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2025-01-30
--12-31
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): January 30, 2025
NEXPOINT DIVERSIFIED REAL ESTATE TRUST
(Exact Name Of Registrant As Specified In Charter)
Delaware
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001-32921
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80-0139099
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(State or Other Jurisdiction
of Incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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300 Crescent Court, Suite 700
Dallas, Texas 75201
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (214) 276-6300
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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☐
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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☐
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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☐
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class
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Trading
Symbol(s)
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Name of each exchange
on which registered
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Common Shares, par value $0.001 per share
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NXDT
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New York Stock Exchange
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5.50% Series A Cumulative Preferred Shares, par value $0.001 per share ($25.00 liquidation preference per share) |
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NXDT-PA |
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New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Item 1.01. Entry into a Material Definitive Agreement.
Dealer Manager Agreement
On January 30, 2025, NexPoint Diversified Real Estate Trust, a Delaware statutory trust (the “Company”), entered into a Dealer Manager Agreement (the “Dealer Manager Agreement”) with NexPoint Securities, Inc., a Delaware corporation (the “Dealer Manager”) and an affiliate of NexPoint Real Estate Advisors X, L.P., the Company’s external adviser, whereby the Dealer Manager will serve as the Company’s exclusive dealer manager in connection with the Company’s offering (the “Offering”) of up to 16,000,000 shares of the Company’s 9.00% Series B Cumulative Redeemable Preferred Shares, par value $0.001 per share (“Series B Preferred Shares”), at a public offering price of $25.00 per share.
The Series B Preferred Shares are registered with the Securities and Exchange Commission (the “SEC”) pursuant to a registration statement on Form S-3 (File No. 333-280954), as the same may be amended and/or supplemented (the “Registration Statement”), under the Securities Act of 1933, as amended (the “Securities Act”), and will be offered and sold pursuant to a prospectus supplement, dated January 30, 2025 (the “Prospectus Supplement”), and a base prospectus dated August 1, 2024 relating to the Registration Statement (together with the Prospectus Supplement, the “Prospectus”).
Under the Dealer Manager Agreement, the Dealer Manager will use its reasonable best efforts to sell the Series B Preferred Shares offered in the Offering, and the Company will pay the Dealer Manager, subject to the discounts and other special circumstances described or referenced therein, (i) selling commissions of 7.0% of the aggregate gross proceeds from sales of Series B Preferred Shares in the Offering (“Selling Commissions”) and (ii) a dealer manager fee of 3.0% of the gross proceeds from sales of Series B Preferred Shares in the Offering (the “Dealer Manager Fee”). The Dealer Manager Agreement provides that the Dealer Manager, subject to federal and state securities laws, will reallow all or any portion of the Selling Commissions and may reallow a portion of the Dealer Manager Fee to other securities dealers that the Dealer Manager may retain (collectively, the “Participating Broker-Dealers”) who sold the Series B Preferred Shares as will be described more fully in the agreements between each of the Participating Broker-Dealers and the Dealer Manager.
Pursuant to the Dealer Manager Agreement, in no event shall the total aggregate underwriting compensation payable to the Dealer Manager and any Participating Broker-Dealers participating in the Offering, including, but not limited to, Selling Commissions, the Dealer Manager Fee and permissible forms of non-cash compensation, exceed 10.0% of gross offering proceeds from the Offering in the aggregate.
In addition, the Company shall reimburse the Dealer Manager or any Participating Broker-Dealer for reasonable bona fide due diligence expenses incurred by the Dealer Manager or any Participating Broker-Dealer to the extent permitted pursuant to the rules of Financial Industry Regulatory Authority, Inc., provided, however, that no due diligence expenses shall be reimbursed by the Company which would cause the aggregate of all of the Offering expenses paid by the Company and compensation to the Dealer Manager described above to exceed 15% of the gross proceeds from the Offering in the aggregate.
Pursuant to the Dealer Manager Agreement, the Company agreed to indemnify the Dealer Manager and Participating Broker-Dealers, and the Dealer Manager has agreed to indemnify the Company, against certain losses, claims, damages and liabilities, including but not limited to those arising out of (i) untrue statements or alleged untrue statements of a material fact contained in the Prospectus or Registration Statement relating to the Offering, and any amendments or supplements thereto relating to the Series B Preferred Shares, or (ii) the omission or alleged omission to state a material fact required to be stated in the Prospectus or Registration Statement.
The Dealer Manager Agreement will terminate automatically upon the termination of the Offering, upon the dissolution or liquidation of the Company, or upon the revocation or suspension of the Dealer Manager’s license or registration to act as a broker-dealer if the same is not cured within ten days. In addition, the Dealer Manager Agreement may be terminated by the Company or the Dealer Manager upon ten calendar days’ written notice to the other party.
In compliance with the Company’s Related Party Transaction Policy, the Dealer Manager Agreement was reviewed and approved by the Audit Committee of the Company’s Board of Trustees.
The foregoing description of the Dealer Manager Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Dealer Manager Agreement, which is filed as Exhibit 1.1 to this Current Report on Form 8-K and is hereby incorporated by reference into this Item 1.01.
Amendment and Restatement of the Operating Partnership Agreement
On January 30, 2025, the General Partner of NexPoint Diversified Real Estate Trust Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”), entered into the Amended and Restated Limited Partnership Agreement of the Operating Partnership (the “Amended and Restated OP LPA”). Substantially all of the Company’s business is conducted through the Operating Partnership and, as of September 30, 2024, the Company held 100% of the limited partnership units in the Operating Partnership. The Amended and Restated OP LPA provides for the designation of 5.50% Series A Cumulative Preferred Units (the “Series A Preferred Units”) and 9.00% Series B Cumulative Redeemable Preferred Units (the “Series B Preferred Units”) as new series of preferred units of the Operating Partnership and the authorization for issuance of up to 4,800,000 Series A Preferred Units and 16,000,000 Series B Preferred Units. The Operating Partnership issued 3,359,593 Series A Preferred Units to the Company in connection with entering into the Amended and Restated OP LPA. The Company expects to contribute the net proceeds from the sale of the Series B Preferred Shares in the Offering to the Operating Partnership in exchange for the same number of Series B Preferred Units. Any such issuance of the Series B Preferred Units will be exempt from registration pursuant to Section 4(a)(2) of the Securities Act. The Series A Preferred Units and the Series B Preferred Units have economic terms that mirror the terms of the Company’s 5.50% Series A Cumulative Preferred Shares, par value $0.001 per share, liquidation preference $25.00 per share ("Series A Preferred Shares") and Series B Preferred Shares, respectively.
The foregoing description of the Amended and Restated OP LPA is a summary and is qualified in its entirety by reference to the full text of the Amended and Restated OP LPA, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is hereby incorporated by reference into this Item 1.01.
Item 3.03. Material Modification to Rights of Security Holders.
On January 30, 2025, the Company adopted a Statement of Preferences (the “Statement of Preferences”) to classify and designate 16,000,000 shares of the Company’s authorized but unissued preferred shares, par value $0.001 per share, as Series B Preferred Shares, with the powers, designations, preferences and other rights as set forth therein. A summary of the material terms of the Series B Preferred Shares is set forth under the caption “Description of Series B Preferred Shares” in the
Prospectus Supplement, and is hereby incorporated by reference into this Item 3.03. The summary of the Series B Preferred Shares in the Prospectus Supplement and the following description of the Series B Preferred Shares does not purport to be complete and is qualified in its entirety by reference to the full text of the Statement of Preferences, which is filed as Exhibit 3.1 to this Current Report on Form 8-K and is hereby incorporated by reference into this Item 3.03.
The Series B Preferred Shares rank senior to the Company’s common shares, par value $0.001 per share (“Common Shares”), and pari passu with the Company’s Series A Preferred Shares, with respect to distribution rights and rights upon the voluntary or involuntary liquidation, dissolution or winding up of the Company.
In addition to other preferential rights, upon any voluntary or involuntary liquidation, dissolution, termination, cancellation or winding-up of our affairs, before any distribution or payment will be made to holders of our Common Shares or any other class or series of beneficial interests ranking junior to our Series B Preferred Shares, the holders of Series B Preferred Shares then outstanding will be entitled to be paid out of our assets legally available for distribution to our shareholders, after payment or provision for our debts and other liabilities, the liquidation preference equal to $25.00 per share, subject to appropriate adjustment in relation to any recapitalizations, share dividends, share splits, share combinations, reclassifications or other similar events which affect the Series B Preferred Shares, plus an amount equal to accrued but unpaid cash dividends thereon, if any, to but not including the date of payment, pari passu with the holders of our Series A Preferred Shares and any other class or series of our beneficial interests ranking on parity with the Series B Preferred Shares as to the liquidation preference and/or accrued but unpaid dividends they are entitled to receive.
Furthermore, the Company is restricted from declaring or paying any distributions, or setting aside any funds for the payment of distributions, on Common Shares or, subject to certain exceptions, redeeming or otherwise acquiring Common Shares unless full cumulative distributions on the Series B Preferred Shares and the Series A Preferred Shares have been declared and either paid or set aside for payment in full for all past distribution periods.
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
The information set forth above under Item 3.03 of this report is hereby incorporated by reference into this Item 5.03.
Item 7.01. Regulation FD Disclosure.
Press Release
On January 30, 2025, the Company issued a press release announcing the Offering.
A copy of this press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is hereby incorporated by reference into this Item 7.01. This press release shall not be deemed “filed” for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information in Item 7.01, including Exhibit 99.1, shall not be deemed incorporated by reference into any filing under the Exchange Act or the Securities Act, regardless of any general incorporation language in such filing.
Item 8.01. Other Events.
The Series B Preferred Shares will be offered and sold in the Offering pursuant to the Registration Statement and Prospectus. A form of the Subscription Agreement for sales of Series B Preferred Shares through Direct Registration System settlement is filed herewith as Exhibit 99.2 to this Current Report on Form 8-K.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit Number
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Exhibit Description
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104
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Cover Page Interactive Data File (embedded within the Inline XBRL document)
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Cautionary Statement regarding Forward-Looking Statements
This Current Report on Form 8-K contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management’s current expectations, assumptions and beliefs. Forward-looking statements can often be identified by words such as “anticipate,” “estimate,” “expect,” “intend,” “may,” “should” and similar expressions, and variations or negatives of these words. These forward-looking statements include, but are not limited to, statements regarding the best efforts of the Dealer Manager to sell Series B Preferred Shares, the performance of the parties under the Dealer Manager Agreement, and the contribution of the net proceeds of the Offering to the Operating Partnership. They are not guarantees of future results and forward-looking statements are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statement, including those described in greater detail in our filings with the SEC, particularly those described in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers should not place undue reliance on any forward-looking statements and are encouraged to review the Company’s other filings with the SEC for a more complete discussion of risks and other factors that could affect any forward-looking statement. The statements made herein speak only as of the date of this Current Report on Form 8-K and except as required by law, the Company does not undertake any obligation to publicly update or revise any forward-looking statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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NEXPOINT DIVERSIFIED REAL ESTATE TRUST
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By:
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/s/ Matt McGraner
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Name: Matt McGraner
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Title: Executive VP and Chief
Investment Officer
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Date: January 30, 2025
Exhibit 1.1
NEXPOINT SECURITIES, INC.
DEALER MANAGER AGREEMENT
January 30, 2025
NexPoint Securities, Inc.
200 Crescent Court, Suite 700
Dallas, Texas 75201
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RE:
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NexPoint Diversified Real Estate Trust
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Ladies and Gentlemen:
NexPoint Diversified Real Estate Trust (the “Company”) is a Delaware statutory trust qualified to be taxed as a real estate investment trust (a “REIT”) for federal income tax purposes beginning with the taxable year ended December 31, 2021. The Company proposes to offer (the “Offering”) up to 16,000,000 shares of the Company’s Series B Cumulative Redeemable Preferred Shares, par value $0.001 per share (“Shares”). The offering also covers the Company’s common shares, par value $0.001 per share that may be issuable upon redemption of the Shares. Each Share will be sold at a public offering price of $25.00 per share.
Upon the terms and subject to the conditions contained in this Dealer Manager Agreement (this “Agreement”), the Company hereby appoints NexPoint Securities, Inc., a Delaware corporation (the “Dealer Manager”), to act as the exclusive dealer manager for the Offering, and the Dealer Manager desires to accept such engagement, and the Company and the Dealer Manager agree as follows:
1.
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Representations And Warranties Of The Company. The Company hereby represents, warrants and agrees, as of the date of this Agreement and on each Effective Date (as defined below) as follows:
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(a)
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Registration Statement and Prospectus. In connection with the Offering, the Company has prepared and filed with the Securities and Exchange Commission (the “Commission”) a Registration Statement for the registration of the Shares under the Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations of the Commission promulgated thereunder (the “Securities Act Rules and Regulations”); and one or more amendments to such Registration Statement have been or may be so prepared and filed. The Registration Statement and the Prospectus contained therein, as finally amended on the date the registration statement was declared effective by the Commission (the “Effective Date”), are respectively hereinafter referred to as the “Registration Statement” and the “Prospectus”, except that:
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(i)
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if the Company files a post-effective amendment to such registration statement, then the term “Registration Statement” shall, from and after the declaration of the effectiveness of such post-effective amendment by the Commission, refer to such registration statement as amended by such post-effective amendment, and the term “Prospectus” shall refer to the amended prospectus then on file with the Commission; and
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(ii)
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if the prospectus filed by the Company pursuant to either Rule 424(b) or 424(c) of the Securities Act Rules and Regulations shall differ from the prospectus on file at the time the Registration Statement or the most recent post-effective amendment thereto, if any, shall have become effective, then the term “Prospectus” shall refer to such prospectus filed pursuant to either Rule 424(b) or 424(c), as the case may be, from and after the date on which it shall have been filed.
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As used herein, the terms “Registration Statement” and “Prospectus” shall include the documents, if any, incorporated by reference therein.
As used herein, the term “Effective Date” also shall refer to the effective date of each post-effective amendment to the Registration Statement, unless the context otherwise requires.
As used in this Agreement, unless explicitly stated otherwise, (i) the term “Registration Statement” means, at any given time, the registration statement listed on Schedule 1, as such Schedule 1 may be amended from time to time, as such registration statement is finally amended and revised at the effective date of the registration statement (including at the effective date of any post-effective amendment thereto) and (ii) the term “Prospectus” means, at any given time, a prospectus contained in, or that supplements or amends, the registration statement listed on Schedule 1.
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(b)
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Compliance With the Securities Act. As of each Effective Date or filing date, as applicable:
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(i)
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the Registration Statement, the Prospectus and any amendments or supplements thereto have complied, and will comply, in all material respects with the Securities Act, the Securities Act Rules and Regulations, the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations promulgated thereunder (the “Exchange Act Rules and Regulations”);
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(ii)
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the Registration Statement does not, and any amendment thereto will not, in each case as of the applicable Effective Date, include any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and the Prospectus does not, and any amendment or supplement thereto will not, as of the applicable filing date, include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading; provided, however, that the foregoing provisions of this Section 1(b) will not extend to any statements contained in or omitted from the Registration Statement or the Prospectus that are based upon written information furnished to the Company by the Dealer Manager expressly for use in the “Plan of Distribution” section of Registration Statement or Prospectus; and
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(iii)
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the documents incorporated or deemed to be incorporated by reference in the Prospectus, at the time they are hereafter filed with the Commission, will comply in all material respects with the requirements of the Exchange Act and the Exchange Act Rules and Regulations, and, when read together with the other information in the Prospectus, at the time the Registration Statement became effective and as of the applicable Effective Date of each post-effective amendment to the Registration Statement, did not and will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
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(c)
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Securities Matters. There has not been:
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(i)
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any request by the Commission for any further amendment to the Registration Statement or the Prospectus or for any additional information;
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(ii)
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any issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the institution or, to the Company’s knowledge, threat of any proceeding for that purpose; or
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(iii)
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any notification with respect to the suspension of the qualification of the Shares for sale in any jurisdiction or any initiation or, to the Company’s knowledge, threat of any proceeding for such purpose.
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The Company is in compliance in all material respects with all federal and state securities laws, rules and regulations applicable to it and its activities with respect to the Offering and the sale of the Shares.
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(d)
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Corporate Status and Good Standing. The Company is a Delaware statutory trust duly organized and validly existing and in good standing under the laws of the State of Delaware, with all requisite power and authority to enter into this Agreement and to carry out its obligations hereunder.
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(e)
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Authorization of Agreement. This Agreement is duly authorized, executed and delivered by or on behalf of the Company and, assuming due authorization, execution and delivery of this Agreement by the Dealer Manager, constitutes a valid and legally binding agreement of the Company enforceable against the Company in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability and except that rights to indemnity and contribution hereunder may be limited by applicable law and public policy.
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(f)
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Absence of Conflict or Default. The execution and delivery of this Agreement and the performance of this Agreement, the consummation of the transactions contemplated herein and compliance with the terms of this Agreement by the Company do not and will not conflict with, or result in a breach of any of the terms and provisions of, or constitute a default under:
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(i)
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the Company’s or any of its subsidiaries’ Agreement and Declaration of Trust, bylaws, or other organizational documents, as the case may be;
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(ii)
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any indenture, mortgage, deed of trust, voting trust agreement, note, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or any of their properties is bound except for such conflicts, breaches or defaults that do not result in and could not reasonably be expected to result in, individually or in the aggregate, a Company MAE (as defined below in this Section 1(f)); or
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(iii)
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any statute, rule or regulation or order of any court or other governmental agency or body having jurisdiction over the Company, any of its subsidiaries or any of their properties, except for such conflicts, breaches or defaults that do not result in and would not reasonably be expected to result in, individually or in the aggregate, a Company MAE.
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No consent, approval, authorization or order of any court or other governmental agency or body has been or is required for the performance of this Agreement or for the consummation by the Company of any of the transactions contemplated hereby (except as have been obtained under the Securities Act, the Exchange Act, or as may be required under the Financial Industry Regulatory Authority, Inc. (“FINRA”) or state securities or applicable blue sky laws in connection with the offer and sale of the Shares or under the laws of states in which the Company may own real properties in connection with its qualification to transact business in such states or as may be required by subsequent events which may occur). Neither the Company nor any of its subsidiaries is in violation of its Agreement and Declaration of Trust, bylaws or other organizational documents, as the case may be, that would reasonably be expected to result in a Company MAE.
As used in this Agreement, “Company MAE” means any event, circumstance, occurrence, fact, condition, change or effect, individually or in the aggregate, that has, or could reasonably be expected to, have a materially adverse effect on the condition, business, properties, assets, net worth, results of operations or prospects of the Company and its subsidiaries, taken as a whole, or (B) the ability of the Company to perform its obligations under this Agreement or the validity or enforceability of this Agreement or the Shares.
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(g)
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Actions or Proceedings. As of the initial Effective Date, except as disclosed in the Company’s filings with the Commission, there are no actions, suits or proceedings against, or investigations of, the Company or its subsidiaries pending or, to the knowledge of the Company, threatened, before any court, arbitrator, administrative agency or other tribunal:
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(i)
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asserting the invalidity of this Agreement;
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(ii)
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seeking to prevent the issuance of the Shares or the consummation of any of the transactions contemplated by this Agreement;
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(iii)
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that would reasonably be expected to result in a Company MAE; or
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(iv)
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seeking to affect adversely the federal income tax attributes of the Shares except as described in the Prospectus.
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The Company promptly will give notice to the Dealer Manager of the occurrence of any action, suit, proceeding or investigation of the type referred to above arising or occurring on or after the initial Effective Date.
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(h)
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Escrow Agreement. The Company will enter into an escrow agreement (the “Escrow Agreement”) with UMB Bank, National Association (the “Escrow Agent”).
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(i)
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Sales Literature. Any supplemental sales literature or advertisement (including, without limitation any “broker-dealer use only” or institutional material), regardless of how labeled or described, used in addition to the Prospectus in connection with the Offering which previously has been, or hereafter is, furnished or approved by the Company (collectively, “Approved Sales Literature”), shall, to the extent required, be filed with and approved by the appropriate securities agencies and bodies, provided that the Dealer Manager will make all FINRA filings, to the extent required. Any and all Approved Sales Literature, when used in connection with the Prospectus, did not or will not at the time provided for use include 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, in light of the circumstances under which they were made, not misleading.
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(j)
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Authorization of Shares. The Shares have been duly authorized and, when issued and sold as contemplated by the Prospectus and upon payment therefor as provided in this Agreement and the Prospectus, will be validly issued, fully paid and nonassessable and will conform in all material aspects to the description thereof contained in the Prospectus.
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(k)
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Taxes. Any taxes, fees and other governmental charges in connection with the execution and delivery of this Agreement or the execution, delivery and sale of the Shares have been or will be paid when due.
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(l)
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Investment Company. The Company is not, and neither the offer or sale of the Shares nor any of the activities of the Company will cause the Company to be, an “investment company” or under the control of an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.
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(m)
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Tax Returns. The Company has filed or will file all material federal, state and foreign income tax returns required to be filed by or on behalf of the Company on or before the due dates therefor (taking into account all extensions of time to file) and has paid or provided for the payment of all such material taxes, except those being contested in good faith, indicated by such tax returns and all assessments received by the Company to the extent that such taxes or assessments have become due.
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(n)
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REIT Qualifications. The Company made a timely election to be subject to tax as a REIT pursuant to Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”) beginning with its taxable year ended December 31, 2021. The Company has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code. The Company’s planned method of operation will enable it to continue to meet the requirements for qualification and taxation as a REIT under the Code.
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(o)
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Independent Registered Public Accounting Firm; Financial Reporting. The accountants who have certified certain financial statements appearing in the Prospectus are an independent registered public accounting firm as required by the Securities Act and the Securities Act Rules and Regulations. Such accountants have not been engaged by the Company to perform any “prohibited activities” (as defined in Section 10A of the Exchange Act).
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The Company and its subsidiaries maintain systems of “internal control over financial reporting” (as defined in Rule 13a-15(f) of the Exchange Act) that comply with the requirements of the Exchange Act and have been designed by, or under the supervision of, their respective principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles as applied in the United States (“GAAP”), including, without limitation:
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(i)
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transactions are executed in accordance with management’s general or specific authorizations;
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(ii)
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transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets;
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(iii)
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access to assets is permitted only in accordance with management’s general or specific authorizations; and
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(iv)
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the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
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Except as described in the Registration Statement, and the Company’s filings with the Commission, since the end of the Company’s most recent audited fiscal year, there has been (1) no material weakness in the Company’s internal control over financial reporting (whether or not remediated), and (2) no change in the Company’s internal control over financial reporting that has materially adversely affected, or is reasonably likely to materially adversely affect, the Company’s internal control over financial reporting, it being understood that the Company is not required as of the date hereof to comply with the auditor attestation requirements under Section 404 of the Sarbanes-Oxley Act of 2002 and all rules and regulations of the Commission promulgated thereunder (the “Sarbanes-Oxley Act”).
The Company and its subsidiaries maintain an effective system of “disclosure controls and procedures” (as defined in Rule 13a-15(e) of the Exchange Act) that complies with the requirements of the Exchange Act and that has been designed to provide reasonable assurances that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, including controls and procedures designed to ensure that such information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure.
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(p)
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Preparation of the Financial Statements. The financial statements, together with the notes thereto, filed with the Commission as a part of the Registration Statement and included in the Prospectus present fairly in all material respects the consolidated financial position of the Company and its subsidiaries as of and at the dates indicated and the results of their operations and cash flows for the periods specified. Such financial statements have been prepared in conformity with GAAP applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto. No other financial statements or supporting schedules are required to be included or incorporated by reference in the Registration Statement or any applicable Prospectus.
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(q)
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Material Adverse Change. Since the respective dates as of which information is given in the Registration Statement and the Prospectus, except as may otherwise be stated therein or contemplated thereby, or in the Company’s filings with the Commission, there has not occurred a Company MAE, whether or not arising in the ordinary course of business.
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(r)
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Properties. Except as otherwise disclosed in the Prospectus and except as would not result in, individually or in the aggregate, a Company MAE, the Company and its subsidiaries have good and marketable title to, or have valid rights to lease or otherwise use, all items of personal property that are material to the respective businesses of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances, claims and defects and imperfections of title.
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2.
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Representations and Warranties of the Dealer Manager. The Dealer Manager represents and warrants to the Company as of the date of this Agreement and on each Effective Date that:
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(a)
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Organization Status. The Dealer Manager is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with all requisite power and authority to enter into this Agreement and to carry out its obligations hereunder.
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(b)
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Authorization of Agreement. This Agreement has been duly authorized, executed and delivered by the Dealer Manager, and assuming due authorization, execution and delivery of this Agreement by the Company, constitutes a valid and legally binding agreement of the Dealer Manager enforceable against the Dealer Manager in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability and except that rights to indemnity and contribution hereunder may be limited by applicable law and public policy.
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(c)
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Absence of Conflict or Default. The execution and delivery of this Agreement and the performance of this Agreement, the consummation of the transactions contemplated herein and compliance with the terms of this Agreement by the Dealer Manager do not and will not conflict with, or result in a breach of any of the terms and provisions of, or constitute a default under:
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(i)
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its organizational documents;
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(ii)
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any indenture, mortgage, deed of trust or lease to which the Dealer Manager is a party or by which it may be bound, or to which any of the property or assets of the Dealer Manager is subject; or
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(iii)
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any statute, rule, regulation or order of any court or other governmental agency or body having jurisdiction over the Dealer Manager or its assets, properties or operations,
except in the case of clause (ii) or (iii) for such conflicts, breaches or defaults that would not individually or in the aggregate have a material adverse effect on the condition (financial or otherwise), business, properties or results of operations of the Dealer Manager.
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(d)
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Broker-Dealer Registration; FINRA Membership. The Dealer Manager is, and during the term of this Agreement will be, duly registered as a broker-dealer pursuant to the provisions of the Exchange Act, a member in good standing of FINRA, and a broker or dealer duly registered as such in those states where the Dealer Manager is required to be registered in order to carry out the Offering as contemplated by this Agreement. Moreover, the Dealer Manager’s employees and representatives have all required licenses and registrations to act under this Agreement. There is no provision in the Dealer Manager’s FINRA membership agreement that would restrict the ability of the Dealer Manager to carry out the Offering as contemplated by this Agreement.
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(e)
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The information in the “Plan of Distribution” section of the Prospectus insofar as it relates to the Dealer Manager, furnished to the Company by the Dealer Manager in writing specifically for use in the Registration Statement, any preliminary Prospectus or the Prospectus, does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
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3.
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Offering and Sale of the Shares. Upon the terms and subject to the conditions set forth in this Agreement, the Company hereby appoints the Dealer Manager as its agent and exclusive distributor to solicit and to retain the Participating Broker-Dealers (as defined in Section 3(a)) to solicit subscriptions for the Shares at the subscription price to be paid in cash. Upon the terms and subject to the conditions set forth in this Agreement, the Dealer Manager hereby accepts such agency and exclusive distributorship and agrees to use its reasonable best efforts to sell or cause to be sold the Shares in such quantities and to such persons in accordance with such terms as are set forth in this Agreement, the Prospectus and the Registration Statement.
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The Dealer Manager shall do so during the period commencing on the date of this Agreement and ending on the earliest to occur of the following: (1) the acceptance by the Company of subscriptions for the amount offered in the Offering; (2) the termination of this Agreement; and (3) the liquidation or dissolution of the Company.
The number of Shares, if any, to be reserved for sale by each Participating Broker-Dealer may be determined by mutual agreement, from time to time, by the Dealer Manager and the Company. In the absence of such determination, the Company shall, subject to the provisions of Section 3(b), accept subscriptions based upon a first-come, first accepted reservation or other similar method. Under no circumstances will the Dealer Manager be obligated to underwrite or purchase any Shares for its own account and, in soliciting purchases of Shares, the Dealer Manager shall act solely as the Company’s agent and not as an underwriter or principal.
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(a)
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Participating Broker-Dealers. The Shares offered and sold through the Dealer Manager under this Agreement shall be offered and sold only by the Dealer Manager and other securities dealers the Dealer Manager may retain (collectively the “Participating Broker-Dealers”); provided, however, that:
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(i)
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the Dealer Manager reasonably believes that all Participating Broker-Dealers are registered with the Commission, members of FINRA and are duly licensed or registered by the regulatory authorities in the jurisdictions in which they will offer and sell Shares; and
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(ii)
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all such engagements are evidenced by written agreements, the terms and conditions of which substantially conform to the form of Participating Broker-Dealer Agreement substantially in the form of Exhibit A hereto (the “Participating Broker-Dealer Agreement”).
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Shares may also be distributed through registered investment advisors pursuant to written agreements upon terms mutually agreed upon by the parties.
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(b)
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Subscription Documents. Each person desiring to purchase Shares through the Dealer Manager, or any other Participating Broker-Dealer, will be required to complete and execute the subscription documents described in the Prospectus.
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(c)
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Completed Sale. The Company will sell Shares using two closing services, including but not limited to The Depository Trust Company (“DTC”) closing (“DTC Settlement”) and the Direct Registration Service (“DRS Settlement”). The Company may also utilize Delivery Versus Payment (“DVP Settlement”), which is a type of DTC Settlement. A sale of a Share shall be deemed by the Company to be completed if and only if (i) the Company has received payment of the full purchase price of each purchased Share, from an investor who satisfies the minimum purchase requirements set forth in the Registration Statement as determined by the Participating Broker-Dealer, or the Dealer Manager, as applicable, in accordance with the provisions of this Agreement, (ii) the Company has accepted such subscription, and, if using DRS Settlement, a properly completed and executed Subscription Agreement, and (iii) the Company has instructed the issuance of purchased Shares. In addition, no sale of Shares shall be completed until after the date on which the subscriber receives a copy of the Prospectus. The Dealer Manager hereby acknowledges and agrees that the Company, in its sole and absolute discretion, may accept or reject any subscription, in whole or in part, for any reason whatsoever or no reason, and no commission or Dealer Manager Fee will be paid to the Dealer Manager with respect to that portion of any subscription which is rejected.
