible Issuer Status
. As of the determination date referenced in Rule 164(h) under the Securities Act, the Company was not, is not or will not be (as applicable) an “ineligible issuer” in connection with the offering of the Shares pursuant to Rules 164, 405 and 433 under the Securities Act. Each free writing prospectus that the Company is required to file pursuant to Rule 433(d) under the Securities Act has been, or will be, filed with the Commission in accordance with the requirements of the Securities Act. Each free writing prospectus that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act or that was prepared by or on behalf of or used or referred to by the Company complies or will comply in all material respects with the requirements of Rule 433 under the Securities Act, including timely filing with the Commission or retention where required and legending, and each such free writing prospectus, as of its issue date and at all subsequent times through the completion of the offer and sale of the Shares did not, does not and will not include any information that conflicted, conflicts or will conflict with the information contained in the Registration Statement, the Prospectus, as then amended and supplemented, or any preliminary prospectus. Except for the free writing prospectuses and electronic road shows, if any, furnished to any Agent and any Forward Purchaser before first use in compliance with Section 4(e) herein, the Company has not prepared, used or referred to, and will not, without the prior written consent of the Agents and the Forward Purchasers, prepare, use or refer to, any free writing prospectus (except that no such written consent shall be required for any free writing prospectus relating solely to an offering of Primary Shares pursuant to a Terms Agreement to which the relevant Agent is not a party). Each Road Show, when considered together with the Time of Sale Prospectus, did not, as of the Time of Sale, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(e)
Distribution of Offering Material By the Company
.
The Company has not distributed any offering material in connection with the offering and sale of the Shares other than the Registration Statement, the Time of Sale Prospectus and the Prospectus, as in each case, as from time to time amended or supplemented in compliance with Section 4(d), or any free writing prospectus distributed in compliance with Section 4(e), as from time to time amended or supplemented in compliance with Section 4(e).
(f)
This Agreement; Confirmations; Terms Agreements
. This Agreement has been duly authorized, executed and delivered by each of the Company and the Operating Partnership. Each Terms Agreement and Confirmation that may be entered into by the Company and the Operating Partnership (as applicable) pursuant to this Agreement will, as of its date, have been duly authorized, executed and delivered by the Company and the Operating Partnership (as applicable).
(g)
The Articles Supplementary
. The Articles Supplementary to the Company’s declaration of trust setting forth the terms of the Series A Preferred Shares (the “
Articles Supplementary
”) have been duly authorized and duly executed by the Company and accepted for record with the Maryland State Department of Assessments and Taxation (the “
SDAT
”).
(h)
The Partnership Agreement and Facilities Portfolio Management Agreements
. The limited partnership agreement of the Operating Partnership (as so amended and amended and restated, the “
Partnership Agreement
”) and each of the facilities portfolio management agreements (as so amended and amended and restated), each as described in the Registration Statement, the Time of Sale Prospectus and the Prospectus, constitute legal, valid and binding obligations of the Company and the Subsidiaries, to the extent a party thereto, enforceable against the Company and the Subsidiaries, to the extent a party thereto, in accordance with their terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization or other laws affecting enforcement of creditors’ rights or by general equitable principles or by the ability of any person to receive the remedies of injunctive relief, specific performance, liquidated damages or any similar remedies in any proceeding.
(i)
Authorization of the Primary Shares and Confirmation Shares
. The Primary Shares have been duly authorized for issuance and sale pursuant to this Agreement and, if applicable, any Terms Agreement and, when issued and delivered by the Company against payment therefor pursuant to this Agreement and any Terms Agreement, as applicable, will be validly issued, fully paid and nonassessable, and the issuance and sale of such Primary Shares is not subject to any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase the Primary Shares. The Confirmation Shares have been duly authorized for issuance pursuant to a Confirmation and when the Confirmation Shares, if any, are issued and delivered by the Company to the Forward Purchaser against payment therefor pursuant to a Confirmation, such Confirmation Shares will be validly issued, fully paid and non-assessable, and the issuance of such Confirmation Shares will not be subject to any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase the Confirmation Shares.
(j)
No Applicable Registration or Other Similar Rights
. Except as otherwise disclosed in the Registration Statement, the Time of Sale Prospectus and the Prospectus, there are no persons with registration or other similar rights to have any equity or debt securities registered for sale under the Registration Statement or included in the offering contemplated by this Agreement or any Terms Agreement.
(k)
No Material Adverse Change
. Except as otherwise disclosed in the Registration Statement, the Time of Sale Prospectus and the Prospectus, subsequent to the respective dates as of which information is given in the Registration Statement, the Time of Sale Prospectus and the
Prospectus: (i) there has been no material adverse change, or any development that would be expected to result in a material adverse change, in the condition, financial or otherwise, or in the earnings, business, properties, operations, assets, liabilities or prospects, whether or not arising from transactions in the ordinary course of business, of the Company and the Subsidiaries, considered as one entity (any such change being referred to herein as a “
Material Adverse Change
”); and (ii) the Company and the Subsidiaries, considered as one entity, have not incurred any material liability or obligation, indirect, direct or contingent, including without limitation any losses or interference with its business from fire, explosion, flood, earthquakes, accident or other calamity, whether or not covered by insurance, or from any strike, labor dispute or court or governmental action, order or decree, that are material, individually or in the aggregate, to the Company and the Subsidiaries, considered as one entity, or has entered into any transactions not in the ordinary course of business; and (iii) there has not been any material decrease in the shares of beneficial interest or any material increase in any short-term or long-term indebtedness of the Company or the Subsidiaries and, except for dividends or distributions paid by the Company and the Operating Partnership in the ordinary course of business and dividends or distributions paid to the Company or other Subsidiaries, there has been no dividend or distribution of any kind declared, paid or made by the Company or by any of the Subsidiaries on any class of shares of beneficial interest or other equity securities and, except for any redemption of units of the Operating Partnership as permitted under the Partnership Agreement, there has been no repurchase or redemption by the Company or any Subsidiary of any class of shares of beneficial interest or other equity securities.
(l)
Independent Accountants
. KPMG LLP, which has expressed its opinion with respect to the consolidated and combined financial statements (which term as used in this Agreement includes the related notes thereto) and supporting schedule filed with the Commission as a part of the Registration Statement, the Time of Sale Prospectus and the Prospectus, is, and was during the periods covered by its report, an independent registered public accounting firm as required by the Securities Act, the Exchange Act and the rules of the Public Company Accounting Oversight Board (“
PCAOB
”).
(m)
Financial Statements
. The historical consolidated and combined financial statements filed with the Commission as a part of the Registration Statement, the Time of Sale Prospectus and the Prospectus present fairly the consolidated financial position of the Company and the Subsidiaries as of the dates indicated and their respective consolidated and combined results of operations, changes in equity (deficit) and cash flows for the periods specified. The supporting schedule included in the Registration Statement presents fairly the information required to be stated therein. The statements of revenues and certain expenses filed with the Commission as a part of the Registration Statement, the Time of Sale Prospectus and the Prospectus present fairly the revenues and certain expenses related to the operations of each of properties or group of properties identified in statements of revenues and certain expenses for the periods specified. Such financial statements and supporting schedule and statements of revenues and certain expenses have been prepared in conformity with generally accepted accounting principles (“
GAAP
”) applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto. The interactive data in eXtensible Business Reporting Language included or incorporated by reference in the Registration Statement fairly presents the information
called for in all material respects and has been prepared in accordance with the Commission’s rules and guidelines applicable thereto. The pro forma condensed consolidated financial statements of the Company and the Subsidiaries and the related notes filed with the Commission as part of the Registration Statement, the Time of Sale Prospectus and the Prospectus present fairly the information contained therein, have been prepared in accordance with the Commission’s rules and guidelines with respect to pro forma financial statements and have been properly presented on the bases described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein.
Except as included therein, no other historical or pro forma financial statements or supporting schedules or statements of revenues and certain expenses are required to be included in the Registration Statement, the Time of Sale Prospectus or the Prospectus. All disclosures contained in the Registration Statement, any preliminary prospectus, the Time of Sale Prospectus or the Prospectus and any free writing prospectus, that constitute non-GAAP financial measures (as defined by the rules and regulations under the Securities Act and the Exchange Act) comply with Regulation G under the Exchange Act and Item 10 of Regulation S-K under the Securities Act, as applicable. To the Company’s knowledge, no person who has been suspended or barred from being associated with a registered public accounting firm, or who has failed to comply with any sanction pursuant to Rule 5300 promulgated by the PCAOB, has participated in or otherwise aided the preparation of, or audited, the financial statements, supporting schedules, statements of revenues and certain expenses or other financial data filed with the Commission as a part of the Registration Statement, the Time of Sale Prospectus and the Prospectus.
(n)
Company’s Accounting System
. The Company and each of the Subsidiaries make and keep accurate books and records and maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences; and (v) the interactive data in eXtensible Business Reporting Language included or incorporated by reference in the Registration Statement, the Time of Sale Prospectus and the Prospectus fairly presents the information called for in all material respects and is prepared in accordance with the Commission’s rules and guidelines applicable thereto.
(o)
Disclosure Controls and Procedures; Deficiencies in or Changes to Internal Control Over Financial Reporting
. The Company has established and maintains disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 under the Exchange Act), which (i) are designed to ensure that material information relating to the Company, including its consolidated Subsidiaries, is made known to the Company’s principal executive officer and its principal financial officer by others within those entities, particularly during the periods in which the periodic reports required under the Exchange Act are being prepared; (ii) have been evaluated by management of the Company for effectiveness as of the end of the Company’s most recent fiscal quarter; and (iii) are effective in all material respects to perform the functions for which they were established. Since the end of the Company’s most recent audited fiscal year, there have been no significant
deficiencies or material weakness in the Company’s internal control over financial reporting (whether or not remediated) and no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company is not aware of any change in its internal control over financial reporting that has occurred during its most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
(p)
Organization and Good Standing of the Company
. The Company has been duly organized and is validly existing as a real estate investment trust in good standing under the laws of Maryland and has the real estate investment trust power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement, the Time of Sale Prospectus and the Prospectus and to enter into and perform its obligations under this Agreement, any Confirmation and any Terms Agreement and to authorize and duly file an articles supplementary to the Company's declaration of trust for the purpose of reclassifying additional preferred shares of beneficial interest, $0.01 par value per share, of the Company as additional Series A Preferred Shares (the “
Additional Articles Supplementary
”). The Company is duly qualified as a foreign real estate investment trust to transact business and is in good standing in the State of Colorado and each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not be expected, individually or in the aggregate, to result in a Material Adverse Effect (as defined herein).
(q)
Good Standing of the Operating Partnership
. The Operating Partnership has been duly organized and is validly existing as a limited partnership in good standing under the laws of Delaware and has the limited partnership power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement, the Time of Sale Prospectus and the Prospectus and to enter into and perform its obligations under this Agreement and any Terms Agreement. The Operating Partnership is duly qualified as a foreign limited partnership to transact business and is in good standing in the State of Colorado and each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not be expected, individually or in the aggregate, to result in a Material Adverse Effect (as defined herein). The Company is the sole general partner of the Operating Partnership.
(r)
Subsidiaries
. Each “subsidiary” of the Company (as defined in Rule 405 under the Securities Act, each, a “
Subsidiary
,” and together, the “
Subsidiaries
”), other than the Operating Partnership, has been duly incorporated, organized or formed, as the case may be, and is validly existing as a corporation, limited partnership or limited liability company, as applicable, in good standing under the laws of the jurisdiction of its incorporation or organization and has the power and authority (corporate or other) to own, lease and operate its properties and to conduct its business as described in the Registration Statement, the Time of Sale Prospectus and the Prospectus, except where the failure to so qualify or to be in good standing would not be expected, individually or in the aggregate, to result in a Material Adverse Effect (as defined herein). The Operating Partnership and each DownREIT Partnership is a Subsidiary of the Company. Each Subsidiary,
other than the Operating Partnership, is duly qualified as a foreign corporation, partnership or limited liability company, as applicable, to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not be expected, individually or in the aggregate, to result in a Material Adverse Effect. All of the issued and outstanding capital stock or other equity or ownership interests of each Subsidiary, other than the Operating Partnership and each DownREIT Partnership, have been duly authorized and validly issued, are fully paid and nonassessable and, except as described in the Registration Statement, the Time of Sale Prospectus and the Prospectus and with respect to liens created pursuant to customary pledges of equity in connection with mortgages and/or mezzanine financings, are owned by the Company, directly or through Subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance or adverse claim.
(s)
Capitalization and Other Matters
. The authorized, issued and outstanding shares of beneficial interest of the Company is as set forth in the line items appearing under the caption “Equity” in the Company’s balance sheet appearing in the most recent Annual Report on Form 10-K or, if more recent, the most recent Quarterly Report on Form 10-Q (including any Form 10-K/A or Form 10-Q/A) (other than for subsequent issuances, if any, pursuant to this Agreement, any Confirmation, any Terms Agreement, or employee benefit plans, or upon the exercise, redemption, or exchange of convertible or exchangeable securities, including OP Units (as defined below) and issuances of OP Units in connection with acquisitions and conversions of OP Units into SP Units (as defined below) in accordance with, and as defined by, the Partnership Agreement, in each case described in the Registration Statement, the Time of Sale Prospectus and the Prospectus). The Common Shares and Series A Preferred Shares conform in all material respects to the description thereof contained in the Time of Sale Prospectus. All of the issued and outstanding Common Shares and Series A Preferred Shares have been duly authorized and validly issued, are fully paid and nonassessable and have been issued in compliance with all federal and state securities laws. None of the outstanding Common Shares and Series A Preferred Shares was issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company. There are no (i) authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or (ii) equity or debt securities convertible into or exchangeable or exercisable for, any shares of beneficial interest of the Company or any Subsidiary, other than those described in the Registration Statement, the Time of Sale Prospectus and the Prospectus. The descriptions of the Company’s 2015 Equity Incentive Plan, 2013 Long-Term Incentive Plan and other share plans or arrangements, and the equity-based awards or other rights granted thereunder, set forth in the Registration Statement, the Time of Sale Prospectus and the Prospectus, accurately and fairly present the information required to be disclosed by Item 402 of Regulation S-K under the Securities Act with respect to such plans, arrangements, awards and rights.
(t)
Limited Partner Interests
.
The Class A common units of limited partner interest in the Operating Partnership (“
OP Units
”), Class B common units of limited partner interest in the Operating Partnership (“
SP Units
”), long-term incentive plan units in the Operating Partnership (“
LTIP Units
”), Class X common units of limited partner or limited liability company interest in subsidiaries of the Operating Partnership (each such partnership, a “
DownREIT Partnership
”
and such units, “
DownREIT OP Units
”), Class B common units of limited partner or limited liability company interest in a DownREIT Partnership (“
DownREIT SP Units
”), 6.000% Series A cumulative redeemable preferred units of limited partnership interest in the Operating Partnership (“
Series A Preferred Units
”) and 6.000% Series A-1 cumulative redeemable preferred units of limited partnership interest in the Operating Partnership (the “
Series A-1 Preferred Units
”, and together with OP Units, SP Units, LTIP Units, DownREIT OP Units, DownREIT SP Units and Series A Preferred Units, collectively, “
Units
”) conform in all material respects to the descriptions thereof contained in or incorporated by reference into the Registration Statement, the Time of Sale Prospectus and the Prospectus. All of the issued and outstanding Units have been duly authorized and validly issued and have been issued in compliance with all federal and state securities laws. None of the outstanding Units was issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Operating Partnership or any DownREIT Partnership. There are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, any Units or other ownership interests of the Operating Partnership or any DownREIT Partnership, other than those described in the Registration Statement, the Time of Sale Prospectus, and the Prospectus. The OP Units and Series A Preferred Units to be issued to the Company by the Operating Partnership in connection with the Company’s issuance of the Common Shares or Series A Preferred Shares, respectively, have been duly authorized for issuance by the Operating Partnership to the Company and, on the applicable Settlement Date, will be validly issued and fully paid. All OP Units and Series A Preferred Units to be issued in connection with the Company’s issuance of the Common Shares and Series A Preferred Shares, respectively, will be issued pursuant to an exemption from registration or qualification under the Securities Act and applicable state securities laws. The outstanding Units (other than the Series A Preferred Units) of the Operating Partnership are as set forth in the table appearing under the note to the Company’s financial statements titled “Noncontrolling Interests” appearing in the most recent Annual Report on Form 10-K or, if more recent, the most recent Quarterly Report on Form 10-Q (including any Form 10-K/A or Form 10-Q/A) (other than for subsequent issuances after the period set forth in the applicable Form 10-K or Form 10-Q, if any, pursuant to this Agreement, any Terms Agreement or employee benefit plans, or upon the exercise, redemption, or exchange of convertible or exchangeable securities, including OP Units and issuances of OP Units in connection with acquisitions and conversions of OP Units into SP Units in accordance with, and as defined by, the Partnership Agreement, in each case described in the Registration Statement, the Time of Sale Prospectus and the Prospectus)
(u)
Authorization of Conversion Shares
. The Common Shares issuable upon conversion of the Series A Preferred Shares (the “
Conversion Shares
”) have been duly authorized for issuance and, when issued and delivered upon conversion of the Series A Preferred Shares in accordance with the terms of the articles supplementary, will be validly issued, fully paid and nonassessable, and the issuance of the Conversion Shares upon conversion of the Series A Preferred Shares in accordance with the terms of the articles supplementary will not be subject to any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase the Common Shares.
(v)
Stock Exchange Listing
. The Common Shares and Series A Preferred Shares are registered pursuant to Section 12(b) or 12(g) of the Exchange Act and are listed on the New York Stock Exchange (the “
NYSE
”), and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Shares and Series A Preferred Shares under the Exchange Act or delisting the Common Shares and Series A Preferred Shares from the NYSE, nor has the Company received any notification that the Commission or the NYSE is contemplating terminating such registration or listing. To the Company’s knowledge, it is in compliance with all applicable listing requirements of NYSE.
(w)
Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required
. Neither the Company nor any Subsidiary is in violation of its declaration of trust, charter or bylaws, partnership agreement or operating agreement or similar organizational documents, as applicable, or is in default (or, with the giving of notice or lapse of time, would be in default) (“
Default
”) under any indenture, loan, credit agreement, note, lease, license agreement, contract, franchise or other instrument (including, without limitation, any pledge agreement, security agreement, mortgage or other instrument or agreement evidencing, guaranteeing, securing or relating to indebtedness) to which the Company or any Subsidiary is a party or by which it or any of them may be bound, or to which any of their respective properties or assets are subject (each, an “
Existing Instrument
”), except for such Defaults as would not be expected, individually or in the aggregate, to have a material adverse effect on the condition (financial or otherwise), earnings, business, properties, operations, assets, liabilities or prospects of the Company and the Subsidiaries, considered as one entity (a “
Material Adverse Effect
”). The Company’s and the Operating Partnership’s (as applicable) execution, delivery and performance of this Agreement, any Confirmation and any Terms Agreement, consummation of the transactions contemplated hereby and thereby and by the Registration Statement, the Time of Sale Prospectus and the Prospectus and the offer and sale of the Shares (including the use of proceeds from the sale of the Primary Shares hereunder or under any Terms Agreement and proceeds from the settlement of any Confirmation Shares under the applicable Confirmation as described in the Registration Statement, the Time of Sale Prospectus and the Prospectus under the caption “Use of Proceeds”) (i) have been duly authorized by all necessary real estate investment trust or limited partnership action, as applicable, and will not result in any violation of the provisions of the declaration of trust or bylaws, partnership agreement, operating agreement or similar organizational documents, as applicable, of the Company or any Subsidiary; (ii) will not conflict with or constitute a breach of, or Default or a Debt Repayment Triggering Event (as hereinafter defined) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any Subsidiary pursuant to, or require the consent of any other party to (except for such consents as have been obtained or made by the Company or any such Subsidiary and are in full force and effect), any Existing Instrument, except as would not be expected, individually or in the aggregate, to have a Material Adverse Effect; and (iii) will not result in any violation of any law, administrative regulation or administrative or court decree applicable to the Company or any Subsidiary, except for such violations that would not be expected, individually or in the aggregate, to result in a Material Adverse Effect. No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental or regulatory authority or agency (including, but not limited to, in connection with the Alternative Investment Fund Managers Directive 2011/61/EU (“
AIFMD
”) or any laws and regulations implementing AIFMD), is required
for the Company’s or the Operating Partnership’s (as applicable) execution, delivery and performance of this Agreement, any Confirmation or any Terms Agreement and consummation of the transactions contemplated hereby and thereby and by the Registration Statement, the Time of Sale Prospectus and the Prospectus, except (i) such as have been obtained or made by the Company or the Operating Partnership and are in full force and effect under the Securities Act or which shall have been obtained or made prior to each relevant Settlement Date, (ii) the filing and acceptance of record of the Articles Supplementary and the Additional Articles Supplementary (as defined herein) with SDAT, and (iii) such as may be required under applicable state securities or blue sky laws or by the Financial Industry Regulatory Authority, Inc. (“
FINRA
”). As used herein, a “
Debt Repayment Triggering Event
” means any event or condition which gives, or with the giving of notice or lapse of time would give, the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any Subsidiary.
(x)
Compliance with Laws
.
The Company and the Subsidiaries have been and are in compliance with all applicable laws, rules and regulations, except where failure to be so in compliance would not be expected, individually or in the aggregate, to have a Material Adverse Effect.
(y)
No Material Actions or Proceedings
. There is no action, suit, proceeding, inquiry or investigation brought by or before any governmental entity now pending or, to the knowledge of the Company or the Operating Partnership, threatened, against or affecting the Company or any Subsidiary, which would be expected, individually or in the aggregate, to have a Material Adverse Effect or materially and adversely affect the consummation of the transactions contemplated by this Agreement, any Confirmation or any Terms Agreement or the performance by the Company or the Operating Partnership of its respective obligations hereunder or thereunder; and the aggregate of all pending legal or governmental proceedings to which the Company or any Subsidiary is a party or of which any of their respective properties or assets is the subject, including ordinary routine litigation incidental to the business, if determined adversely to the Company or any Subsidiary, would not be expected to have a Material Adverse Effect. No material labor dispute with the employees of the Company or any Subsidiary exists or, to the knowledge of the Company and the Operating Partnership, is threatened or imminent, which, in either case, would, individually or in the aggregate, result in a Material Adverse Effect.
(z)
Intellectual Property Rights
.
The Company and the Subsidiaries own or possess all inventions, patent applications, patents, trademarks (both registered and unregistered), trade names, service names, copyrights, trade secrets and other proprietary information described in the Registration Statement, the Time of Sale Prospectus or the Prospectus as being owned or licensed by any of them or which is necessary for the conduct of, or material to, any of their respective businesses (collectively, the “
Intellectual Property
”), and the Company is unaware of any claim to the contrary or any challenge by any other person to the rights of the Company or any Subsidiary with respect to the Intellectual Property, which would be expected, individually or in the aggregate, to result in a Material Adverse Effect; neither the Company nor any Subsidiary has infringed or is infringing the intellectual property of a third party, which infringement would be expected,
individually or in the aggregate, to result in a Material Adverse Effect, and neither the Company nor any Subsidiary has received notice of a claim by a third party to the contrary.
(aa)
Cybersecurity
. (A) To the knowledge of the Company, there has been no security breach or incident, unauthorized access or disclosure, or other compromise of the Company’s or its Subsidiaries’ information technology and computer systems, networks, hardware, software, data and databases (including the data and information of their respective tenants, customers, employees, suppliers, vendors and any third party data maintained, processed or stored by the Company and its Subsidiaries, and any such data processed or stored by third parties on behalf of the Company and its Subsidiaries), equipment or technology (collectively, “
IT Systems and Data
”), except for any such security breach or incident, unauthorized access or disclosure, or other compromise of the Company’s or its Subsidiaries’ IT Systems and Data that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect: (B) the knowledge of the Company, neither the Company nor its Subsidiaries have been notified in writing of, and have no knowledge of any event or condition that would result in, any material security breach or incident, unauthorized access or disclosure or other compromise of the Company’s or its Subsidiaries’ IT Systems and Data and (C) the Company and its Subsidiaries have implemented commercially reasonable controls, policies, procedures, and technological safeguards to maintain and protect the integrity, operation, redundancy and security of their IT Systems and Data used in connection with the business of the Company and its Subsidiaries as currently conducted. The Company and its Subsidiaries are presently in compliance with all applicable laws and statutes and all judgments, orders, rules and regulations of any court or arbitrator or governmental or regulatory authority and contractual obligations relating to the privacy and security of IT Systems and Data and to the protection of such IT Systems and Data from unauthorized use, access, misappropriation or modification, except where failure to be so in compliance would not be expected, individually or in the aggregate, to have a Material Adverse Effect.
(bb)
All Necessary Permits, etc.
The Company and the Subsidiaries possess such valid and current certificates, authorizations or permits required by state, federal or foreign regulatory agencies or bodies to conduct their respective businesses as currently conducted and as described in the Registration Statement, the Time of Sale Prospectus or the Prospectus (“
Permits
”). Neither the Company nor any Subsidiary is in violation of, or in default under, any of the Permits or has received any notice of proceedings relating to the revocation or modification of, or non-compliance with, any such Permit.
(cc)
Title to Properties
. (i) The Operating Partnership holds, directly or indirectly through another Subsidiary, good and marketable title (fee or, in the case of ground leases and as disclosed in the Registration Statement, the Time of Sale Prospectus and the Prospectus, leasehold) to all real property described in the Registration Statement, the Time of Sale Prospectus or the Prospectus as owned by it and the improvements located thereon (individually, a “
Property
,” and, collectively, the “
Properties
”), and the Company and the Subsidiaries have good and marketable title to all other assets, if any, owned by them, in each case, free and clear of all mortgages, deeds of trust, pledges, liens, security interests, claims, restrictions or encumbrances of any kind, except as (A) are described in the Registration Statement, the Time of Sale Prospectus, and the Prospectus or (B) would not be expected, individually or in the aggregate, to materially affect the value of
such Property or assets and would not be expected to materially interfere with the use made and proposed to be made of such Property or assets by the Company or any Subsidiary; (ii) (X) each ground lease relating to a Property under which the Company or a Subsidiary is a tenant is in full force and effect; (Y) neither the Company nor any Subsidiary has received any notice of any event which, with or without the passage of time or the giving of notice, or both, would constitute a material default under any such ground lease; and (Z) neither the Company nor any Subsidiary has received any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any Subsidiary under any such ground lease or affecting or questioning the rights of the Company or any Subsidiary to the continued possession of the leased premises under such ground lease, other than as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; (iii) all liens, charges, encumbrances, claims or restrictions on any of the Properties or other assets of the Company or any Subsidiary that are required to be disclosed in the Registration Statement, the Time of Sale Prospectus and the Prospectus are disclosed therein; and (iv) and no third party has any option or right of first refusal to purchase any Property or any portion thereof or interest therein (other than with respect to one Property that does not constitute a material portion of the Properties, taken as a whole).
Neither the Company nor the Operating Partnership has knowledge of any violation of any municipal, state or federal law, rule or regulation concerning any Property, except as would not be expected, individually or in the aggregate, to result in a Material Adverse Effect; each of the Properties complies with all applicable zoning laws, ordinances, regulations and deed restrictions or other covenants, except where the failure to comply would not be expected, individually or in the aggregate, to result in a Material Adverse Effect; neither the Company nor any Subsidiary has received from any governmental authority any written notice of any condemnation of or zoning change, and neither the Company nor any Subsidiary has received written notice of any such threatened condemnation or zoning change, that, in either case, if consummated, would be expected, individually or in the aggregate, to have a Material Adverse Effect.
Except as disclosed in the Registration Statement, the Time of Sale Prospectus and the Prospectus, no mortgages encumbering the Properties are or will be: (i) convertible into an equity interest of the Company or any Subsidiary; (ii) cross-defaulted to any indebtedness other than indebtedness of the Company or any Subsidiary; or (iii) cross-collateralized to any property or assets not owned directly or indirectly by the Company or any Subsidiary.
To the knowledge of the Company and the Operating Partnership, water, stormwater, sanitary sewer, electricity and telephone service are all available at the property lines of each Property over duly dedicated streets or perpetual easements of record benefiting the applicable Property, except as would not be expected, individually or in the aggregate, to result in a Material Adverse Effect.