The Company has the sole right to:
● determine and change the number and timing of closings, including the right to change the number and timing of closings after communicating the anticipated closing timing to Participating Broker-Dealers;
● limit the total amount of the Shares sold by all Participating Broker-Dealers per closing;
● limit the total amount of the Shares sold by any one Participating Broker-Dealer per closing;
● limit the total number of the Shares sold by any one Participating Broker-Dealer; and
● initiate, from time to time at its discretion, without warning, blackout periods where no closings or settlement may take place. If any orders are submitted during a blackout period, such orders will not be settled, no dividends will accrue and no commissions or fees will be paid until the applicable closing or settlement occurs after the end of the blackout period.
As used in this Agreement, “business day” means any day other than a Saturday, Sunday or a day on which banking institutions in the State of Texas are authorized or obligated by law or executive order to close.
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In connection with DRS Settlement, when a Participating Broker-Dealer’s internal supervisory procedures are conducted at the site at which the Subscription Agreement and check were initially received by the Participating Broker-Dealer from the subscriber, the Participating Broker-Dealer shall transmit the properly completed Subscription Agreement and check to the Escrow Agent by the end of the next business day following receipt of the check and Subscription Agreement. When, pursuant to the Participating Broker-Dealer’s internal supervisory procedures, the Participating Broker-Dealer’s final internal supervisory procedures are conducted at a different location (the “Final Review Office”), the Participating Broker-Dealer shall transmit the check and properly completed Subscription Agreement to the Final Review Office by the end of the next business day following the Participating Broker-Dealer’s receipt of the Subscription Agreement and check. The Final Review Office will, by the end of the next business day following its receipt of the Subscription Agreement and check, forward both the Subscription Agreement and check to the Escrow Agent.
If any Subscription Agreement solicited by the Participating Broker-Dealer is rejected by the Dealer Manager or the Company, then the Subscription Agreement and check will be returned to the rejected subscriber within 10 business days from the date of rejection.
Those persons who purchase Shares using DRS Settlement will be instructed by the Dealer Manager or the Participating Broker-Dealer to make their checks payable as provided in the Prospectus and Subscription Agreement for the Offering of the Shares of the Company. The Dealer Manager and any Participating Broker-Dealer receiving a check that does not conform to the instructions in the Prospectus and Subscription Agreement shall promptly return such check directly to such subscriber. Checks received by the Dealer Manager or Participating Broker-Dealer which conform to the instructions in the Prospectus and Subscription Agreement shall be transmitted for deposit pursuant to one of the methods described in this Section 3.
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(d)
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Dealer-Manager Compensation.
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(i)
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Subject to the discounts and other special circumstances described in or otherwise provided in the “Plan of Distribution” section of the Prospectus or this Section 3(d), the Company agrees to pay the Dealer Manager selling commissions in the amount of seven percent (7.0%) of the aggregate gross offering proceeds from the Shares offered in the Offering. The Company may pay reduced selling commissions or may eliminate commissions on certain sales, including the reduction or elimination of selling commissions in accordance with, and on the terms set forth in, the “Plan of Distribution” section of the Prospectus. The Dealer Manager will re-allow all or any portion of the selling commissions, subject to federal and state securities laws, to the Participating Broker-Dealer who sold the Shares as described more fully in the Participating Broker-Dealer Agreement.
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(ii)
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Subject to the special circumstances described in or otherwise provided in the “Plan of Distribution” section of the Prospectus or this Section 3(d), as compensation for acting as the dealer manager, the Company will pay the Dealer Manager, a dealer manager fee in the amount of three percent (3.0%) of the gross offering price from the Shares offered in the Offering (the “Dealer Manager Fee”).
The Dealer Manager may re-allow a portion of the Dealer Manager Fee, subject to federal and state securities laws, to the Participating Broker-Dealer who sold the Shares, as described more fully in the Participating Broker-Dealer Agreement.
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(iii)
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All selling commissions and Dealer Manager Fees payable to the Dealer Manager will be paid at least within ten (10) business days after the sale of the Shares. The Dealer Manager acknowledges that no commissions, payments or amount will be paid to the Dealer Manager unless and until the gross proceeds of the Shares sold are disbursed to the Company in accordance with the terms of the Escrow Agreement.
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(iv)
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In no event shall the total aggregate underwriting compensation payable to the Dealer Manager and any Participating Broker-Dealers participating in the Offering, including, but not limited to, selling commissions, the Dealer Manager Fee and permissible forms of non-cash compensation, exceed ten percent (10.0%) of gross offering proceeds from the Offering in the aggregate.
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(v)
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Notwithstanding anything to the contrary contained herein, if the Company pays any selling commission to the Dealer Manager for sale by a Participating Broker-Dealer of one or more Shares and the subscription is rescinded as to one or more of the Shares covered by such subscription, then the Company shall decrease the next payment of selling commissions or other compensation otherwise payable to the Dealer Manager by the Company under this Agreement by an amount equal to the commission rate established in this Section 3(d), multiplied by the number of Shares as to which the subscription is rescinded. If no payment of selling commissions or other compensation is due to the Dealer Manager after such withdrawal occurs, then the Dealer Manager shall pay the amount specified in the preceding sentence to the Company within a reasonable period of time not to exceed 30 days following receipt of notice by the Dealer Manager from the Company stating the amount owed as a result of rescinded subscriptions.
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(e)
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Reasonable Bona Fide Due Diligence Expenses. The Company will authorize a collection of available information, as reasonably agreed to by the Company, regarding the Offering, which collection the Company may amend and supplement from time to time, to be delivered to the Dealer Manager to the Participating Broker-dealers (or their agents performing due diligence) in connection with their due diligence review of the Offering. In the event the Dealer Manager or a Participating Broker-Dealer (or its agent performing due diligence) requests additional information or otherwise wishes to conduct additional due diligence regarding the Offering, the Company and the Dealer Manager will reasonably cooperate with such Participating Broker-Dealer to accommodate such request; provided, however, any additionally provided information will be subject to the terms of a confidentiality agreement executed by the Dealer Manager and the Participating Broker-Dealer to the extent such additionally provided information is material non-public information as determined by the Company in its sole discretion.
In addition to any payments to the Dealer Manager pursuant to Section 3(d), the Company shall reimburse the Dealer Manager or any Participating Broker-Dealer for reasonable bona fide due diligence expenses incurred by the Dealer Manager or any Participating Broker-Dealer to the extent permitted pursuant to FINRA rules, provided, however, that no due diligence expenses shall be reimbursed by the Company pursuant to this Section 3(e) which would cause the aggregate of all of the Company’s expenses described in Section 3(f) and compensation paid pursuant to Section 3(d) to exceed 15% of the gross proceeds from the Offering in the aggregate (the “15% cap”). Also, the Company shall only reimburse the Dealer Manager or any Participating Broker-Dealer for such approved bona fide due diligence expenses to the extent such expenses have actually been incurred and are supported by detailed and itemized invoice(s) provided to the Company.
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(f)
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Company Expenses. Subject to the limitations described above, the Company agrees to pay all costs and expenses incident to the Offering, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, including expenses, fees and taxes in connection with:
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(i)
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the registration fee, the preparation and filing of the Registration Statement (including without limitation financial statements, exhibits, schedules and consents), the Prospectus, and any amendments or supplements thereto, and the printing and furnishing of copies of each thereof to the Dealer Manager and to Participating Broker-Dealers (including costs of mailing and shipment);
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(ii)
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the preparation, issuance and delivery of certificates, if any, for the Shares, including any stock or other transfer taxes or duties payable upon the sale of the Shares;
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(iii)
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all fees and expenses of the Company’s legal counsel, independent public or certified public accountants and other advisors;
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(iv)
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the determination of the Shares eligibility for sale or an exemption under state law and the printing and furnishing of copies of blue sky surveys if any;
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(v)
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the filing fees in connection with filing for review by FINRA, if required, of all necessary documents and information relating to the Offering and the Shares;
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(vi)
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the fees and expenses of any transfer agent or registrar for the Shares and miscellaneous expenses referred to in the Registration Statement;
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(vii)
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all costs and expenses incident to the travel and accommodation of officers of the Company, in making road show presentations and presentations to Participating Broker-Dealers and other broker-dealers and financial advisors with respect to the offering of the Shares; and
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(viii)
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the performance of the Company’s other obligations hereunder.
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4.
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Conditions to the Dealer Manager’s Obligations. The Dealer Manager’s obligations hereunder shall be subject to the following terms and conditions:
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(a)
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The representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects and the Company shall have complied with its covenants, agreements and obligations contained in this Agreement in all material respects;
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(b)
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The Registration Statement shall have become effective and no stop order suspending the effectiveness of the Registration Statement shall have been issued by the Commission and, to the best knowledge of the Company, no proceedings for that purpose shall have been instituted, threatened or contemplated by the Commission; and any request by the Commission for additional information (to be included in the Registration Statement or Prospectus or otherwise) shall have been complied with to the reasonable satisfaction of the Dealer Manager.
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(c)
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The Registration Statement and the Prospectus, and any amendment or any supplement thereto, shall not contain any untrue statement of material fact, or omit to state a material fact that is required to be stated therein or is necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
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5.
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Covenants of the Company. The Company covenants and agrees with the Dealer Manager as follows:
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(a)
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Securities Laws. The Company will comply in all material respects with all federal and state securities laws, rules and regulations which are required to be complied with in order to permit the continuance of offers and sales of the Shares in accordance with the provisions hereof and of the Prospectus.
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(b)
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Commission Orders. If the Commission shall issue any stop order or any other order preventing or suspending the use of the Prospectus, or shall institute any proceedings for that purpose, then the Company will promptly notify the Dealer Manager and use its reasonable best efforts to prevent the issuance of any such order and, if any such order is issued, to use its reasonable best efforts to obtain the removal thereof as promptly as possible.
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(c)
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Blue Sky Qualifications. In the event the Company reasonably determines that the Shares are not “covered securities” under applicable blue sky laws, the Company will use its reasonable best efforts to qualify the Shares for offering and sale under the state securities or blue sky laws of such jurisdictions as the Dealer Manager and the Company shall mutually agree upon and to make such applications, file such documents and furnish such information as may be reasonably required for that purpose. The Company will, at the Dealer Manager’s request, furnish the Dealer Manager with a copy of such papers filed by the Company in connection with any such qualification. The Company will promptly advise the Dealer Manager of the issuance by such securities administrators of any stop order preventing or suspending the use of the Prospectus or of the institution of any proceedings for that purpose, and will use its reasonable best efforts to prevent the issuance of any such order and if any such order is issued, to use its reasonable best efforts to obtain the removal thereof as promptly as possible.
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(d)
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Amendments and Supplements. If, at any time when a Prospectus relating to the Shares is required to be delivered under the Securities Act, any event shall have occurred to the knowledge of the Company, or the Company receives notice from the Dealer Manager that it believes such an event has occurred, as a result of which the Prospectus or any Approved Sales Literature as then amended or supplemented would include any untrue statement of a material fact, or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Registration Statement or supplement the Prospectus relating to the Shares to comply with the Securities Act, then the Company will promptly notify the Dealer Manager thereof (unless the information shall have been received from the Dealer Manager) and will prepare and file with the Commission an amendment or supplement which will correct such statement or effect such compliance to the extent required, and shall make available to the Dealer Manager thereof sufficient copies for its own use and/or distribution to the Participating Broker-Dealers.
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(e)
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Requests from Commission. The Company will promptly advise the Dealer Manager of any request made by the Commission or a state securities administrator for amending the Registration Statement, supplementing the Prospectus or for additional information.
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(f)
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Copies of Prospectus. The Company will furnish the Dealer Manager with the Prospectus and all amendments and supplements thereto, as the Dealer Manager may reasonably request for sale of the Shares.
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(g)
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Qualification to Transact Business. The Company will take all steps reasonably necessary to ensure that at all times the Company will validly exist as a Delaware statutory trust and will be qualified to do business in all jurisdictions in which the conduct of its business requires such qualification and where such qualification is required under local law.
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(h)
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Authority to Perform Agreements. The Company undertakes to obtain all consents, approvals, authorizations or orders of any court or governmental agency or body which are required for (i) the Company’s performance of this Agreement, or (ii) the conducting by the Company of the business described in the Prospectus, except for such consents, authorizations or orders which, if not obtained, do not result in and would not reasonably be expected to result in, individually or in the aggregate, a Company MAE.
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(i)
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Sales Literature. The Company will furnish to the Dealer Manager as promptly as practicable upon request any Approved Sales Literature (provided that the use of said material has been first approved for use to the extent required by all appropriate regulatory agencies). Any supplemental sales literature or advertisement, regardless of how labeled or described, used in addition to the Prospectus in connection with the Offering which is furnished or approved by the Company (including, without limitation, Approved Sales Literature) shall, to the extent required, be filed with and, to the extent required, approved by the appropriate securities agencies and bodies, provided that the Dealer Manager will make all FINRA filings, to the extent required. The Company will not (and will instruct its affiliates not to): show or give to any investor or prospective investor or reproduce any material or writing that is marked “broker-dealer use only,” institutional or otherwise bears a legend denoting that it is not to be used in connection with the sale of Shares to members of the public; or show or give to any investor or prospective investor in a particular jurisdiction any material or writing if such material bears a legend denoting that it is not to be used in connection with the sale of Shares to members of the public in such jurisdiction.
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(j)
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Use of Proceeds. The Company will apply the proceeds from the sale of the Shares as set forth in the Prospectus.
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(k)
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Customer Information. The Dealer Manager and the Company shall, when applicable:
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(i)
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abide by and comply with (A) the privacy standards and requirements of the Gramm-Leach-Bliley Act of 1999 (the “GLB Act”) and applicable regulations promulgated thereunder, (B) the privacy standards and requirements of any other applicable federal or state law, including but not limited to, the Fair Credit Reporting Act (“FCRA”), and (C) its own internal privacy policies and procedures, each as may be amended from time to time;
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(ii)
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refrain from the use or disclosure of nonpublic personal information (as defined under the GLB Act) of all customers who have opted out of such disclosures except as necessary to service the customers or as otherwise necessary or required by applicable law;
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(iii)
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except as expressly permitted under the FCRA, the Dealer Manager and the Company shall not disclose any information that would be considered a “consumer report” under the FCRA; and
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(iv)
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determine which customers have opted out of the disclosure of nonpublic personal information by periodically reviewing and, if necessary, retrieving an aggregated list of such customers from the Participating Broker-Dealers (the “List”) to identify customers that have exercised their opt-out rights.
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If either party uses or discloses nonpublic personal information of any customer for purposes other than servicing the customer, or as otherwise required by applicable law, that party will consult the List to determine whether the affected customer has exercised his or her opt-out rights. Each party understands that it is prohibited from using or disclosing any nonpublic personal information of any customer that is identified on the List as having opted out of such disclosures.
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(l)
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Certain Payments. Without the prior consent of the Dealer Manager, neither the Company nor any of its affiliates will make any payment (cash or non-cash) to any associated person or registered representative of the Dealer Manager.
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6.
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Covenants of the Dealer Manager. The Dealer Manager covenants and agrees with the Company as follows:
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(a)
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Compliance With Laws. With respect to the Dealer Manager’s participation and the participation by each Participating Broker-Dealer in the offer and sale of the Shares (including, without limitation, any resales and transfers of Shares), the Dealer Manager agrees, and each Participating Broker-Dealer in its Participating Broker-Dealer Agreement will agree, to comply in all material respects with all applicable requirements of the Securities Act, the Securities Act Rules and Regulations, the Exchange Act, the Exchange Act Rules and Regulations and all other federal regulations applicable to the Offering including Regulation Best Interest, the sale of Shares and with all applicable state securities or blue sky laws, and the Rules of FINRA applicable to the Offering, from time to time in effect, specifically including, but not in any way limited to, FINRA Rules 2040 (Payments to Unregistered Persons), 2111 (Suitability), 2231 (Customer Account Statements), 2310 (Direct Participation Programs), 5130 (Restrictions on the Purchase and Sale of Initial Equity Public Offerings), and 5141 (Sale of Securities in a Fixed Price Offering) therein. The Dealer Manager will not offer the Shares for sale in any jurisdiction unless and until it has been advised that the Shares are either registered in accordance with, or exempt from, the securities and other laws applicable thereto.
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In addition, the Dealer Manager shall, in accordance with applicable law or as prescribed by any state securities administrator, provide, or require in the Participating Broker-Dealer Agreement that the Participating Broker-Dealer shall provide, to any prospective investor copies of any prescribed document which is part of the Registration Statement and any supplements thereto during the course of the Offering and prior to the sale. The Company may provide the Dealer Manager with certain Approved Sales Literature to be used by the Dealer Manager and the Participating Broker-Dealers in connection with the solicitation of purchasers of the Shares. The Dealer Manager agrees not to deliver the Approved Sales Literature to any person prior to the date of this Agreement. If the Dealer Manager elects to use such Approved Sales Literature after the date of this Agreement, then the Dealer Manager agrees that such material shall not be used by it in connection with the solicitation of purchasers of the Shares and that it will direct Participating Broker-Dealers not to make such use unless accompanied or preceded by the Prospectus, as then currently in effect, and as it may be amended or supplemented in the future.
The Dealer Manager agrees that it will not use any Approved Sales Literature other than those provided to the Dealer Manager by the Company for use in the Offering. The use of any other sales material is expressly prohibited. The Dealer Manager will not, and each Participating Broker-Dealer in its Participating Broker-Dealer Agreement shall agree not to: show or give to any investor or prospective investor or reproduce any material or writing that is marked “broker-dealer use only,” institutional or otherwise bears a legend denoting that it is not to be used in connection with the sale of Shares to members of the public; or show or give to any investor or prospective investor in a particular jurisdiction any material or writing if such material bears a legend denoting that it is not to be used in connection with the sale of Shares to members of the public in such jurisdiction.
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(b)
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No Additional Information. In offering the Shares for sale, the Dealer Manager shall not, and each Participating Broker-Dealer shall agree not to, give or provide any information or make any representation other than those contained in the Prospectus or the Approved Sales Literature.
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(c)
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Sales of Shares. The Dealer Manager shall, and each Participating Broker-Dealer shall agree to, solicit purchases of the Shares only in the jurisdictions in which the Dealer Manager and such Participating Broker-Dealer are legally qualified to so act and in which the Dealer Manager and each Participating Broker-Dealer have been advised by the Company or counsel to the Company that such solicitations can be made.
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(d)
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Subscription Agreement. The Dealer Manager will comply in all material respects with the subscription procedures and “Plan of Distribution” set forth in the Prospectus. Subscriptions using DRS Settlement will be submitted by the Dealer Manager and each Participating Broker-Dealer to the Company only on the Subscription Agreement, a form of which has been filed with the Commission by the Company. The Dealer Manager understands and acknowledges, and each Participating Broker-Dealer shall acknowledge if using DRS Settlement, that the Subscription Agreement must be executed and initialed by the subscriber as provided for by the Subscription Agreement.
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(e)
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Suitability. The Dealer Manager will offer Shares, and in its agreement with each Participating Broker-Dealer will require that the Participating Broker-Dealer offer Shares, only to persons that it has reasonable grounds to believe meet the financial qualifications set forth in the Prospectus or in any suitability letter or memorandum sent to it by the Company and will not make offers to persons in the states in which it is advised in writing by the Company that the Shares are not qualified for sale. In offering Shares, the Dealer Manager will comply, and in its agreements with the Participating Broker-Dealers, the Dealer Manager will require that the Participating Broker-Dealers comply, with the provisions of all applicable rules and regulations relating to suitability of investors, including applicable FINRA Rules.
The Dealer Manager agrees that in recommending the purchase of the Shares in the Offering to an investor, the Dealer Manager and each person associated with the Dealer Manager that makes such recommendation shall have, and each Participating Broker-Dealer in its Participating Broker-Dealer Agreement shall agree with respect to investors to whom it makes a recommendation that it shall have, reasonable grounds to believe, on the basis of information obtained from the investor concerning the investor’s investment objectives, other investments, financial situation and needs, and any other information known by the Dealer Manager, the person associated with the Dealer Manager or the Participating Broker-Dealer that:
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(i)
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the investor is or will be in a financial position appropriate to enable the investor to realize to a significant extent the benefits described in the Prospectus, including the tax benefits where they are a significant aspect of the Company;
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(ii)
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the investor has a fair market net worth sufficient to sustain the risks inherent in the program, including loss of investment and lack of liquidity; and
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(iii)
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an investment in the Shares offered in the Offering is otherwise suitable for the investor.
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The Dealer Manager agrees as to investors to whom it makes a recommendation with respect to the purchase of the Shares in the Offering (and each Participating Broker-Dealer in its Participating Broker-Dealer Agreement shall agree, with respect to investors to whom it makes such recommendations) it will rely on relevant information provided by the investor, including information as to the investor’s age, investment objectives, investment experience, investment time horizon, income, net worth, financial situation and needs, tax status, other investments, liquidity needs, risk tolerance and other pertinent information. The Dealer Manager agrees as to investors to whom it makes a recommendation with respect to the purchase of the Shares in the Offering (and each Participating Broker-Dealer in its Participating Broker-Dealer Agreement shall agree, with respect to Investors to whom it makes such recommendations) to maintain in the files of the Dealer Manager (or the Participating Broker-Dealer, as applicable) documents disclosing the basis upon which the determination of suitability was reached as to each investor.
In making the determinations as to financial qualifications and as to suitability, the Dealer Manager and Participating Broker-Dealers may rely on (A) representations from investment advisers who are not affiliated with a Participating Broker-Dealer, and banks acting as trustees or fiduciaries, and (B) information it has obtained from a prospective investor, including such information as the investment objectives, other investments, financial situation and needs of the person or any other information known by the Dealer Manager (or Participating Broker-Dealer, as applicable), after due inquiry. Notwithstanding the foregoing, the Dealer Manager shall not, and each Participating Broker-Dealer shall agree not to, execute any transaction in the Company in a discretionary account without prior written approval of the transaction by the customer.
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(f)
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Participating Broker-Dealer Agreements. All engagements of the Participating Broker-Dealers will be evidenced by a Participating Broker-Dealer Agreement.
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(g)
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Electronic Delivery and Electronic Signatures. If the Dealer Manager uses electronic delivery to distribute the Prospectus to any person or allows the use of electronic signatures, it will comply with all applicable requirements of the Commission, the blue sky laws and/or FINRA and any other laws or regulations related to the electronic delivery of documents and the use of electronic signatures.
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(h)
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AML Compliance. The Dealer Manager represents to the Company that it has established and implemented an anti-money laundering compliance program (“AML Program”) in accordance with Section 352 of the USA PATRIOT Act of 2001 (the “PATRIOT Act”) and FINRA Rule 3310, that complies with applicable anti-money laundering laws and regulations, including, but not limited to, the customer identification program requirements of Section 326 of the PATRIOT Act, and the suspicious activity reporting requirements of Section 356 of the PATRIOT Act, and the laws, regulations and Executive Orders administered by the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of Treasury (collectively, “AML/OFAC Laws”). The Dealer Manager hereby covenants to remain in compliance with the AML/OFAC Laws and shall, upon request by the Company, provide a certification to the Company that, as of the date of such certification, its AML Program is compliant with the AML/OFAC Laws.
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(i)
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Customer Information. The Dealer Manager will use its best efforts to provide the Company with any and all subscriber information that the Company requests in order for the Company to satisfy its obligations under the AML/OFAC Laws and comply with the requirements under Section 5(k) above.
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(j)
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Recordkeeping. The Dealer Manager will comply, and will require each Participating Broker-Dealer to comply, with the record keeping requirements of the Exchange Act, including, but not limited to, Rules 17a-3 and 17a-4 promulgated under the Exchange Act, and shall maintain, for at least six years or for a period of time not less than that required in order to comply with all applicable federal, state and other regulatory requirements, whichever is later, such records with respect to each investor who purchases Shares, information used to determine that the investor meets the suitability standards imposed on the offer and sale of the Shares, the amount of Shares sold, and a representation of the investor that the investor is investing for the investor’s own account or, in lieu of such representation, information indicating that the investor for whose account the investment was made met the suitability standards.
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(k)
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Suspension or Termination of Offering. The Dealer Manager agrees, and will require that each of the Participating Broker-Dealers agree, to suspend or terminate the offering and sale of the Shares upon request of the Company at any time and to resume the offering and sale of the Shares upon subsequent request of the Company.
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(a)
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Indemnified Parties Defined. For the purposes of this Agreement, an “Indemnified Party” shall mean an entity entitled to indemnification under this Section 7, as well as such entity’s officers, directors, employees, members, partners, affiliates, agents and representatives, and each person, if any, who controls such person or entity within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act.
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(b)
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Indemnification of the Dealer Manager and Participating Broker-Dealers. The Company will indemnify, defend and hold harmless the Dealer Manager and the Participating Broker-Dealers, and their respective Indemnified Parties, from and against any losses, claims, expenses (including reasonable legal and other expenses incurred in investigating and defending such claims or liabilities), damages or liabilities, joint or several, to which any such Participating Broker-Dealers or the Dealer Manager, or their respective Indemnified Parties, may become subject under the Securities Act, the Securities Act Rules and Regulations, the Exchange Act, the Exchange Act Rules and Regulations or otherwise, insofar as such losses, claims, expenses, damages or liabilities (or actions in respect thereof) arise out of or are based upon:
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(i)
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in whole or in part, any material inaccuracy in a representation or warranty contained herein by the Company, any material breach of a covenant contained herein by the Company, or any material failure by the Company to perform its obligations hereunder or to comply with state or federal securities laws applicable to the Offering;
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(ii)
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any untrue statement or alleged untrue statement of a material fact contained (A) in the Registration Statement or any post-effective amendment thereto or in the Prospectus or any amendment or supplement to the Prospectus, (B) in any Approved Sales Literature or (C) in any blue sky application or other document executed by the Company or on its behalf specifically for the purpose of qualifying any or all of the Shares for sale under the securities laws of any jurisdiction or based upon written information furnished by the Company under the securities laws thereof (any such application, document or information being hereinafter called a “Blue Sky Application”); or
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(iii)
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the omission or alleged omission to state a material fact required to be stated in the Registration Statement or any post-effective amendment thereof or the omission or alleged omission to state a material fact required to be stated in the Prospectus or any amendment thereof or supplement thereto to make the statements therein, in light of the circumstances under which they were made, not misleading.
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The Company will reimburse each Participating Broker-Dealer or the Dealer Manager, and their respective Indemnified Parties, for any legal or other expenses reasonably incurred by such Participating Broker-Dealer or the Dealer Manager, and their respective Indemnified Parties, in connection with investigating or defending such loss, claim, expense, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, expense, damage or liability arises out of, or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by the Dealer Manager expressly for use in the “Plan of Distribution” section of Registration Statement or any post-effective amendment thereof or the Prospectus or any such amendment thereof or supplement thereto. This indemnity agreement will be in addition to any liability which the Company may otherwise have.
Notwithstanding the foregoing, the indemnification and agreement to hold harmless provided in this Section 7(b) is further limited to the extent that no such indemnification by the Company of the Dealer Manager, the Participating Broker-Dealers or their respective Indemnified Parties, shall be permitted under this Agreement for, or arising out of, an alleged violation of federal or state securities laws, unless one or more of the following conditions are met: (a) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular indemnitee; (b) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee; or (c) a court of competent jurisdiction approves a settlement of the claims against the particular indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the SEC and of the published position of any state securities regulatory authority in which the securities were offered or sold as to indemnification for violations of securities laws.
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(c)
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Dealer Manager Indemnification of the Company. The Dealer Manager will indemnify, defend and hold harmless the Company and its Indemnified Parties and each person who has signed the Registration Statement, from and against any losses, claims, expenses (including the legal and other expenses reasonably incurred in investigating and defending any such claims or liabilities), damages or liabilities to which any of the aforesaid parties may become subject under the Securities Act, the Securities Act Rules and Regulations, the Exchange Act, the Exchange Act Rules and Regulations or otherwise, insofar as such losses, claims, expenses, damages (or actions in respect thereof) arise out of or are based upon:
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(i)
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in whole or in part, any material inaccuracy in a representation or warranty contained herein by the Dealer Manager or any material breach of a covenant contained herein by the Dealer Manager;
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(ii)
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any untrue statement or any alleged untrue statement of a material fact contained (A) in the Registration Statement or any post-effective amendment thereto or in the Prospectus or any amendment thereto or supplement thereof, (B) in any Approved Sales Literature, or (C) any Blue Sky Application; or
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(iii)
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the omission or alleged omission to state a material fact required to be stated in the Registration Statement, or any post-effective amendment thereof, or the omission or alleged omission to state a material fact required to be stated in the Prospectus or any amendment thereto or supplement thereof to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that in each case described in clauses (ii) and (iii) to the extent, but only to the extent, that such untrue statement or omission was made in reliance upon and in conformity with written information furnished to the Company by the Dealer Manager expressly for use in the Registration Statement or any such post-effective amendments thereof or the Prospectus or any such amendment thereof or supplement thereto;
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(iv)
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any use of sales literature, including “broker-dealer use only” materials, by the Dealer Manager that is not Approved Sales Literature; or
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(v)
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any untrue statement made by the Dealer Manager or its authorized registered representatives or omission to state a fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading in connection with the Offering provided, however, this clause (v) shall not apply to any statements or omissions made in conformity with the Registration Statement, the Prospectus, any Approved Sales Literature or any other materials or information furnished by or on behalf of the Company.
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The Dealer Manager will reimburse the aforesaid parties for any reasonable legal or other expenses incurred in connection with investigation or defense of such loss, claim, expense, damage, liability or action. This indemnity agreement will be in addition to any liability which the Dealer Manager may otherwise have.
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(d)
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Participating Broker-Dealer Indemnification of the Company. By virtue of entering into the Participating Broker-Dealer Agreement, each Participating Broker-Dealer severally will agree to indemnify, defend and hold harmless the Company, the Dealer Manager, each of their respective Indemnified Parties, and each person who signs the Registration Statement, from and against any losses, claims, expenses, damages or liabilities to which the Company, the Dealer Manager, or any of their respective Indemnified Parties, or any person who signed the Registration Statement, may become subject, under the Securities Act or otherwise, as more fully described in the Participating Broker-Dealer Agreement.