(dd)
Tax Law Compliance
. The Company and the Subsidiaries have filed all material federal, state and foreign income and franchise tax returns or have properly requested extensions thereof and have paid all material taxes required to be paid by any of them and, if due and payable, any related or similar material assessment, fine or penalty levied against any of them except as
may be being contested in good faith and by appropriate proceedings. The Company has made adequate charges, accruals and reserves in the applicable financial statements referred to in Section 2(m) above in respect of all federal, state and foreign income and franchise taxes for all periods as to which the tax liability of the Company or any Subsidiary has not been finally determined. No material deficiency for taxes has been asserted against the Company or any Subsidiary, and there are no current, pending or threatened audits, assessments or other actions relating to any material tax liability of the Company or any Subsidiary.
(ee)
Real Estate Investment Trust
. Commencing with its taxable year ended December 31, 2015, the Company has been organized and operated in conformity with the requirements for qualification and taxation as a real estate investment trust (“
REIT
”) under the Internal Revenue Code of 1986, as amended (the “
Code
”), and the Company’s proposed method of operation will enable it to continue to meet the requirements for qualification and taxation as a REIT under the Code. All factual statements regarding the Company’s qualification and taxation as a REIT and descriptions of the Company’s organization and proposed method of operation set forth in the Registration Statement, the Time of Sale Prospectus and the Prospectus are true, complete and accurate in all material respects.
(ff)
Insurance
. Each of the Company and the Subsidiaries are insured by recognized, financially sound and reputable institutions with policies in such amounts and with such deductibles and covering such risks as are generally deemed adequate and customary for their businesses including, but not limited to, policies covering real and personal property owned or leased by the Company and the Subsidiaries against theft, damage, destruction, and acts of vandalism. Neither the Company nor the Operating Partnership has reason to believe that it or any Subsidiary will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not be expected to have a Material Adverse Effect. Neither the Company nor any Subsidiary has been denied any insurance coverage which it has sought or for which it has applied; provided that the representation in this sentence, as it relates to the DownREIT Partnerships, shall be to the knowledge of the Company.
(gg)
Compliance with Environmental Laws
.
Except as would not be expected, individually or in the aggregate, to have a Material Adverse Effect: (i) neither the Company nor any Subsidiary is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, “
Hazardous Materials
”) or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, “
Environmental Laws
”); (ii) the Company and the Subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance with their requirements; (iii) there are no pending or threatened administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company or any Subsidiary; and (iv) to the Company’s knowledge, there are no events or circumstances that might reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting the Company or any Subsidiary relating to Hazardous Materials or any Environmental Laws.
(hh)
ERISA Compliance
. The Company and the Subsidiaries and any “employee benefit plan” (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, “
ERISA
”)) established or maintained by the Company, the Subsidiaries or their “ERISA Affiliates” (as defined below) are in compliance in all material respects with ERISA. “
ERISA Affiliate
” means, with respect to the Company or any Subsidiary, any member of any group of organizations described in Sections 414(b), (c), (m) or (o) of the Code of which the Company or such Subsidiary is a member. No “reportable event” (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any “employee benefit plan” established or maintained by the Company, the Subsidiaries or any of their ERISA Affiliates that are subject to Title IV of ERISA. No “employee benefit plan” subject to Title IV of ERISA established or maintained by the Company, the Subsidiaries or any of their ERISA Affiliates, if such “employee benefit plan” were terminated, would have any “amount of unfunded benefit liabilities” (as defined under ERISA). Neither the Company, the Subsidiaries nor any of their ERISA Affiliates has incurred or reasonably expects to incur any liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “employee benefit plan” or (ii) Sections 412, 4971, 4975 or 4980B of the Code, other than as would not result in a Material Adverse Effect. Each employee benefit plan established or maintained by the Company, the Subsidiaries or any of their ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification.
(ii)
Company and Operating Partnership Not an “Investment Company.”
Neither the Company nor the Operating Partnership is, or will be, either after receipt of payment for the Primary Shares hereunder or under any Terms Agreement or proceeds from the settlement of any Confirmation Shares under the applicable Confirmation or after the application of the proceeds therefrom as described under “Use of Proceeds” in the Registration Statement, the Time of Sale Prospectus or the Prospectus, required to register as an “investment company” under the Investment Company Act of 1940, as amended (the “
Investment Company Act
”).
(jj)
No Price Stabilization or Manipulation; Compliance with Regulation M
. Neither the Company nor any Subsidiary has taken, directly or indirectly, any action designed to or that might cause or result in stabilization or manipulation of the price of the Common Shares or the Series A Preferred Shares or of any “reference security” (as defined in Rule 100 of Regulation M under the Exchange Act (“
Regulation M
”)) with respect to the Common Shares or the Series A Preferred Shares, whether to facilitate the sale or resale of the Shares or otherwise, and has taken no action which would directly or indirectly violate Regulation M.
(kk)
Related-Party Transactions
. There are no business relationships or related-party transactions involving the Company or any Subsidiary or any other person required to be described in the Registration Statement, the Time of Sale Prospectus or the Prospectus that have not been described as required.
(ll)
FINRA Matters
. All of the information provided to the Agents or to counsel for the Agents by the Company, and to the knowledge of the Company, its officers and trustees and the holders of any securities (debt or equity) or options to acquire any securities of the Company in connection with the offering of the Shares is true, complete, and correct in all material respects and any letters, filings or other supplemental information provided to FINRA pursuant to FINRA Rules or National Association of Securities Dealers, Inc. Conduct Rules is true, complete and correct in all material respects.
(mm)
Statistical and Market-Related Data
. All statistical, demographic and market-related data included in the Registration Statement, the Time of Sale Prospectus or the Prospectus are based on or derived from sources that the Company believes, after reasonable inquiry, to be reliable and accurate. To the extent required, the Company has obtained the written consent to the use of such data from such sources.
(nn)
No Unlawful Contributions or Other Payments
. Neither the Company nor any Subsidiary nor, to the best knowledge of the Company and the Operating Partnership, any employee or agent acting on behalf of the Company or any Subsidiary, in the course of its actions for, or on behalf of, the Company or any Subsidiary, has made any contribution or other payment to any official of, or candidate for, any federal, state or foreign office in violation of any law.
(oo)
Foreign Corrupt Practices Act
. Neither the Company nor any Subsidiary nor, to the knowledge of the Company, any trustee, officer, agent, employee, affiliate or other person acting on behalf of the Company or any Subsidiary, in the course of its actions for, or on behalf of, the Company or any Subsidiary (i) has used or will use any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) has made or will make any direct or indirect unlawful payment to any domestic government official, “foreign official” (as defined in the U.S. Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (collectively, the “
FCPA
”), or employee from corporate funds; (iii) has violated, is in violation of or will violate any provision of the FCPA or any applicable non-U.S. anti-bribery statute or regulation; or (iv) has made or will make any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any domestic government official, such foreign official or employee; and the Company and the Subsidiaries and, to the knowledge of the Company, the Company’s affiliates have conducted their respective businesses in compliance with the FCPA and applicable anti-corruption laws and the Company and the Subsidiaries have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith.
(pp)
Money Laundering Laws
. The operations of the Company and the Subsidiaries are, and have been conducted at all times, in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all applicable jurisdictions, the rules and regulations
thereunder and any related or similar applicable rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “
Money Laundering Laws
”); provided that the foregoing representation, as it relates to the DownREIT Partnerships, shall be to the knowledge of the Company, and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company and the Operating Partnership, threatened.
(qq)
OFAC
. Neither the Company nor any Subsidiary nor, to the knowledge of the Company, any trustee, officer, agent, employee, affiliate or person acting on behalf of the Company or any Subsidiary is, or is controlled by a person or entity that is, (i) currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“
OFAC
”), (ii) located, organized or resident in a country or territory that is the subject of sanctions (including, without limitation, Cuba, Iran, North Korea, Crimea, and Syria) (“
Sanctioned Country
”); neither the Company nor the Operating Partnership will directly or indirectly use the proceeds of the offering of the Primary Shares hereunder or under any Terms Agreement or proceeds from the settlement of any Confirmation Shares under the applicable Confirmation, or lend, contribute or otherwise make available such proceeds to any Subsidiary, or any joint venture partner or other person or entity, (i) to fund or facilitate the activities of or business with any person, or in any country or territory, that, at the time of such funding or facilitating, is the subject to any U.S. sanctions administered by OFAC, (ii) to fund or facilitate any activities of business in any Sanctioned Country or (iii) in any other manner that will result in a violation by any person (including any person participating in the transaction whether as sales agent, principal, advisor, investor or otherwise) of U.S. sanctions administered by OFAC. For the past five years, the Company and the Subsidiaries have not knowingly engaged in, are not now knowingly engaged in and will not engage in, any dealings or transactions with any person, or in any country or territory, that at the time of the dealing or transaction is or was the subject of sanctions or any Sanctioned Country.
(rr)
Sarbanes-Oxley Compliance
. The Company is, and after execution, delivery and performance of this Agreement, any Confirmation and any Terms Agreement and the consummation of the transactions contemplated hereby and thereby will be, in compliance in all material respects with all applicable effective provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations of the Commission promulgated thereunder, including Section 402 related to loans and Sections 302 and 906 related to certifications.
(ss)
Brokers
. Except pursuant to this Agreement, any Confirmation or any Terms Agreement, there is no broker, finder or other party that is entitled to receive from the Company or any Subsidiary any brokerage or finder’s fee or other fee or commission as a result of any transactions contemplated by this Agreement, any Confirmation or any Terms Agreement.
(tt)
Forward-Looking Statements
. Each financial or operational projection or other “forward-looking statement” (as defined by Section 27A of the Securities Act or Section 21E of the Exchange Act) contained in the Registration Statement, the Time of Sale Prospectus or the Prospectus was so included by the Company in good faith and with reasonable basis after due
consideration by the Company of the underlying assumptions, estimates and other applicable facts and circumstances. No such statement was made with the knowledge of an executive officer or trustee of the Company that is was false or misleading.
(uu)
Accurate Disclosure
. The statements in the Registration Statement, the Time of Sale Prospectus the Prospectus or the Company’s most recent Annual Report on Form 10-K or, if more recent, the most recent Quarterly Report on Form 10-Q (including any Form 10-K/A or Form 10-Q/A) under the headings “Description of Securities—Restrictions on Ownership and Transfer,” “Risk Factors—Risks Related to Our Structure and Our Relationships with Our PROs,” “Risk Factors—Risks Related to Our Qualification as a REIT,” “Executive Compensation” and “Certain Relationships and Related Transactions, and Director Independence” insofar as such statements summarize laws, legal matters, agreements, documents or proceedings discussed therein, are true and accurate summaries of such laws, legal matters, agreements, documents or proceedings in all material respects.
(vv)
Dividend Restrictions
. Except as disclosed in the Registration Statement, the Time of Sale Prospectus and the Prospectus, upon the breach of certain covenants or during an event of default under any mortgage or other loan document, no Subsidiary is prohibited or restricted, directly or indirectly, from paying dividends to the Company or the Operating Partnership, or from making any other distribution with respect to such Subsidiary’s equity securities or from repaying to the Company, the Operating Partnership or any other Subsidiary any amounts that may from time to time become due under any loans or advances to such Subsidiary from the Company or the Operating Partnership.
(ww)
Credit Rating
. Neither the Company nor any Subsidiary has any debt securities or preferred stock that are rated by any “nationally recognized statistical rating agency” (as defined in Section 3(a)(62) of the Exchange Act).
(xx)
Additional Articles Supplementary
. The Additional Articles Supplementary, including their filing with the SDAT, have been duly authorized by the Company. The Additional Articles Supplementary will have been duly executed by the appropriate Company officers, and filed with, and accepted for record by, the SDAT, prior to the first Instruction Notice that relates to the Series A Preferred Shares.
Any certificate signed by any officer of the Company or any Subsidiary and delivered to any Agent, any Forward Purchaser, counsel for the Agents or counsel for the Forward Purchasers in connection with the offer and sale of the Shares shall be deemed a representation and warranty by the Company and the Operating Partnership to the Agents and to the Forward Purchasers (as applicable) as to the matters covered thereby.
The Company and the Operating Partnership have a reasonable basis for making each of the representations set forth in this Section 2. The Company and the Operating Partnership acknowledge that the Agents and the Forward Purchasers and, for purposes of the opinions to be delivered pursuant to Section 5 hereof, counsel to the Company and the Operating Partnership, counsel to the Agents and counsel to the Forward Purchasers, will rely upon the accuracy and truthfulness of the foregoing representations and hereby consents to such reliance.
Section 3.
SALE OF SHARES
(a)
Sale of Securities
. On the basis of the representations, warranties and agreements herein contained, from time to time during the Agency Period:
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(i)
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the Company may seek to sell Shares through an Agent, acting as sales agent, based on and in accordance with Instruction Notices as the Company may deliver (and the Agent agrees to use its commercially reasonable efforts to sell such Shares when acting as sales agent for the Company), or if agreed to by the Agent pursuant to a Terms Agreement with the Company and the Operating Partnership, to issue and sell Primary Shares to be sold pursuant to such Terms Agreement directly to the Agent, acting as principal, and/or
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(ii)
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provided that the Company enters into a Confirmation with a Forward Purchaser with respect to a relevant Forward in accordance with Section 3(b)(i), the Company may, in consultation with the Forward Purchaser and the applicable Agent, based on and in accordance with the relevant Forward Instruction Notice, instruct such Agent, acting as forward seller on behalf of such Forward Purchaser, to offer and sell the Forward Hedge Shares borrowed by such Forward Purchaser from third parties to hedge such Forward Purchaser’s exposure under the Forward, (and the Agent, acting as forward seller on behalf of the applicable Forward Purchaser agrees to use its commercially reasonable efforts to offer and sell such Forward Hedge Shares at such prices and in such amounts as contemplated by the relevant Forward Instruction Notice (as defined below))
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with an aggregate Sales Price of up to the Maximum Program Amount and, in each case referred to in clauses (i) and (ii) above, on the terms and subject to the conditions set forth in this Agreement and, if applicable, such Terms Agreement or Confirmation. Sales of Shares, if any, purchased by the Agent as principal will be made as provided in the applicable Terms Agreement and preliminary prospectus relating to such Primary Shares.
(b)
Mechanics of Sale
.
(i) The Shares are to be sold on an agency basis on any trading day (other than a day on which the Principal Market is scheduled to close prior to its regular weekday closing time) (each, a “
Trading Day
”) during the Agency Period on which (i) the Company has instructed an Agent to make such sales, on behalf of the Company or on behalf of the applicable Forward Purchaser as forward seller, pursuant to the Instruction Notice or the Forward Instruction Notice, as applicable and (ii) the Company has satisfied or such Agent (and if applicable, such Forward Purchaser) has waived the covenants and conditions set forth in Section 5(a) and Section 5(e) hereof. On any Trading Day the Company may sell Shares through only one Agent;
provided
that the foregoing shall not prohibit the Company and the Operating Partnership from entering into a Terms Agreement with two or more Agents providing for such Agents, each acting severally as principal, to offer and sell Primary Shares set forth in the Terms Agreements or prohibit or limit in any respect the offer or sale of Primary Shares purchased by any Agent, as principal, from the Company pursuant to a Terms Agreement. If the Company determines to sell Shares through an Agent, it shall by notice
that is executed by its Chief Executive Officer, President or Chief Financial Officer (i) in the case of sales on behalf of the Company, instruct a representative of the applicable Agent (previously identified by the Agent in writing, with the understanding that, with prior written notice, the Agent may modify the list of its representatives from time to time) by telephone and confirmed promptly by email (which confirmation will be promptly acknowledged by such Agent) as to the maximum number and the maximum aggregate Sales Price of Shares to be sold on such Trading Day and the Floor Price, in the form of a notice set forth in Exhibit B (the “
Instruction Notice
”), or (ii) in the case of a Forward, propose to the applicable Forward Purchaser and such Agent acting as forward seller, by delivery of an instruction by email, to execute a Forward with the parameters specified in the next paragraph;
provided, however
, that in no event shall the aggregate Sales Price or number, as the case may be, of Shares offered or sold pursuant to this Agreement, or which are the subject of instructions to an Agent as sales agent pursuant to Section 3(b) hereof (including offers and sales of Forward Hedge Shares on behalf of any relevant Forward Purchaser, but excluding Confirmation Shares), exceed, as the case may be: (i) the Maximum Program Amount, as reduced by prior sales of the Shares under this Agreement, (ii) the aggregate gross sales price or number, as the case may be, of Shares available for sale under the Registration Statement or (iii) the number of Shares duly authorized from time to time to be issued and sold under this Agreement by the Company or approved for listing on the Principal Market, and, in each case referred to in clause (ii) and (iii), notified to the Agents in writing. The Agents shall have no responsibility for maintaining records with respect to Shares available for sale under the Registration Statement or for determining the aggregate gross sales price or number of Shares duly authorized by the Company. If the Agent elects to purchase Primary Shares as principal, the sale and purchase of such Primary Shares shall be made pursuant to a Terms Agreement, and the Company and the Operating Partnership agree not to enter into a Terms Agreement with the Agent to sell any Primary Shares in excess of the aggregate Sales Price of Primary Shares set forth in clauses (x) or (y) of the preceding sentence.
If the Company desires that a Forward Purchaser enter into a Confirmation and that the applicable Agent sell Forward Hedge Shares as forward seller on behalf of such Forward Purchaser pursuant to such Confirmation in accordance with Section 3(a)(ii), the Company’s instruction shall be substantially in the form set forth in Exhibit F hereto (or such other form as the Company, such Forward Purchaser and the relevant Agent shall agree) (as accepted by the relevant Forward Purchase and Agent in accordance with this paragraph, the “
Forward Instruction Notice
”), shall be addressed to the representatives of such Forward Purchaser and the relevant Agent (previously identified by such Forward Purchaser and Agent in writing, with the understanding that, with prior written notice, the Forward Purchasers and the Agents may modify the lists of their respective representatives from time to time) and shall include: (A) the maximum number, the maximum aggregate Sales Price and the Floor Price per share of Forward Hedge Shares to be sold by the relevant Agent over the Forward Hedge Selling Period specified in such instruction (such maximum aggregate Sales Price, the “
Aggregate Maximum Forward Hedge Amount
”) and (B) the desired terms for the related Confirmation. The relevant Forward Purchaser and/or the Agent shall promptly, and in any event prior to the opening of trading on the Trading Day following the Trading Day on which such instruction was delivered, choose to (1) accept the terms proposed in such instruction, (2) decline to participate in the proposed Forward or (3) propose amended terms upon which the Forward Purchaser and/or the Agent would participate in the proposed Forward;
provided
, however, that in the case of clause (3), the Company may accept or reject such amended terms in its sole discretion
no later than on the Trading Day following the Trading Day on which the Forward Purchaser and/or the Agent proposed such amended terms. Promptly upon the acceptance of such instruction (or its amended terms, as applicable, and in any event prior to the opening of trading on the immediately following Trading Day), the Company and the Forward Purchaser shall enter into a Confirmation substantially in the form of Exhibit G hereto and consistent with such Forward Instruction Notice.
“
Forward Hedge Selling Period
” means the period of such number of consecutive Trading Days (as determined by the Company in the Company’s sole discretion and specified in the applicable Forward Instruction Notice), beginning on the date specified in the such Forward Instruction Notice or, if such date is not a Trading Day, the next Trading Day following such date and ending on the last such Trading Day or such earlier date on which the Agent, as forward seller, shall have completed the sale of Forward Hedge Shares in connection with the relevant Confirmation (such date, which shall be notified by the Agent, as forward seller, to the Company by way of a Pricing Supplement (as defined in the relevant Confirmation), the “Hedge Completion Date” for the purposes of the relevant Confirmation); provided, however, that if, prior to the scheduled end of any Forward Hedge Selling Period (x) any event occurs that would permit the Forward Purchaser to designate a “Scheduled Trading Day” as a “Termination Settlement Date” (as each such term is defined in the relevant Confirmation) under, and pursuant to the provisions of Section 7(g) of the relevant Confirmation or (y) a “Bankruptcy Termination Event” (as such term is defined in the relevant Confirmation) occurs, then the Forward Hedge Selling Period shall, upon the relevant Agent, as forward seller, becoming aware of such occurrence, immediately terminate as of the first such occurrence; and provided, further, that any Forward Hedge Selling Period then in effect shall immediately terminate upon the termination of this Agreement.
(ii)
Agents’ and Forward Purchasers’ Efforts
. Subject to the terms and conditions specified herein (including, without limitation, the accuracy of the representations and warranties of the Company and the performance by the Company of its covenants and other obligations, contained herein and the satisfaction of the additional conditions specified in Section 5 hereof), (A) the relevant Agent shall use its commercially reasonable efforts, consistent with its normal trading and sales practices and applicable law and regulations, to sell all of the Shares so designated by the Company as sales agent (whether acting on behalf of the Company or as forward seller on behalf of the applicable Forward Purchaser) in accordance with the relevant Instruction Notice pursuant to Section 3(b)(i) or the Forward Hedge Shares borrowed by the relevant Forward Purchaser pursuant to clause (B) below at such prices and in such amounts as contemplated by the relevant Forward Instruction Notice, as applicable, and (B) the applicable Forward Purchaser shall use its commercially reasonable efforts to borrow or cause its affiliate to borrow at such times as required to settle such sales a number of Forward Hedge Shares sufficient to have an aggregate Sales Price as close as reasonably practicable to the Aggregate Maximum Forward Hedge Amount. On any Trading Day, the Company shall give at least one Trading Day’s prior written notice by email to the Agents as to any change of the Agent through whom sales of Shares as sales agent on behalf of the Company will be made. For the avoidance of doubt, the foregoing limitation shall not apply to sales solely to employees or security holders of the Company or its subsidiaries or to a trustee or other person acquiring Shares for the accounts of such persons in which either Jefferies LLC, Robert W. Baird & Co. Incorporated, BMO Capital Markets Corp., BTIG, LLC, KeyBanc Capital Markets
Inc., Morgan Stanley & Co. LLC, SunTrust Robinson Humphrey Inc. or Wells Fargo Securities, LLC is acting for the Company in a capacity other than as Agent under this Agreement..
(iii)
Method of Offer and Sale
. Sales of the Shares, if any, through an Agent acting as sales agent or as forward seller or directly to an Agent acting as principal may be made by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act, including (A) by means of ordinary brokers' transactions on the Principal Market at market prices prevailing at the time of sale, in negotiated transactions, block transactions or as otherwise agreed by the Company, the applicable Agent and the applicable investor, (B) to or through any market maker or (C) on or through any other national securities exchange or facility thereof, trading facility of a securities association or national securities exchange, alternative trading system, electronic communication network or other similar market venue, or (D) pursuant to a Terms Agreement. Under no circumstances shall any Shares with respect to which the Agent acts as sales agent on behalf of the Company, forward seller or as principal be offered or sold at a price lower than the Floor Price therefor duly authorized from time to time by the Company and notified to the Agents in writing. Nothing in this Agreement shall be deemed to require either party to agree to the method of offer and sale specified in the preceding sentence, and (except for sales made directly on the Principal Market or sales made to or through a market maker or through an electronic communications network) the method of placement of any Shares by the Agent shall be at the Agent’s discretion.
(iv)
Confirmation to the Company
. If acting as sales agent or forward seller hereunder, the relevant Agent will provide written confirmation to the Company following the closing of trading on the Principal Market on each Trading Day on which Shares are sold hereunder setting forth: (i) the number of Primary Shares and Forward Hedge Shares sold on such day, (ii) the aggregate Sales Price of such Shares, (iii) the aggregate Net Proceeds to the Company or the Forward Purchaser, as applicable, (iv) the Initial Forward Price (as defined in the applicable Confirmation) as of such day under any Confirmation pursuant to which the Forward Hedge Shares were sold on such day, and (v) the Selling Commission payable by the Company to such Agent with respect to such sales. If sales of Forward Hedge Shares are made by the Agent under a Confirmation, promptly, and in no event later than the opening of the first Trading Day following the Hedge Completion Date (as defined in such Confirmation), the Forward Purchaser shall execute and deliver to the Company a Pricing Supplement (as defined in such Confirmation) in accordance with such Confirmation.
(v)
Settlement
. On each Settlement Date for the sale of Shares through an Agent as sales agent pursuant to Section 3(a)(i) hereof (each such day, a “
Direct Settlement Date
”), the Company will, or will cause the Company’s transfer agent to, electronically transfer such Shares by crediting the Agent or its designee’s account at The Depository Trust Company through its Deposit/Withdrawal At Custodian (DWAC) System, or by such other means of delivery as may be mutually agreed upon by the parties hereto, against payment by such Agent of the Net Proceeds from the sale of such Shares in same day funds delivered to an account designated by the Company. On each Settlement Date for the sale of Forward Hedge Shares through the Agent as forward seller pursuant to Section 3(a)(ii) hereof (each such day, a “
Forward Settlement Date
”), such Shares shall be delivered by the applicable Forward Purchaser to the Agent in book entry form to the Agent’s account at The Depository Trust Company against payment by such Agent of the Net Proceeds from
the sale of such Shares in same day funds delivered to an account designated by the applicable Forward Purchaser. If the Company shall default on its obligation to deliver Shares to the relevant Agent acting as sales agent on behalf of the Company on any Direct Settlement Date (and not including, for the avoidance of doubt, any Forward Hedge Shares intended to be borrowed and delivered by the relevant Forward Purchaser under a Confirmation on a Forward Settlement Date), the Company shall (i) indemnify and hold such Agent harmless against any loss, claim or damage arising from or as a result of such default by the Company and (ii) pay such Agent any commission to which it would otherwise be entitled absent such default. The applicable Net Proceeds on any Direct Settlement Date shall always be delivered substantially simultaneously with the Shares delivered by the Company. In the case of any Shares purchased by the Agent as principal, the foregoing settlement procedures may be superseded by any different procedures set forth in the applicable Terms Agreement.
(vi)
Suspension or Termination of Sales
. Consistent with standard market settlement practices, the Company or the Agent through whom the sale of Shares is to be made on an agency basis on any Trading Day may, upon notice to the other relevant parties in writing or by telephone (confirmed promptly by email, which confirmation will be promptly acknowledged by each receiving party), suspend any sale of Shares with respect to which such Agent is acting as sales agent, and the Selling Period shall immediately terminate;
provided, however
, that (A) such suspension and termination shall not affect or impair the respective parties’ obligations with respect to any Shares placed or sold, or with respect to Shares that the Company has instructed such Agent to sell, hereunder prior to the receipt of such notice, that the Agent has agreed to purchase prior to the receipt of such notice pursuant to a Terms Agreement or with respect to any offering or resale of any Shares purchased or to be purchased by the Agent pursuant to a Terms Agreement entered into prior to the receipt of such notice; (B) if the Company suspends or terminates any sale of Shares after the Agent confirms such sale thereto, the Company shall still be obligated to comply with Section 3(b)(v) with respect to such Shares; (C) such suspension and termination shall not affect or impair the respective parties’ obligations with respect to any Confirmation executed and delivered by the Company and the relevant Forward Purchaser prior to giving of such notice under which Forward Hedge Shares have been sold, and (D) if the Company defaults in its obligation to deliver Shares on a Settlement Date, the Company and the Operating Partnership agree that they will hold the relevant Agent harmless against any loss, claim, damage or expense (including, without limitation, penalties, interest and reasonable legal fees and expenses), as incurred, arising out of or in connection with such default by the Company. Each of the parties hereto acknowledges and agrees that, in performing its obligations under this Agreement, the Agent may borrow Common Shares and/or Series A Preferred Shares from stock lenders in the event that the Company has not delivered Shares to settle sales as required by subsection (v) above, and may use the Shares to settle or close out such borrowings. The Company and the Operating Partnership agree that no such notice shall be effective against the Agent unless it is made to the representatives identified in writing by the Agent pursuant to Section 3(b)(i).
(vii)
No Guarantee of Placement, Etc.