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(e)
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Action Against Parties; Notification. Promptly after receipt by any Indemnified Party under this Section 7 of notice of the commencement of any action, such Indemnified Party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 7, promptly notify the indemnifying party of the commencement thereof; provided, however, that the failure to give such notice shall not relieve the indemnifying party of its obligations hereunder except to the extent it shall have been actually prejudiced by such failure. In case any such action is brought against any Indemnified Party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled, to the extent it may wish, jointly with any other indemnifying party similarly notified, to participate in the defense thereof, with separate counsel. Such participation shall not relieve such indemnifying party of the obligation to reimburse the Indemnified Party for legal and other expenses reasonably incurred by such Indemnified Party in defending itself, except for such expenses incurred after the indemnifying party has deposited funds sufficient to effect the settlement, with prejudice, of, and unconditional release of all liabilities from, the claim in respect of which indemnity is sought. Any such indemnifying party shall not be liable to any such Indemnified Party on account of any settlement of any claim or action effected without the consent of such indemnifying party, such consent not to be unreasonably withheld or delayed.
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(f)
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Reimbursement of Fees and Expenses. An indemnifying party under this Section 7 of this Agreement shall be obligated to reimburse an Indemnified Party for reasonable legal and other expenses as follows:
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(i)
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In the case of the Company indemnifying the Dealer Manager, the advancement of funds to the Dealer Manager for legal expenses and other costs incurred as a result of any legal action for which indemnification is being sought shall be permissible only if all of the following conditions are satisfied: (A) the legal action relates to acts or omissions with respect to the performance of duties or services on behalf of the Company; (B) the legal action is initiated by a third party who is not a shareholder of the Company or the legal action is initiated by a shareholder of the Company acting in his or her capacity as such and a court of competent jurisdiction specifically approves such advancement; and (C) the Dealer Manager undertakes to repay the advanced funds to the Company, together with the applicable legal rate of interest thereon, in cases in which the Dealer Manager is found not to be entitled to indemnification.
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(ii)
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In any case of indemnification other than that described in Section 7(f)(i) above, the indemnifying party shall pay all legal fees and expenses reasonably incurred by the Indemnified Party in the defense of such claims or actions; provided, however, that the indemnifying party shall not be obligated to pay legal expenses and fees to more than one law firm in connection with the defense of similar claims arising out of the same alleged acts or omissions giving rise to such claims notwithstanding that such actions or claims are alleged or brought by one or more parties against more than one Indemnified Party. If such claims or actions are alleged or brought against more than one Indemnified Party, then the Indemnifying Party shall only be obliged to reimburse the expenses and fees of the one law firm (in addition to local counsel) that has been participating by a majority of the indemnified parties against which such action is finally brought; and if a majority of such indemnified parties is unable to agree on which law firm for which expenses or fees will be reimbursable by the indemnifying party, then payment shall be made to the first law firm of record representing an Indemnified Party against the action or claim. Such law firm shall be paid only to the extent of services performed by such law firm and no reimbursement shall be payable to such law firm on account of legal services performed by another law firm.
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(a)
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If Indemnification is Unavailable. If the indemnification provided for in Section 7 is for any reason unavailable to or insufficient to hold harmless an Indemnified Party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such Indemnified Party, as incurred:
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(i)
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in such proportion as is appropriate to reflect the relative benefits received by the Company, the Dealer Manager and the Participating Broker-Dealer, respectively, from the proceeds received in the Offering pursuant to this Agreement and the relevant Participating Broker-Dealer Agreement; or
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(ii)
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if the allocation provided by clause (i) 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, the Dealer Manager and the Participating Broker-Dealer, respectively, in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations.
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(b)
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Relative Benefits. The relative benefits received by the Company, the Dealer Manager and the Participating Broker-Dealers, respectively, in connection with the proceeds received in the Offering pursuant to this Agreement and the relevant Participating Broker-Dealer Agreement shall be deemed to be in the same respective proportion as the total net proceeds from the Offering pursuant to this Agreement and the relevant Participating Broker-Dealer Agreement (before deducting expenses), received by the Company, and the total selling commissions and dealer manager fees received by the Dealer Manager and the Participating Broker-Dealer, respectively, in each case as set forth on the cover of the Prospectus bear to the aggregate offering price of the Shares sold in the Offering as set forth on such cover.
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(c)
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Relative Fault. The relative fault of the Company, the Dealer Manager and the Participating Broker-Dealers, respectively, 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 related to information supplied by the Company, by the Dealer Manager or by the Participating Broker-Dealer, respectively, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
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(d)
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Pro Rata is Unreasonable. The Company, the Dealer Manager and the Participating Broker-Dealers (by virtue of entering into the Participating Broker-Dealer Agreement) agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable contributions referred to above in this Section 8. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an Indemnified Party and referred to above in this Section 8 shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission or alleged omission.
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(e)
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Limits. Notwithstanding the provisions of this Section 8, the Dealer Manager and the Participating Broker-Dealers, respectively, shall not be required to contribute any amount by which the aggregate dollar amount of selling commissions and Dealer Manager Fees received by the Dealer Manager or such Participating Broker-Dealer, respectively, exceeds the amount of any damages which the Dealer Manager and the Participating Broker-Dealers, respectively, have otherwise been required to pay by reason of any untrue or alleged untrue statement or omission or alleged omission.
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(f)
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Fraudulent Misrepresentation. No party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any party who was not guilty of such fraudulent misrepresentation.
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(g)
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Benefits of Contribution. For the purposes of this Section 8, the Dealer Manager’s officers, directors, employees, members, partners, agents and representatives, and each person, if any, who controls the Dealer Manager within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution of the Dealer Manager, and each officers, directors, employees, members, partners, agents and representatives of the Company, each officer of the Company who signed the Registration Statement and each person, if any, who controls the Company, within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution of the Company. The Participating Broker-Dealers’ respective obligations to contribute pursuant to this Section 8 are several in proportion to the number of Shares sold by each Participating Broker-Dealer in the Offering and not joint.
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9.
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Termination of this Agreement.
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(a)
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Term; Termination. Unless sooner terminated pursuant to this Section 9(a) or by operation of law, this Agreement shall automatically terminate at the first occurrence of any of the following events: (i) the date that the Company accepts subscriptions for the amount of Shares offered in the Offering, (ii) the date of the dissolution or liquidation of the Company, or (iii) the date of the Dealer Manager’s license or registration to act as a broker-dealer is revoked or suspended by any federal, self-regulatory or state agency and such revocation or suspension is not cured within ten days from the date of such occurrence (and this Agreement shall be deemed to be suspended during revocation or suspension period). In addition, this Agreement may be terminated by the Company or the Dealer Manager upon ten calendar days’ written notice to the other party.
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(b)
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Delivery of Records Upon Termination. Upon the expiration or termination of this Agreement for any reason, the Dealer Manager shall:
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(i)
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promptly deposit any and all funds, if any, in its possession which were received from investors for the sale of Shares into the appropriate account designated by the Company for the deposit of investor funds;
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(ii)
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to the extent not previously provided to the Company, provide to the Company a list of all investors who have subscribed for or purchased Shares and all broker-dealers with whom the Dealer Manager has entered into a Participating Broker-Dealer Agreement;
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(iii)
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notify Participating Broker-Dealers of such termination; and
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(iv)
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promptly deliver to the Company all records and documents in its possession which relate
to the Offering and are not designated as dealer copies, including copies of any sales literature designed for use specifically for the Offering that it is then in the process of preparing.
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Upon expiration or termination of this Agreement, the Company shall pay to the Dealer Manager all (i) earned but unpaid compensation and (ii) reimbursement for all incurred, accountable expenses to which the Dealer Manager is or becomes entitled under Section 3(d) or Section 3(f), respectively, at such time as such compensation becomes payable.
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(a)
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Survival. The following provisions of the Agreement shall survive the expiration or termination of this Agreement: Section 3(d) (Dealer-Manager Compensation); Section 3(e) (Reasonable Bona Fide Due Diligence Expenses); Section 6(h) (AML Compliance); Section 7 (Indemnification); Section 8 (Contribution); Section 9 (Termination of this Agreement) and this Section 10 (Miscellaneous). Notwithstanding anything else that may be to the contrary herein, the expiration or termination of this Agreement shall not relieve a party for liability for any breach occurring prior to such expiration or termination. In no event shall the Dealer Manager be entitled to payment of any compensation in connection with the Offering that is not completed according to this Agreement; provided, however, that the reimbursement of out-of-pocket accountable expenses actually incurred by the Dealer Manager or person associated with the Dealer Manager shall not be presumed to be unfair or unreasonable and shall be payable under normal circumstances.
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(b)
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Notices. All notices or other communications required or permitted hereunder, except as herein otherwise specifically provided, shall be in writing and shall be deemed given or delivered:
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(i)
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when delivered personally or by commercial messenger;
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(ii)
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one business day following deposit with a recognized overnight courier service, provided such deposit occurs prior to the deadline imposed by such service for overnight delivery; or
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(iii)
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when transmitted, if sent by email;
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in each case above provided such communication is addressed to the intended recipient thereof as set forth below:
If to the Company:
NexPoint Diversified Real Estate Trust
300 Crescent Court, Suite 700
Dallas, Texas 75201
Attention: Legal Department, Real Estate
Email: legal@nexpoint.com
with a copy (which will not constitute notice) to:
Winston & Strawn LLP
2121 N. Pearl Street, Suite 900
Dallas, Texas 75201
Attention: Charles Haag and Justin Reinus
Email: chaag@winston.com; jreinus@winston.com
If to the Dealer Manager:
NexPoint Securities, Inc.
200 Crescent Court, Suite 700
Dallas, Texas 75201
Attention: Eric Holt
Email: eholt@nexpoint.com
with a copy (which will not constitute notice) to:
Kunzman & Bollinger, Inc.
5100 N. Brookline Avenue, Suite 600
Oklahoma City, Oklahoma 73112
Attention: Wallace W. Kunzman, Jr.
Email: wkunzman@kunzboll.net
Any party may change its address specified above by giving each party notice of such change in accordance with this Section 10(b).
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(c)
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Successors and Assigns. No party shall assign (voluntarily, by operation of law or otherwise) this Agreement or any right, interest or benefit under this Agreement without the prior written consent of each other party. Subject to the foregoing, this Agreement shall be fully binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and assigns.
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(d)
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Invalid Provision. The invalidity or unenforceability of any provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted.
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(e)
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Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without regard to the principles of conflicts of laws.
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(f)
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Waiver. EACH OF THE PARTIES HERETO WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) RELATED TO OR ARISING OUT OF THIS AGREEMENT. The parties hereto each hereby irrevocably submits to the exclusive jurisdiction of the courts of the State of Texas and the Federal courts of the United States of America located in Dallas County, Texas, for purposes of any suit, action or other proceeding arising from this Agreement and the Offering, and each hereby waives, and agrees not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof or thereof, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement or any such related document may not be enforced in or by such courts. The parties hereto each hereby consent to and grant any such court jurisdiction over the person of such parties and over the subject matter of any such dispute.
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(g)
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No Partnership. Nothing in this Agreement shall be construed or interpreted to constitute the Dealer Manager or the Participating Broker-Dealers as being in association with or in partnership with the Company or one another, and instead, this Agreement only shall constitute the Dealer Manager and Participating Broker-Dealers as brokers authorized by the Company to sell and to manage the sale by others of the Shares according to the terms set forth in the Registration Statement, the Prospectus or this Agreement. Nothing herein contained shall render the Dealer Manager or the Company liable for the obligations of any of the Participating Broker-Dealers or one another.
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(h)
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Third Party Beneficiaries. Except for the persons and entities referred to in Section 7 (Indemnification) and Section 8 (Contribution), there shall be no third party beneficiaries of this Agreement, and no provision of this Agreement is intended to be for the benefit of any person or entity not a party to this Agreement, and no third party shall be deemed to be a beneficiary of any provision of this Agreement. Except for the persons and entities referred to in Section 7 and Section 8, no third party shall by virtue of any provision of this Agreement have a right of action or an enforceable remedy against any party to this Agreement. Each of the persons and entities referred to in Section 7 and Section 8 shall be a third-party beneficiary of this Agreement.
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(i)
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Entire Agreement. This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by written agreement of the Dealer Manager and the Company.
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(j)
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Nonwaiver. The failure of any party to insist upon or enforce strict performance by any other party of any provision of this Agreement or to exercise any right under this Agreement shall not be construed as a waiver or relinquishment to any extent of such party’s right to assert or rely upon any such provision or right in that or any other instance; rather, such provision or right shall be and remain in full force and effect.
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(k)
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Access to Information. The Company may authorize the Company’s transfer agent to provide information to the Dealer Manager and each Participating Broker-Dealer regarding recordholder information about the clients of such Participating Broker-Dealer who have invested with the Company on an on-going basis for so long as such Participating Broker-Dealer has a relationship with such clients. The Dealer Manager shall require in the Participating Broker-Dealer Agreement that Participating Broker-Dealers not disclose any password for a restricted website or portion of website provided to such Participating Broker-Dealer in connection with the Offering and not disclose to any person, other than an officer, director, employee or agent of such Participating Broker-Dealers, any material downloaded from such a restricted website or portion of a restricted website.
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(l)
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Counterparts. This Agreement may be executed (including by facsimile transmission) with counterpart signature pages or in counterpart copies, each of which shall be deemed an original but all of which together shall constitute one and the same instrument comprising this Agreement.
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If the foregoing is in accordance with your understanding of our agreement, kindly sign and return it to us, whereupon this instrument will become a binding agreement between you and the Company in accordance with its terms.
[Signatures on following page]
IN WITNESS WHEREOF, the parties hereto have each duly executed this Dealer Manager Agreement as of the day and year set forth above.
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THE COMPANY:
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NEXPOINT DIVERSIFIED REAL ESTATE TRUST
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By:
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/s/ Matt McGraner
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Name:
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Matt McGraner
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Title:
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Authorized Signatory
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Accepted as of the date first above written:
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THE DEALER MANAGER:
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NEXPOINT SECURITIES, INC.
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By:
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/s/ Dustin Norris
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Name:
Title:
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Dustin Norris
President
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[Signature Page to Dealer Manager Agreement]
SCHEDULE 1
REGISTRATION STATEMENT
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1.
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Registration Statement on Form S-3, File No. 333-280954
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Exhibit 3.1
NEXPOINT DIVERSIFIED REAL ESTATE TRUST
STATEMENT OF PREFERENCES OF
9.00% SERIES B CUMULATIVE REDEEMABLE PREFERRED SHARES
NexPoint Diversified Real Estate Trust, a Delaware statutory trust (the “Trust”), hereby certifies that:
FIRST: The Board of Trustees of the Trust (the “Board”), on January 30, 2025 pursuant to authority expressly vested in it by the Agreement and Declaration of Trust of the Trust, as amended from time to time (the “Declaration”), adopted resolutions classifying and designating a series of up to 16,000,000 authorized but unissued preferred shares, par value $0.001 per share, of the Trust (“Preferred Shares”) as “9.00% Series B Cumulative Redeemable Preferred Shares,” with such preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption as appear below.
SECOND: Capitalized terms used herein and not otherwise defined shall have the meanings given to them in the Declaration.
9.00% Series B Cumulative Redeemable Preferred Shares
1.
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Designation and Number. A series of up to 16,000,000 Preferred Shares, is hereby designated the “9.00% Series B Cumulative Redeemable Preferred Shares” (the “Series B Preferred Shares”). The par value of the Series B Preferred Shares shall be $0.001 per share. The Series B Preferred Shares shall constitute a separate series of Preferred Shares.
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2.
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Definitions. In addition to the capitalized terms elsewhere defined herein, the following terms, when used herein, shall have the meanings indicated:
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(a)
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“Applicable NAV” shall mean the estimated fair market net asset value of the Trust per Common Share as most recently published by the Trust at the time of issuance of the applicable Series B Preferred Share. The Trust’s determination of the Applicable NAV is final and binding.
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(b)
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“Business Day” shall mean each day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in Texas or New York are authorized or required by law, regulation or executive order to close.
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(c)
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A “Change of Control” is when, after the original issuance of the Series B Preferred Shares, the following have occurred and are continuing:
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(i)
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the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of capital shares of the Trust entitling that person to exercise more than 50% of the total voting power of all capital shares of the Trust entitled to vote generally in elections of trustees (except that such person shall be deemed to have beneficial ownership of all capital shares of the Trust that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and
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(ii)
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following the closing of any transaction referred to in (i) above, neither the Trust nor the acquiring or surviving entity has a class of common securities (or American Depositary Receipts representing such securities) listed on the NYSE, the NYSE American LLC or the Nasdaq Stock Market, or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE American LLC or the Nasdaq Stock Market.
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(d)
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“Governing Instruments” shall mean the Declaration, the Bylaws of the Trust, the Statement of Preferences designating the Series A Preferred Shares, this Statement of Preferences designating the Series B Preferred Shares and such other governing instruments as may be adopted from time to time, and as each of the foregoing may be amended or amended and restated from time to time.
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(e)
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“Initial Stated Value” shall mean $25.00 per Series B Preferred Share.
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(f)
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“NYSE” shall mean the New York Stock Exchange or any successor exchange or automated quotation service upon which the Common Shares are listed.
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(g)
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"Requisite Shareholder Approval" shall mean the approval of the Trust's shareholders as may be required under the Trust's governing documents, law and/or the listing standards of NYSE (or any successor thereto or any trading market on which the Common Shares are listed), including Rule 312.03 of the NYSE Listed Company Manual.
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(h)
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“Series A Preferred Shares” shall mean the Trust’s 5.50% Series A Cumulative Preferred Shares, par value $0.001 per share.
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(i)
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“Stated Value” shall mean the Initial Stated Value, subject to appropriate adjustment in relation to any recapitalizations, share dividends, share splits, share combinations, reclassifications or other similar events which affect the Series B Preferred Shares.
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(j)
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“Trading Day” shall mean, (i) if the Common Shares are listed or admitted to trading on the NYSE, a day on which the NYSE is open for the transaction of business, (ii) if the Common Shares are not listed or admitted to trading on the NYSE but are listed or admitted to trading on another national securities exchange or automated quotation system, a day on which the principal national securities exchange or automated quotation system, as the case may be, on which the Common Shares are listed or admitted to trading is open for the transaction of business, or (iii) if the Common Shares are not listed or admitted to trading on any national securities exchange or automated quotation system, any Business Day.
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3.
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Rank. The Series B Preferred Shares, with respect to priority of payment of dividends and other distributions and rights upon voluntary or involuntary liquidation, dissolution, termination, cancellation or winding up of the affairs of the Trust, shall rank (a) senior to all classes or series of common shares, par value $0.001 per share, of the Trust (“Common Shares”), and to any other class or series of capital shares of the Trust issued in the future (together with the Common Shares, the “Junior Shares”), unless the terms of such shares expressly provide that it ranks senior to, or on parity with, the Series B Preferred Shares with respect to priority of payment of dividends and other distributions or rights upon voluntary or involuntary liquidation, dissolution, termination, cancellation or winding up of the affairs of the Trust; (b) on parity with the Series A Preferred Shares and any other class or series of capital shares of the Trust the terms of which expressly provide that it ranks on parity with the Series B Preferred Shares with respect to priority of payment of dividends and other distributions or rights upon voluntary or involuntary liquidation, dissolution, termination, cancellation or winding up of the affairs of the Trust (collectively, the “Parity Shares”); and (c) junior to any class or series of capital shares of the Trust, the terms of which expressly provide that it ranks senior to the Series B Preferred Shares with respect to priority of payment of dividends and other distributions or rights upon voluntary or involuntary liquidation, dissolution, termination, cancellation or winding up of the affairs of the Trust. The term “capital shares” does not include convertible or exchangeable debt securities, including convertible or exchangeable debt securities which rank senior to the Series B Preferred Shares prior to conversion or exchange. The Series B Preferred Shares shall also rank junior in right to payment to the Trust’s other existing and future indebtedness.
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4.
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Dividends and Distributions.
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(a)
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Subject to the preferential rights of the holders of any class or series of capital shares of the Trust ranking senior to the Series B Preferred Shares with respect to priority of dividend and distribution payments, holders of each Series B Preferred Share are entitled to receive, when, as and if authorized by the Board and declared by the Trust, out of funds legally available therefor, cumulative cash dividends and distributions on such Series B Preferred Share at the rate of 9.00% per annum of the Stated Value (each, a “Cash Dividend”). If a Series B Preferred Share has a date of original issuance (the “Original Issue Date”) prior to the Dividend Record Date (defined below) for the Dividend Period (defined below) in which such share is issued, the Cash Dividends payable on such share shall begin accruing on, and be cumulative from and including, the first day of the Dividend Period in which such share is issued. If a Series B Preferred Share has an Original Issue Date after the Dividend Record Date for the Dividend Period in which such share is issued, the Cash Dividends payable on such share shall begin accruing on, and be cumulative from and including, the first day of the first Dividend Period commencing after its issuance. Cash Dividends shall be payable monthly in arrears on or about the fifth day of each calendar month or, if such date is not a Business Day, on the next succeeding Business Day, with the same force and effect as if paid on such date (each, a “Dividend Payment Date”), and no interest or additional distributions or other sums shall accrue on the amount so payable from such Dividend Payment Date to such next succeeding Business Day. A “Dividend Period” is the respective period commencing on and including the first day of each calendar month and ending on and including the day preceding the first day of the next succeeding Dividend Period. Cash Dividends shall be payable to holders of record of the Series B Preferred Shares as they appear in the share register of the Trust at the close of business on the 25th day of the calendar month preceding the applicable Dividend Payment Date or, if such date is not a Business Day, on the immediately preceding Business Day (each, a “Dividend Record Date”). Any dividends and distributions payable on the Series B Preferred Shares for any Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months.
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(b)
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No dividends and distributions on Series B Preferred Shares shall be authorized by the Board or declared or paid or set apart for payment by the Trust at such time as the terms and provisions of any agreement of the Trust, including any agreement relating to its indebtedness, prohibits such authorization, declaration, payment or setting apart for payment or provides that such authorization, declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such authorization, declaration, payment or setting apart for payment shall be restricted or prohibited by law.
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(c)
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Notwithstanding anything to the contrary contained herein, dividends and distributions on the Series B Preferred Shares shall accrue whether or not the restrictions referred to in Section 4(b) exist, whether or not the Trust has earnings, whether or not there are assets legally available for the payment of such dividends and distributions and whether or not such dividends and distributions are authorized by the Board or declared by the Trust. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend and distribution payment or payments on the Series B Preferred Shares which may be in arrears. When cumulative dividends and distributions are not paid in full (or a sum sufficient for such full payment is not so set apart) upon the Series B Preferred Shares and the shares of any class or series of Parity Shares, all dividends and distributions declared upon the Series B Preferred Shares and any class or series of Parity Shares shall be declared as nearly pro rata as possible in proportion to the respective amounts of dividends and distributions accumulated but unpaid on each such series of Parity Shares (which shall not include any accrual in respect of unpaid dividends and distributions for prior dividend periods if such series of Parity Shares does not have a cumulative dividend) on the relevant Dividend Payment Date.
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(d)
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Except as provided in the foregoing Section 4(c), unless full cumulative dividends and distributions on the Series B Preferred Shares have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof in full is set apart for payment for all past Dividend Periods that have ended, no dividends or other distributions of cash or other property may be declared and paid or declared and set apart for payment, directly or indirectly, on or with respect to the Junior Shares or the Parity Shares (other than dividends or other distributions in Junior Shares or in options, warrants or rights to subscribe for or purchase Junior Shares), nor shall any Junior Shares or Parity Shares be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Shares or Parity Shares made for purposes of and in compliance with requirements of any incentive, benefit or share purchase plan of the Trust or any subsidiary thereof, or a redemption, purchase or acquisition of Parity Shares or Junior Shares as permitted under Article XII of the Declaration) for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any such shares), directly or indirectly, by the Trust (except by conversion into or exchange for Junior Shares, or options, warrants or rights to subscribe for or purchase Junior Shares, and except for purchases or exchanges pursuant to a purchase or exchange offer made on the same terms to all holders of Series B Preferred Shares and all holders of Parity Shares).
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(e)
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If, for any taxable year, the Trust elects to designate as “capital gain dividends” (as defined in Section 857 of the Internal Revenue Code of 1986, as amended (the “Code”)) any portion (the “Capital Gains Amount”) of the dividends and distributions (as determined for U.S. federal income tax purposes) paid or made available for the year to holders of all classes and series of shares (the “Total Dividends”), then the portion of the Capital Gains Amount that shall be allocable to the holders of Series B Preferred Shares shall be the amount that the total dividends and distributions (as determined for U.S. federal income tax purposes) paid or made available to the holders of the Series B Preferred Shares for the year bears to the Total Dividends. The Trust may elect to retain and pay income tax on its net long-term capital gains. In such a case, the holders of Series B Preferred Shares would include in income their appropriate share of the Trust’s undistributed long-term capital gains, as designated by the Trust.
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(f)
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Holders of Series B Preferred Shares shall not be entitled to any dividend or distribution, whether payable in cash, property or capital shares of the Trust, in excess of full cumulative dividends and distributions on the Series B Preferred Shares as described above. Any dividend or other distribution payment made on the Series B Preferred Shares shall first be credited against the earliest accrued but unpaid dividends and distributions due with respect to such shares which remain payable. Accrued but unpaid dividends and distributions on the Series B Preferred Shares shall accumulate as of the Dividend Payment Date on which they first become payable or on the date of redemption, as the case may be.
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(g)
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“Set apart for payment” shall be deemed to include (without limitation): the recording by the Trust in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to an authorization by the Board and a declaration of dividends or other distribution by the Trust, the allocation of funds to be so paid on any series or class of shares of the Trust; provided, however, that if any funds for any class or series of Junior Shares or Parity Shares are placed in a separate account of the Trust or delivered to a disbursing, paying or other similar agent, then “set apart for payment” with respect to the Series B Preferred Shares shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent.
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(h)
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In determining whether a distribution (other than upon voluntary or involuntary liquidation), by distribution, redemption or other acquisition of the Trust’s equity securities is legally available, no effect shall be given to amounts that would be needed, if the Trust were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights on dissolution are superior to those receiving the distribution.
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5.
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Liquidation Preference.
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(a)
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Upon any voluntary or involuntary liquidation, dissolution, termination, cancellation or winding up of the affairs of the Trust, the holders of Series B Preferred Shares then outstanding are entitled to be paid, or have the Trust declare and set apart for payment, out of the assets of the Trust legally available for distribution to its shareholders, after payment of or provision for payment of the Trust’s debts and other liabilities, the Stated Value per share, plus an amount equal to any accrued and unpaid Cash Dividends (whether or not authorized or declared) thereon to but not including the date of payment or the date the amount for payment is set apart (collectively, the “Liquidating Distributions”), before any distribution or payment of assets is made to holders of Junior Shares. If the assets of the Trust legally available for distribution to shareholders are insufficient to pay in full the Liquidating Distributions on all outstanding Series B Preferred Shares and the corresponding amounts payable on all outstanding shares of any class or series of Parity Shares, then all assets distributed to the holders of the Series B Preferred Shares and any class or series of Parity Shares shall be distributed ratably in proportion to the respective preferential liquidation amounts to which they are entitled. Written notice of the effective date of any such liquidation, dissolution, termination, cancellation or winding up of the affairs of the Trust, stating the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable, shall be given by first class mail, postage pre-paid, not fewer than 30 nor more than 60 days prior to the payment date stated therein, to each record holder of the Series B Preferred Shares at the respective addresses of such holders as the same shall appear on the share register records of the Trust.
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(b)
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After payment of the full amount of the Liquidating Distributions to which they are entitled, the holders of Series B Preferred Shares shall have no right or claim to any of the remaining assets of the Trust.
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(c)
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For the avoidance of doubt, the consolidation or merger of the Trust with or into another entity, a consolidation or merger of another entity with or into the Trust, a statutory share exchange by the Trust, the conversion of the Trust into another form of organization, the change of the Trust’s jurisdiction of organization, or a sale, lease, transfer or conveyance of all or substantially all of the Trust’s assets or business shall not be deemed to constitute a liquidation, dissolution, termination, cancellation or winding up of the affairs of the Trust.
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6.
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Redemption at Option of Holders.
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(a)
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Subject to the provisions of this Section 6, beginning on the first day of the calendar month following the Original Issue Date, each holder of Series B Preferred Shares shall have the right (the “Holder Redemption Right”), at such holder’s option, to require the Trust to redeem any or all of such holder’s Series B Preferred Shares at a redemption price per Series B Preferred Share (the “Holder Redemption Price”) equal to the Stated Value, minus the Redemption Fee (defined below), plus an amount equal to all accrued but unpaid Cash Dividends, if any, to but not including the date fixed for redemption (the “Holder Redemption Date”), which shall be a date selected by the Trust in its discretion that is within 45 days of the date the Trust receives the Holder Redemption Notice (defined below). The Redemption Fee shall be an amount equal to: (i) 12.0% of the Stated Value beginning on the first day of the calendar month following the Original Issue Date of the Series B Preferred Shares to be redeemed; (ii) 9.0% of the Stated Value beginning on the first day of the calendar month following the first anniversary of the Original Issue Date of the Series B Preferred Shares to be redeemed; (iii) 6.0% of the Stated Value beginning on the first day of the calendar month following the second anniversary of the Original Issue Date of the Series B Preferred Shares to be redeemed; (iv) 3.0% of the Stated Value beginning on the first day of the calendar month following the third anniversary of the Original Issue Date of the Series B Preferred Shares to be redeemed; and (v) 0% of the Stated Value beginning on the first day of the calendar month following the fourth anniversary of the Original Issue Date of the Series B Preferred Shares to be redeemed (the “Redemption Fee”).