The Company, the Operating Partnership, the Agents and the Forward Purchasers each acknowledge and agree that (A) there can be no assurance that any Agent will be successful in selling any Shares on an agency basis or that any Forward Purchaser will be successful in borrowing any Forward Hedge Shares, (B) no Agent will incur any
liability or obligation to the Company if it fails to sell Shares for any reason other than a failure to use its respective commercially reasonable efforts, consistent with its normal trading and sales practices and applicable law and regulations, to sell such Shares as required by this Agreement (whether acting as sales agent on behalf of the Company or as forward seller on behalf of the Forward Purchaser), (C) no Forward Purchaser will incur any liability or obligation to the Company if it or its affiliate fails to borrow Forward Hedge Shares for any reason other than a failure by such Forward Purchaser to use its commercially reasonable efforts to borrow or cause its affiliate to borrow such Forward Hedge Shares as required by Section 3(b)(ii)(B), and (D) the Agents shall be under no obligation to purchase Primary Shares on a principal basis pursuant to this Agreement, except as otherwise specifically agreed by the Agents, the Company and the Operating Partnership pursuant to, and on the terms and subject to the conditions set forth in, a Terms Agreement signed by the relevant Agent. In the event of a conflict between the terms of this Agreement and the terms of any Terms Agreement to which the relevant Agent is a party or any Confirmation (including the related Forward Instruction Notice), the terms of such Terms Agreement or such Confirmation, as applicable, will control. Neither the Agents nor Forward Purchasers shall incur any liability for not borrowing, offering or selling any Shares as a result of any of the circumstances in clauses (A) or (B) of Section 3(b)(ix).
(viii)
Material Non-Public Information.
Notwithstanding any other provision of this Agreement, the Company, the Operating Partnership and the Agents agree that the Company shall not deliver any Instruction Notice or Forward Instruction Notice to any Agent and, if applicable, the relevant Forward Purchaser, and the Agents shall not be obligated to place any Shares or Forward Hedge Shares (and the relevant Forward Purchaser shall not be obligated to borrow any Forward Hedge Shares) and the Company shall not enter into any Terms Agreement with the Agents or any Confirmation with any Forward Purchasers, (i) during any period in which either the Company or the Operating Partnership is, or could be deemed to be, in possession of material non-public information or (ii) except as provided in Section 4(i)(B), at any time during the period commencing on the 10th Trading Day prior to the time the Company makes any public announcement or release disclosing the Company's and the Operating Partnership’s results of operations or financial condition for a completed quarterly or annual fiscal period (each, an “
Earnings Release
”) through and including the time that is 24 hours after the time that the Company files a Quarterly Report on Form 10-Q or an Annual Report on Form 10-K (a “
Filing Time
”) that includes consolidated financial statements as of and for the same fiscal period or periods, as the case may be, covered by such Earnings Release.
(ix)
Forward Hedge Shares
. Notwithstanding anything herein to the contrary, in the event that either (A) the relevant Forward Purchaser is unable to borrow and deliver a number of Forward Hedge Shares equal to the Aggregate Maximum Forward Hedge Amount for sale under this Agreement, as set forth in the relevant Forward Instruction Notice or (B) in the commercially reasonable judgement of the relevant Forward Purchaser, it is either impracticable to do so or the Forward Purchaser would incur a stock loan cost that is equal to or greater than the maximum stock loan rate per annum to be set forth in the relevant Confirmation pursuant to the Forward Instruction Notice, then the relevant Agent, as forward seller, shall be obligated to use commercially reasonable efforts to sell only the aggregate number of Forward Hedge Shares that the Forward Purchaser is able to, and that in the commercially reasonable judgment of the Forward Purchaser it is practicable
to, so borrow below such cost. For the avoidance of doubt, the obligations of the Agent or the Forward Purchaser hereunder with respect to the borrowing of or offer or sale of any Forward Hedge Shares in connection with a Forward shall be subject to the related Confirmation being effective and not having been terminated.
(x)
Regulation M Matters
. If the Company or any relevant Agent or Forward Purchaser believe that the exemptive provisions set forth in Rule 101(c)(1) of Regulation M under the Exchange Act are not satisfied with respect to the Company or the Shares, such party shall promptly notify the other relevant parties, and sales of Shares under this Agreement and any Terms Agreement shall be suspended until that or other exemptive provisions have been satisfied in the judgment of each relevant party;
provided
, however, that such suspension shall not affect or impair the parties’ respective obligations with respect to (i) any Primary Shares that an Agent has agreed to purchase prior to the giving of such notice pursuant to a Terms Agreement, with respect to any offering or resale of any Primary Shares purchased or to be purchased by an Agent pursuant to a Terms Agreement entered into prior to the giving of such notice, or with respect to any Shares which an investor has agreed to purchase but which have not been delivered to, and paid for by, such investor as contemplated hereby prior to the giving of such notice or (ii) any Confirmation executed and delivered by the Company and the Forward Purchaser prior to the giving of such notice under which Forward Hedge Shares have been sold.
(c)
Fees
. The Sales Price of any Shares sold pursuant to this Agreement by the applicable Agent acting as sales agent of the Company or as forward seller shall be equal to, in the discretion of such Agent but subject to the specific instructions of the Company, the market price prevailing at the time of sale for the Shares sold by such Agent on the Principal Market or otherwise, at prices related to prevailing market prices or at negotiated prices. In connection with sales pursuant to Section 3(a)(i) of this Agreement, the compensation payable to an Agent for sales of Shares with respect to which such Agent acts as sales agent shall be at a mutually agreed rate, not to exceed 2.0% of the Sales Price per such Share. The foregoing rate of compensation shall not apply when the Agent acts as principal pursuant to a Terms Agreement, in which case the Company may sell Primary Shares to the Agent as principal at a price set forth in such Terms Agreement. In connection with sales pursuant to Section 3(a)(ii) of this Agreement, the compensation payable to the Agent for sales of Forward Hedge Shares with respect to which the Agent acts as forward seller, shall be reflected in a reduction not to exceed 2.0% from the Initial Forward Price (as such term is defined in the applicable Confirmation). The remaining proceeds, after further deduction for any transaction fees, transfer taxes or similar taxes or fees imposed by any Governmental Entity or self-regulatory organization in respect of such sales, shall constitute the net proceeds to the Company or the Forward Purchaser, as applicable, for such sales (the “Net Proceeds”). The applicable Agent shall notify the Company as promptly as practicable if any deduction referenced in the preceding sentence will be made.
(d)
Expenses
. Each of the Company and the Operating Partnership, jointly and severally, agrees to pay all costs, fees and expenses incurred in connection with the performance of its obligations hereunder or under any Terms Agreement or any Confirmation and in connection with the transactions contemplated hereby and thereby, including without limitation (i) all expenses incident to the issuance and delivery of the Primary Shares (including all printing and engraving
costs), (ii) all fees and expenses of the registrar and transfer agent of the Shares, (iii) all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of the Shares, (iv) all fees and expenses of the Company’s counsel, independent public or certified public accountants and other advisors, (v) all costs and expenses incurred in connection with the preparation, printing, filing, shipping and distribution of the Registration Statement (including financial statements, exhibits, schedules, consents and certificates of experts), the Time of Sale Prospectus, the Prospectus, each free writing prospectus prepared by or on behalf of, used by, or referred to by the Company, and all amendments and supplements thereto, this Agreement, any Confirmation and any Terms Agreement, (vi) the costs, fees and expenses incurred by the Agents and the Forward Purchasers in connection with determining their compliance with the rules and regulations of FINRA related to the Agents’ and the Forward Purchasers’ participation in the offering and distribution of the Shares, including the legal fees of, and disbursements by, counsel to the Agents and the Forward Purchasers not in excess of $5,000, (vii) the costs and expenses of the Company relating to investor presentations on any “road show” in connection with a sale of Primary Shares by the Agent as principal, including, without limitation, expenses associated with the preparation or dissemination of any electronic road show, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged by the Company in connection with the road show presentations with the prior approval of the Company, travel and lodging expenses of the representatives, employees and officers of the Company and any such consultants, and the cost of any aircraft and other transportation chartered in connection with the road show (except that the Agents shall pay lodging, commercial airfare and other expenses attributable to employees of the Agents and one-half of the cost of any aircraft chartered in connection with the road show), (viii) the fees and expenses associated with listing the Shares on the NYSE and (ix) all other fees, costs and expenses of the nature referred to in Item 14 of Part II of the Registration Statement. Except as provided in this Section or in Section 6 hereof, each of the Agent and the Forward Purchaser shall pay its own expenses, including the fees and disbursements of its counsel.
If Shares having an aggregate Sales Prices of at least $10,000,000 have not been offered and sold under this Agreement and any Terms Agreement by December 31, 2020 (or such earlier date on which the Company terminates this Agreement), the Company shall reimburse the Agents for all of their reasonable out-of-pocket expenses, including the fees, disbursements and expenses of counsel for the Agents incurred by them in connection with this Agreement, any Confirmation and any Terms Agreement, and ongoing services in connection with the transactions contemplated under this Agreement, any Confirmation and any Terms Agreement, in any event not to exceed $50,000 in the aggregate.
Section 4.
ADDITIONAL COVENANTS
Each of the Company and the Operating Partnership further covenants and agrees with each Agent and each Forward Purchaser as follows, in addition to any other covenants and agreements made elsewhere in this Agreement:
(a)
Exchange Act Compliance
. During the Agency Period, the Company shall (i) file, on a timely basis, with the Commission all reports and documents required to be filed under Section
13, 14 or 15 of the Exchange Act in the manner and within the time periods required by the Exchange Act and (ii) either (A) include in its quarterly reports on Form 10-Q and its annual reports on Form 10-K, a summary detailing, for the relevant reporting period, (1) the number of Shares sold through the Agents pursuant to this Agreement, any Confirmation and any Terms Agreement, (2) the “Number of Shares” (as defined in the related Confirmation) underlying each Confirmation, and (3) the gross proceeds (or average price) and net proceeds received by the Company from (or offering expenses/commissions paid by the Company in connection with) such sales or (B) prepare a prospectus supplement containing, or include in such other filing permitted by the Securities Act or Exchange Act (each an “
Interim Prospectus Supplement”)
,
such summary information and, at least once a quarter and subject to this Section 4, file such Interim Prospectus Supplement pursuant to Rule 424(b) under the Securities Act (and within the time periods required by Rule 424(b) and Rule 430B under the Securities Act)). The Company shall advise the relevant Agent and Forward Purchaser, prior to the delivery of any Instruction Notice or Forward Instruction Notice (as the case may be) and during the period from and including the Instruction Date through and including the last Settlement Date for the applicable Selling Period, if the Company is unable to file any documents required to be filed by the Company with the Commission pursuant to Sections 13, 14 or 15 of the Exchange Act subsequent to the date of this Agreement in the manner and within the time periods required by the Exchange Act.
(b)
Securities Act Compliance
. After the date of this Agreement, the Company shall promptly advise the Agents and the Forward Purchasers in writing of (i) the receipt of any comments of, or requests for additional or supplemental information from, the Commission, (ii) the time and date of any filing of any post-effective amendment to the Registration Statement or any Rule 462(b) Registration Statement or any amendment or supplement to any preliminary prospectus, the Time of Sale Prospectus, any free writing prospectus or the Prospectus, (iii) the time and date that any post-effective amendment to the Registration Statement or any Rule 462(b) Registration Statement becomes effective and (iv) the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto or any Rule 462(b) Registration Statement or any amendment or supplement to any preliminary prospectus, the Time of Sale Prospectus, any free writing prospectus or the Prospectus or of any order preventing or suspending the use of any preliminary prospectus, the Time of Sale Prospectus, any free writing prospectus or the Prospectus, or of any proceedings to remove, suspend or terminate from listing or quotation the Shares from any securities exchange upon which they are listed for trading or included or designated for quotation, or of the threatening or initiation of any proceedings for any of such purposes. If the Commission shall enter any such stop order at any time, the Company will use its reasonable best efforts to obtain the lifting of such order at the earliest possible moment. Additionally, the Company agrees that it shall comply with the provisions of Rule 424(b) and Rule 433, as applicable, under the Securities Act and will use its reasonable efforts to confirm that any filings made by the Company under such Rule 424(b) or Rule 433 were received in a timely manner by the Commission.
(c)
Amendments and Supplements to the Time of Sale Prospectus or the Prospectus and Other Securities Act Matters
. If any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Time of Sale Prospectus or the Prospectus so that the Time of Sale Prospectus or the Prospectus does not include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when the Time of Sale Prospectus or the Prospectus is delivered to a purchaser, not misleading, or if in the opinion of the relevant Agent, Forward Purchaser, counsel for the Agents or counsel for the Forward Purchasers, it is otherwise necessary to amend or supplement the Time of Sale Prospectus or the Prospectus to comply with applicable law, including the Securities Act, the Company agrees (subject to Section 3(b) and Section 3(c)) to promptly prepare, file with the Commission and furnish at its own expense to the Agent and the Forward Purchaser, amendments or supplements to the Time of Sale Prospectus or the Prospectus so that the statements in the Time of Sale Prospectus or the Prospectus as so amended or supplemented will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when the Time of Sale Prospectus or the Prospectus is delivered to a purchaser, be misleading or so that the Time of Sale Prospectus or the Prospectus, as amended or supplemented, will comply with applicable law including the Securities Act. Neither the Agents’ consent to, the Forward Purchaser’s consent to, or delivery of, any such amendment or supplement shall constitute a waiver of any of the Company’s obligations under Section 3(b) or Section 3(c).
(d)
Agents’ and Forward Purchasers’ Review of Proposed Amendments and Supplements
.
Prior to amending or supplementing the Registration Statement (including any registration statement filed under Rule 462(b) under the Securities Act), any preliminary prospectus, Time of Sale Prospectus or the or the Prospectus (including any amendment or supplement through incorporation of any report filed under the Exchange Act), the Company shall furnish to each of the Agent and the Forward Purchaser for review, a reasonable amount of time prior to the proposed time of filing or use thereof, a copy of each such proposed amendment or supplement, and the Company shall not file or use any such proposed amendment or supplement without each of the Agent’s and the Forward Purchaser’s prior consent, which shall not be unreasonably withheld, conditioned or delayed, and to file with the Commission within the applicable period specified in Rule 424(b) under the Securities Act any prospectus required to be filed pursuant to such Rule.
(e)
Free Writing Prospectuses
.
The Company shall furnish to each of the Agents and the Forward Purchasers for review, a reasonable amount of time prior to the proposed time of filing or use thereof, a copy of each proposed free writing prospectus or any amendment or supplement thereto prepared by or on behalf of, used by, or referred to by the Company, and the Company shall not file, use or refer to any proposed free writing prospectus or any amendment or supplement thereto without each of the Agent’s and the Forward Purchaser’s prior written consent (except that no such written consent shall be required for any free writing prospectus relating solely to an offering of Shares pursuant to a Terms Agreement to which the relevant Agent is not a party). The Company shall furnish to each of the Agent and the Forward Purchaser, without charge, as many copies of any free writing prospectus prepared by or on behalf of, used by or referred to by the Company as the Agent and the Forward Purchaser may reasonably request. If at any time when a prospectus is required by the Securities Act (including, without limitation, pursuant to Rule 173(d)) to be delivered (whether physically or through compliance with Rule 172 under the Securities Act or any similar rule) in connection with sales of the Shares (but in any event if at any time through and including the date of this Agreement) there occurred or occurs
an event or development as a result of which any free writing prospectus prepared by or on behalf of, used by, or referred to by the Company conflicted or would conflict with the information contained in the Registration Statement or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Company shall promptly amend or supplement such free writing prospectus to eliminate or correct such conflict so that the statements in such free writing prospectus as so amended or supplemented will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, as the case may be;
provided, however
, that prior to amending or supplementing any such free writing prospectus, the Company shall furnish to the Agents and the Forward Purchasers for review, a reasonable amount of time prior to the proposed time of filing or use thereof, a copy of such proposed amended or supplemented free writing prospectus, and the Company shall not file, use or refer to any such amended or supplemented free writing prospectus without the Agent’s and the Forward Purchaser’s prior written consent, which consent shall not be unreasonably or untimely withheld.
(f)
Filing of Agent Free Writing Prospectuses.
The Company shall not take any action that would result in any Agent, any Forward Purchaser or the Company being required to file with the Commission pursuant to Rule 433(d) under the Securities Act a free writing prospectus prepared by or on behalf of any Agent or any Forward Purchaser that the Agent or the Forward Purchaser, as applicable, otherwise would not have been required to file thereunder.
(g)
Copies of Registration Statement and Prospectus
. After the date of this Agreement through the last time that a prospectus is required by the Securities Act (including, without limitation, pursuant to Rule 173(d)) to be delivered in connection with sales of the Shares, the Company agrees to furnish the Agents and the Forward Purchasers with copies (which may be electronic copies) of the Registration Statement and each amendment thereto, and with copies of the Prospectus and each amendment or supplement thereto in the form in which it is filed with the Commission pursuant to the Securities Act or Rule 424(b) under the Securities Act, both in such quantities as the Agents and the Forward Purchasers may reasonably request from time to time; and, if the delivery of a prospectus is required under the Securities Act or under the blue sky or securities laws of any jurisdiction at any time on or prior to the applicable Settlement Date for any Selling Period in connection with the offering or sale of the Shares and if at such time any event has occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason it is necessary during such same period to amend or supplement the Prospectus or to file under the Exchange Act any document incorporated by reference in the Prospectus in order to comply with the Securities Act or the Exchange Act, to notify the relevant Agent and to request that such Agent suspend offers to sell Shares (and, if so notified, the Agent shall cease such offers as soon as practicable); and if the Company decides to amend or supplement the Registration Statement or the Prospectus as then amended or supplemented, to advise the relevant Agent promptly by telephone (with confirmation in writing) and to prepare and cause to be filed promptly with the Commission an
amendment or supplement to the Registration Statement, any preliminary prospectus or the Prospectus as then amended or supplemented that will correct such statement or omission or effect such compliance; provided, however, that if during such same period the relevant Agent is required to deliver a prospectus in respect of transactions in the Shares, the Company shall promptly prepare and file with the Commission such an amendment or supplement.
(h)
Blue Sky Compliance
. The Company shall cooperate with the Agents, the Forward Purchasers, counsel for the Agents and counsel for the Forward Purchasers to qualify or register the Shares and any Confirmation Shares for sale under (or obtain exemptions from the application of) the state securities or blue sky laws or Canadian provincial securities laws (or other foreign laws) of those jurisdictions designated by the relevant Agent and the relevant Forward Purchaser, shall comply with such laws and shall continue such qualifications, registrations and exemptions in effect so long as required for the distribution of the Shares. The Company shall not be required to qualify as a foreign real estate investment trust or to take any action that would subject it to general service of process in any such jurisdiction where it is not presently qualified or where it would be subject to taxation as a foreign real estate investment trust. The Company will advise the Agents and the Forward Purchasers promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Shares for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, the Company shall use its best efforts to obtain the withdrawal of such order at the earliest possible moment.
(i)
Earnings Statement
.
(A) The Company will make generally available to its security holders and to the Agents and the Forward Purchasers as soon as practicable an earnings statement (which need not be audited) covering a period of at least twelve months beginning with the first fiscal quarter of the Company commencing after the date of this Agreement that will satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder.
(B) Notwithstanding clause (ii) of Section 3(b)(viii), if the Company issues any Earnings Release and the Company has not yet filed a Quarterly Report on Form 10-Q or an Annual Report on Form 10-K with respect to such information, as applicable, then, if the Company wishes to offer or sell Shares to any Agent as sales agent or as principal pursuant to a Terms Agreement or as forward seller pursuant to a Confirmation during the period from and including an Earnings Release through and including the corresponding Filing Time, prior to any sale of Shares or entry into any Terms Agreement, the Company shall be obligated to (y) file a Current Report on Form 8-K, which Form 8-K shall include the applicable financial information, or (z) furnish a Current Report on Form 8- K pursuant to Item 2.02 thereof, which current report shall specifically state that the applicable financial information shall be deemed “filed” under the Exchange Act.
(j)
Listing
. The Company will maintain the listing of the Common Shares and the Series A Preferred Shares on the New York Stock Exchange.
(k)
Transfer Agent
. The Company shall engage and maintain, at its expense, a registrar and transfer agent for the Common Shares, Series A Preferred Shares and the Confirmation Shares.
(l)
Due Diligence
. During the term of this Agreement, the Company will reasonably cooperate with any reasonable due diligence review conducted by the Agents and the Forward Purchasers in connection with the transactions contemplated hereby, including, without limitation, providing information and making available documents and senior corporate officers, during normal business hours and at the Company’s principal offices, as the relevant Agent or the relevant Forward Purchaser may reasonably request from time to time.
(m)
Representations and Warranties
. The Company and the Operating Partnership acknowledge that each delivery of an Instruction Notice or a Forward Instruction Notice, the entry into a Terms Agreement to which the Agent is a party, the entry into a Confirmation to which the Forward Purchaser is a party, and each delivery of Shares on a Settlement Date shall be deemed to be (i) an affirmation to the relevant Agent and the relevant Forward Purchaser that the representations and warranties of the Company and the Operating Partnership contained in or made pursuant to this Agreement are true and correct as of the Instruction Date and the date of the execution of such Terms Agreement, the execution of such Confirmation, or of such Settlement Date, as the case may be, as though made at and as of each such date, except as may be disclosed in the Prospectus (including any documents incorporated by reference therein and any supplements thereto), and (ii) an undertaking that the Company will advise each of the relevant Agent and the Forward Purchaser if any of such representations and warranties will not be true and correct as of the Settlement Date for the Shares relating to such Instruction Notice or Forward Instruction Notice (as the case may be), as though made at and as of each such date (except that such representations and warranties shall be deemed to relate to the Registration Statement, any preliminary prospectus and the Prospectus as amended and supplemented relating to such Shares).
(n)
Qualification and Taxation as a REIT
. The Company will use its best efforts to continue to meet the requirements for qualification and taxation as a REIT under the Code for its taxable year ending December 31, 2019, and the Company will use its best efforts to continue to qualify for taxation as a REIT under the Code unless and until the Company’s board of trustees determines in good faith that it is no longer in the best interests of the Company and its shareholders to be so qualified.
(o)
Replacement Registration Statement and Prospectus
. At any time prior to the third anniversary of the initial effective date of the Registration Statement when this Agreement is still in effect, the Company may file a new registration statement (a “
Replacement Registration Statement
”) and a new prospectus supplement (the “
Replacement Prospectus Supplement
”) with the Commission, in form and substance reasonably satisfactory to the Agents and the Forward Purchasers. The Company shall promptly notify the Agents and the Forward Purchasers in writing of the effectiveness of the Replacement Registration Statement and the filing of the Replacement Prospectus Supplement and, following delivery of such notice, references herein to the “Registration Statement” and “Prospectus Supplement” shall refer to such Replacement Registration Statement and Replacement Prospectus Supplement, as applicable, in lieu of the Registration Statement and Prospectus Supplement as defined herein or any predecessor
Replacement Registration Statement and Replacement Prospectus Supplement, as the case may be.
(p)
Deliverables at Triggering Event Dates; Certificates
. The Company and the Operating Partnership agree that on or prior to the first Instruction Date and, during the term of this Agreement after the first Instruction Date, upon:
(A) the filing of the Prospectus or the amendment or supplement of the Registration Statement or the Prospectus (other than a prospectus supplement relating solely to an offering of securities other than the Shares or a prospectus filed pursuant to Section 4(a)(ii)(B)), by means of a post-effective amendment, sticker or supplement, but not by means of incorporation of documents by reference into the Registration Statement or the Prospectus;
(B) the filing with the Commission of an Annual Report on Form 10-K or a Quarterly Report on Form 10-Q (including any Form 10-K/A or Form 10-Q/A containing amended financial information or a material amendment to the previously filed Annual Report on Form 10-K or Quarterly Report on Form 10-Q), in each case, of the Company;
(C) the filing with the Commission of a current report on Form 8-K of the Company containing amended financial information (other than information “furnished” pursuant to Item 2.02 or 7.01 of Form 8-K or to provide disclosure pursuant to Item 8.01 of Form 8-K relating to reclassification of certain properties as discontinued operations in accordance with Statement of Financial Accounting Standards No. 144) that is material to the offering of securities of the Company in the Agent’s and/or the Forward Purchaser’s reasonable discretion; or
(D) Settlement Date of any Primary Shares sold to the Agent pursuant to a Terms Agreement; or
(E) at any other time reasonably requested by the Agent or the Forward Purchaser
(any such event, a “
Triggering Event Date
”), the Company and the Operating Partnership shall furnish or cause to be furnished to the Agents and the Forward Purchasers (but in the case of clause (C) above only if any Agent or Forward Purchaser, as applicable, reasonably determines that the information contained in such current report on Form 8-K of the Company is material) with a certificate as of the Triggering Event Date, in form and substance reasonably satisfactory to the Agents, the Forward Purchasers, and their respective counsels, modified, as necessary, to relate to the Registration Statement, any preliminary prospectus and the Prospectus, as amended or supplemented, (A) confirming that the representations and warranties of the Company and the Operating Partnership contained in this Agreement are true and correct, (B) that each of the Company and the Operating Partnership has performed all of its obligations hereunder to be performed on or prior to the date of such certificate and as to the matters set forth in Section 5 hereof, and (C) containing any other certification that any Agent or Forward Purchaser shall reasonably request. The requirement to provide a certificate under this Section 4(p) shall be waived for any Triggering Event Date occurring at a time when no Instruction Notice or Forward Instruction Notice is pending or a suspension is in effect, which waiver shall continue until the earlier to occur of an Instruction Date (which for such calendar quarter shall be considered a Triggering Event Date) and the next
occurring Triggering Event Date. Notwithstanding the foregoing, if the Company subsequently decides to sell Shares following a Triggering Event Date when a suspension was in effect and did not provide the Agent or the Forward Purchaser with a certificate under this Section 4(p), then before the Company may deliver any Instruction Notice or a Forward Instruction Notice or the relevant Agent sells any Shares pursuant to such instruction, the Company and the Operating Partnership shall provide the relevant Agent and, if applicable, the Forward Purchaser with a certificate in conformity with this Section 4(p) dated as of the Instruction Date.
Each time that the Company is obligated to make a filing in accordance with Section 4(i)(B) of this Agreement, the Company and the Operating Partnership shall furnish or cause to be furnished to the Agents and the Forward Purchasers forthwith a certificate, dated and delivered the date of filing with the Commission of such prospectus supplement or Current Report on Form 8-K, to the effect that (i) the accounting records upon which the applicable financial information contained in the Earnings Release is based have been prepared in conformity with GAAP and (ii) nothing came to such officer’s attention since the issuance of the Earnings Release that caused such officer to believe that the applicable financial information contained in the Earnings Release was inaccurate or incomplete in any material respect or failed to fairly present, in all material respects, the financial condition, results of operations and cash flows of the Company and the Operating Partnership as of, and for, the periods presented in the Earnings Release.
(q)
Legal Opinions.
On or prior to the date of the first Instruction Date and within five Trading Days of each Triggering Event Date with respect to which the Company and the Operating Partnership are obligated to deliver a certificate pursuant to Section 4(p) for which no waiver is applicable (including, for the avoidance of doubt, a Triggering Event Date deemed to occur upon the Company’s delivery of instructions for the sale of Shares hereunder following a waiver) and excluding the date of this Agreement, a negative assurances letter and the written legal opinion of Clifford Chance US LLP, counsel to the Company, in the form attached hereto as Exhibit C and to such further effect as the Agents and the Forward Purchasers shall reasonably request, and Venable LLP, Maryland counsel to the Company, in the form attached hereto as Exhibit D and to such further effect as the Agents and the Forward Purchasers shall reasonably request, and Clifford Chance LLP, tax counsel to the Company, in the form attached hereto as Exhibit E and to such further effect as the Agents and the Forward Purchasers shall reasonably request, each dated the date of delivery, modified, as necessary, to relate to the Registration Statement, the Time of Sale Prospectus and the Prospectus as then amended or supplemented. In lieu of such opinions for subsequent periodic filings, in the discretion of the Agents and the Forward Purchasers, the Company may furnish a reliance letter from such counsel to the Agents and the Forward Purchasers, permitting the Agents and the Forward Purchasers to rely on a previously delivered opinion letter, modified as appropriate for any passage of time or Triggering Event Date (except that statements in such prior opinion shall be deemed to relate to the Registration Statement, the Time of Sale Prospectus and the Prospectus as amended or supplemented as of such Triggering Event Date).