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(b)
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If a Holder Redemption Date falls after a Dividend Record Date and on or prior to the corresponding Dividend Payment Date, each holder of record of Series B Preferred Shares at the close of business on such Dividend Record Date shall be entitled to the dividend or other distribution payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemption of such shares on or prior to such Dividend Payment Date, and each holder of Series B Preferred Shares that shall be redeemed pursuant to the Holder Redemption Right shall be entitled to an amount equal to the dividends and distributions accruing after the end of the Dividend Period to which such Dividend Payment Date relates, up to but not including, the Holder Redemption Date.
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(c)
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For so long as the Common Shares are listed or admitted to trading on the NYSE or another national securities exchange or automated quotation system, the Trust has the right, in its sole discretion, to pay the Holder Redemption Price in cash or in equal value of Common Shares, calculated based on the closing price per share of the Common Shares for the single Trading Day prior to the Holder Redemption Date.
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(d)
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Redemption of the Series B Preferred Shares shall be made pursuant to the Holder Redemption Right upon:
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(i)
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delivery by such holder of a duly complete notice to the Trust or through the procedures of the Depository Trust Company (the “Holder Redemption Notice”), which shall be irrevocable, except upon written consent of the Trust, in compliance with the required procedures including those of the Trust and The Depository Trust Company (the “Stated Transfer Procedures”), and specifying the number of Series B Preferred Shares to be redeemed that are held by such holder as of the date of such Holder Redemption Notice; and
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(ii)
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transfer of the Series B Preferred Shares in compliance with the Stated Transfer Procedures.
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(e)
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If (i) a Holder Redemption Notice has been received by the Trust, (ii) (1) if the Series B Preferred Shares shall be redeemed in cash, the funds necessary for such redemption have been set apart by the Trust in trust for the benefit of the holder of any Series B Preferred Shares to be redeemed or (2) if the Series B Preferred Shares shall be redeemed with Common Shares, the Trust’s transfer agent has been instructed in writing that the Series B Preferred Shares shall be redeemed in Common Shares and (iii) irrevocable instructions have been given to pay or issue the Holder Redemption Price, then from and after the Holder Redemption Date, dividends and distributions shall cease to accrue on such Series B Preferred Shares, such Series B Preferred Shares shall no longer be deemed outstanding, and all rights of the holders of such Series B Preferred Shares shall terminate, except the right to receive the Holder Redemption Price in cash or in Common Shares, as applicable, without interest, upon transfer of such Series B Preferred Shares.
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(f)
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Limitations on Holder Redemption.
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(i)
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Notwithstanding any provision of this Section 6, the Trust’s obligation to redeem the Series B Preferred Shares at the option of the holders pursuant to the Holder Redemption Right shall be subject to the following aggregate redemption limits (collectively, the “Redemption Limits”):
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1.
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no more than 2.0% of the aggregate number of outstanding Series B Preferred Shares shall be redeemed per calendar month;
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2.
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no more than 5.0% of the aggregate number of outstanding Series B Preferred Shares shall be redeemed per fiscal quarter; and
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3.
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no more than 20.0% of the aggregate number of outstanding Series B Preferred Shares shall be redeemed per fiscal year.
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(ii)
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Redemptions at the option of the Trust pursuant to the Trust Redemption Right and the Change of Control Redemption Right (each as defined below) below shall not count towards the Redemption Limits. Redemptions at the option of the holder following the death or disability of a holder pursuant to the Estate Redemption Right (defined below) shall count towards the Redemption Limits, but shall not be subject to such limits.
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(iii)
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If, after applying the Redemption Limits, a holder would own less than one Series B Preferred Share, all of such holder’s Series B Preferred Shares shall be redeemed. Otherwise, all redemption amounts shall be rounded down such that after giving effect to any redemption, no holder is left owning a fractional share. If, after applying the Redemption Limits, the number of Series B Preferred Shares to be redeemed is less than the number of Series B Preferred Shares submitted for redemption by a holder, the excess Series B Preferred Shares shall remain subject to redemption in future periods until the earlier of (i) all Series B Preferred Shares submitted by such holder for redemption have been redeemed, or (ii) such holder delivers to us a written notice of withdrawal stating the number of withdrawn Series B Preferred Shares and the number of Series B Preferred Shares, if any, which remain subject to redemption.
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(iv)
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The foregoing provisions of this Section 6(f) shall not prevent any other action by the Trust pursuant to the Declaration or otherwise in order to ensure that the Trust remains qualified as a REIT for U.S. federal income tax purposes.
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(g)
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Notwithstanding any provision of this Section 6, no redemptions of Series B Preferred Shares shall be made by the Trust if such redemption shall be restricted or prohibited by law. Further, no redemptions of Series B Preferred Shares shall be made by the Trust at such time as the terms and provisions of any agreement of the Trust prohibits such redemption or provides that such redemption would constitute a breach thereof or a default thereunder, or if such redemption would result in a Change of Control.
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7.
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Optional Redemption by the Trust.
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(a)
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The Series B Preferred Shares are not redeemable by the Trust prior to the first day of the first quarter following the second anniversary of each Original Issue Date of Series B Preferred Shares, except as permitted by Article XII of the Declaration and as otherwise provided in this Section 7 and Section 9 below. Beginning on the first day of the first quarter following the second anniversary of each Original Issue Date of Series B Preferred Shares, such Series B Preferred Shares shall be redeemable by the Trust, at the Trust’s option, in whole or in part, at any time or from time to time (the “Trust Redemption Right”), at a redemption price per Series B Preferred Share (the “Trust Redemption Price”) equal to the Stated Value plus an amount equal to any accrued but unpaid Cash Dividends, if any, to but not including the date fixed for redemption (the “Trust Redemption Date”).
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(b)
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If fewer than all of the outstanding Series B Preferred Shares are to be redeemed pursuant to the Trust Redemption Right, the Series B Preferred Shares to be redeemed shall be redeemed pro rata (as nearly as may be practicable without creating fractional shares), by lot or by any other equitable method that the Trust determines. If such redemption is to be by lot and, as a result of such redemption, any holder of Series B Preferred Shares, other than a holder of Series B Preferred Shares that has received an exemption, would become a holder of a number of Series B Preferred Shares in excess of the Aggregate Share Ownership Limit because such holder’s Series B Preferred Shares were not redeemed, or were only redeemed in part, then, except as otherwise provided in Article XII of the Declaration, the Trust shall redeem the requisite number of Series B Preferred Shares of such holder such that no holder shall hold a number of shares in excess of the Aggregate Share Ownership Limit subsequent to such redemption.
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(c)
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Unless full cumulative dividends and distributions on all Series B Preferred Shares for all past Dividend Periods that have ended shall have been or contemporaneously are declared and paid in cash or Common Shares or declared and a sum sufficient for the payment thereof is set apart for payment, (i) no Series B Preferred Shares shall be redeemed pursuant to the Trust Redemption Right unless all outstanding Series B Preferred Shares are simultaneously redeemed, and (ii) the Trust shall not purchase or otherwise acquire directly or indirectly for any consideration, nor shall any monies be paid to or be made available for a sinking fund for the redemption of, any Series B Preferred Shares (except by conversion into or exchange for Junior Shares, or options, warrants or rights to purchase or subscribe for Junior Shares); provided, however, that the foregoing shall not prevent the redemption or purchase by the Trust of Series B Preferred Shares pursuant to Article XII of the Declaration or otherwise in order to ensure that the Trust remains qualified as a REIT for U.S. federal income tax purposes or the purchase or acquisition of Series B Preferred Shares pursuant to a purchase or exchange offer made on the same terms to all holders of Series B Preferred Shares and all holders of Parity Shares.
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(d)
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If a Trust Redemption Date falls after a Dividend Record Date and on or prior to the corresponding Dividend Payment Date, each holder of record of Series B Preferred Shares at the close of business on such Dividend Record Date shall be entitled to the dividend or other distribution payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemption of such shares on or prior to such Dividend Payment Date, and each holder of Series B Preferred Shares that shall be redeemed pursuant to the Trust Redemption Right shall be entitled to an amount equal to the dividends and distributions accruing after the end of the Dividend Period to which such Dividend Payment Date relates, up to but not including, the Trust Redemption Date.
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(e)
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For so long as the Common Shares are listed or admitted to trading on the NYSE or another national securities exchange or automated quotation system, the Trust has the right, in its sole discretion, to pay the Trust Redemption Price in cash or in equal value of Common Shares, calculated based on the closing price per share of the Common Shares for the single Trading Day prior to the Trust Redemption Date.
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(f)
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Notice of redemption pursuant to the Trust Redemption Right (a “Trust Redemption Notice”) shall be mailed by the Trust, postage prepaid, no less than seven days prior to the Trust Redemption Date, addressed to the respective holders of record of all of the Series B Preferred Shares to be redeemed at their respective addresses as they appear on the transfer records maintained by the Trust’s transfer agent. No failure to give such notice or defect therein shall affect the validity of the proceedings for the redemption of any Series B Preferred Shares except as to the holder to whom such notice was defective or not given; provided that notice given to the last address of record shall be deemed to be valid notice. In addition to any information required by law or by the applicable rules of any exchange upon which the Series B Preferred Shares may be listed or admitted to trading, each Trust Redemption Notice shall state: (i) the Trust Redemption Date; (ii) the Trust Redemption Price on a per share basis; (iii) the CUSIP number(s) of the Series B Preferred Shares to be redeemed; (iv) the number of Series B Preferred Shares to be redeemed, if fewer than all, or the method for determining such number; (v) that dividends and distributions on the Series B Preferred Shares to be redeemed shall cease to accrue on the Trust Redemption Date; (vi) that the Series B Preferred Shares are being redeemed at the Trust’s option pursuant to the Trust Redemption Right; and (vii) any conditions to the redemption. Any such redemption may be made conditional on such factors as may be determined by the Board and as set forth in the Trust Redemption Notice.
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(g)
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If (i) a Trust Redemption Notice has been given by the Trust with respect to any Series B Preferred Shares, (ii) (1) if the Series B Preferred Shares shall be redeemed in cash, the funds necessary for such redemption have been set apart by the Trust in trust for the benefit of the holders of any Series B Preferred Shares so called for redemption or (2) if the Series B Preferred Shares shall be redeemed with Common Shares, the Trust’s transfer agent has been instructed in writing that the Series B Preferred Shares shall be redeemed in Common Shares, and (iii) irrevocable instructions have been given to pay or issue the Trust Redemption Price, then from and after the Trust Redemption Date, dividends and distributions shall cease to accrue on such Series B Preferred Shares, such Series B Preferred Shares shall no longer be deemed outstanding, and all rights of the holders of such Series B Preferred Shares shall terminate, except the right to receive the Trust Redemption Price in cash or in Common Shares, as applicable, without interest, upon transfer of such Series B Preferred Shares.
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(h)
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If the Trust calls for redemption of any Series B Preferred Shares pursuant to and in accordance with Article XII of the Declaration, including through a purchase from a Charitable Trust (as defined in the Declaration), then the redemption price shall be an amount equal to the Stated Value per share, plus any accrued and unpaid dividends and distributions (whether or not declared) on the Series B Preferred Shares to but not including, the redemption date, subject to any restrictions, limitations or requirements contained in Article XII of the Declaration. Notwithstanding anything else to the contrary herein, the Trust shall not be required to provide advanced notice to the holder of Series B Preferred Shares in the event such holder’s Series B Preferred Shares are redeemed in order for the Trust to qualify or maintain the qualification of the Trust as a REIT for U.S. federal income tax purposes.
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(i)
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Subject to applicable law and the limitation on purchases when distributions on the Series B Preferred Shares are in arrears, the Trust may, at any time and from time to time, purchase any Series B Preferred Shares by tender or by private agreement.
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8.
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Optional Redemption Following Death or Qualifying Disability of a Holder.
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(a)
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Subject to the terms of this Section 8, the Trust shall redeem upon receipt of an Estate Redemption Notice (defined below) from the holder any Series B Preferred Shares, beginning on the first day of the calendar month following the first anniversary of the Original Issue Date of such shares, held by a natural person upon his or her death or upon his or her suffering a qualifying disability (the right to redemption arising thereupon, the “Estate Redemption Right”), including Series B Preferred Shares held through a revocable grantor trust, or an individual retirement account or other retirement or profit-sharing plan, where the Estate Redemption Notice is from (i) in the case of the death of a holder, the holder’s estate, the recipient of such Series B Preferred Shares through bequest or inheritance, or, with respect to Series B Preferred Shares held through a revocable grantor trust, the trustee of such trust, who shall have the sole ability to give the Estate Redemption Notice on behalf of the trust, or (ii) in the case of the qualifying disability of a holder, the holder or the holder’s legal representative. If spouses are joint registered holders of Series B Preferred Shares, the Estate Redemption Notice may be made upon the death or qualifying disability of either spouse. If the holder of Series B Preferred Shares is not a natural person, such as a trust (other than a revocable grantor trust) or a partnership, corporation or similar legal entity, the right of redemption upon death or qualifying disability of a beneficiary of such trust or the holder of an ownership interest in such partnership, corporation or similar legal entity shall be subject to the approval of the Board in its sole discretion. Series B Preferred Shares redeemed pursuant to the Estate Redemption Right shall be redeemed at a redemption price per Series B Preferred Share (the “Estate Redemption Price”) equal to (A) beginning on the first day of the calendar month following the first anniversary of the Original Issue Date of the Series B Preferred Shares to be redeemed, 95% of the Stated Value and (B) beginning on the first day of the calendar month following the second anniversary of the Original Issue Date of the Series B Preferred Shares to be redeemed, 100% of the Stated Value, in each case plus an amount equal to accrued but unpaid Cash Dividends thereon, if any, to but not including the date fixed for redemption (the “Estate Redemption Date”), which shall be a date selected by the Trust in its discretion that is within 45 days of the date the Trust receives the Estate Redemption Notice.
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(b)
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If an Estate Redemption Date falls after a Dividend Record Date and on or prior to the corresponding Dividend Payment Date, each holder of record of Series B Preferred Shares at the close of business on such Dividend Record Date shall be entitled to the dividend or other distribution payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemption of such shares on or prior to such Dividend Payment Date, and each holder of Series B Preferred Shares that shall be redeemed pursuant to the Estate Redemption Right shall be entitled to an amount equal to the dividends and distributions accruing after the end of the Dividend Period to which such Dividend Payment Date relates, up to but not including, the Estate Redemption Date.
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(c)
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For so long as the Common Shares are listed or admitted to trading on the NYSE or another national securities exchange or automated quotation system, the Trust has the right, in its sole discretion, to pay the Estate Redemption Price in cash or in equal value of Common Shares, calculated based on the closing price per share of the Common Shares for the single Trading Day prior to the Estate Redemption Date.
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(d)
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Redemption of the Series B Preferred Shares shall be made pursuant to the Estate Redemption Right upon:
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(i)
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delivery by such holder of a duly complete notice to the Trust or through the procedures of the Depository Trust Company (the “Estate Redemption Notice”), which shall be irrevocable, except upon written consent of the Trust, in compliance with the Stated Transfer Procedures, and specifying the number of Series B Preferred Shares to be redeemed that are held by such holder as of the date of such Estate Redemption Notice;
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(ii)
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transfer of the Series B Preferred Shares in compliance with the Stated Transfer Procedures; and
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(iii)
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compliance with the other requirements of this Section 8.
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(e)
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If (i) an Estate Redemption Notice has been received by the Trust, (ii) (1) if the Series B Preferred Shares shall be redeemed in cash, the funds necessary for such redemption have been set apart by the Trust in trust for the benefit of the holder of any Series B Preferred Shares to be redeemed or (2) if the Series B Preferred Shares shall be redeemed with Common Shares, the Trust’s transfer agent has been instructed in writing that the Series B Preferred Shares shall be redeemed in Common Shares and (iii) irrevocable instructions have been given to pay or issue the Estate Redemption Price, then from and after the Estate Redemption Date, dividends and distributions shall cease to accrue on such Series B Preferred Shares, such Series B Preferred Shares shall no longer be deemed outstanding, and all rights of the holders of such Series B Preferred Shares shall terminate, except the right to receive the Estate Redemption Price in cash or in Common Shares, as applicable, without interest, upon transfer of such Series B Preferred Shares.
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(f)
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In order for the Trust to redeem Series B Preferred Shares upon the death or qualifying disability of a holder thereof, the following conditions must be met: (i) the deceased or disabled holder must be the sole holder of the Series B Preferred Shares to be redeemed or the beneficiary of a trust or an individual retirement account or other retirement or profit-sharing plan that is a holder or, in the case of Series B Preferred Shares owned by spouses who are joint registered holders (or holders by tenants in the entirety), one of the joint holders; (ii) the Estate Redemption Notice must be received by the Trust within one year after the death or qualifying disability of the holder but no sooner than the first day of the calendar month following the first anniversary of the Original Issue Date of the Series B Preferred Shares to be redeemed; (iii) the Estate Redemption Notice must be given by (A) in the case of the death of a holder, a recipient of the Series B Preferred Shares through bequest or inheritance, (B) in the case of the death of a beneficiary of a trust, the trustee of the trust, or (C) in the case of the death of a holder of Series B Preferred Shares owned by spouses who are joint registered holders (or holders by tenants in the entirety), the surviving spouse; and (iv) in the case of the qualifying disability of a holder, (A) such disability must meet the requirements of Section 72(m)(7) of the Code (i.e., the individual must be unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or to be of a long continued and indefinite duration), (B) a determination of disability must be made by the U.S. governmental agency responsible for reviewing the disability retirement benefits that the holder could be eligible to receive, (C) the condition causing the disability shall have occurred after the date that the holder became a holder of Series B Preferred Shares and (D) the condition causing the disability shall have occurred before the holder reached full retirement age, which is the age at which workers can claim full Social Security retired-worker benefits. The Trust may in its discretion request from the holder, and the holder must promptly provide, reasonable documentation supporting the satisfaction of the foregoing conditions.
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(g)
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Notwithstanding any provision of this Section 8, no redemptions of Series B Preferred Shares shall be made by the Trust if such redemption shall be restricted or prohibited by law. Further, no redemptions of Series B Preferred Shares shall be made by the Trust at such time as the terms and provisions of any agreement of the Trust prohibits such redemption or provides that such redemption would constitute a breach thereof or a default thereunder, or if such redemption would result in a Change of Control.
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9.
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Optional Redemption by Trust Upon a Change of Control.
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(a)
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If a Change of Control occurs at any time the Series B Preferred Shares are outstanding, the Trust shall have the right (the “Change of Control Redemption Right”), but not the obligation, to redeem in cash all or some portion of the Series B Preferred Shares issued and outstanding, on a date (the “Change of Control Redemption Date”) specified by the Trust no later than 120 calendar days after the first date on which such Change of Control occurred, at a redemption price equal to 100% of the Stated Value per share, plus an amount equal to all accrued but unpaid Cash Dividends thereon (whether or not authorized or declared) to but not including the Change of Control Redemption Date (such price, the “Change of Control Redemption Price”).
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(b)
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If fewer than all of the outstanding Series B Preferred Shares are to be redeemed pursuant to the Change of Control Redemption Right, the Series B Preferred Shares to be redeemed shall be redeemed pro rata (as nearly as may be practicable without creating fractional shares), by lot or by any other equitable method that the Trust determines. If such redemption is to be by lot and, as a result of such redemption, any holder of Series B Preferred Shares, other than a holder of Series B Preferred Shares that has received an exemption, would become a holder of a number of Series B Preferred Shares in excess of the Aggregate Share Ownership Limit because such holder’s Series B Preferred Shares were not redeemed, or were only redeemed in part, then, except as otherwise provided in Article XII of the Declaration, the Trust shall redeem the requisite number of Series B Preferred Shares of such holder such that no holder shall hold a number of shares in excess of the Aggregate Share Ownership Limit subsequent to such redemption.
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(c)
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Unless full cumulative dividends and distributions on all Series B Preferred Shares for all past Dividend Periods that have ended shall have been or contemporaneously are declared and paid in cash or declared and a sum sufficient for the payment thereof is set apart for payment, (i) no Series B Preferred Shares shall be redeemed pursuant to the Change of Control Redemption Right unless all outstanding Series B Preferred Shares are simultaneously redeemed, and (ii) the Trust shall not purchase or otherwise acquire directly or indirectly for any consideration, nor shall any monies be paid to or be made available for a sinking fund for the redemption of, any Series B Preferred Shares (except by conversion into or exchange for Junior Shares, or options, warrants or rights to purchase or subscribe for Junior Shares); provided, however, that the foregoing shall not prevent the redemption or purchase by the Trust of Series B Preferred Shares pursuant to Article XII of the Declaration or otherwise in order to ensure that the Trust remains qualified as a REIT for U.S. federal income tax purposes or the purchase or acquisition of Series B Preferred Shares pursuant to a purchase or exchange offer made on the same terms to all holders of Series B Preferred Shares and all holders of Parity Shares.
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(d)
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If a Change of Control Redemption Date falls after a Dividend Record Date and on or prior to the corresponding Dividend Payment Date, each holder of record of Series B Preferred Shares at the close of business on such Dividend Record Date shall be entitled to the dividend or other distribution payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemption of such shares on or prior to such Dividend Payment Date, and each holder of Series B Preferred Shares that shall be redeemed pursuant to the Change of Control Redemption Right shall be entitled to an amount equal to the dividends and distributions accruing after the end of the Dividend Period to which such Dividend Payment Date relates, up to but not including, the Change of Control Redemption Date.
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(e)
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Notice of redemption pursuant to a Change of Control (the “Change of Control Redemption Notice”) shall be mailed by the Trust, postage prepaid, no fewer than seven days prior to the Change of Control Redemption Date, addressed to the respective holders of record of all of the Series B Preferred Shares to be redeemed at their respective addresses as they appear on the transfer records maintained by the Trust’s transfer agent. No failure to give such notice or defect therein shall affect the validity of the proceedings for the redemption of any Series B Preferred Shares except as to the holder to whom such notice was defective or not given; provided, that notice given to the last address of record shall be deemed to be valid notice. In addition to any information required by law or by the applicable rules of any exchange upon which the Series B Preferred Shares may be listed or admitted to trading, each Change of Control Redemption Notice shall state: (i) the Change of Control Redemption Date; (ii) the Change of Control Redemption Price on a per share basis; (iii) the CUSIP number(s) of the Series B Preferred Shares to be redeemed; (iv) the number of Series B Preferred Shares to be redeemed, if fewer than all, or the method for determining such number; (v) that dividends and distributions on the Series B Preferred Shares to be redeemed shall cease to accrue on the Change of Control Redemption Date; (vi) that the Series B Preferred Shares are being redeemed at the Trust’s option pursuant to the Change of Control Redemption Right and a brief description of the transaction or transactions constituting such Change of Control; and (vii) any conditions to the redemption. Any such redemption may be made conditional on such factors as may be determined by the Board and as set forth in the Change of Control Redemption Notice.
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(f)
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If (i) a Change of Control Redemption Notice has been given by the Trust, (ii) the funds necessary for such redemption have been set apart by the Trust in trust for the benefit of the holders of any Series B Preferred Shares so called for redemption and (iii) irrevocable instructions have been given to pay the Change of Control Redemption Price, then from and after the Change of Control Redemption Date, dividends and distributions shall cease to accrue on such Series B Preferred Shares, such Series B Preferred Shares shall no longer be deemed outstanding, and all rights of the holders of such Series B Preferred Shares shall terminate, except the right to receive the Change of Control Redemption Price in cash, without interest, upon transfer of such Series B Preferred Shares.
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(a)
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Holders of the Series B Preferred Shares shall not have any voting rights except as set forth below.
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(b)
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So long as any Series B Preferred Shares remain outstanding, the Trust shall not:
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(i)
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authorize or create, or increase the authorized or issued amount of, any class or series of capital shares of the Trust expressly designated as ranking senior to the Series B Preferred Shares as to distribution rights and rights upon liquidation, dissolution, termination, cancellation or winding up of the Trust, or reclassify any authorized capital shares of the Trust into any such senior shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such senior equity securities, without the affirmative vote of the holders of at least two-thirds of the outstanding Series B Preferred Shares and the holders of any outstanding Parity Shares upon which like voting rights have been conferred and are exercisable (“Voting Parity Shares”) (voting together as a single class); or
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(ii)
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amend, alter or repeal the provisions of the Declaration or this Statement of Preferences, whether by merger, consolidation or otherwise (in any case, an “Event”), so as to materially and adversely affect any right, preference, privilege or voting powers of the Series B Preferred Shares or the holders thereof, without the affirmative vote of the holders of at least two-thirds of the outstanding Series B Preferred Shares (voting as a separate class); provided, however, that with respect to the occurrence of any Event set forth above, so long as Series B Preferred Shares remain outstanding with the terms thereof materially unchanged or the holders of Series B Preferred Shares receive capital shares, or options, warrants or rights to purchase or subscribe for capital shares or other securities with rights, preferences, privileges and voting powers substantially similar, taken as a whole, to the rights, preferences, privileges and voting powers of the Series B Preferred Shares, the occurrence of any such Event shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the Series B Preferred Shares or the holders thereof; provided further that the conversion of the Trust into another form of organization or the change of the Trust’s jurisdiction of organization shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers or the holders thereof so long as the holders of the Series B Preferred Shares continue to hold securities of the successor entity with rights, preferences, privileges and voting powers that are substantially similar to those of the Series B Preferred Shares; and provided further that any increase in the amount of the authorized Series B Preferred Shares or the creation or issuance, or increase in the amounts authorized, of any other classes or series of Parity Shares or Junior Shares shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers or the holders thereof.
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(c)
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In any matter in which the holders of Series B Preferred Shares are entitled to vote separately as a single class, each such holder shall have the right to one vote for each Series B Preferred Share held by such holder. If the holders of Series B Preferred Shares and the holders of outstanding Voting Parity Shares, including our Series A Preferred Shares, are entitled to vote together as a single class on any matter, such holders shall each have one vote for each $25.00 of Stated Value.
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(d)
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The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding Series B Preferred Shares shall have been redeemed.
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(e)
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Notwithstanding any other provision of the Governing Instruments, the holders of Series B Preferred Shares shall not be entitled to vote on any amendment to any statement of preferences establishing the rights and preferences of any other class of preferred shares of the Trust, nor shall the holders of Series B Preferred Shares be entitled to vote on any matter that only affects the rights or interests of one or more other series of shares of the Trust.
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11.
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Conversion at the Option of Holders.
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(a)
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Subject to the provisions of this Section 11, beginning on the first day of the calendar month following the third anniversary of the Original Issue Date, each holder of Series B Preferred Shares shall have the right (the “Holder Conversion Right”), at such holder’s option, to require the Trust to convert any or all of such holder’s Series B Preferred Shares into a number of Common Shares equal to the Holder Conversion Amount (as defined below), if the 5-day volume weighted average price (“VWAP”) of the Common Shares on the NYSE ending on the Trading Day immediately preceding the date the Company receives the Holder Conversion Notice (defined below) (such 5-day VWAP, the “Market Price”) is equal to or greater than 115% of the Applicable NAV.
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(b)
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The number of Common Shares issued per Series B Preferred Share pursuant to the Holder Conversion Right (the “Holder Conversion Amount”) shall be determined as follows:
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(i)
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Beginning on the first day of the month following the third anniversary of the Original Issue Date and continuing to, but not including, the first day of the month following the fourth anniversary of the Original Issue Date, the Holder Conversion Amount shall be a number of Common Shares that is equal to the quotient of (i) the Holder Conversion Price (defined below) as of the Holder Conversion Date (as defined below) divided by (ii) 94% of the Market Price;
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(ii)
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Beginning on the first day of the month following the fourth anniversary of the Original Issue Date and continuing to, but not including, the first day of the month following the fifth anniversary of the Original Issue Date, the Holder Conversion Amount shall be a number of Common Shares that is equal to the quotient of (i) the Holder Conversion Price as of the Holder Conversion Date divided by (ii) 90% of the Market Price; and
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(iii)
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Beginning on the first day of the month following the fifth anniversary of the Original Issue Date and continuing thereafter, the Holder Conversion Amount shall be a number of Common Shares that is equal to the quotient of (i) the Holder Conversion Price as of the Holder Conversion Date divided by (ii) 88% of the Market Price.
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(iv)
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The “Holder Conversion Price” means the Stated Value plus any an amount equal to all accrued but unpaid Cash Dividends, if any, to but not including the date fixed for conversion (the “Holder Conversion Date”), which shall be a date selected by the Trust in its discretion that is within 45 days of the date the Trust receives the Holder Conversion Notice.
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(c)
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The Applicable NAV shall be adjusted for any share splits (including those effected pursuant to ta distribution of Common Shares), subdivisions, combinations or other similar events (in each case, a “Share Split”) with respect to the Common Shares as follows: the adjusted Applicable NAV as the result of a Share Split will be equal to the product obtained by multiplying (i) the Applicable NAV in effect immediately prior to such Share Split by (ii) a fraction, the numerator of which is the number of Common Shares outstanding after giving effect to such Share Split and the denominator of which is the number of Common Shares outstanding immediately prior to such Share Split.
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(d)
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Conversion of the Series B Preferred Shares to Common Shares shall be made pursuant to the Holder Conversion Right upon:
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(i)
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delivery by such holder of a duly complete notice to the Trust or through the procedures of the Depository Trust Company (the “Holder Conversion Notice”), which shall be irrevocable, except upon written consent of the Trust, in compliance with the Stated Transfer Procedures, and specifying the number of Series B Preferred Shares to be converted that are held by such holder as of the date of such Holder Conversion Notice and the number of Series B Preferred Share to be held by such holder following such conversion; and
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(ii)
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transfer of the Series B Preferred Shares in compliance with the Stated Transfer Procedures.
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(e)
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In the event that the Trust provides a Trust Redemption Notice or Change of Control Redemption Notice with respect to some or all of the Series B Preferred Shares for which a holder of such shares has previously submitted a Holder Conversion Notice, such holder may revoke their Holder Conversion Notice with respect to Series B Preferred Shares subject to a Trust Redemption Notice or Change of Control Redemption Notice by delivering a notice of revocation to the Trust or through the Stated Transfer Procedures at any time prior to 5:00 p.m. (Eastern time) on the Business Day immediately preceding the Trust Redemption Date or Change of Control Redemption Date, as applicable. To the extent a holder of Series B Preferred Shares does not revoke their Holder Conversion Notice with respect to Series B Preferred Shares subject to a Trust Redemption Notice or Change of Control Redemption Notice, such Series B Preferred Shares shall not be subject to any redemption by the Trust pursuant to Section 7 or 9 for which a Trust Redemption Notice or Change of Control Redemption Notice was delivered subsequent to the date on which the holder of such Series B Preferred Shares delivered a Holder Conversion Notice.
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(f)
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No fractional Common Shares or scrip representing fractional Common Shares shall be issued upon conversion of any Series B Preferred Shares into Common Shares. In lieu of fractional shares otherwise issuable, each holder will be entitled to receive an amount in cash equal to the fraction of a Common Share multiplied by the Market Price on the date the Holder Conversion Notice was delivered. In order to determine whether the number of Common Shares to be delivered to a holder upon the conversion of such holder’s Series B Preferred Shares will include a fractional share, such determination shall be based on the aggregate number of Series B Preferred Shares of such holder that are being converted on any single Holder Conversion Date.
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(g)
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Limitations on Holder Conversion.
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(i)
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Notwithstanding any provision of this Section 11, the Trust’s obligation to convert the Series B Preferred Shares to Common Shares at the option of the holders pursuant to the Holder Conversion Right shall be subject to the following aggregate conversion limits (collectively, the “Conversion Limits”):
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1.
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no more than 5.0% of the aggregate number of outstanding Series B Preferred Shares shall be converted per calendar month;
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2.
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no more than 12.0% of the aggregate number of outstanding Series B Preferred Shares shall be converted per fiscal quarter; and
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3.
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no more than 33.0% of the aggregate number of outstanding Series B Preferred Shares shall be converted per fiscal year.
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(ii)
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If, after applying the Conversion Limits, a holder would own less than one Series B Preferred Share, all of such holder’s Series B Preferred Shares shall be converted. Otherwise, the number of such holder’s Series B Preferred Shares to be converted shall be rounded down such that after giving effect to any conversion, no holder is left owning a fractional share of Series B Preferred Shares. If, after applying the Conversion Limits, the number of Series B Preferred Shares to be converted is less than the number of Series B Preferred Shares submitted for conversion by a holder, the excess Series B Preferred Shares shall remain subject to conversion in future periods until the earlier of (i) all Series B Preferred Shares submitted by such holder for conversion have been converted, or (ii) such holder delivers to us a written notice of withdrawal stating the number of withdrawn Series B Preferred Shares and the number of Series B Preferred Shares, if any, which remain subject to conversion.
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(iii)
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If, as a result of any conversion pursuant to this Section 11, any holder of Series B Preferred Shares, other than a holder of Series B Preferred Shares that has received an exemption, would become a holder of a number of Common Shares in excess of the Aggregate Share Ownership Limit or Common Share Ownership Limit, then, except as otherwise provided in Article XII of the Declaration, the Trust shall only convert such number of Series B Preferred Shares of such holder that would not cause such holder to hold Series B Preferred Shares and Common Shares in excess of the Aggregate Share Ownership Limit or Common Share Ownership Limit.
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(iv)
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The foregoing provisions of this Section 11(h) shall not prevent any other action by the Trust pursuant to the Declaration or otherwise in order to ensure that the Trust remains qualified as a REIT for U.S. federal income tax purposes.
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(v)
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Notwithstanding any provision of this Section 11, prior to the receipt of the Requisite Shareholder Approval, the Series B Preferred Shares shall not be convertible, in aggregate, into more than 19.99% of the number of Common Shares or voting power outstanding prior to the initial issuance of any Series B Preferred Shares (subject to appropriate adjustment in relation to any recapitalizations, share dividends, share splits, share combinations, reclassifications or other similar events).
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(h)
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If a Holder Conversion Date falls after a Dividend Record Date and on or prior to the corresponding Dividend Payment Date, each holder of record of Series B Preferred Shares at the close of business on such Dividend Record Date shall be entitled to the dividend or other distribution payable on such shares on the corresponding Dividend Payment Date notwithstanding the conversion of such shares on or prior to such Dividend Payment Date, and each holder of the Series B Preferred Shares that shall be converted pursuant to the Holder Conversion Right shall be entitled to an amount equal to the dividends and distributions accruing after the end of the Dividend Period to which such Dividend Payment Date relates, up to but not including, the Holder Conversion Date.
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(i)
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If (i) a Holder Conversion Notice has been received by the Trust, (ii) the Trust’s transfer agent has been instructed in writing that the Series B Preferred Shares shall be converted into Common Shares and (iii) irrevocable instructions have been given to issue the Holder Conversion Amount, then from and after the Holder Conversion Date, dividends and distributions shall cease to accrue on such Series B Preferred Shares, such Series B Preferred Shares shall no longer be deemed outstanding, and all rights of the holders of such Series B Preferred Shares shall terminate, except the right to receive the Holder Conversion Amount, without interest, upon transfer of such Series B Preferred Shares.
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(j)
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Notwithstanding any provision of this Section 11, no conversions of Series B Preferred Shares shall be made by the Trust if such conversion shall be restricted or prohibited by law. Further, no conversions of Series B Preferred Shares shall be made by the Trust at such time as the terms and provisions of any agreement of the Trust prohibits such conversion or provides that such conversion would constitute a breach thereof or a default thereunder, or if such conversion would result in a Change of Control.
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12.
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Term. The Series B Preferred Shares have no stated maturity date and shall not be subject to any sinking fund and, except as otherwise set forth herein, is not subject to mandatory redemption. The Trust shall not be required to set aside funds to redeem the Series B Preferred Shares.
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13.
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Status of Redeemed, Converted or Repurchased Series B Preferred Shares. All Series B Preferred Shares redeemed, converted repurchased or otherwise acquired in any manner by the Trust shall constitute authorized but unissued Series B Preferred Shares.
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14.
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Application of Article XII. The Series B Preferred Shares constitute Shares (as defined in the Declaration) and, as such, are subject to the provisions of Article XII of the Declaration applicable to Shares.
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15.
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Restrictions on Ownership. Prior to the receipt of the Requisite Shareholder Approval, no Series B Preferred Shares shall be issued to (i) any officers, employees, trustees, directors or other service providers of the Trust, (ii) any controlling shareholder or member of a control group or any other substantial shareholder of the Trust that has an affiliated person who is an officer, trustee or director of the Trust or (iii) any entity affiliated with NexPoint Real Estate Advisors X, L.P.
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16.
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Relationship to Governing Instruments. This Statement of Preferences sets forth the rights, powers, preferences and privileges of the Series B Preferred Shares and the provisions set forth herein shall operate as additions to or modifications of the rights, powers, preferences and privileges of the holders of the Series B Preferred Shares under the Governing Instruments, as the context may require. To the extent the provisions set forth herein conflict with the provisions of the Governing Instruments with respect to any such rights, powers, preferences and privileges of the Series B Preferred Shares, this Statement of Preferences shall control. Except as set forth in this Section 15, the Governing Instruments shall control as to the Trust generally and the rights, powers, preferences and privileges of other Shares of the Trust and the holders thereof.
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IN WITNESS WHEREOF, NexPoint Diversified Real Estate Trust has caused this Statement of Preferences to be signed in its name and on its behalf by a duly authorized officer, who acknowledges said instrument to be the statutory trust act of the Trust, and states that, to the best of such officer’s knowledge, information and belief under penalty of perjury, the matters and facts herein set forth with respect to approval are true in all material respects, as of January 30, 2025.
WITNESS:
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NEXPOINT DIVERSIFIED REAL ESTATE TRUST:
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/s/ Dustin Norris
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By:
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/s/ Matt McGraner
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Name: Dustin Norris
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Name:
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Matt McGraner
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Title: Executive Vice President
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Title:
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Executive VP and Chief Investment Officer
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Exhibit 5.1
NexPoint Diversified Real Estate Trust
300 Crescent Court, Suite 700
Dallas, Texas 75201
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Re:
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NexPoint Diversified Real Estate Trust, a Delaware statutory trust (the “Company”)–Issuance and sale of up to 16,000,000 shares of 9.00% Series B Cumulative Redeemable Preferred Shares, par value $0.001 per share (the “Series B Preferred Shares”), of the Company and the common shares, par value $0.001 (the “Common Shares,” and, together with the Series B Preferred Shares, the “Shares”), of the Company to be issued from time to time upon redemption of the Series B Preferred Shares pursuant to a Registration Statement on Form S-3 (Registration No. 333-280954) filed with the United States Securities and Exchange Commission (the “Commission”) on or about July 23, 2024 (the “Registration Statement”)
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Ladies and Gentlemen:
We have acted as special Delaware counsel to the Company, in connection with the registration of the Shares, under the Securities Act of 1933, as amended (the “Securities Act”). You have requested our opinion with respect to the matters set forth below.
This opinion letter is being delivered in accordance with the requirements of Item 601(b)(5) of Regulation S-K promulgated under the Securities Act.
In rendering the opinion set forth below, we examined and relied upon such certificates, statutory trust records, agreements, instruments and other documents, and examined such matters of law, that we considered necessary or appropriate as a basis for the opinions. In rendering the opinion set forth below, we have examined and are familiar with originals or copies, certified or otherwise identified to our satisfaction, of (i) the restated certificate of trust of the Company, as in effect on the date hereof, (ii) the restated Agreement and Declaration of Trust of the Company (“Declaration of Trust”) dated as of July 1, 2022 (ii) the bylaws of the Company, as in effect on the date hereof, (iii) the Registration Statement and related base prospectus, and the related prospectus supplement, dated January 30, 2025, (iv) the Statement of Preferences of the Series B Preferred Shares dated as of the date of this opinion letter, (v) certain resolutions adopted by the Board of Trustees of the Company relating to, among other things, the authorization of the issuance of the Shares (the “Trustees’ Resolutions”), (vi) a Certificate of Good Standing of the Company dated January 6, 2025 issued by the Secretary of State of the State of Delaware; and (vii) such other documents as we have deemed necessary or appropriate as a basis for the opinions set forth below. In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such latter documents. As to any facts material to the opinion expressed herein that we did not independently establish or verify, we have relied upon oral or written statements and representations of officers and other representatives of the Company and others.
1325 Avenue of the Americas ♦ 27th Floor ♦ New York, NY 10019
Tel: (646) 863-9754 ♦ Fax: (646) 478-9129
Colorado ♦ Connecticut ♦ Delaware ♦ District of Columbia ♦ Georgia ♦
Maryland ♦ New Jersey ♦ New York ♦ Pennsylvania ♦ Spain ♦ Virginia
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Attorneys admitted solely in the jurisdiction where listed office is located, unless otherwise note |
NexPoint Diversified Real Estate Trust
January 30, 2025
Page 2
Based upon the foregoing and subject to the assumptions, qualifications and limitations set forth herein, we are of the opinion that (i) the Series B Preferred Shares have been duly authorized for issuance by all necessary statutory trust action on the part of the Company and, when issued and delivered by the Company in exchange for payment therefor in accordance with the Trustees’ Resolutions, such Shares will be validly issued, fully paid and non-assessable; and (ii) the issuance of the Common Shares has been duly authorized and, when and if issued and delivered upon redemption of Series B Preferred Shares in accordance with the Trustees’ Resolutions, such Common Shares will be validly issued, fully paid and nonassessable.
The foregoing opinion is limited to the Delaware Statutory Trust Act and other laws of the State of Delaware as currently in effect. We undertake no responsibility to supplement this opinion if any applicable laws change after the date hereof or if any facts or circumstances come to our attention after the date hereof that might change this opinion. We express no opinion with respect to any other laws, statutes, regulations or ordinances.
We hereby consent to the filing of this opinion letter as Exhibit 5.1 to the Registration Statement. In giving such consent, we do not thereby admit that we are experts within the meaning of the Securities Act or the rules and regulations of the Commission or that this consent is required by Section 7 of the Securities Act.
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TUAN OLONA, LLP |
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/s/ Tuan Olona, LLP |
Exhibit 8.1
January 30, 2025
NexPoint Diversified Real Estate Trust
300 Crescent Court, Suite 700
Dallas, Texas 75201
Ladies and Gentlemen:
We have acted as counsel to NexPoint Diversified Real Estate Trust, a Delaware statutory trust (the “Company”), in connection with the offering, issuance and sale by the Company of the Company’s 9.00% Series B Cumulative Redeemable Preferred Shares, par value $0.001 per share and at a public offering price of $25.00 per share (the “Preferred Shares”). The Preferred Shares are included in the Company’s registration statement on Form S-3, in the form filed with the Securities and Exchange Commission on July 23, 2024 (the “Registration Statement”), in connection with the registration under the Securities Act of 1933, as amended (the “Securities Act”), and the prospectus supplement, dated the date hereof, to the base prospectus forming part of the Registration Statement on Form S-3 (together with the documents incorporated by reference therein, the “Prospectus”). Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Registration Statement.
You have requested our opinion concerning certain U.S. federal income tax considerations relating to the Company, including with respect to its election to be taxed as a real estate investment trust (a “REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). In connection with our opinion, we have reviewed and are relying upon
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(i)
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the Registration Statement, including the documents incorporated by reference therein and the information deemed to be part thereof pursuant to Rule 430B under the Securities Act;
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(ii)
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the Prospectus, in the form contained in the Registration Statement;
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(iii)
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the Company’s Agreement and Declaration of Trust and Bylaws, in each case, as in effect on the date hereof;
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(iv)
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the Amended and Restated Limited Partnership Agreement of NexPoint Diversified Real Estate Trust Operating Partnership, L.P. (the “OP”), as in effect on the date hereof;
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(v)
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resolutions adopted by the Board of Trustees of the Company on January 30, 2025; and
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NexPoint Diversified Real Estate Trust
January 30, 2025
Page 2
such other documents, records and instruments that we have deemed necessary or appropriate for purposes of our opinion, and have assumed their accuracy as of the date hereof. For purposes of our review, we have also assumed, with your consent, the authenticity of all documents we have examined as well as the genuineness of signatures and the validity of the indicated capacity of each party executing a document. This opinion is based on various facts and assumptions, including the facts set forth in the Registration Statement (as the same may be amended or supplemented from time to time) concerning the business, assets and governing documents of the Company and its subsidiaries. We have also been furnished with, and have relied upon, (i) certain representations made by the Company with respect to certain factual matters set forth in a certificate of an authorized and knowledgeable (with respect to the matters therein) officer of the Company, dated as of the date hereof (the “Company Officer’s Certificate”), (ii) certain representations made by NexPoint Storage Partners, Inc. with respect to certain factual matters set forth in a certificate of an authorized and knowledgeable (with respect to matters therein) officer of NexPoint Storage Partners, Inc., dated as of the date hereof (the “NexPoint Storage Partners Officer’s Certificate”), and (iii) certain representations made by NexPoint Real Estate Capital, LLC with respect to certain factual matters set forth in a certificate of an authorized and knowledgeable (with respect to matters therein) officer of NexPoint Real Estate Capital, LLC dated as of the date hereof (the “NexPoint Real Estate Capital Officer’s Certificate”).
In our capacity as counsel to the Company we have made such legal and factual examinations and inquiries, including an examination of originals or copies certified or otherwise identified to our satisfaction of such documents, corporate records and other instruments, as we have deemed necessary or appropriate for purposes of this opinion. For purposes of our opinion, we have not made an independent investigation or audit of the facts set forth in the above referenced documents or in the Officer’s Certificate, the NexPoint Storage Partners, Inc. Officer’s Certificate, or the NexPoint Real Estate Capital Officer’s Certificate. In addition, in rendering this opinion we have assumed the truth and accuracy of all representations and statements made to us which are qualified as to knowledge or belief, without regard to such qualification. In our examination, we have assumed the authenticity of all documents submitted to us as originals, the genuineness of all signatures thereon, the legal capacity of natural persons executing such documents, and the conformity to authentic original documents of all documents submitted to us as copies.
Our opinion is based upon the current provisions of the Code, Treasury Regulations promulgated thereunder, current administrative rulings, judicial decisions, and other applicable authorities, all as in effect on the date hereof. All of the foregoing authorities are subject to change or new interpretation, both prospectively and retroactively, and such changes or interpretation, as well as changes in the facts as they have been represented to us or assumed by us, could affect our opinion. Our opinion is rendered only as of the date hereof and we undertake no responsibility to update this opinion after this date. Our opinion does not foreclose the possibility of a contrary determination by the Internal Revenue Service (the “IRS”) or by a court of competent jurisdiction, or of a contrary position by the IRS or Treasury Department in regulations or rulings issued in the future.
NexPoint Diversified Real Estate Trust
January 30, 2025
Page 3
Based on the foregoing, and subject to the limitations, qualifications and exceptions set forth herein, we are of the opinion that:
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(1)
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during the period commencing with the Company’s taxable year ended December 31, 2021 through its taxable year ended December 31, 2024, the Company was organized and has operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and the Company’s current organization and current and proposed method of operation will enable the Company to continue to meet the requirements for qualification and taxation as a REIT under the Code for its taxable year ending December 31, 2025 and for future taxable years; and
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(2)
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the statements set forth in the Prospectus constituting part of the Registration Statement under the caption “U.S. Federal Income Tax Considerations”, insofar as such statements purport to summarize U.S. federal income tax laws or provisions of documents referred to therein, present fair summaries of such laws and documents in all material respects.
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The Company’s qualification and taxation as a REIT depend upon the Company’s ability to meet on a continuing basis, through actual annual operating and other results, the various requirements under the Code with regard to, among other things, the sources of gross income, the composition of assets, the level of distributions to shareholders, and the diversity of its share ownership. Winston & Strawn LLP undertakes no responsibility to review, and will not review, the Company’s compliance with these requirements on a continuing basis. Accordingly, no assurance can be given that the actual results of the Company’s operations, the nature of its assets, the amount and types of its gross income, the level of its distributions to shareholders and the diversity of its share ownership for any given taxable year has satisfied or will satisfy the requirements under the Code for qualification and taxation as a REIT.
Other than as expressly stated above, we express no opinion on any issue relating to the Company, the OP, the Adviser or any of the Company’s subsidiaries or to any investment therein.
We hereby consent to the filing of this opinion as Exhibit 8.1 to the Company’s Current Report on Form 8-K relating to the Preferred Shares, which is incorporated by reference in the Prospectus constituting a part of the Registration Statement and to the reference to us under the caption “Certain U.S. Federal Income Tax Considerations” in the Prospectus constituting a part of such Registration Statement. In giving such consent, we do not hereby admit that we are included in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the SEC promulgated thereunder.
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Very truly yours, |
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/s/ Winston & Strawn LLP |
Exhibit 10.1
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
NEXPOINT DIVERSIFIED REAL ESTATE TRUST OPERATING PARTNERSHIP, L.P.
a Delaware limited partnership
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE PARTNERSHIP AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE PARTNERSHIP, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS.
AMENDED AND RESTATED AS OF JANUARY 30, 2025
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINED TERMS
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1
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ARTICLE 2. ORGANIZATIONAL MATTERS
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9
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Section 2.1. Continuation
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9
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Section 2.2. Name
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10
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Section 2.3. Registered Office and Agent; Principal Office
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10
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Section 2.4. Power of Attorney
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10
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Section 2.5. Term
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11
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Section 2.6. Admission of Partners
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11
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ARTICLE 3. PURPOSE
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12
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Section 3.1. Purpose and Business
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12
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Section 3.2. Powers
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12
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Section 3.3. Representations and Warranties by the Parties
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12
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Section 3.4. Intended Tax Classification
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14
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ARTICLE 4. CAPITAL CONTRIBUTIONS
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15
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Section 4.1. Capital Contributions of the Partners
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15
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Section 4.2. Issuances of Additional Partnership Interests
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15
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Section 4.3. Additional Funds
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15
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Section 4.4. Preemptive Rights
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16
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Section 4.5. No Interest
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16
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ARTICLE 5. DISTRIBUTIONS
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16
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Section 5.1. Requirement and Characterization of Distributions
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16
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Section 5.2. Amounts Withheld
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17
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Section 5.3. Distributions Upon Liquidation
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17
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Section 5.4. Restricted Distributions
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17
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Section 5.5. Compliance with REIT Requirements
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17
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ARTICLE 6. ALLOCATIONS
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17
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ARTICLE 7. MANAGEMENT AND OPERATIONS OF BUSINESS
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18
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Section 7.1. Management
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18
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Section 7.2. Certificate of Limited Partnership
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22
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Section 7.3. Restrictions on General Partner Authority
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22
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Section 7.4. Reimbursement of the General Partner and the Company
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22
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Section 7.5. Outside Activities of the General Partner
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23
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Section 7.6. Contracts with Affiliates
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23
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Section 7.7. Indemnification
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24
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Section 7.8. Liability of the General Partner
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26
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Section 7.9. Other Matters Concerning the General Partner
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27
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Section 7.10. Title to Partnership Assets
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28
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Section 7.11. Reliance by Third Parties
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28
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ARTICLE 8. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
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28
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Section 8.1. Limitation of Liability
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28
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Section 8.2. Management of Business
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29
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Section 8.3. Outside Activities of Limited Partners
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29
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Section 8.4. Return of Capital
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29
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Section 8.5. Rights of Limited Partners Relating to the Partnership
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30
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Section 8.6. Redemption Right
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31
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ARTICLE 9. BOOKS, RECORDS, ACCOUNTING AND REPORTS
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32
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Section 9.1. Records and Accounting
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32
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Section 9.2. Fiscal Year
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33
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Section 9.3. Reports
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33
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ARTICLE 10. TAX MATTERS
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33
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Section 10.1. Preparation of Tax Returns
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33
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Section 10.2. Tax Elections
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34
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Section 10.3. Partnership Representative
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34
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Section 10.4. Withholding
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34
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ARTICLE 11. TRANSFERS AND WITHDRAWALS
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35
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Section 11.1. Transfer
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35
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Section 11.2. Transfer of General Partner Interest
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35
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Section 11.3. Limited Partners’ Rights to Transfer
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36
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Section 11.4. Substituted Limited Partners
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37
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Section 11.5. Assignees
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38
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Section 11.6. Drag-Along Rights
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38
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Section 11.7. General Provisions
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40
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ARTICLE 12. ADMISSION OF PARTNERS
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40
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Section 12.1. Admission of Successor General Partner
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40
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Section 12.2. Admission of Additional Limited Partners
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41
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Section 12.3. Amendment of Agreement and Certificate of Limited Partnership
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41
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ARTICLE 13. DISSOLUTION, LIQUIDATION AND TERMINATION
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41
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Section 13.1. Dissolution
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41
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Section 13.2. Winding Up
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42
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Section 13.3. [Reserved]
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44
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Section 13.4. [Reserved]
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44
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Section 13.5. Rights of Limited Partners
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44
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Section 13.6. Notice of Dissolution
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44
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Section 13.7. Termination of Partnership and Cancellation of Certificate of Limited Partnership
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44
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Section 13.8. Reasonable Time for Winding Up
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44
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Section 13.9. Waiver of Partition
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44
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ARTICLE 14. AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
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45
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Section 14.1. Amendment of Partnership Agreement
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45
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Section 14.2. Meetings of the Partners
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45
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ARTICLE 15. GENERAL PROVISIONS
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46
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Section 15.1. Addresses and Notice
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46
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Section 15.2. Titles and Captions
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46
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Section 15.3. Pronouns and Plurals
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46
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Section 15.4. Further Action
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46
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Section 15.5. Binding Effect
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47
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Section 15.6. Creditors
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47
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Section 15.7. Waiver
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47
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Section 15.8. Counterparts
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47
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Section 15.9. Applicable Law
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47 |
Section 15.10. Invalidity of Provisions; Consent to Jurisdiction; Waiver of Jury Trial
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48
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Section 15.11. Entire Agreement
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48
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Section 15.12. Legal Counsel Relationships
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48 |
Exhibit A – [RESERVED] |
A-1 |
Exhibit B – [RESERVED] |
B-1 |
Exhibit C – Notice of Redemption |
C-1 |
Exhibit D – Constructive Ownership Definition |
D-1 |
Exhibit E – Schedule of Partner’s Ownership with Respect to Tenants |
E-1 |
Exhibit F – [RESERVED] |
F-1 |
Exhibit G – [RESERVED] |
G-1 |
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Annex A – Designation of the Series A Preferred Units |
Annex A-1 |
Annex B – Designation of the Series B Preferred Units |
Annex B-1 |
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
NEXPOINT DIVERSIFIED REAL ESTATE TRUST
OPERATING PARTNERSHIP, L.P.
THIS AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF NEXPOINT DIVERSIFIED REAL ESTATE TRUST OPERATING PARTNERSHIP, L.P. (as now or hereafter amended, restated, modified, supplemented, or replaced, this “Agreement”), dated as of January 30, 2025, is entered into by and among NexPoint Diversified Real Estate Trust OP GP, LLC, a Delaware limited liability company (the “General Partner”), the Persons (as defined below) who are admitted from time to time as limited partners in accordance with this Agreement and who have not subsequently withdrawn (the “Limited Partners”), such Persons being identified on the books and records of the Partnership.
WHEREAS, the Partnership was formed on July 1, 2022 and the original agreement of limited partnership of the Partnership was entered into on July 1, 2022 (the “Original Agreement”); and
WHEREAS, the General Partner and the Limited Partners desire to amend and restate the Original Agreement in its entirety as set forth herein.
NOW THEREFORE, in consideration of the mutual covenants herein contained, and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1.
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.
“Act” means the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. §17-101, et seq., as it may be amended from time to time, and any successor to such statute.
“Additional Funds” has the meaning set forth in Section 4.3(A).
“Additional Limited Partner” means a Person admitted to the Partnership as a Limited Partner pursuant to Section 12.2 and who is shown as such on the books and records of the Partnership.
“Affiliate” means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with such Person. For purposes of this definition, “control” when used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“Agreement” has the meaning set forth in the recitals hereto.
“Aggregate Consideration” has the meaning set forth in Section 11.6(C).
“Approved Sale” means a Sale of the Partnership which is approved by the Partners holding, collectively, more than 50% of the issued and outstanding Partnership Interests.
“Approving Partners” has the meaning set forth in Section 11.6(A).
“Assignee” means a Person to whom all or a portion of a Partnership Interest has been transferred in a manner permitted under this Agreement, but who has not become a Substituted Limited Partner, and who has the rights set forth in Section 11.5.
“Available Cash” means, with respect to any period for which such calculation is being made, all cash balances of the Partnership net of the Partnership’s working capital needs, anticipated capital expenditures, operating expenses, debt service requirements and other necessary reserves including with respect to contingencies or commitments, each as determined by the General Partner.
“Bankruptcy Event” shall mean, with respect to any Person, such Person (a) is insolvent, or is generally unable to pay its debts as they become due, or admits in writing its inability to pay its debts as they become due, or makes a general assignment for the benefit of its creditors or (b) becomes the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar person charged with the reorganization or liquidation of its business appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment.
“Board of Trustees” means the Board of Trustees of the Company.
“Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close.
“Capital Contribution” means, with respect to any Partner, any cash, cash equivalents or the fair market value of Contributed Property which such Partner contributes or is deemed to contribute to the Partnership.
“Cash Amount” means an amount of cash equal to the Value on the Valuation Date of the REIT Shares Amount.
“Certificate” means the Certificate of Limited Partnership of the Partnership as filed in the office of the Delaware Secretary of State on July 1, 2022, as amended, restated and/or supplemented from time to time in accordance with the terms hereof and the Act.
“Code” means the Internal Revenue Code of 1986, as amended and in effect from time to time, as interpreted by the applicable regulations thereunder. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law.
“Common Units” means the Partnership Units, other than Series A Preferred Units, Series B Preferred Units or any other class or series of units of Limited Partner Interest issued in the future and designated as preferred or otherwise different from the Common Units, such difference including, but not limited to, with respect to the payment of distributions, including distributions upon liquidation.
“Company” means NexPoint Diversified Real Estate Trust, a Delaware statutory trust.
“Constructive Ownership” or “Constructively Own” means ownership under the constructive ownership rules described in Exhibit D.
“Contributed Property” means each property or other asset, in such form as may be permitted by the Act (but excluding cash), contributed or deemed contributed to the Partnership.