(r)
Comfort Letter
. On or prior to the date of the first Instruction Date and within five Trading Days of each Triggering Event Date with respect to which the Company is obligated to deliver a certificate pursuant to Section 4(p) for which no waiver is applicable (including, for the avoidance of doubt, a Triggering Event Date deemed to occur upon the Company’s delivery of
instructions for the sale of Shares hereunder following a waiver) and excluding the date of this Agreement, the Company shall (i) cause KPMG LLP, the independent registered public accounting firm who has audited the financial statements included or incorporated by reference in the Registration Statement, to furnish the Agent and the Forward Purchaser a comfort letter, dated the date of delivery, in form and substance reasonably satisfactory to the Agents and the Forward Purchasers, containing statements and information of the type ordinarily included in accountant’s “comfort letters” to agents, delivered according to Statement of Auditing Standards No. 72 (or any successor bulletin), with respect to the audited and unaudited consolidated and combined financial statements and certain financial information contained in the Registration Statement and each free writing prospectus, if any and (ii) cause each of the independent registered public accountants who have audited the financial statements or statements of revenues and certain expenses prepared for the purposes of compliance with Rule 3-05 or Rule 3-14 of Regulation S-X under the Securities Act, as applicable, and included or incorporated by reference in the Registration Statement, to furnish the Agents and the Forward Purchasers a comfort letter, dated the date of delivery, in form and substance reasonably satisfactory to the Agents and the Forward Purchasers, containing statements and information of the type ordinarily included in accountant’s “comfort letters” to agents, delivered according to Statement of Auditing Standards No. 72 (or any successor bulletin), with respect to the audited and unaudited financial statements or statements of revenues and certain expenses, as applicable, and certain financial information contained in the Registration Statement and each free writing prospectus, if any; provided, however, that any such comfort letters will only be required on the Triggering Event Date specified to the extent that it contains financial statements filed with the Commission under the Exchange Act and incorporated or deemed to be incorporated by reference into a Prospectus. If requested by the Agents or the Forward Purchasers, the Company shall also cause a comfort letter to be furnished to the Agents and/or the Forward Purchasers within ten (10) Trading Days of the date of occurrence of any material transaction or event requiring the filing of a current report on Form 8-K containing material amended financial information of the Company, including the restatement of the Company’s financial statements. In connection with any letter delivered on a Settlement Date of any Shares sold to any Agent pursuant to a Terms Agreement, such letter may reaffirm the statements made in the letter dated on the date of such Terms Agreement, except that the specified date referred to in such letter for carrying out procedures shall be no more than three business days prior to such Settlement Date.
(s)
Chief Executive Officer and CFO Certificate
. On or prior to the date of the first Instruction Date and within five Trading Days of each Triggering Event Date with respect to which the Company and the Operating Partnership are obligated to deliver a certificate pursuant to Section 4(p) for which no waiver is applicable (including, for the avoidance of doubt, a Triggering Event Date deemed to occur upon the Company’s delivery of instructions for the sale of Shares hereunder following a waiver) and excluding the date of this Agreement, the Company shall furnish the Agents and the Forward Purchasers a certificate executed by the Chief Executive Officer and the Chief Financial Officer of the Company with respect to certain financial data contained in the Registration Statement, the Time of Sale Prospectus the Prospectus and each free writing prospectus, if any, providing “management comfort” with respect to such information, in form and substance reasonably satisfactory to the Agents and the Forward Purchasers.
(t)
Secretary’s Certificate
. On or prior to the date of the first Instruction Date and within five Trading Days of each Triggering Event Date with respect to which the Company and the Operating Partnership are obligated to deliver a certificate pursuant to Section 4(p) for which no waiver is applicable (including, for the avoidance of doubt, a Triggering Event Date deemed to occur upon the Company’s delivery of instructions for the sale of Shares hereunder following a waiver) and excluding the date of this Agreement, the Company shall furnish the Agents and the Forward Purchasers a certificate executed by the Secretary of the Company, signing in such capacity, (i) certifying that attached thereto are true and complete copies of the resolutions duly adopted by the board of trustees of the Company authorizing the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and any Confirmation (including, without limitation, the delivery of the Shares and the Confirmation Shares pursuant to this Agreement and any Confirmation, as applicable), which authorization shall be in full force and effect on and as of the date of such certificate, (ii) certifying and attesting to the office, incumbency, due authority and specimen signatures of each Person who executed this Agreement for or on behalf of the Company, and (iii) containing any other certification that the Agents or the Forward Purchasers shall reasonably request.
(u)
Agents’ and Forward Purchasers’ Own Accounts; Clients’ Account
. Each of the Company and the Operating Partnership consents to each of the Agents and the Forward Purchasers trading, in compliance with applicable law, in the Shares for any such Agent’s or Forward Purchaser’s own account, as applicable, and for the account of their clients at the same time as sales of the Shares occur pursuant to this Agreement, any Confirmation or any Terms Agreement.
(v)
Investment Limitation
.
The Company shall not invest or otherwise use the proceeds received by the Company from its sale of the Shares hereunder or from the settlement of any Confirmation Shares under the applicable Confirmation in such a manner as would require the Company or any Subsidiary to register as an investment company under the Investment Company Act.
(w)
Market Activities
. The Company and the Operating Partnership will not take, directly or indirectly, any action designed to or that might be reasonably expected to cause or result in stabilization or manipulation of the price of the Shares or any other reference security, whether to facilitate the sale or resale of the Shares or otherwise, and neither will take any action prohibited by Regulation M under the Exchange Act in connection with the offering of the Shares contemplated by this Agreement, any Confirmation or any Terms Agreement.
(x)
Notice of Other Sale
. For any period during which the Company has instructed any Agent to sell Shares as sales agent on behalf of the Company pursuant to an Instruction Notice or as forward seller on behalf of the relevant Forward Purchaser pursuant to a Forward Instruction Notice, as applicable, until the relevant Settlement Date or during the term of any Terms Agreement until the issuance of the Shares described thereunder, the Company will not, without the prior written consent of the relevant Agent, unless the Company has given the relevant Agent at least three business days’ prior written notice specifying the nature of the proposed sale and the date of such proposed sale, directly or indirectly, offer to sell, sell, contract to sell, grant any option to sell or otherwise dispose of any Common Shares or Series A Preferred Shares or securities
convertible into or exchangeable for Common Shares or Series A Preferred Shares (other than Shares hereunder), warrants or any rights to purchase or acquire Common Shares or Series A Preferred Shares;
provided, however
, that such restriction will not be required in connection with the Company’s (i) grant or issuance of equity based awards under the Company’s 2015 Equity Incentive Plan, (ii) issuance of Common Shares, Series A Preferred Shares, OP Units and SP Units upon the exercise, redemption, conversion or exchange of convertible or exchangeable securities described in the Registration Statement, the Time of Sale Prospectus and the Prospectus; (iii) facilitation of conversions of OP Units into SP Units in accordance with the limited partnership agreement of the Operating Partnership, (iv) issuance of Common Shares pursuant to any Company dividend reinvestment plan or direct share purchase plan, and (v) issuance of Common Shares, Series A Preferred Shares or securities convertible into or exchangeable for Common Shares or Series A Preferred Shares, including, as applicable, OP Units, SP Units, LTIP Units, DownREIT OP Units, DownREIT SP Units and Series A-1 Preferred Units in connection with the acquisition of self-storage properties or companies that manage self-storage properties;
provided that
, with respect to clause (v) of this Section only, no single issuance of such securities shall exceed two percent (2%) of the Company’s outstanding Common Shares on a fully diluted basis (assuming a one-for-one exchange or conversion into Common Shares for each such OP Unit, LTIP Unit and DownREIT OP Unit and assuming an exchange or conversion on an as-converted basis into Common Shares for each SP Unit and DownREIT SP Unit) as of the date of such issuance. Upon receipt of any written notice contemplated above, the relevant Agent and the relevant Forward Purchaser may suspend its activity under this Agreement for such period of time as deemed appropriate by such Agent or Forward Purchaser, as applicable. The provisions set forth in this paragraph shall be in addition to, and shall not limit, any lock-up agreement that may be set forth in any Terms Agreement.
(y)
Documentation Pursuant to Terms Agreement
.
In connection with any offering of Shares by any Agent as principal, the Company and the Operating Partnership shall prepare a preliminary pricing supplement to the Prospectus and, as promptly as practicable after the execution of the Terms Agreement relating to such offering, the Company and the Operating Partnership shall prepare a pricing prospectus supplement to the Prospectus, in each case setting forth (as applicable) the plan of distribution for such Shares and such other matters as the Agent or any of the Agents party to such Terms Agreement may reasonably request or that the Company shall deem necessary or appropriate for inclusion therein and, in the case of the pricing supplement, the public offering price of the Shares to be sold pursuant to such Terms Agreement, any discounts or commissions payable to the Agent or Agents, as the case may be, party thereto and the net proceeds to the Company from the sale of such Shares and the use of such proceeds, each of which shall be reasonably satisfactory to each of the Agents party to such Terms Agreement in form and substance, and the Company shall file the same, in each case together with the Prospectus, with the Commission and, to the extent required, with the New York Stock Exchange not later than the two business days following the date thereof and provide electronic and, if requested by any such Agent, hard copies thereof to such Agents.
(z)
Articles Supplementary
. At or prior to the first Instruction Notice relating to the Series A Preferred Shares, the Company will authorize, execute and file the Additional Articles Supplementary with the SDAT.
(aa)
Conversion Shares
. The Company will reserve and keep available at all times the maximum number of Common Shares issuable upon conversion of the Series A Preferred Shares until such time as such Common Shares have been issued or the Series A Preferred Shares have been redeemed.
Section 5.
CONDITIONS TO DELIVERY OF INSTRUCTION NOTICES, FORWARD INSTRUCTION NOTICES AND TO SETTLEMENT
(A) The right of the Company to deliver an Instruction Notice or Forward Instruction Notice hereunder or to enter into a Terms Agreement, and (B) the obligations of (i) the relevant Forward Purchaser under this Agreement with respect to any Forward Hedge Shares subject to a Forward Instruction Notice, (ii) of the relevant Agent hereunder with respect to any Shares that the Company has instructed the Agent to sell as sales agent on behalf of the Company or as forward seller on behalf of the relevant Forward Purchasers, and (ii) of the relevant Agent hereunder and under any Terms Agreement with respect to any Primary Shares that the Agent has agreed to purchase or has the option to purchase as principal pursuant to such Terms Agreement, are each subject to the satisfaction, on each Trading Day during the Selling Period, in the case of the sale of Shares hereunder as a sales agent, or on each day beginning with the execution of the Terms Agreement and ending on the settlement date pursuant to such Terms Agreement, of each of the following conditions:
(a)
Accuracy of the Company and the Operating Partnership’ Representations and Warranties; Performance by the Company
. The Company and the Operating Partnership shall have delivered the certificate required to be delivered pursuant to Section 4(p) on or before the date on which delivery of such certificate is required pursuant to Section 4(p). The Company and the Operating Partnership shall have performed, satisfied and complied with all covenants, agreements and conditions required by this Agreement, any Confirmation and any Terms Agreement to be performed, satisfied or complied with by the Company and the Operating Partnership at or prior to such date, including, but not limited to, the covenants contained in Section 4(o), Section 4(r) and Section 4(t).
(b)
No Injunction
. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby that prohibits or directly and materially adversely affects any of the transactions contemplated by this Agreement, any Confirmation or any Terms Agreement, and no proceeding shall have been commenced that may have the effect of prohibiting or materially adversely affecting any of the transactions contemplated by this Agreement, any Confirmation or any Terms Agreement.
(c)
Material Adverse Changes
. Except as disclosed in the Prospectus, since the commencement of the offering of the Shares under this Agreement or, if later, since the filing with the Commission of an Annual Report on Form 10-K or a Quarterly Report on Form 10-Q (including any Form 10-K/A or Form 10-Q/A containing amended financial information or a material amendment to the previously filed Annual Report on Form 10-K or Quarterly Report on Form 10-Q), and, in the case of the sale of Primary Shares pursuant to a Terms Agreement to which the
Agent is a party, since the date of such Terms Agreement, in the judgment of the Agent there shall not have occurred any Material Adverse Change.
(d)
No Suspension of Trading in or Delisting of the Common Shares or Series A Preferred Shares; Other Events
. The trading of the Common Shares or Series A Preferred Shares (including without limitation the Shares) shall not have been suspended by the Commission, the Principal Market or FINRA and the Common Shares and Series A Preferred Shares (including without limitation the Shares contemplated to be delivered hereunder and any Confirmation Shares contemplated to be delivered under any Confirmation) shall have been approved for listing or quotation on and shall not have been delisted from the Principal Market, subject to notice of issuance. There shall not have occurred (and be continuing in the case of occurrences under clauses (i) and (ii) below) any of the following: (i) trading or quotation in any of the Company’s securities shall have been suspended or limited by the Commission or by the Principal Market, or trading in securities generally on either the Principal Market shall have been suspended or limited, or minimum or maximum prices shall have been generally established on any of such stock exchanges by the Commission or FINRA; (ii) a general banking moratorium shall have been declared by any of federal or New York authorities; or (iii) there shall have occurred any outbreak or escalation of national or international hostilities or any crisis or calamity, or any change in the United States or international financial markets, or any substantial change or development involving a prospective substantial change in United States’ or international political, financial or economic conditions, as in the judgment of the Agent or the Forward Purchaser is material and adverse and makes it impracticable to market the Shares in the manner and on the terms described in the Prospectus or to enforce contracts for the sale of securities;
(e)
Documents Required to be Delivered on each Instruction Date
. An Agent’s obligation to use its commercially reasonable efforts to sell Shares hereunder on an agency basis or purchase Shares pursuant to any Terms Agreement shall additionally be conditioned upon the delivery to the Agent and, if applicable, the relevant Forward Purchaser on or before the Instruction Date or entry into any Terms Agreement of a certificate in form and substance reasonably satisfactory to the Agent and, if applicable, the relevant Forward Purchaser, executed by the Chief Executive Officer, President or Chief Financial Officer of the Company, to the effect that all conditions to the delivery of such Instruction Notice or Forward Instruction Notice (as the case may be) or entry into such Terms Agreement shall have been satisfied as at the date of such certificate (which certificate shall not be required if the foregoing representations shall be set forth in such Instruction Notice, Forward Instruction Notice or Terms Agreement, as applicable).
Section 6.