“Conversion Factor” means 1.0, subject to adjustment as follows: (i) in case the Company shall (A) make a distribution on the outstanding REIT Shares in REIT Shares, (B) subdivide or reclassify the outstanding REIT Shares into a greater number of REIT Shares, or (C) combine or reclassify the outstanding REIT Shares into a smaller number of REIT Shares, the Conversion Factor in effect at the opening of business on the day following the date fixed for the determination of shareholders entitled to receive such distribution or subject to such subdivision, combination or reclassification shall be proportionately adjusted so that a holder of Partnership Units shall be entitled to receive, upon exchange thereof, the number of REIT Shares which the holder would have owned at the opening of business on the day following the date fixed for such determination had such Partnership Units been exchanged immediately prior to such determination; (ii) in case the Partnership shall subdivide or reclassify the outstanding Partnership Units into a greater number of Partnership Units, the Conversion Factor in effect at the opening of business on the day following the date fixed for the determination of Partnership Unit holders subject to such subdivision or reclassification shall be proportionately adjusted so that a holder of Partnership Units shall be entitled to receive, upon exchange thereof, the number of REIT Shares which the holder would have owned at the opening of business on the day following the date fixed for such determination had such Partnership Units been exchanged immediately prior to such determination; (iii) in case the Company (A) shall issue rights or warrants to all holders of REIT Shares entitling them to subscribe for or purchase REIT Shares at a price per share less than the daily market price per REIT Share on the date fixed for the determination of shareholders entitled to receive such rights or warrants, (B) shall not issue similar rights or warrants to all holders of Partnership Units entitling them to subscribe for or purchase REIT Shares or Partnership Units at a comparable price (determined, in the case of Partnership Units, by reference to the Conversion Factor), and (C) cannot issue such rights or warrants to a Redeeming Partner as otherwise required by the definition of “REIT Shares Amount” set forth in this Article 1, then the Conversion Factor in effect at the opening of business on the day following the date fixed for such determination shall be increased by multiplying such Conversion Factor by a fraction of which the numerator shall be the number of REIT Shares outstanding at the close of business on the date fixed for such determination plus the number of REIT Shares so offered for subscription or purchase, and of which the denominator shall be the number of REIT Shares outstanding at the close of business on the date fixed for such determination plus the number of REIT Shares which the aggregate offering price of the total number of REIT Shares so offered for subscription would purchase at such daily market price per share, such increase to the Conversion Factor to become effective immediately after the opening of business on the day following the date fixed for such determination; and (iv) in case the Company shall, by distribution or otherwise, distribute to all holders of its REIT Shares, (A) capital shares of any class other than its REIT Shares, (B) evidence of its indebtedness or (C) assets (excluding any rights or warrants referred to in clause (iii) above, any cash distribution lawfully paid under the laws of the state of organization of the Company, and any distribution referred to in clause (i) above) and shall not cause a corresponding distribution to be made to all holders of Partnership Units, the Conversion Factor shall be adjusted so that the same shall equal the ratio determined by multiplying the Conversion Factor in effect immediately prior to the close of business on the date fixed for the determination of shareholders entitled to receive such distribution by a fraction of which the numerator shall be the daily market price per REIT Share on the date fixed for such determination, and of which the denominator shall be such daily market price per REIT Share less the fair market value (as determined by the Board of Trustees, whose determination shall be conclusive and described in a resolution of the Board of Trustees certified by the Secretary of the Company and delivered to the holders of the Partnership Units) of the portion of the capital shares or evidences of indebtedness or assets so distributed applicable to one REIT Share, such adjustment to become effective immediately prior to the opening of business on the day following the date fixed for the determination of shareholders entitled to receive such distribution.
“Covered Person” has the meaning set forth in Section 7.8(A).
“Debt” means, as to any Person, as of any date of determination, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, (ii) all amounts owed by such Person to banks or other Persons in respect of reimbursement obligations under letters of credit, surety bonds and other similar instruments guaranteeing payment or other performance of obligations by such Person, (iii) all indebtedness for borrowed money or for the deferred purchase price of property or services secured by any lien on any property owned by such Person, to the extent attributable to such Person’s interest in such property, even though such Person has not assumed or become liable for the payment thereof, and (iv) obligations of such Person incurred in connection with entering into a lease which, in accordance with GAAP, should be capitalized.
“Declaration” means the Amended and Restated Agreement and Declaration of Trust of the Company entered into August 28, 2020, as amended, restated and/or supplemented from time to time.
“Delaware Courts” has the meaning set forth in Section 15.10(B).
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended and in effect from time to time, as interpreted by the applicable regulations thereunder. Any reference herein to a specific section or Title of ERISA shall be deemed to include a reference to any corresponding provision of future law.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“flow through entity” has the meaning set forth in Section 3.3(D)(3).
“GAAP” means U.S. generally accepted accounting principles, applied on a consistent basis.
“General Partner” has the meaning set forth in the recitals hereto or any Person who becomes an additional or a successor general partner of the Partnership.
“General Partner Interest” means a Partnership Interest held by the General Partner, in its capacity as general partner of the Partnership. A General Partner Interest may be (but is not required to be) expressed as a number of Partnership Units.
“Incapacity” or “Incapacitated” means, (i) as to any individual Partner, death, total physical disability or entry by a court of competent jurisdiction adjudicating him incompetent to manage his Person or his estate; (ii) as to any corporation which is a Partner, the filing of a certificate of dissolution, or its equivalent, for the corporation or the revocation of its charter; (iii) as to any partnership or limited liability company which is a Partner, the dissolution and commencement of winding up of the partnership or limited liability company; (iv) as to any estate which is a Partner, the distribution by the fiduciary of the estate’s entire interest in the Partnership; (v) as to any trustee of a trust which is a Partner, the termination of the trust (but not the substitution of a new trustee); or (vi) as to any Partner, the bankruptcy of such Partner. For purposes of this definition, bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner commences a voluntary proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect; (b) the Partner is adjudged as bankrupt or insolvent, or a final and non-appealable order for relief under any bankruptcy, insolvency or similar law now or hereafter in effect has been entered against the Partner; (c) the Partner executes and delivers a general assignment for the benefit of the Partner’s creditors; (d) the Partner files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Partner in any proceeding of the nature described in clause (b) above; (e) the Partner seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator for the Partner or for all or any substantial part of the Partner’s properties; (f) any proceeding seeking liquidation, reorganization or other relief of or against such Partner under any bankruptcy, insolvency or other similar law now or hereafter in effect has not been dismissed within 120 days after the commencement thereof; (g) the appointment without the Partner’s consent or acquiescence of a trustee, receiver or liquidator has not been vacated or stayed within 90 days of such appointment; or (h) an appointment referred to in clause (g) which has been stayed is not vacated within 90 days after the expiration of any such stay.
“Indemnitee” means (i) any Person made a party to a proceeding by reason of (A) his or its status as the General Partner, or as a trustee, director, officer, shareholder, partner, member, employee, representative or agent of the General Partner or as an officer, employee, representative or agent of the Partnership or as the Partnership Representative, or (B) his, her or its liabilities, pursuant to a loan guarantee or otherwise, for any indebtedness of the Partnership or any Subsidiary of the Partnership (including, without limitation, any indebtedness which the Partnership or any Subsidiary of the Partnership has assumed or taken assets subject to); and (ii) such other Persons (including Affiliates of the General Partner or the Partnership) as the General Partner may designate from time to time (whether before or after the event giving rise to potential liability), in its sole and absolute discretion.
“Limited Partner” has the meaning set forth in the recitals hereto, including any Substituted Limited Partner or Additional Limited Partner, in such Person’s capacity as a limited partner of the Partnership. For purposes of this Agreement and the Act, the Limited Partners shall constitute a single class or group of limited partners.
“Limited Partner Interest” means a Partnership Interest of a Limited Partner in the Partnership representing a fractional part of the Partnership Interests of all Limited Partners and includes any and all benefits to which the holder of such a Partnership Interest may be entitled, as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. A Limited Partner Interest may be (but is not required to be) expressed as a number of Partnership Units.
“Liquidating Event” has the meaning set forth in Section 13.1.
“Liquidator” has the meaning set forth in Section 13.2.
“Non-Approving Partners” has the meaning set forth in Section 11.6(A).
“Notice of Redemption” means the Notice of Redemption substantially in the form of Exhibit C to this Agreement.
“Original Agreement” has the meaning set forth in the recitals hereto.
“Partner” means a General Partner or a Limited Partner, and “Partners” means the General Partner and the Limited Partners collectively.
“Partnership” has the meaning set forth in the recitals hereto, and any successor thereto.
“Partnership Interest” means an ownership interest in the Partnership held by either a Partner and includes any and all benefits to which the holder of such a partnership interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. A Partnership Interest may be (but is not required to be) expressed as a number of Partnership Units.
“Partnership Record Date” means the record date established by the General Partner for the distribution of Available Cash pursuant to Section 5.1, which record date shall be the same as the record date established by the Company for a distribution to its shareholders of some or all of its portion of such distribution.
“Partnership Unit” means a fractional, undivided share of the Partnership Interests of all Partners issued pursuant to Sections 4.1 and 4.2 and includes Common Units, Series A Preferred Units, Series B Preferred Units and any other classes or series of Partnership Units established after the date hereof. The number of Partnership Units outstanding and the Percentage Interest in the Partnership represented by such Partnership Units are identified on the books and records of the Partnership
“Partnership Year” means the fiscal year of the Partnership, which shall be the calendar year.
“Percentage Interest” means, as to a Partner, its interest in the Partnership as determined by dividing the Partnership Units owned by such Partner by the total number of Partnership Units then outstanding and as specified in the books and records of the Partnership; provided, however, that to the extent applicable in context, the term “Percentage Interest” means, as to a Partner, its interest in a specific class or series (or specified group of classes and/or series) as determined by dividing the Partnership Units of a specific class or series (or specified group of classes and/or series) owned by such Partner by the total number of Partnership Units of such specific class or series (or specified group of classes and/or series) outstanding.
“Person” means an individual or a real estate investment trust, corporation, partnership, limited liability company, trust, estate, unincorporated organization, association or other entity.
“Qualified REIT Subsidiary” means a qualified REIT subsidiary of the Company within the meaning of Section 856(i)(2) of the Code.
“Redeeming Partner” has the meaning set forth in Section 8.6(A).
“Redemption Right” shall have the meaning set forth in Section 8.6(A).
“Regulations” means the Income Tax Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).
“REIT” means a real estate investment trust under Section 856 of the Code.
“REIT Shares” means common shares of transferable units of beneficial interest, $0.001 par value per share, of the Company.
“REIT Shares Amount” means a number of REIT Shares equal to the product of the number of Partnership Units offered for redemption by a Redeeming Partner, multiplied by the Conversion Factor; provided, that in the event the Company issues to all holders of REIT Shares rights, options, warrants or convertible or exchangeable securities entitling the shareholders to subscribe for or purchase REIT Shares, or any other securities or property (collectively, the “rights”), and the Company can issue such rights to the Redeeming Partner, then the REIT Shares Amount shall also include such rights that a holder of that number of REIT Shares would be entitled to receive.
“Sale of the Partnership” means (a) a sale or other disposition of all or substantially all of the assets of the Partnership or a related series of transactions that taken together, result in the sale or other disposition of all or substantially all of the assets of the Partnership, (b) a transaction or series of related transactions in which a Person, or group of related Persons, acquires more than 50% of the outstanding Partnership Units, or (c) the merger or consolidation of the Partnership with or into another Person that is not (i) an Affiliate of the Partnership or (ii) a Partner, in each case in clauses (b) and (c) above, under circumstances in which the holders of a majority of Partnership Units, immediately prior to such transaction, own less than a majority in voting power of the surviving or resulting Person immediately following such transaction.
“Securities Act” means the Securities Act of 1933, as amended.
“Series A Preferred Units” has the meaning set forth in Annex A.
“Series B Preferred Units” has the meaning set forth in Annex B.
“Specified Redemption Date” means the 10th Business Day after receipt by the Partnership of a Notice of Redemption; provided, that if the Company combines its outstanding REIT Shares, no Specified Redemption Date shall occur after the record date of such combination of REIT Shares and prior to the effective date of such combination.
“Subsidiary” means, with respect to any Person, any real estate investment trust, corporation, partnership, limited liability company or other entity of which (a) a majority of (i) the voting power of the voting equity securities; or (ii) the outstanding equity interests, is owned, directly or indirectly, by such Person or (b) such Person acts as the general partner, sole member or sole manager.
“Substituted Limited Partner” means a Person who is admitted as a Limited Partner to the Partnership pursuant to Section 11.4.
“Tenant” means any tenant from which the Company derives rent either directly or indirectly through partnerships or limited liability companies, including the Partnership.
“Trading Days” means days on which the primary trading market for REIT Shares, if any, is open for trading.
“Transaction” has the meaning set forth in Section 15.12.
“transfer”, when used in Article 11, has the meaning set forth in Section 11.1(A).
“Valuation Date” means the date of receipt by the General Partner of a Notice of Redemption or, if such date is not a Business Day, the first Business Day thereafter.
“Value” means, with respect to a REIT Share, the greater of (i) the Company’s most recent net asset value as determined by the Board of Trustees and (ii) if the REIT Shares are listed or admitted to trading on any national securities exchange, the volume weighted average price for the 10 consecutive Trading Days immediately preceding the Valuation Date. If the REIT Shares are not listed or admitted to trading on any national securities exchange, the volume weighted average price with respect to a REIT Share will be the volume weighted average price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the General Partner or if no such closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than 10 days prior to the date in question) for which prices have been so reported; provided, that if there are no bid and asked prices reported during the 10 days prior to the date in question, the Value of the REIT Shares shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. In the event the REIT Shares Amount includes rights that a holder of REIT Shares would be entitled to receive, then the Value of such rights shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.
ARTICLE 2.
ORGANIZATIONAL MATTERS
Section 2.1. Continuation
The Partners hereby continue the Partnership as a limited partnership under and pursuant to the Act. Except as expressly provided herein to the contrary, the rights and obligations of the Partners and the administration and termination of the Partnership shall be governed by the Act. The Partnership Interest of each Partner shall be personal property for all purposes.
Section 2.2. Name
The name of the Partnership heretofore formed and continued hereby shall be NexPoint Diversified Real Estate Trust Operating Partnership, L.P. The Partnership’s business may be conducted under any other name or names deemed advisable by the General Partner, including the name of the General Partner or any Affiliate thereof. The words “Limited Partnership,” “L.P.,” “Ltd.” or similar words or letters shall be included in the Partnership’s name where necessary for the purposes of complying with the laws of any jurisdiction that so requires. The General Partner in its sole and absolute discretion may change the name of the Partnership at any time and from time to time and shall notify the Limited Partners of such change in the next regular communication to the Limited Partners.
Section 2.3. Registered Office and Agent; Principal Office
The address of the registered office of the Partnership in the State of Delaware is 1209 Orange Street, Wilmington, New Castle County, Delaware, 19801 and the registered agent for service of process on the Partnership in the State of Delaware shall be The Corporation Trust Company. The principal office of the Partnership shall be 300 Crescent Court, Suite 700, Dallas, Texas 75201 or such other place as the General Partner may from time to time designate by notice to the Limited Partners. The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the General Partner deems advisable.
Section 2.4. Power of Attorney
A. Each Limited Partner and each Assignee hereby constitutes and appoints the General Partner, any Liquidator, and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead to execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (a) all certificates, documents and other instruments (including, without limitation, this Agreement and the Certificate and all amendments or restatements thereof) that the General Partner or the Liquidator deems appropriate or necessary to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the Limited Partners have limited liability) in the State of Delaware and in all other jurisdictions in which the Partnership may or plans to conduct business or own property; (b) all instruments that the General Partner deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with its terms; (c) all conveyances and other instruments or documents that the General Partner or the Liquidator deems appropriate or necessary to reflect the dissolution and winding up of the Partnership pursuant to the terms of this Agreement, including, without limitation, a certificate of cancellation; (d) all instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to Articles 11, 12 or 13 or the Capital Contribution of any Partner; and (e) all conveyances and other instruments or documents that the General Partner or the Liquidator deems appropriate or necessary to reflect the distribution or exchange of assets of the Partnership pursuant to the terms of this Agreement. Nothing contained herein shall be construed as authorizing the General Partner or any Liquidator to amend this Agreement except in accordance with Article 14 or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, in recognition of the fact that each of the Partners will be relying upon the power of the General Partner and any Liquidator to act as contemplated by this Agreement in any filing or other action by it on behalf of the Partnership, and it shall survive and not be affected by the subsequent Incapacity of any Limited Partner or Assignee and the transfer of all or any portion of such Limited Partner’s or Assignee’s Partnership Units and shall extend to such Limited Partner’s or Assignee’s heirs, successors, assigns and personal representatives. Each such Limited Partner or Assignee hereby agrees to be bound by any representation made by the General Partner or any Liquidator, acting in good faith pursuant to such power of attorney, and each such Limited Partner or Assignee hereby waives any and all defenses which may be available to contest, negate or disaffirm the action of the General Partner or any Liquidator, taken in good faith under such power of attorney. Each Limited Partner or Assignee shall execute and deliver to the General Partner or the Liquidator, within 15 days after receipt of the General Partner’s or Liquidator’s request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator, as the case may be, deems necessary to effectuate this Agreement and the purposes of the Partnership.
Section 2.5. Term
The term of the Partnership commenced on the date that the Certificate was filed with the Secretary of State of the State of Delaware and shall continue until dissolved pursuant to the provisions of Article 13 or as otherwise provided by law.
Section 2.6. Admission of Partners
Each Limited Partner being admitted to the Partnership from time to time after the date hereof shall be deemed admitted to the Partnership as a limited partner of the Partnership upon such Limited Partner’s execution and delivery of a counterpart to this Agreement or equivalent thereof, including but not limited to a power of attorney granted to the General Partner, and delivery to the Partnership of its initial Capital Contribution, such initial Capital Contribution specified on the books and records of the Partnership pursuant to Section 4.1. Each General Partner being admitted to the Partnership from time to time after the date hereof shall be deemed admitted to the Partnership as a general partner of the Partnership in accordance with Section 11.2 following such General Partner’s execution and delivery of a counterpart to this Agreement or equivalent thereof and such other documentation reasonably required by the General Partner.
ARTICLE 3.
PURPOSE
Section 3.1. Purpose and Business
The purpose and nature of the business to be conducted by the Partnership is (i) to conduct any business that may be lawfully conducted by a limited partnership formed pursuant to the Act; provided, however, that such business shall be limited to and conducted in such a manner as to permit the Company at all times to qualify as a REIT, unless the Company ceases to qualify as a REIT for reasons other than as a result of the conduct of the business of the Partnership or voluntarily revokes its election to be a REIT; (ii) to enter into any partnership, joint venture or other similar arrangement to engage in any of the foregoing or to own interests in any entity engaged in any of the foregoing; and (iii) to do anything necessary, convenient or incidental to the foregoing. In connection with the foregoing, and without limiting the Company’s right, in its sole discretion, to cease qualifying as a REIT, the Partners acknowledge that the Company’s current status as a REIT inures to the benefit of all of the Partners and not solely to the General Partner, the Company or their Affiliates.
Section 3.2. Powers
The Partnership shall be empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described herein and for the protection and benefit of the Partnership, and shall have, without limitation, any and all of the powers that may be exercised on behalf of the Partnership by the General Partner pursuant to and according to the terms of this Agreement; provided, however, that the Partnership may not, without the General Partner’s consent take, or refrain from taking, any action which, in the judgment of the General Partner (i) could adversely affect the ability of the Company to qualify and to continue to qualify as a REIT; (ii) could subject the Company to any additional taxes under Section 857 or Section 4981 of the Code or any other related or successor provision of the Code; or (iii) could violate any law or regulation of any governmental body or agency having jurisdiction over the Company, its securities or the Partnership, unless such action (or inaction) under clause (i), clause (ii) or clause (iii) above shall have been specifically consented to by the Company in writing.
Section 3.3. Representations and Warranties by the Parties
A. Each Partner that is an individual represents and warrants to each other Partner that (i) such Partner has the legal capacity to enter into this Agreement and perform such Partner’s obligations hereunder, (ii) the consummation of the transactions contemplated by this Agreement to be performed by such Partner will not result in a breach or violation of, or a default under, any agreement by which such Partner or any of such Partner’s property is or are bound, or any statute, regulation, order or other law to which such Partner is subject, (iii) such Partner is a “United States person” within the meaning of Section 7701(a)(30) of the Code, and (iv) this Agreement is binding upon, and enforceable against, such Partner in accordance with its terms.
B. Each Partner that is not an individual represents and warrants to each other Partner that (i) its execution and delivery of this Agreement and all transactions contemplated by this Agreement to be performed by it have been duly authorized by all necessary action, including without limitation, that of its general partner(s), committee(s), trustee(s), beneficiaries, director(s) and/or shareholder(s), as the case may be, as required, (ii) the consummation of such transactions shall not result in a breach or violation of, or a default under, its certificate of limited partnership, partnership agreement, trust agreement, limited liability company operating agreement, declaration of trust, charter or bylaws, as the case may be, any agreement by which such Partner or any of such Partner’s properties or any of its partners, beneficiaries, trustees or shareholders, as the case may be, is or are bound, or any statute, regulation, order or other law to which such Partner or any of its partners, trustees, beneficiaries or shareholders, as the case may be, is or are subject, (iii) such Partner is a “United States person” within the meaning of Section 7701(a)(30) of the Code and (iv) this Agreement is binding upon, and enforceable against, such Partner in accordance with its terms.
C. Each Partner represents, warrants and agrees that it has acquired and continues to hold its interest in the Partnership for its own account for investment only and not for the purpose of, or with a view toward, the resale or distribution of all or any part thereof, nor with a view toward selling or otherwise distributing such interest or any part thereof at any particular time or under any predetermined circumstances. Each Partner further represents and warrants that it is a sophisticated investor, able and accustomed to handling sophisticated financial matters for itself, particularly real estate investments, and that it has a sufficiently high net worth that it does not anticipate a need for the funds it has invested in the Partnership in what it understands to be a highly speculative and illiquid investment.
D. Each Partner further represents, warrants, covenants and agrees as follows:
(1) Except as provided in Exhibit E hereto, at any time such Partner actually or Constructively Owns a 25% or greater capital interest or profits interest in the Partnership, it does not and will not, without the prior written consent of the General Partner, actually own or Constructively Own (a) with respect to any Tenant that is a corporation, any stock of such Tenant, and (b) with respect to any Tenant that is not a corporation, any interest in either the assets or net profits of such Tenant.
(2) Upon request of the General Partner, it will promptly disclose to the General Partner the amount of REIT Shares or other capital shares of the Company that it actually owns or Constructively Owns.
(3) Without the consent of the General Partner, which may be given or withheld in its sole discretion, no Partner shall take any action that would cause the Partnership at any time to have more than 100 partners (including as partners those Persons indirectly owning an interest in the Partnership through a partnership, limited liability company, S corporation or grantor trust (such entity, a “flow through entity”), but only if substantially all of the value of such person’s interest in the flow through entity is attributable to the flow through entity’s interest (direct or indirect) in the Partnership).
E. The representations and warranties contained in this Section 3.3 shall survive the execution and delivery of this Agreement by each Partner and the dissolution and winding up of the Partnership.
F. Each Partner hereby acknowledges that no representations as to potential profit, cash flows, funds from operations or yield, if any, in respect of the Partnership or the Company have been made by any Partner or any employee or representative or Affiliate of any Partner, and that projections and any other information, including, without limitation, financial and descriptive information and documentation, which may have been in any manner submitted to such Partner shall not constitute any representation or warranty of any kind or nature, express or implied.
G. Each Partner understands that if, for any reason, (a) the representations, warranties or agreements set forth in this Section 3.3 are violated, or (b) the Partnership’s actual or Constructive Ownership of REIT Shares or other capital shares of the Company violates the limitations set forth in the Declaration, if any, then, as applicable, (x) some or all of the Redemption Rights of the Partners may become non-exercisable, and (y) some or all of the REIT Shares owned by the Partners may be automatically transferred to a trust for the benefit of a charitable beneficiary, as provided in the Declaration.
Section 3.4. Intended Tax Classification
The Partners intend for the Partnership to be classified as an entity disregarded from its owner within the meaning of Regulations § 301.7701-3 for U.S. federal income tax purposes at all times during which the Partnership has only one equity owner (as determined for U.S. federal income tax purposes), and no election to the contrary shall be made.
ARTICLE 4.
CAPITAL CONTRIBUTIONS
Section 4.1. Capital Contributions of the Partners
At the time of their respective execution of this Agreement by delivery of a counterpart signature page to the same or an equivalent thereof, the Partners shall make or shall have made Capital Contributions. The Partners shall own Partnership Units of the class or series and in the amounts and shall have a Percentage Interest in the Partnership in each case as set forth on the books and records of the Partnership. The Percentage Interest shall be adjusted from time to time by the General Partner to the extent necessary to reflect accurately exchanges, redemptions, additional Capital Contributions, the issuance of additional Partnership Units (pursuant to any merger or otherwise), or similar events having an effect on any Partner’s Percentage Interest. Except as provided in Section 4.2, Section 4.3, and Section 10.4, the Partners shall have no obligation to make any additional Capital Contributions or loans to the Partnership. Each Limited Partner that contributes any Contributed Property shall promptly provide the General Partner and the Board of Trustees, upon either of their request, with any information regarding such Contributed Property, including for Partnership tax return reporting purposes.
Section 4.2. Issuances of Additional Partnership Interests
The General Partner is hereby authorized, without the need for any vote or approval of any Partner or any other Person who may hold Partnership Units or Partnership Interests, to cause the Partnership from time to time to issue to any existing Partner (including the General Partner and the Company) or to any other Person, and to admit such Person as a limited partner in the Partnership, Partnership Units (including, without limitation, Common Units and preferred Partnership Units) or other Partnership Interests, in each case in exchange for the contribution by such Person of property or other assets, in one or more classes, or one or more series of any of such classes, or otherwise with such designations, preferences, redemption and conversion rights and relative, participating, optional or other special rights, powers and duties, including rights, powers and duties senior to Limited Partner Interests, all as shall be determined by the General Partner in its sole and absolute discretion subject to Delaware law, including, without limitation, (i) the allocations of items of Partnership income, gain, loss, deduction and credit to each such class or series of Partnership Interests; (ii) the right of each such class or series of Partnership Interests to share in Partnership distributions; and (iii) the rights of each such class or series of Partnership Interests upon dissolution and liquidation of the Partnership.
Section 4.3. Additional Funds
A. The General Partner may from time to time, determine that the Partnership requires additional funds (“Additional Funds”) for the acquisition of additional assets, for the redemption of Partnership Units or for such other purposes as the General Partner may determine in its sole and absolute discretion. Additional Funds may be obtained by the Partnership, at the election of the General Partner, in any manner provided in, and in accordance with, the terms of this Section 4.3, without the approval of any Limited Partner.
B. The General Partner, on behalf of the Partnership, may obtain any Additional Funds by accepting Capital Contributions from any Partners or other Persons. In connection with any such Capital Contribution, the General Partner is hereby authorized to cause the Partnership from time to time to issue additional Partnership Units (as set forth in Section 4.2 above) in consideration therefor, and the Percentage Interests of the Partners shall be adjusted to reflect the issuance of such additional Partnership Units.
C. The General Partner, on behalf of the Partnership, may obtain any Additional Funds by causing the Partnership to incur Debt upon such terms as the General Partner determines appropriate, including making such Debt convertible, redeemable or exchangeable for Partnership Units or REIT Shares; provided, however, that the Partnership shall not incur any such Debt if such Debt is recourse to any Partner (unless the Partner otherwise agrees).
D. The General Partner, on behalf of the Partnership, may obtain any Additional Funds by causing the Partnership to incur Debt with the Company; provided, however, that the Partnership shall not incur any such Debt if (a) a breach, violation or default of such Debt would be deemed to occur by virtue of the transfer of any Partnership Interest, or (b) such Debt is recourse to any Partner (unless the Partner otherwise agrees).
Section 4.4. Preemptive Rights
No Person shall have any preemptive, preferential or other similar right with respect to (i) additional Capital Contributions or loans to the Partnership; or (ii) the issuance or sale of any Partnership Units or other Partnership Interests.
Section 4.5. No Interest
No Partner shall be entitled to interest on its Capital Contribution, unless determined by the General Partner.
ARTICLE 5.
DISTRIBUTIONS
Section 5.1. Requirement and Characterization of Distributions
The General Partner shall distribute at least quarterly, or more frequently if required by this Agreement, a portion of Available Cash generated by the Partnership during such quarter or shorter period, such portion as determined by the General Partner, to the Partners that are Partners on the Partnership Record Date with respect to such quarter or shorter period in accordance with the following order of priority: (i) first, with respect to any Partnership Units that are entitled to any preference in distribution, in accordance with the rights of holders of such class(es) of Partnership Unit (and, within each class, among the holders of each such class, pro rata in proportion to their respective Percentage Interests of such class on such Partnership Record Date); and (ii) second, with respect to any Partnership Units that are not entitled to any preference in distribution, in accordance with the rights of holders of such class(es) of Partnership Unit (and, within each class, among the holders of each such class, pro rata in proportion to their respective Percentage Interests of such class on such Partnership Record Date); provided, that in no event may a Partner receive a distribution of Available Cash with respect to a Partnership Unit if such Partner is entitled to receive a distribution out of such Available Cash with respect to a REIT Share for which such Partnership Unit has been exchanged, and any such distribution shall be made to the Company.
Section 5.2. Amounts Withheld
All amounts withheld pursuant to the Code or any provisions of any state, local or non-U.S. tax law and Section 10.4 with respect to any allocation, payment or distribution to any Partner or Assignee shall be treated as amounts distributed to such Partner or Assignee pursuant to Section 5.1 for all purposes under this Agreement.
Section 5.3. Distributions Upon Liquidation
Proceeds from a Sale of the Partnership and any other cash received or reductions in reserves made after commencement of the liquidation of the Partnership shall be distributed to the Partners in accordance with Section 13.2.
Section 5.4. Restricted Distributions
Notwithstanding any provision to the contrary contained in this Agreement, the Partnership, and the General Partner on behalf of the Partnership, shall not make a distribution to any Partner on account of its interest in the Partnership if such distribution would violate Section 17-607 of the Act or other applicable law.
Section 5.5. Compliance with REIT Requirements
The General Partner shall make such reasonable efforts consistent with the Company’s qualification as a REIT, to cause the Partnership to distribute sufficient amounts to enable the Company, for so long as the Company has determined to qualify as a REIT, to pay stockholder dividends that will (a) satisfy the requirements for qualifying as a REIT under the Code and Regulations (the “REIT Requirements”) and (b) except to the extent otherwise determined by the Company, eliminate any federal income or excise tax liability of the Company.
ARTICLE 6.
ALLOCATIONS
[Reserved]
ARTICLE 7.
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1. Management
A. Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership are and shall be exclusively vested in the General Partner, and no Limited Partner shall have any right to participate in or exercise control or management power over the business and affairs of the Partnership. The General Partner may not be removed by the Limited Partners. In addition to the powers now or hereafter granted to a general partner of a limited partnership under applicable law or which are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to the terms of this Agreement, shall have full power and authority to do all things deemed necessary, desirable or convenient by it to conduct the business of the Partnership, to exercise all powers set forth in Section 3.2 and to effectuate the purposes set forth in Section 3.1, including, without limitation:
(1) the making of any expenditures, the lending or borrowing of money (including, without limitation, making prepayments on loans and borrowing money to permit the Partnership to make distributions to its Partners in such amounts as will permit the Company (so long as the Company desires to maintain its qualification as a REIT) to avoid the payment of any U.S. federal income tax (including, for this purpose, any excise tax pursuant to Section 4981 of the Code) and to make distributions to its shareholders in amounts sufficient to permit the Company to maintain its REIT status), the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidence of indebtedness (including the securing of the same by deed, mortgage, deed of trust or other lien or encumbrance on the Partnership’s assets or any assets of its Subsidiaries) and the incurring of any obligations it deems necessary for the conduct of the activities of the Partnership;
(2) the making of tax, regulatory and other filings or elections, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Partnership;
(3) the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any assets of the Partnership (including the exercise or grant of any conversion, option, privilege, or subscription right or other right available in connection with any assets at any time held by the Partnership) or the merger or other combination of the Partnership with or into another entity (all of the foregoing subject to any prior approval only to the extent required by Section 7.3);
(4) the mortgage, pledge, encumbrance or hypothecation of any assets of the Partnership, the use of the assets of the Partnership (including, without limitation, cash on hand) for any purpose consistent with the terms of this Agreement and on any terms that it sees fit, including, without limitation, the financing of the conduct of the operations of the Partnership, the Company or any of the Partnership’s or the Company’s Subsidiaries, the lending of funds to other Persons (including, without limitation, the Subsidiaries of the Partnership and/or the Company) and the repayment of obligations of the Partnership and its Subsidiaries and any other Person in which it has an equity investment, and the making of capital contributions to its Subsidiaries;
(5) the management, operation, leasing, landscaping, repair, alteration, demolition, disposition or improvement of any real property or improvements owned by the Partnership or any Subsidiary or the Partnership;
(6) the negotiation, execution, delivery and performance of any contracts (including leases), conveyances or other instruments that the General Partner considers useful or necessary or convenient to the conduct of the Partnership’s operations or the implementation of the General Partner’s powers under this Agreement, including, without limitation, contracting with consultants, accountants, legal counsel, other professional advisors and other agents and the payment of their expenses and compensation out of the Partnership’s assets;
(7) the distribution of Partnership cash or other Partnership assets in accordance with this Agreement;
(8) holding, managing, investing and reinvesting cash and other assets of the Partnership;
(9) the collection and receipt of revenues and income of the Partnership;
(10) the amending, restating and/or supplementing of this Agreement or the Certificate;
(11) the establishment of one or more divisions of the Partnership, the selection and dismissal of employees of the Partnership (including, without limitation, employees who may be designated as officers with titles such as “president,” “vice president,” “secretary” and “treasurer” of the Partnership), and agents, outside attorneys, accountants, consultants and contractors of the Partnership, and the determination of their compensation and other terms of employment or hiring;
(12) the maintenance of such insurance for the benefit of the Partnership and the Partners as it deems necessary or appropriate;
(13) the formation of, or acquisition of an interest in, and the contribution of property to, any further limited or general partnerships, limited liability companies, real estate investment trusts, corporations, entities that are treated as REITs, “taxable REIT subsidiaries” or as foreign corporations for federal income tax purposes, joint ventures or other relationships that it deems desirable (including, without limitation, the acquisition of interests in, and the contributions of property or the making of loans to, its or the Company’s Subsidiaries and any other Person in which it has an equity investment from time to time or the incurrence of indebtedness on behalf of such Persons or the guarantee of obligations of such Persons and the making of any tax, regulatory or other filing or election with respect to any of the foregoing Persons); provided, that as long as the Company has determined to continue to qualify as a REIT, the Partnership may not engage in any such formation, acquisition or contribution that would cause the Company to fail to qualify as a REIT;
(14) the control of any matters affecting the rights and obligations of the Partnership, including the settlement, compromise, submission to arbitration or any other form of dispute resolution, or abandonment of, any claim, cause of action, liability, Debt or damages, due or owing to or from the Partnership, the commencement or defense of suits, legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, and the representation of the Partnership in all suits or legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, the incurrence of legal expense, and the indemnification of any Person against liabilities and contingencies to the extent permitted by law;
(15) the undertaking of any action in connection with the Partnership’s direct or indirect investment in any Subsidiary or any other Person (including, without limitation, the contribution or loan of funds by the Partnership to such Persons);
(16) the determination of the fair market value of any Partnership property distributed in kind using such reasonable method of valuation as the General Partner may adopt;
(17) the enforcement of any rights against any Partner pursuant to representations, warranties, covenants and indemnities relating to such Partner’s contribution of property or assets to the Partnership;
(18) the exercise, directly or indirectly, through any attorney-in-fact acting under a general or limited power of attorney, of any right, including the right to vote, appurtenant to any asset or investment held by the Partnership;
(19) the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of or in connection with any Subsidiary of the Partnership or any other Person in which the Partnership has a direct or indirect interest, or jointly with any such Subsidiary or other Person;
(20) the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of any Person in which the Partnership does not have an interest pursuant to contractual or other arrangements with such Person;
(21) the making, execution, delivery and performance of any and all deeds, leases, notes, mortgages, deeds of trust, security agreements, conveyances, contracts, guarantees, warranties, indemnities, waivers, releases or legal instruments or agreements in writing necessary, appropriate or convenient, in the judgment of the General Partner, for the accomplishment of any of the powers of the General Partner enumerated in this Agreement;
(22) the issuance of additional Partnership Units and other partnership interests to any Partners or other Persons; and
(23) the taking of any action necessary or appropriate to enable the Company to qualify as a REIT.
B. Each of the Limited Partners agrees that the General Partner is authorized to execute, deliver and perform the above-mentioned agreements and transactions on behalf of the Partnership, and otherwise to exercise any power of the General Partner under this Agreement or the Act, without any further act, approval or vote of the Partners, notwithstanding any other provision of this Agreement (except as provided in Section 7.3), the Act or any applicable law, rule or regulation, to the fullest extent permitted under the Act or other applicable law, rule or regulation. The execution, delivery or performance by the General Partner or the Partnership of any agreement authorized or permitted under this Agreement shall not constitute a breach by the General Partner of any duty that the General Partner may owe the Partnership or the Limited Partners or any other Persons under this Agreement or of any duty stated or implied by law or equity.
C. At all times from and after the date hereof, the General Partner may cause the Partnership to establish and maintain at any and all times working capital accounts and other cash or similar balances in such amounts as the General Partner, in its sole and absolute discretion, deems appropriate and reasonable from time to time.
D. In exercising its authority under this Agreement, the General Partner may, but shall be under no obligation to, take into account the tax consequences to any Partner of any action taken by it. The General Partner and the Partnership shall not be liable to a Limited Partner under any circumstances as a result of an income tax or other tax liability incurred by such Limited Partner as a result of an action (or inaction) by the General Partner taken pursuant to its authority under this Agreement and in accordance with the terms of Section 7.3.
Section 7.2. Certificate of Limited Partnership
The General Partner has filed the Certificate with the Secretary of State of the State of Delaware as required by the Act. The General Partner shall use all reasonable efforts to cause to be filed such other certificates or documents as may be reasonable and necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware and any other state, or the District of Columbia, in which the Partnership may elect to do business or own property. To the extent that such action is determined by the General Partner to be reasonable and necessary or appropriate or convenient, the General Partner shall file amendments to and restatements of the Certificate and do all of the things to maintain the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) under the laws of the State of Delaware and each other state, or the District of Columbia, in which the Partnership may elect to do business or own property. Subject to the terms of Section 8.5(A)(2), the General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate or any amendment thereto or restatement thereof to any Limited Partner.
Section 7.3. Restrictions on General Partner Authority
The General Partner may not take any action in contravention of an express prohibition or limitation of this Agreement without the written consent of Limited Partners holding a majority of the Percentage Interests held by Limited Partners, or such other percentage of the Limited Partners as may be specifically provided for under a provision of this Agreement.
Section 7.4. Reimbursement of the General Partner and the Company
A. Except as provided in this Section 7.4 and elsewhere in this Agreement (including the provisions of Articles 5 and 6 regarding distributions, payments, and allocations to which it may be entitled), the General Partner shall not be compensated for its services as general partner of the Partnership.
B. The Partnership shall be responsible for and shall pay all expenses relating to the Partnership’s and the General Partner’s organization and the ownership of each of their assets and operations. The General Partner and its Affiliates shall be reimbursed on a monthly basis, or such other basis as the General Partner may determine in its sole and absolute discretion, for all expenditures that each incurs relating to the ownership and operation of, or for the benefit of, the Partnership; provided, that the amount of any such reimbursement shall be reduced by any interest earned by the General Partner with respect to bank accounts or other instruments or accounts held by it on behalf of the Partnership; and provided, further, that the General Partner and its Affiliates shall not be reimbursed for any (i) trustees’/directors’ fees, (ii) income tax liabilities or (iii) filing or similar fees in connection with maintaining the General Partner’s or any such Affiliate’s continued existence that are incurred by the General Partner or an Affiliate, but the Partners acknowledge that all other expenses of the General Partner and its Affiliates are deemed to be for the benefit of the Partnership. Such reimbursement shall be in addition to any reimbursement made as a result of indemnification pursuant to Section 7.7. Included among the expenditures for which the General Partner shall be entitled to reimbursement hereunder shall be any payments of debt service made by the General Partner, in its capacity as General Partner, as guarantor or otherwise, with respect to indebtedness encumbering any property held by the Partnership.
C. In the event that the Company shall elect to purchase from its shareholders REIT Shares for the purpose of delivering such REIT Shares to satisfy an obligation under any distribution reinvestment program adopted by the Company, any employee share purchase plan adopted by the Company, or any similar obligation or arrangement undertaken by the Company in the future, the purchase price paid by the Company for such REIT Shares and any other expenses incurred by the Company in connection with such purchase shall be considered expenses of the Partnership and shall be reimbursed to the Company, subject to the condition that: (i) if such REIT Shares subsequently are sold by the Company, the Company shall pay to the Partnership any proceeds received by the Company for such REIT Shares (which sales proceeds shall include the amount of distributions reinvested under any distribution reinvestment or similar program; provided, that a transfer of REIT Shares for Partnership Units pursuant to Section 8.6 would not be considered a sale for such purposes); and (ii) if such REIT Shares are not retransferred by the Company within 30 days after the purchase thereof, the General Partner shall cause the Partnership to cancel a number of Partnership Units held by the Company equal to the product obtained by multiplying the Conversion Factor by the number of such REIT Shares (in which case such reimbursement shall be treated as a distribution in redemption of Partnership Units held by the Company).
Section 7.5. Outside Activities of the General Partner
The General Partner and any Affiliates of the General Partner shall only conduct the activities contemplated by this Agreement. Notwithstanding the foregoing, the General Partner and any Affiliates of the General Partner may (a) acquire Limited Partner Interests and shall be entitled to exercise all rights of a Limited Partner relating to such Limited Partner Interests and (b) acquire less than 5% of the equity securities of any Person, which securities are listed on any national securities exchange and the General Partner or such Affiliate has no other business relationship, direct or indirect, with the issuer of such securities. For the avoidance of doubt, family members of Affiliates of the General Partner are permitted to own real estate for commercial purposes.
Section 7.6. Contracts with Affiliates
A. The Partnership may lend or contribute funds or other assets to, and borrow funds from, its or the Company’s Subsidiaries or other Persons in which it or the Company has an equity or other interests and such Persons may borrow funds from, and lend or contribute funds or assets to, the Partnership, on terms and conditions established by the General Partner, in its sole and absolute discretion. The foregoing authority shall not create any right or benefit in favor of any Subsidiary or any other Person.
B. Except as provided in Section 7.5, the Partnership may transfer assets to joint ventures, other partnerships, limited liability companies, real estate investment trusts, corporations or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions consistent with this Agreement and applicable law as the General Partner deems appropriate, in its sole and absolute discretion.
C. Except as expressly permitted by this Agreement, neither the General Partner nor any of its Affiliates shall sell, transfer or convey any property to, or purchase any property from, the Partnership, directly or indirectly, except pursuant to transactions that are determined by the General Partner in good faith to be fair and reasonable.
D. The General Partner, in its sole and absolute discretion, may propose and adopt, on behalf of the Partnership, employee benefit plans, share option plans, and similar plans funded by the Partnership for the benefit of employees of the General Partner, the Company, the Partnership, Subsidiaries of the Partnership or any Affiliate of any of them in respect of services performed, directly or indirectly, for the benefit of the Partnership, the Company, the General Partner or any Subsidiaries of the Partnership.
E. The General Partner, in its sole and absolute discretion, shall cause the Partnership to contribute the proceeds from any offerings of REIT Shares that the Company contributes to the Partnership in exchange for Partnership Units to the Partnership’s Subsidiaries at the discretion of the General Partner, in its sole and absolute discretion.
Section 7.7. Indemnification
A. To the fullest extent permitted by Delaware law, the Partnership shall indemnify each Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including, without limitation, attorneys’ fees and other legal fees and expenses), judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Partnership or the Company as set forth in this Agreement, in which such Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, except to the extent such Indemnitee acted in bad faith, or with gross negligence or willful misconduct. Without limitation, the foregoing indemnity shall extend to any liability of any Indemnitee, pursuant to a loan guaranty or otherwise for any indebtedness of the Partnership or any Subsidiary of the Partnership (including without limitation, any indebtedness which the Partnership or any Subsidiary of the Partnership has assumed or taken subject to), and the General Partner is hereby authorized and empowered, on behalf of the Partnership, to enter into one or more indemnity agreements consistent with the provisions of this Section 7.7 in favor of any Indemnitee having or potentially having liability for any such indebtedness. Any indemnification pursuant to this Section 7.7 shall be made only out of the assets of the Partnership, and neither the General Partner nor any Limited Partner shall have any obligation to contribute to the capital of the Partnership, or otherwise provide funds, to enable the Partnership to fund its obligations under this Section 7.7.
B. Reasonable expenses incurred by an Indemnitee who is a party to a proceeding shall be paid or reimbursed by the Partnership in advance of the final disposition of the proceeding, upon receipt by the Partnership of an undertaking by or on behalf of the Indemnitee to repay such amount if it shall be determined that the Indemnitee is not entitled to be indemnified as authorized in Section 7.7(A).
C. The indemnification provided by this Section 7.7 shall be in addition to any other rights to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity unless otherwise provided in a written agreement pursuant to which such Indemnitees are indemnified.
D. The Partnership may, but shall not be obligated to, purchase and maintain insurance, on behalf of the Indemnitees and such other Persons as the General Partner shall determine, against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Partnership’s activities, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement.
E. For purposes of this Section 7.7, the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute fines within the meaning of this Section 7.7; and actions taken or omitted by the Indemnitee with respect to an employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject any of the Partners to personal liability by reason of the indemnification provisions set forth in this Agreement.
G. An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.7 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons. Any amendment, modification or repeal of this Section 7.7 or any provision hereof shall be prospective only and shall not in any way affect the Partnership’s liability to any Indemnitee under this Section 7.7, as in effect immediately prior to such amendment, modification, or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.
Section 7.8. Liability of the General Partner
A. Notwithstanding anything to the contrary set forth in this Agreement, none of the General Partner, its Affiliates, or any of their respective officers, trustees, directors, shareholders, partners, members, employees, representatives or agents or any officer, employee, representative or agent of the Partnership and its Affiliates (individually, a “Covered Person” and collectively, the “Covered Persons”) shall be liable for monetary damages to the Partnership, any Partners or any Assignees for losses sustained or liabilities incurred as a result of errors in judgment or of any act or omission if the Covered Person’s conduct did not constitute bad faith, gross negligence or willful misconduct.
B. The Limited Partners expressly acknowledge that the General Partner is acting on behalf of the Partnership, the Limited Partners and the shareholders of the Company collectively, that the General Partner is under no obligation to consider the separate interests of the Limited Partners (except as otherwise provided herein) in deciding whether to cause the Partnership to take (or decline to take) any actions. In the event of a conflict between the interests of the shareholders of the Company on the one hand and the Limited Partners on the other, the General Partner shall endeavor in good faith to resolve the conflict in a manner not adverse to either the shareholders of Company or the Limited Partners; provided, however, that any such conflict that the General Partner, in its sole and absolute discretion, determines cannot be resolved in a manner not adverse to either the shareholders of the Company or the Limited Partners shall be resolved in favor of the shareholders of the Company. The General Partner shall not be liable for monetary damages for losses sustained, liabilities incurred, or benefits not derived by Limited Partners in connection with such decisions; provided, that the General Partner has acted in good faith.
C. Subject to its obligations and duties as General Partner set forth in Section 7.1(A), the General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its employees and agents.
D. Any amendment, modification or repeal of this Section 7.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the Covered Person’s liability to the Partnership and the Limited Partners under this Section 7.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.
E. To the extent that, at law or in equity, a Covered Person has duties (including fiduciary duties) and liabilities relating thereto to the Partnership or to the Partners, any Covered Person acting under this Agreement or otherwise shall not be liable to the Partnership or to any Partner for its good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the Partners to replace such other duties and liabilities of such Covered Person.
F. Whenever in this Agreement the General Partner is permitted or required to make a decision (i) in its “sole discretion” or “discretion,” or under a similar grant of authority or latitude, the General Partner shall be entitled to consider such interests and factors as it desires and may consider its own interests and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Partnership or the Limited Partners, or (ii) in its “good faith” or under another express standard, the General Partner shall act under such express standard and shall not be subject to any other or different standards imposed by this Agreement or by law or any other agreement contemplated herein.
Section 7.9. Other Matters Concerning the General Partner
A. The General Partner may rely and shall be protected in acting, or refraining from acting, upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, or other paper or document believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties.
B. The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers, architects, engineers, environmental consultants and other consultants and advisers selected by it and any act taken or omitted to be taken in reliance upon the opinion of such Persons as to matters which the General Partner reasonably believes to be within such Person’s professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion.
C. The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers and duly appointed attorneys-in-fact. Each such attorney shall, to the extent provided by the General Partner in the power of attorney, have full power and authority to do and perform each and every act and duty which is permitted or required to be done by the General Partner hereunder.
D. Notwithstanding any other provisions of this Agreement or the Act, any action of the General Partner on behalf of the Partnership or any decision of the General Partner to refrain from acting on behalf of the Partnership, undertaken in the good faith belief that such action or omission is necessary or advisable in order (i) to protect the ability of the Company to continue to qualify as a REIT; (ii) for the Company to otherwise satisfy the REIT Requirements; or (iii) to avoid the Company incurring any taxes under Section 337(d), 857, 1374 or 4981 of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners.
Section 7.10. Title to Partnership Assets
Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof.
Section 7.11. Reliance by Third Parties
Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner has full power and authority, without consent or approval of any other Partner or Person (unless set forth herein), to encumber, sell or otherwise use in any manner any and all assets of the Partnership and to enter into any contracts on behalf of the Partnership, and take any and all actions on behalf of the Partnership and such Person shall be entitled to deal with the General Partner as if the General Partner were the Partnership’s sole party in interest, both legally and beneficially. Each Limited Partner hereby waives any and all defenses or other remedies which may be available against such Person to contest, negate or disaffirm any action of the General Partner in connection with any such dealing. In no event shall any Person dealing with the General Partner or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (i) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect; (ii) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership; and (iii) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership.
ARTICLE 8.
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1. Limitation of Liability
Each Limited Partner acting in its capacity as such shall have no liability under this Agreement except for liability resulting from: (a) an act or omission on the part of such Limited Partner that was committed in bad faith or was the result of active and deliberate dishonesty; (b) in the case of any criminal proceeding, an act or omission that such Limited Partner had reasonable cause to believe was unlawful; (c) any transaction for which such Limited Partner actually received an improper personal benefit in money, property or services in violation or breach of any provision of this Agreement; or (d) as expressly provided in this Agreement or under the Act.
Section 8.2. Management of Business
No Limited Partner or Assignee (other than the General Partner, any of its Affiliates or any officer, trustee, director, member, employee or agent of the General Partner, the Partnership or any of their Affiliates, in their capacity as such) shall take part in the operation, management or control (within the meaning of the Act) of the Partnership’s business, transact any business in the Partnership’s name or have the power to sign documents for or otherwise bind the Partnership. The transaction of any such business by the General Partner, any of its Affiliates or any officer, trustee, director, member, employee or agent of the General Partner, the Partnership or any of their Affiliates, in their capacity as such, shall not affect, impair or eliminate the limitations on the liability of the Limited Partners or Assignees under this Agreement.
Section 8.3. Outside Activities of Limited Partners
Subject to any agreements entered into by a Limited Partner or its Affiliates with the Partnership or any of its Subsidiaries, any Limited Partner (other than the Company) and any officer, trustee, director, member, employee, agent, trustee, Affiliate or shareholder of any such Limited Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities that are in direct competition with the Partnership or that are enhanced by the activities of the Partnership. Neither the Partnership nor any Partners shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner or Assignee. None of the Limited Partners (other than the Company) nor any other Person shall have any rights by virtue of this Agreement or the Partnership relationship established hereby in any business ventures of any other Person and such Person shall have no obligation pursuant to this Agreement to offer any interest in any such business ventures to the Partnership, any Limited Partner or any such other Person, even if such opportunity is of a character which, if presented to the Partnership, any Limited Partner or such other Person, could be taken by such Person.
Section 8.4. Return of Capital
Except pursuant to the right of redemption set forth in Section 8.6, no Limited Partner shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent of distributions made pursuant to this Agreement or upon termination of the Partnership as provided herein. Except as otherwise expressly provided in this Agreement, no Limited Partner or Assignee shall have priority over any other Limited Partner or Assignee, either as to the return of Capital Contributions or as to profits, losses or distributions.
Section 8.5. Rights of Limited Partners Relating to the Partnership
A. In addition to the other rights provided by this Agreement or by the Act, and except as limited by Section 8.5(C), each Limited Partner shall have the right, for a purpose reasonably related to such Limited Partner’s interest as a limited partner in the Partnership, upon written demand with a statement of the purpose of such demand and at such Limited Partner’s own expense (including such copying and administrative charges as the General Partner may establish from time to time):
(1) to obtain a copy of the Partnership’s federal, state and local income tax returns for each Partnership Year;
(2) to obtain a copy of this Agreement and the Certificate and all amendments thereto, together with executed copies of all powers of attorney pursuant to which this Agreement, the Certificate and all amendments thereto have been executed; and
(3) to obtain true and full information regarding the amount of cash and a description and statement of any other property or services contributed by each Partner and which each Partner has agreed to contribute in the future, and the date on which each became a Partner.
B. The Partnership shall notify each Limited Partner, upon request, of the then current Conversion Factor.
C. Notwithstanding any other provision of this Section 8.5, the General Partner may keep confidential from the Limited Partners, for such period of time as the General Partner determines in its sole and absolute discretion to be reasonable, any information that (i) the General Partner reasonably believes to be in the nature of trade secrets or other information, the disclosure of which the General Partner in good faith believes is not in the best interests of the Partnership or could damage the Partnership or its business; or (ii) the Partnership is required by law or by agreements with an unaffiliated third party to keep confidential.
Upon written request by any Limited Partner, the General Partner shall cause the ownership of Partnership Interests by such Limited Partner to be evidenced by a certificate in such form as the General Partner may determine with respect to any class of Partnership Interests issued from time to time under this Agreement. The General Partner may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Partnership alleged to have been lost, destroyed, stolen or mutilated, upon the making of an affidavit of that fact by the person claiming the certificate to be lost, destroyed, stolen or mutilated. Unless otherwise determined by the General Partner, the owner of such lost, destroyed, stolen or mutilated certificate or certificates, or his or her legal representative, shall be required, as a condition precedent to the issuance of a new certificate or certificates, to give the Partnership a bond in such sum as the General Partner may direct as indemnity against any claim that may be made against the Partnership.
Section 8.6. Redemption Right
A. Subject to Sections 8.6(B) and 8.6(C) and at any time on or after such date as expressly provided for in any agreement entered into between the Partnership and any Limited Partner, each holder of a Common Unit (if other than the General Partner)shall have the right (the “Redemption Right”) to require the Partnership to redeem on a Specified Redemption Date all or a portion of the Partnership Units (provided that such Partnership Units constitute Common Units) held by such holder at a redemption price equal to and in the form of the Cash Amount to be paid by the Partnership; provided that the Partnership Units shall have been outstanding for at least one year; provided, further, that the General Partner, in its sole and absolute discretion, may allow a holder to exercise its Redemption Right prior to the Common Units being outstanding for one year in its discretion. The Redemption Right shall be exercised pursuant to a Notice of Redemption delivered to the Partnership (with a copy to the General Partner) by the holder who is exercising the redemption right (the “Redeeming Partner”); provided, however, that the Partnership shall not be obligated to satisfy such Redemption Right if the Company elects to purchase the Partnership Units subject to the Notice of Redemption pursuant to Section 8.6(B). A holder under this Section 8.6(A) may not exercise the Redemption Right for less than 1,000 Partnership Units at any one time or, if such holder holds less than 1,000 Partnership Units, all of the Partnership Units held by such Partner. The Redeeming Partner shall have no right, with respect to any Partnership Units so redeemed, to receive any distributions paid on or after the Specified Redemption Date. The Assignee of any holder herein may exercise the rights of such Limited Partner pursuant to this Section 8.6(A), and such Limited Partner shall be deemed to have assigned such rights to such Assignee and shall be bound by the exercise of such rights by such Assignee. In connection with any exercise of such rights by an Assignee on behalf of a holder in this Section 8.6(A), the Cash Amount shall be paid by the Partnership directly to such Assignee and not to such holder. Any Partnership Units redeemed by the Partnership pursuant to this Section 8.6(A) shall be cancelled upon such redemption.
B. Notwithstanding the provisions of Section 8.6(A), a Limited Partner that exercises the Redemption Right shall be deemed to have offered to sell the Partnership Units described in the Notice of Redemption to the Company, and the Company may, in its sole and absolute discretion, elect to purchase directly and acquire such Partnership Units by paying to the Redeeming Partner either the Cash Amount or the REIT Shares Amount, as elected by the Company in its sole and absolute discretion, on the Specified Redemption Date, whereupon the Company shall acquire the Partnership Units offered for redemption by the Redeeming Partner and shall be treated for all purposes of this Agreement as the owner of such Partnership Units. If the Company shall elect to exercise its right to purchase Partnership Units under this Section 8.6(B) with respect to a Notice of Redemption, it shall so notify the Redeeming Partner within five Business Days after the receipt by it of such Notice of Redemption. Unless the Company (in its sole and absolute discretion) shall exercise its right to purchase Partnership Units from the Redeeming Partner pursuant to this Section 8.6(B), the Company shall not have any obligation to the Redeeming Partner or the Partnership with respect to the Redeeming Partner’s exercise of the Redemption Right. In the event the Company shall exercise its right to purchase Partnership Units with respect to the exercise of a Redemption Right in the manner described in the first sentence of this Section 8.6(B), the Partnership shall have no obligation to pay any amount to the Redeeming Partner with respect to such Redeeming Partner’s exercise of such Redemption Right, and each of the Redeeming Partner, the Partnership and the Company shall treat the transaction between the Company and the Redeeming Partner, for federal income tax purposes, as a sale of the Redeeming Partner’s Partnership Units to the Company. Each Redeeming Partner agrees to execute such documents as the Company may reasonably require in connection with the issuance of REIT Shares upon exercise of the Redemption Right. In case of any reclassification of the REIT Shares (including, but not limited to, any reclassification upon a consolidation or merger in which the Company is the continuing trust) into securities other than REIT Shares, for purposes of this Section 8.6(B), the Company (or its successor) may thereafter exercise its right to purchase Partnership Units for the kind and amount of shares of such securities receivable upon such reclassification by a holder of the number of REIT Shares for which such Partnership Units could be purchased pursuant to this Section immediately prior to such reclassification.
C. Notwithstanding the provisions of Section 8.6(A) and Section 8.6(B), a Partner shall not be entitled to exercise the Redemption Right pursuant to Section 8.6(A) to the extent that the delivery of REIT Shares to such Partner on the Specified Redemption Date by the Company pursuant to Section 8.6(B) (regardless of whether or not the Company would in fact exercise its rights under Section 8.6(B)) would (i) be prohibited, as determined in the sole discretion of the Company, under the Declaration or (ii) cause the acquisition of REIT Shares by such Partner to be “integrated” with any other distribution of REIT Shares for purposes of complying with the Securities Act.
D. Each Partner covenants and agrees that all Partnership Units delivered for redemption shall be delivered to the Partnership free and clear of all liens; and, notwithstanding anything contained herein to the contrary, the Partnership shall be under no obligation to acquire Partnership Units which are or may be subject to any liens. Each Partner further agrees that, if any state or local property transfer tax is payable as a result of the transfer of its Partnership Units to the Partnership, such Partner shall assume and pay such transfer tax.
ARTICLE 9.
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1. Records and Accounting
The General Partner shall keep or cause to be kept at the principal office of the Partnership those records and documents required to be maintained by the Act and other books and records deemed by the General Partner to be appropriate with respect to the Partnership’s business, including, without limitation, all books and records necessary to provide to the Limited Partners any information, lists and copies of documents required to be provided pursuant to Section 9.3. The books of the Partnership shall be maintained, for financial and tax reporting purposes, on an accrual basis in accordance with GAAP, or such other basis as the General Partner determines to be necessary or appropriate.
Section 9.2. Fiscal Year
The fiscal year of the Partnership shall be the calendar year.
Section 9.3. Reports
A. As soon as practicable, but in no event later than 105 days after the close of each Partnership Year, the General Partner shall cause to be mailed to each Limited Partner as of the close of the Partnership Year, an annual report containing financial statements of the Partnership, or of the Company if such statements are prepared solely on a consolidated basis with the Company, for such Partnership Year, presented in accordance with GAAP, such statements to be audited by a nationally recognized firm of independent public accountants selected by the Company; provided, that if such financial statements of the Company are available on the Securities and Exchange Commission’s website, then this obligation shall be satisfied.