INDEMNIFICATION AND CONTRIBUTION
(a)
Indemnification of the Agents and the Forward Purchasers
. Each of the Company and the Operating Partnership, jointly and severally, agrees to indemnify and hold harmless each of the Agents and the Forward Purchasers, and their respective affiliates, directors, officers, employees and agents, and each person, if any, who controls the respective Agent or the respective Forward Purchaser within the meaning of the Securities Act or the Exchange Act against any loss, claim, damage, liability or expense, as incurred, to which such Agent, such Forward Purchaser or any such affiliate, director, officer, employee, agent or controlling person may become subject,
under the Securities Act, the Exchange Act, other federal or state statutory law or regulation, or the laws or regulations of foreign jurisdictions where Shares have been offered or sold or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Company or the Operating Partnership), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon (A) (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, or any amendment thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; or (ii) any untrue statement or alleged untrue statement of a material fact included in any preliminary prospectus, the Time of Sale Prospectus or any free writing prospectus that the Company has used, referred to or filed, or is required to file, pursuant to Rule 433(d) of the Securities Act, any Marketing Material or the Prospectus (or any amendment or supplement to the foregoing) or any prospectus wrapper material distributed in connection with the foregoing, or the omission or alleged omission to state therein a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading; and to reimburse such Agent, such Forward Purchaser and each such affiliate, director, officer, employee, agent and controlling person for any and all expenses (including the fees and disbursements of counsel) as such expenses are incurred by such Agent, such Forward Purchaser or such affiliate, director, officer, employee, agent or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the foregoing indemnity agreement shall not apply to any loss, claim, damage, liability or expense to the extent, but only to the extent, arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information relating to such Agent or such Forward Purchaser furnished to the Company by such Agent or such Forward Purchaser in writing expressly for use in the Registration Statement, any such preliminary prospectus, the Time of Sale Prospectus, any such free writing prospectus, any such Marketing Material or the Prospectus (or any amendment or supplement thereto), it being understood and agreed that the only such information consists of the information described in Section 6(b) below. The indemnity agreement set forth in this Section 6(a) shall be in addition to any liabilities that the Company and the Operating Partnership may otherwise have.
(b)
Indemnification of the Company and the Operating Partnership
.
Each of the Agents and the Forward Purchasers severally, and not jointly, agrees to indemnify and hold harmless the Company, the Operating Partnership, each of the Company’s trustees, each of its officers who signed the Registration Statement and each person, if any, who controls the Company or the Operating Partnership within the meaning of the Securities Act or the Exchange Act, against any loss, claim, damage, liability or expense, as incurred, to which the Company, or any such trustee, officer or controlling person may become subject, under the Securities Act, the Exchange Act, or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the relevant Agent), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, or any amendment thereto, or any omission or alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading or (ii) any untrue statement or alleged untrue statement of a material fact included in any preliminary prospectus, the Time of Sale Prospectus, any free writing prospectus, that the Company has used, referred to or filed, or is required to file, pursuant to Rule 433 of the Securities Act or the Prospectus (or any such amendment or supplement) or the omission or alleged omission to state therein a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, such preliminary prospectus, the Time of Sale Prospectus, such free writing prospectus or the Prospectus (or any such amendment or supplement), in reliance upon and in conformity with information relating to such Agent or such Forward Purchaser furnished to the Company by such Agent or such Forward Purchaser in writing expressly for use therein; and to reimburse the Company, the Operating Partnership, or any such trustee, officer or controlling person for any and all expenses (including the fees and disbursements of counsel) as such expenses are incurred by the Company, the Operating Partnership, or any such trustee, officer or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action. The Company and the Operating Partnership hereby acknowledge that the only information that the Agent and the Forward Purchaser have furnished to the Company expressly for use in the Registration Statement, any preliminary prospectus, the Time of Sale Prospectus or any free writing prospectus that the Company has filed, or is required to file, pursuant to Rule 433(d) of the Securities Act, or the Prospectus (or any amendment or supplement to the foregoing) is the name of such Agent and the name of such Forward Purchaser set forth in the Prospectus. The indemnity agreement set forth in this Section 6(b) shall be in addition to any liabilities that each Agent and each Forward Purchaser may otherwise have.
(c)
Notifications and Other Indemnification Procedures
. Promptly after receipt by an indemnified party under this Section 6 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 6, notify the indemnifying party in writing of the commencement thereof, but the omission so to notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party to the extent the indemnifying party is not materially prejudiced (through the forfeiture of substantive rights and defenses) as a proximate result of such failure and shall not in any event relieve the indemnifying party from any liability that it may have otherwise than on account of this indemnity agreement. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it shall elect, jointly with all other indemnifying parties similarly notified, by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party;
provided, however
, that if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that a conflict may arise between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of such indemnifying party’s election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 6 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the fees and expenses of more than one separate counsel (together with local counsel), representing the indemnified parties who are parties to such action), which counsel (together with any local counsel) for the indemnified parties shall be selected by the Agents and, if applicable, Forward Purchasers seeking indemnification (in the case of counsel for the indemnified parties referred to in Section 6(a) above) or by the Company (in the case of counsel for the indemnified parties referred to in Section 6(b) above)) or (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action or (iii) the indemnifying party has authorized in writing the employment of counsel for the indemnified party at the expense of the indemnifying party, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying party and shall be paid as they are incurred.
(d)
Settlements
. The indemnifying party under this Section 6 shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, liability or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by Section 6(c) hereof, the indemnifying party shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity was or could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding and does not include an admission of fault or culpability or a failure to act by or on behalf of such indemnified party.
(e)
Contribution
. If the indemnification provided for in Section 6 is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount paid or payable by such indemnified party, as
incurred, as a result of any losses, claims, damages, liabilities or expenses referred to therein (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Operating Partnership, on the one hand, and the Agent and the Forward Purchaser, on the other hand, from the sale of the Shares pursuant to this Agreement, any Confirmation or any Terms Agreement or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Operating Partnership, on the one hand, and the Agent and the Forward Purchaser, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Operating Partnership, on the one hand, and the Agent and the Forward Purchaser, on the other hand, in connection with the offering of the Shares pursuant to this Agreement or any Terms Agreement shall be deemed to be in the same respective proportions as the total proceeds from the sale of the Shares pursuant to this Agreement or any Terms Agreement (before deducting expenses) received by the Company and the Operating Partnership bear to the total commissions received by the Agent (and, for purposes of the foregoing, the Company shall be deemed to have received net proceeds from the sale of Shares sold through the Agent, acting as forward seller on behalf of a Forward Purchaser in connection with a Confirmation entered into by such Forward Purchaser, in an amount equal to the proceeds that would have been received by the Company upon full physical settlement of the Confirmation Shares under such Confirmation, assuming that the aggregate amount payable by the Forward Purchaser to the Company for such Confirmation Shares is equal to the aggregate amount of net proceeds received by the Forward Purchaser from the sale of such Shares through the Agent). The relative fault of the Company and the Operating Partnership, on the one hand, and the Agent and the Forward Purchaser, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Operating Partnership, on the one hand, or the Agent and the Forward Purchaser, on the other hand, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 6(c), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in Section 6(c) with respect to notice of commencement of any action shall apply if a claim for contribution is to be made under this Section 6(e);
provided, however,
that no additional notice shall be required with respect to any action for which notice has been given under Section 6(c) for purposes of indemnification.
The Company, the Operating Partnership, the Agents and the Forward Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 6(e) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 6(e).
Notwithstanding the provisions of this Section 6(e), neither the Agents nor the Forward Purchasers shall be required to contribute any amount in excess of the commissions received by the relevant Agent or the relevant Forward Purchaser, as applicable, in connection with the offering contemplated hereby. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 6(e), each affiliate, director, officer, employee and agent of an Agent or the Forward Purchaser and each person, if any, who controls an Agent or a Forward Purchaser within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the relevant Agent and the relevant Forward Purchaser, as applicable, and each trustee of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company or the Operating Partnership within the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as the Company and the Operating Partnership.
Section 7.
TERMINATION & SURVIVAL
(a)
Term
. Subject to the provisions of this Section 7, the term of this Agreement shall continue from the date of this Agreement until the end of the Agency Period, unless earlier terminated by the parties to this Agreement pursuant to this Section 7.
(b)
Termination; Survival Following Termination
. (i) Each Agent or Forward Purchaser may terminate this Agreement with respect to itself in its sole discretion at any time upon giving a one Trading Day’s prior written notice to the Company and the Operating Partnership. The Company and the Operating Partnership may terminate this Agreement prior to the end of the Agency Period, by giving written notice as required by this Agreement, upon one Trading Day’s written notice to each other party; provided that, (A) if the Company and the Operating Partnership terminate this Agreement after any Agent confirms to the Company any sale of Shares on an agency basis, the Company shall remain obligated to comply with the covenants set forth in Section 3 hereof and such covenants shall remain in effect until such Shares are resold or so delivered, as the case may be, (B) with respect to any pending sale to an Agent pursuant to a Terms Agreement and any offering or resale of any Primary Shares purchased or to be purchased by an Agent pursuant to a Terms Agreement, the obligations of the Company, including in respect of compensation of the Agent, shall remain in full force and effect notwithstanding such termination, (C) Section 2 and Section 6 shall survive termination of this Agreement and (D) if a Pricing Supplement required to be executed and delivered by the Forward Purchaser pursuant to Section 3(b)(iv) hereof has not been executed and delivered on or prior to such date, then the provisions of this Agreement as they relate to the applicable Confirmation and the Forward Instruction Notice shall survive such termination until such time as such Pricing Supplement has been executed and delivered pursuant to such Confirmation. If termination shall occur prior to the Settlement Date for any sale of Shares, such sale shall nevertheless settle in accordance with the terms of this Agreement. Without limiting the foregoing, upon any termination of this Agreement by the Company and the Operating Partnership pursuant to this Section 7(b), any outstanding Instruction Notice or Forward Instruction Notice (as the case may be) shall also be terminated to the extent the relevant Agent has not confirmed a sale of Shares thereunder.
(ii) In addition to the survival provision of Section 7(b)(i), the respective indemnities, agreements, representations, warranties and other statements of each of the Company and the Operating Partnership, of its officers and of the Agent and the Forward Purchaser set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of the Agent, the Forward Purchaser or the Company and the Operating Partnership or any of its or their partners, officers or directors or any controlling person, as the case may be, and, anything herein to the contrary notwithstanding, will survive delivery of and payment for the Shares sold hereunder and any termination of this Agreement.
Section 8.
RECOGNITION OF THE U.S. SPECIAL RESOLUTION REGIMES.
(a)
The following definitions shall be applied to the terms used in Section 8(b) and Section 8(c) below.
“BHC Act Affiliate
” has the meaning assigned to the term “affiliate” in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k).
“
Covered Entity
” means any of the following:
(i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);
(ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or
(iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).
“
Default Right
” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
“
U.S. Special Resolution Regime
” means each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.
(b)
In the event that the Agent or Forward Purchaser is a Covered Entity and becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from the Agent or Forward Purchaser of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United States.
(c)
In the event that the Agent or Forward Purchaser is a Covered Entity or a BHC Act Affiliate of such Agent or Forward Purchaser becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under this Agreement that may be exercised against the Agent or Forward Purchaser are permitted to be exercised to no greater extent than such Default Rights
could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.
Section 9.
MISCELLANEOUS
(a)
No Advisory or Fiduciary Relationship
.
The Company and the Operating Partnership acknowledge and agree that (i) the transactions contemplated by this Agreement, including the determination of any fees, are arm’s-length commercial transactions between the Company, on the one hand and the Agent and the Forward Purchaser, on the other hand, (ii) when acting as a principal under this Agreement, the Agent is and has been acting solely as a principal and is not the agent or fiduciary of the Company or the Operating Partnership, or the Company’s other shareholders, creditors, employees or any other party, (iii) neither the Agent nor the Forward Purchaser has assumed nor will assume an advisory or fiduciary responsibility in favor of the Company or the Operating Partnership with respect to the transactions contemplated hereby or the process leading thereto (irrespective of whether the Agent or the Forward Purchaser has advised or is currently advising the Company or the Operating Partnership on other matters) and neither the Agent nor the Forward Purchaser has any obligation to the Company or the Operating Partnership with respect to the transactions contemplated hereby except the obligations expressly set forth in this Agreement, any Confirmation and any Terms Agreement to which the Agent is a party, (iv) the Agent, the Forward Purchaser and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company and the Operating Partnership, and (v) neither the Agent nor the Forward Purchaser has provided any legal, accounting, regulatory or tax advice with respect to the transactions contemplated hereby and the Company and the Operating Partnership have consulted their own legal, accounting, regulatory and tax advisors to the extent they deemed appropriate.
(b)
Research Analyst Independence
. The Company and the Operating Partnership acknowledge that the Agent’s and the Forward Purchaser’s research analysts and research departments are required to and should be independent from their respective investment banking divisions and are subject to certain regulations and internal policies, and as such the Agent’s and the Forward Purchaser’s research analysts may hold views and make statements or investment recommendations and/or publish research reports with respect to the Company or the offering that differ from the views of their respective investment banking divisions. The Company and the Operating Partnership understand that the Agent and the Forward Purchaser are a full service securities firms and as such from time to time, subject to applicable securities laws, may effect transactions for their own accounts or the accounts of their customers and hold long or short positions in debt or equity securities of the companies that may be the subject of the transactions contemplated by this Agreement, any Confirmation or any Terms Agreement.
(c)
Notices
. All communications hereunder and under any Terms Agreement shall be in writing and shall be mailed, hand delivered, emailed or telecopied and confirmed to the parties hereto as follows:
If to the Agents:
Jefferies LLC
520 Madison Avenue
New York, New York 10022
Telephone: (212) 323-7640
Attention: Equity Derivatives Middle Office
Email: eqderiv_mo@jefferies.com
With copies to:
Jefferies LLC
520 Madison Avenue
New York, New York 10022
Tel: (212) 708-2734
Email: ccurtis@jefferies.com and CorpEqDeriv@jefferies.com
and
Jefferies LLC
520 Madison Avenue
New York, New York 10022
Tel: (212) 284-3433
Attn.: Sonia Han
Email: Shan@jefferies.com
Robert W. Baird & Co. Incorporated
777 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202
Facsimile: (414) 298-7474
Attention: Syndicate Department, with a copy to the Legal Department