B. As soon as practicable, but in no event later than 105 days after the close of each calendar quarter (except the last calendar quarter of each year), the General Partner shall cause to be mailed to each Limited Partner as of the last day of the calendar quarter, a report containing unaudited financial statements of the Partnership, or of the Company, if such statements are prepared solely on a consolidated basis with the Company, and such other information as may be required by applicable law or regulation, or as the General Partner determines to be appropriate; provided that if such financial statements of the Company are available on the Securities and Exchange Commission’s website, then this obligation shall be satisfied.
C. The Partnership shall also cause to be promptly prepared such reports and/or information as are necessary for the Company to determine its qualification as a REIT and its compliance with the requirements for REITs pursuant to the Code and Regulations.
ARTICLE 10.
TAX MATTERS
Section 10.1. Preparation of Tax Returns
The General Partner shall arrange for the preparation and timely filing of all returns of Partnership income, gains, deductions, losses and other items required of the Partnership for federal and state income tax purposes and shall furnish by July 31 of the year immediately following each taxable year, or as soon as reasonably practicable thereafter, the tax information reasonably required by Limited Partners for federal and state income tax reporting purposes.
Section 10.2. Tax Elections
Except as otherwise provided herein, the General Partner shall, in its sole and absolute discretion, determine whether to make any available election pursuant to the Code. Notwithstanding the above, in making any such tax election the General Partner may, but shall be under no obligation to, take into account the tax consequences to the Limited Partners resulting from any such election.
Section 10.3. [Reserved]
Section 10.4. Withholding
Each Limited Partner hereby authorizes the Partnership to withhold from, or pay on behalf of or with respect to, such Limited Partner any amount of federal, state, local, or foreign taxes that the General Partner determines that the Partnership is required to withhold or pay with respect to any amount distributable or allocable to such Limited Partner pursuant to this Agreement, including, without limitation, any taxes required to be withheld or paid by the Partnership pursuant to Section 1441, 1442, 1445, or 1446 of the Code. Any amount paid on behalf of or with respect to a Limited Partner shall constitute a loan by the Partnership to such Limited Partner, which loan shall be repaid by such Limited Partner within 15 days after notice from the General Partner that such payment must be made unless (i) the Partnership withholds such payment from a distribution which would otherwise be made to the Limited Partner, or (ii) the General Partner determines, in its sole and absolute discretion, that such payment may be satisfied out of the available funds of the Partnership which would, but for such payment, be distributed to the Limited Partner. Any amounts withheld pursuant to the foregoing clause (i) or (ii) shall be treated as having been distributed (or paid) to such Limited Partner. In the event that a Limited Partner fails to pay any amounts owed to the Partnership pursuant to this Section 10.4 when due, the General Partner may, in its sole and absolute discretion, elect to make the payment to the Partnership on behalf of such defaulting Limited Partner, and in such event shall be deemed to have loaned such amount to such defaulting Limited Partner and shall succeed to all rights and remedies of the Partnership as against such defaulting Limited Partner. Without limitation, in such event the General Partner shall have the right to receive distributions that would otherwise be distributable to such defaulting Limited Partner until such time as such loan, together with all interest thereon, has been paid in full, and any such distributions so received by the General Partner shall be treated as having been distributed to the defaulting Limited Partner and immediately paid by the defaulting Limited Partner to the General Partner in repayment of such loan. Any amounts payable by a Limited Partner hereunder shall bear interest at the lesser of (A) the base rate on corporate loans at large United States money center commercial banks, as published from time to time in The Wall Street Journal, plus four percentage points, or (B) the maximum lawful rate of interest on such obligation, such interest to accrue from the date such amount is due (i.e., 15 days after demand) until such amount is paid in full. Each Limited Partner shall take such actions as the Partnership or the General Partner shall request in order to perfect or enforce the security interest created hereunder. Upon a Limited Partner’s complete withdrawal from the Partnership, such Limited Partner shall be required to restore funds to the Partnership to the extent that the cumulative amount of taxes withheld from or paid on behalf of, or with respect to, such Limited Partner exceeds the sum of such amounts (i) repaid to the Partnership by such Limited Partner, (ii) withheld from distributions to such Limited Partner and (iii) paid by the General Partner on behalf of such Limited Partner.
ARTICLE 11.
TRANSFERS AND WITHDRAWALS
Section 11.1. Transfer
A. The term “transfer,” when used in this Article 11 with respect to a Partnership Unit, shall be deemed to refer to a transaction by which the General Partner purports to assign all or any part of its General Partner Interest to another Person or by which a Limited Partner purports to assign all or any part of its Limited Partner Interest to another Person, and includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by law or otherwise. The term “transfer” when used in this Article 11 does not include (i) any redemption of Partnership Interests by the Partnership from a Limited Partner, (ii) any acquisition of Partnership Units from a Limited Partner by the Company pursuant to Section 8.6, or (iii) any distribution of Partnership Units by a Limited Partner to its beneficial owners.
B. No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article 11. Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article 11 shall be null and void.
C. Notwithstanding the other provisions of this Article 11, the Partnership Interests of the Company may be transferred, in whole or in part, at any time or from time to time, to any Person that is, at the time of such transfer, a Qualified REIT Subsidiary. Upon any transfer permitted by this Section 11.1(C), the Company shall be relieved of all its obligations under this Agreement. The provisions of Sections 11.2(B), 11.3, 11.4(A) and 11.5 shall not apply to any transfer permitted by this Section 11.1(C).
Section 11.2. Transfer of General Partner Interest
A. The General Partner may not transfer any of its General Partner Interest or withdraw as General Partner except as provided in Section 11.2(B) or Section 11.2(C).
B. Except as set forth in Section 11.2(C), the General Partner shall not withdraw from the Partnership and shall not transfer all or any portion of its General Partner Interests in the Partnership (whether by sale, disposition, statutory merger or consolidation, liquidation or otherwise) unless Limited Partners holding a majority of the Percentage Interests of the Common Units consent to such transfer or withdrawal. Upon any transfer of the General Partner’s Partnership Interest pursuant to the consent of the Limited Partners and otherwise in accordance with the provisions of this Section 11.2(B), the transferee shall become a successor General Partner for all purposes herein, and shall be vested with the powers and rights of the transferor General Partner, and shall be liable for all obligations and responsible for all duties of the General Partner, once such transferee has executed such instruments as may be necessary to effectuate such admission and to confirm the agreement of such transferee to be bound by all the terms and provisions of this Agreement with respect to the Partnership Interest so acquired. It is a condition to any transfer by the General Partner otherwise permitted hereunder that the transferee assumes, by operation of law or express agreement, all of the obligations of the transferor General Partner under this Agreement with respect to such transferred Partnership Interest; provided, such transfer shall not relieve the transferor General Partner of its obligations under this Agreement without the consent of the Limited Partners. In the event that the General Partner withdraws from the Partnership, in violation of this Agreement or otherwise, the remaining Partners may agree in writing to continue the business of the Partnership by selecting a successor General Partner in accordance with the Act.
C. In the event a Bankruptcy Event occurs with respect to the General Partner, the General Partner shall automatically withdraw from the Partnership, in its role as the General Partner, without any action on the part of the General Partner or any other Person, and shall transfer all of its General Partner Interest in the Partnership to the successor general partner selected by the Limited Partners.
Section 11.3. Limited Partners’ Rights to Transfer
A. Except as provided in Section 11.3(B), no Limited Partner shall transfer all or any portion of its Partnership Interest to any transferee without the written consent of the General Partner, which consent may be withheld in its sole and absolute discretion; provided, however, that if a Limited Partner is subject to Incapacity, such Incapacitated Limited Partner may transfer all or any portion of its Partnership Interest.
B. Notwithstanding any other provision of this Article 11, a Limited Partner may transfer all or any portion of its Partnership Interest to any of its Affiliates and such transferee shall be admitted as a Substituted Limited Partner, all without obtaining the consent of the General Partner, unless such Affiliate does not qualify as an “accredited investor” as such term is defined in Rule 501(a) of Regulation D.
C. If a Limited Partner is subject to Incapacity, the executor, administrator, trustee, committee, guardian, conservator or receiver of such Limited Partner’s estate shall have all of the rights of a Limited Partner, but not more rights than those enjoyed by other Limited Partners, for the purpose of settling or managing the estate and such power as the Incapacitated Limited Partner possessed to transfer all or any part of his or its interest in the Partnership. The Incapacity of a Limited Partner, in and of itself, shall not dissolve or terminate the Partnership.
D. Without limiting the generality of Section 11.3(B), the General Partner may prohibit any transfer by a Limited Partner of its Partnership Interest if, in the opinion of legal counsel to the Partnership or the Company, such transfer would require filing of a registration statement under the Securities Act or would otherwise violate any federal or state securities laws or regulations applicable to the Partnership or the Partnership Units.
E. No transfer by a Limited Partner of its Partnership Units may be made to any Person if (i) in the opinion of legal counsel for the Partnership or the Company it could result in the Partnership being classified as other than an entity disregarded as separate from its owner within the meaning of Regulations § 301.7701-3 for U.S. federal income tax purposes; (ii) such transfer could cause the Partnership to become, with respect to any employee benefit plan subject to Title I of ERISA or to Section 4975 of the Code, a “party-in-interest” (as defined in Section 3(14) of ERISA) or a “disqualified person” (as defined in Section 4975(c) of the Code); (iii) such transfer could, in the opinion of legal counsel for the Partnership or the Company, cause any portion of the assets of the Partnership to constitute assets of any employee benefit plan pursuant to Department of Labor Regulations Section 2510.3-101; or (iv) such transfer could subject the Partnership to be regulated under the Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940, as amended, or the fiduciary responsibility provisions of ERISA.
F. [Reserved].
G. The General Partner shall keep a register for the Partnership on which the transfer, pledge or release of Partnership Units shall be shown and pursuant to which entries shall be made to effect all transfers, pledges or releases as required by the applicable sections of Article 8 of the Uniform Commercial Code, as amended, in effect in the State of Delaware. The General Partner shall (i) place proper entries in such register clearly showing each transfer and each pledge and grant of security interest and the transfer and assignment pursuant thereto, such entries to be endorsed by the General Partner, and (ii) maintain the register and make the register available for inspection by all of the Partners and their pledgees at all times during the term of this Agreement. Nothing herein shall be deemed a consent to any pledge or transfer otherwise prohibited under this Agreement.
Section 11.4. Substituted Limited Partners
A. No Limited Partner shall have the right to substitute a transferee as a Limited Partner in his or its place except upon consent of the General Partner, which consent may be given or withheld by the General Partner in its sole and absolute discretion. Following such consent of the General Partner, the transferee of the interest of such Limited Partner shall be admitted pursuant to this Section 11.4 as a Substituted Limited Partner. The General Partner’s failure or refusal to permit a transferee of any such interests to become a Substituted Limited Partner shall not give rise to any cause of action against the Partnership or any Partner. A Person shall be admitted to the Partnership as a Substituted Limited Partner only upon the aforementioned consent of the General Partner and the furnishing to the General Partner of (i) evidence of acceptance in form satisfactory to the General Partner of all of the terms and conditions of this Agreement, including, without limitation, the power of attorney granted in Section 2.4 and (ii) such other documents to effect such Person’s admission as a Substituted Limited Partner. The admission of any Person as a Substituted Limited Partner shall become effective on the date upon which the name of such Person is recorded on the books and records of the Partnership, following the consent of the General Partner to such admission.
B. A transferee who has been admitted as a Substituted Limited Partner in accordance with this Article 11 shall have all the rights and powers and be subject to all the restrictions and liabilities of a Limited Partner under this Agreement.
C. Upon the admission of a Substituted Limited Partner, the General Partner shall update the books and records of the Partnership to reflect the name, address, number of Partnership Units and Percentage Interest (as applicable) of such Substituted Limited Partner and to eliminate or adjust, if necessary, the name, address and interest of the predecessor of such Substituted Limited Partner.
Section 11.5. Assignees
If the General Partner, in its sole and absolute discretion, does not consent to the admission of any permitted transferee as a Substituted Limited Partner, as described in Section 11.4, such transferee shall be considered an Assignee for purposes of this Agreement. An Assignee shall be deemed to have had assigned to it, and shall be entitled to receive distributions from the Partnership and the share of profits and losses of the Partnership attributable to the Partnership Interest assigned to such transferee, but shall not be deemed to be a holder of a Partnership Interest for any other purpose under this Agreement, and shall not be entitled to vote such Partnership Interest in any matter presented to the Limited Partners for a vote (such Partnership Interest being deemed to have been voted on such matter in the same proportion as all other Partnership Interest held by Limited Partners are voted). In the event any such transferee desires to make a further assignment of any such Partnership Interest, such transferee shall be subject to all of the provisions of this Article 11 to the same extent and in the same manner as any Limited Partner desiring to make an assignment of his or its Partnership Interest.
Section 11.6. Drag-Along Rights
A. In the event of an Approved Sale, the Partners who approved the Approved Sale (the “Approving Partners”) have the right to require each other Partner (the “Non-Approving Partners”) to transfer all Partnership Units then held by such Non-Approving Partner, free and clear of all liens, security interests or other restrictions of any kind, in accordance with this Section 11.6.
B. In the event of an Approved Sale, the General Partner shall notify each Non-Approving Partner no more than ten Business Days after the execution and delivery by all of the parties thereto of the definitive agreement entered into with respect to the Approved Sale and, in any event, no later than 20 Business Days prior to the closing date of such Approved Sale, and each Non-Approving Partner will, subject to satisfaction of the conditions in Section 11.6(C), (i) if such transaction requires approval by the Partners, with respect to all Partnership Units that such Partner owns or over which such Partner otherwise exercises voting power, to vote (in person, by proxy or by action by written consent, as applicable) all such Partnership Units in favor of, and adopt, such Approved Sale, and to vote in opposition to any and all other proposals that could reasonably be expected to delay or impair the ability of the Partnership to consummate such Sale of the Partnership, (ii) refrain from exercising any dissenter’s rights or rights of appraisal under applicable law at any time with respect to such Approved Sale, and (iii) if the Approved Sale is structured as a sale of Partnership Units, each Non-Approving Partner will agree to sell the same proportion of Partnership Units beneficially held by such Partner as is being sold by the Approving Partners to the Person(s) to whom the Approving Partners propose to sell their Partnership Units, on the same terms and conditions as the Approving Partners.
C. The obligations of the Partners pursuant to this Section 11.6 with respect to an Approved Sale are subject to the following conditions: (i) the aggregate consideration payable upon consummation of such Approved Sale to all of the Partners (the “Aggregate Consideration”) shall be allocated among the Partners as set forth in Section 5.3, (ii) upon the consummation of the Approved Sale, all of the Partners shall receive the same form of consideration per Partnership Unit of the same class or other equity interest, as allocated pursuant to subsection (i) hereof (except that a member of management may, with such Partner’s consent, receive securities pursuant to a management “rollover” which are not offered to all Partners), and (iii) that any indemnification, escrow, holdback and adjustment obligations undertaken by any Partner shall be pro rata among the Partners in proportion to the consideration to be received by the Partners in such Approved Sale; provided that indemnification obligations that relate solely to a particular Partner, such as indemnification with respect to representations and warranties made by a Partner with respect to such Partner (or such Partner’s ownership of Partnership Units) or covenants made by such Partner, shall be borne only by such Partner and shall not be deemed to reduce the Aggregate Consideration.
D. Subject to the foregoing, each Partner hereby agrees to execute and deliver all related documentation and take such other action in support of the Sale of the Partnership as shall reasonably be requested by the General Partner or the Approving Partners in order to carry out the terms and provision of this Section 11.6 , including without limitation executing and delivering instruments of conveyance and transfer, and any purchase agreement, merger agreement, indemnity agreement, escrow agreement, consent, waiver, governmental filing, share certificates duly endorsed for transfer (free and clear of impermissible liens, claims and encumbrances) and any similar or related documents. Subject to the satisfaction of the conditions in Section 11.6(C), for purposes each Partner (and their respective spouses, if residing in a community property state) hereby appoint the General Partner as their agent and attorney-in-fact to execute any and all documents related in connection with an Approved Sale (including documents granting customary indemnities to a buyer of assets or securities consistent with this Agreement) on their behalf and expressly bind themselves to such document by the General Partner’s execution of such document without further action on their part.
Section 11.7. General Provisions
A. No Limited Partner may withdraw from the Partnership other than as a result of a permitted transfer of all of such Limited Partner’s Partnership Interest in accordance with this Article 11, pursuant to redemption of all of its Partnership Units, or the acquisition thereof by the Company, under Section 8.6.
B. Any Limited Partner who shall transfer all of its Partnership Interest in a transfer permitted pursuant to this Article 11 shall cease to be a Limited Partner upon the admission of all Assignees of such Partnership Interest as Substituted Limited Partners. Similarly, any Limited Partner who shall transfer all of its Partnership Units pursuant to a redemption of all of its Partnership Units, or the acquisition thereof by the Company under Section 8.6 shall cease to be a Limited Partner.
C. Transfers pursuant to this Article 11 may only be made on the first day of a fiscal quarter of the Partnership, unless the General Partner otherwise agrees.
D. If any Partnership Interest is transferred or assigned during any quarterly segment of the Partnership’s fiscal year in compliance with the provisions of this Article 11 or redeemed or transferred pursuant to Section 8.6 on any day other than the first day of a Partnership Year, then all distributions of Available Cash attributable to such Partnership Interest with respect to which the Partnership Record Date is before the date of such transfer, assignment, or redemption shall be made to the transferor Partner or the Redeeming Partner, as the case may be, and in the case of a transfer or assignment other than a redemption, all distributions of Available Cash thereafter attributable to such Partnership Interest shall be made to the transferee Partner.
ARTICLE 12.
ADMISSION OF PARTNERS
Section 12.1. Admission of Successor General Partner
A successor to all of the General Partner Interest pursuant to Section 11.2 who is proposed to be admitted as a successor General Partner shall be admitted to the Partnership as the General Partner, effective immediately prior to such transfer. Any such transferee shall carry on the business of the Partnership without dissolution. In each case, the admission shall be subject to the successor General Partner executing and delivering to the Partnership an acceptance of all of the terms and conditions of this Agreement and such other documents or instruments as may be required to effect the admission. In the case of such admission on any day other than the first day of a Partnership Year, all items attributable to the General Partner Interest for such Partnership Year shall be allocated between the transferring General Partner and such successor as provided in Section 11.6(D).
Section 12.2. Admission of Additional Limited Partners
A. A Person who makes a Capital Contribution to the Partnership in accordance with this Agreement shall be admitted to the Partnership as an Additional Limited Partner only upon furnishing to the General Partner (i) evidence of acceptance in form satisfactory to the General Partner of all of the terms and conditions of this Agreement, including, without limitation, the power of attorney granted in Section 2.4 and (ii) such other documents or instruments as may be required in the discretion of the General Partner in order to effect such Person’s admission as an Additional Limited Partner.
B. Notwithstanding anything to the contrary in this Section 12.2, no Person shall be admitted as an Additional Limited Partner without the consent of the General Partner, which consent may be given or withheld in the General Partner’s sole and absolute discretion. The admission of any Person as an Additional Limited Partner shall become effective on the date upon which the name of such Person is recorded on the books and records of the Partnership, following the consent of the General Partner to such admission.
C. If any Additional Limited Partner is admitted to the Partnership on any day other than the first day of a Partnership Year, then all distributions of Available Cash with respect to which the Partnership Record Date is before the date of such admission shall be made solely to Partners and Assignees, other than such Additional Limited Partner, and all distributions of Available Cash thereafter shall be made to all of the Partners and Assignees, including such Additional Limited Partner.
Section 12.3. Amendment of Agreement and Certificate of Limited Partnership
For the admission to the Partnership of any Partner, the General Partner shall take all steps necessary and appropriate under the Act to amend the records of the Partnership and, if necessary, to prepare as soon as practical an amendment of this Agreement and, if required by law, shall prepare and file an amendment to the Certificate and may for this purpose exercise the power of attorney granted pursuant to Section 2.4.
ARTICLE 13.
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1. Dissolution
The Partnership shall not be dissolved by the admission of Substituted Limited Partners or Additional Limited Partners or by the admission of a successor General Partner in accordance with the terms of this Agreement. Upon the withdrawal of the General Partner, any successor General Partner shall continue the business of the Partnership without dissolution. The Partnership shall dissolve, and its affairs shall be wound up, only upon the first to occur of any of the following (“Liquidating Events”):
A. an election to dissolve the Partnership made by the General Partner with the consent of Partners holding a majority of the Percentage Interests of the Limited Partners;
B. entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of the Act;
C. at any time that there are no limited partners of the Partnership unless the business of the Partnership is continued in accordance with the Act;
D. the sale of all or substantially all of the assets and properties of the Partnership; or
E. any other event sufficient under the Act to cause the dissolution of the Partnership.
Section 13.2. Winding Up
A. Upon the occurrence of a Liquidating Event, the Partnership shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Partners. No Partner shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Partnership’s business and affairs. The General Partner, or, in the event there is no remaining General Partner, any Person elected by a majority of the Percentage Interests of the Limited Partners (the General Partner or such other Person being referred to herein as the “Liquidator”), shall be responsible for overseeing the winding up and dissolution of the Partnership and shall take full account of the Partnership’s liabilities and property and the Partnership property shall be liquidated as promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom (which may, to the extent determined by the Liquidator, include REIT Shares of the Company) shall be applied and distributed in the following order:
(1) First, in satisfaction of all of the Partnership’s Debts and liabilities to creditors other than the Partners (whether by payment or the making of reasonable provision for payment thereof);
(2) Second, to the payment and discharge of all of the Partnership’s Debts and liabilities to the General Partner (whether by payment or the making of reasonable provision for payment thereof), including, but not limited to, amounts due as reimbursements under Section 7.4;
(3) Third, to the payment and discharge of all of the Partnership’s Debts and liabilities to the other Partners; and
(4) The balance, if any, to the Partners in accordance with Section 5.1.
The General Partner shall not receive any additional compensation for any services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2(A) which require liquidation of the assets of the Partnership, but subject to the order of priorities set forth therein, if prior to or upon dissolution of the Partnership the Liquidator determines that an immediate sale of part or all of the Partnership’s assets would be impractical or would cause undue loss to the Partners, the Liquidator may, in its sole and absolute discretion, defer for a reasonable time the liquidation of any assets except those necessary to satisfy liabilities of the Partnership (including to those Partners as creditors) and/or distribute to the Partners, in lieu of cash, as tenants in common and in accordance with the provisions of Section 13.2(A), undivided interests in such Partnership assets as the Liquidator deems not suitable for liquidation. Any such distributions in kind shall be made only if, in the good faith judgment of the Liquidator such distributions in kind are in the best interest of the Partners, and shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operation of such properties at such time. The Liquidator shall determine the fair market value of any property distributed in kind using such reasonable method of valuation as it may adopt.
C. In the discretion of the Liquidator a pro rata portion of the distributions that would otherwise be made to the Partners pursuant to this Article 13 may be:
(1) distributed to a trust established for the benefit of the General Partner and Limited Partners for the purposes of liquidating Partnership assets, collecting amounts owed to the Partnership, and paying any contingent or unforeseen liabilities or obligations of the Partnership or the General Partner arising out of or in connection with the Partnership. The assets of any such trust shall be distributed to the General Partner and Limited Partners from time to time, in the reasonable discretion of the Liquidator in the same proportions as the amount distributed to such trust by the Partnership would otherwise have been distributed to the General Partner and Limited Partners pursuant to this Agreement; or
(2) withheld or escrowed to provide a reasonable reserve for Partnership liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Partnership; provided, that such withheld or escrowed amounts shall be distributed to the General Partner and Limited Partners in the manner and order of priority set forth in Section 13.2(A) as soon as practicable.
Section 13.3. [Reserved].
Section 13.4. [Reserved].
Section 13.5. Rights of Limited Partners
Except as otherwise provided in this Agreement, each Limited Partner shall look solely to the assets of the Partnership for the return of its Capital Contributions and shall have no right or power to demand or receive property other than cash from the Partnership. Except as otherwise provided in this Agreement, no Limited Partner shall have priority over any other Partner as to the return of its Capital Contributions, distributions, or allocations.
Section 13.6. Notice of Dissolution
In the event a Liquidating Event occurs, or an event occurs that would result in a dissolution of the Partnership, the General Partner shall, within 30 days thereafter, provide written notice thereof to each of the Partners.
Section 13.7. Termination of Partnership and Cancellation of Certificate of Limited Partnership
Upon the completion of the winding up of the Partnership and liquidation of its assets, as provided in Section 13.2, the Partnership shall be terminated by filing a certificate of cancellation with the Secretary of State of the State of Delaware, canceling all qualifications of the Partnership as a foreign limited partnership in jurisdictions other than the State of Delaware and taking such other actions as may be necessary to terminate the Partnership.
Section 13.8. Reasonable Time for Winding Up
A reasonable time shall be allowed for the orderly winding-up of the business and affairs of the Partnership and the liquidation of its assets pursuant to Section 13.2, in order to minimize any losses otherwise attendant upon such winding up, and the provisions of this Agreement shall remain in effect among the Partners during the period of liquidation.
Section 13.9. Waiver of Partition
No Partner nor any successor-in-interest to a Partner shall have the right while this Agreement remains in effect to have any property of the Partnership partitioned, or to file a complaint or institute any proceeding at law or in equity to have such property of the Partnership partitioned, and each Partner, on behalf of itself and its successors and assigns hereby waives any such right. It is the intention of the Partners that the rights of the parties hereto and their successors-in-interest to Partnership property, as among themselves, shall be governed by the terms of this Agreement, and that the rights of the Partners and their respective successors-in-interest shall be subject to the limitations and restrictions as set forth in this Agreement.
ARTICLE 14.
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1. Amendment of Partnership Agreement
A. A proposed amendment shall be adopted and be effective as an amendment hereto if it is approved by the General Partner.
B. Notwithstanding Section 14.1(A), this Agreement shall not be amended without the consent of each Partner materially adversely affected if such amendment would (i) convert a Limited Partner Interest in the Partnership into a General Partner Interest; (ii) modify the limited liability of a Limited Partner in a manner materially adverse to such Limited Partner; (iii) alter rights of such Partner to receive distributions pursuant to Article 5 or Article 13, or the allocations specified in Article 6 (except as permitted pursuant to Section 4.2) in a manner materially adverse to such Partner; or (vi) amend this Section 14.1(B); provided, however, that the consent of each Partner materially adversely affected shall not be required for any amendment or action that affects all Partners holding the same class or series of Partnership Units on a uniform or pro rata basis. Any amendment consented to by any Partner shall be effective as to that Partner, notwithstanding the absence of such consent by any other Partner.
Section 14.2. Meetings of the Partners
A. Meetings of the Partners may be called by the General Partner and shall be called upon the receipt by the General Partner of a written request by the Limited Partners (other than the Company) holding 20% or more of the Partnership Interests. The request shall state the nature of the business to be transacted. Notice of any such meeting shall be given to all Partners not less than seven days nor more than 30 days prior to the date of such meeting. Partners may vote in person or by proxy at such meeting. Except as otherwise expressly provided in this Agreement, the consent of holders of a majority of the Percentage Interests held by Limited Partners shall control.
B. Any action required or permitted to be taken at a meeting of the Partners may be taken without a meeting if a written consent setting forth the action so taken is signed by a majority of the Percentage Interests of the Partners (or such other percentage as is expressly required by this Agreement). Such consent may be in one instrument or in several instruments, and shall have the same force and effect as a vote of a majority of the Percentage Interests of the Partners (or such other percentage as is expressly required by this Agreement). Such consent shall be filed with the General Partner. An action so taken shall be deemed to have been taken at a meeting held on the effective date so certified.
C. Each Limited Partner may authorize any Person or Persons to act for him by proxy on all matters in which a Limited Partner is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Limited Partner or his or its attorney-in-fact. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Limited Partner executing it, such revocation to be effective upon the Partnership’s receipt of written notice of such revocation from the Limited Partner executing such proxy.
D. Each meeting of the Partners shall be conducted by the General Partner or such other Person as the General Partner may appoint pursuant to such rules for the conduct of the meeting as the General Partner or such other Person deems appropriate. Without limitation, meetings of Partners may be conducted in the same manner as meetings of the shareholders of the Company and may be held at the same time, and as part of, meetings of the shareholders of the Company.
ARTICLE 15.
GENERAL PROVISIONS
Section 15.1. Addresses and Notice
Any notice, demand, request or report required or permitted to be given or made to a Partner or Assignee under this Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first class United States mail or by other means of written communication to such Partner or Assignee at the address provided by or on behalf of such Partner or Assignee or such other address of which such Partner shall notify the General Partner in writing.
Section 15.2. Titles and Captions
All article or section titles or captions in this Agreement are for convenience only. They shall not be deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof. Except as specifically provided otherwise, references to “Articles” and “Sections” are to Articles and Sections of this Agreement.
Section 15.3. Pronouns and Plurals
Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neutral forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.
Section 15.4. Further Action
The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.
Section 15.5. Binding Effect
This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.
Section 15.6. Creditors
The provisions of this Agreement are solely for the purpose of defining the interests of the Partners, inter se; and no other Person (i.e., a party who is not a signatory hereto or a permitted successor to such signatory hereto) shall have any right, power, title or interest by way of subrogation or otherwise, in and to the rights, powers, title and provisions of this Agreement; provided, that Indemnitees are intended third-party beneficiaries of Section 7.7. No creditor or other third party having dealings with the Partnership shall have the right to enforce the right or obligation of any Partner to make Capital Contributions or loans to the Partnership or to pursue any other right or remedy hereunder or at law or in equity. None of the rights or obligations of the Partners herein set forth to make Capital Contributions or loans to the Partnership shall be deemed an asset of the Partnership for any purpose by any creditor or other third party, nor may any such rights or obligations be sold, transferred or assigned by the Partnership or pledged or encumbered by the Partnership to secure any Debt or other obligation of the Partnership or any of the Partners.
Section 15.7. Waiver
No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute a waiver of any such breach or any other covenant, duty, agreement or condition.
Section 15.8. Counterparts
This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all of the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing his or its signature hereto.
Section 15.9. Applicable Law
This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflict of laws. In the event of a conflict between any provision of this Agreement and any non-mandatory provision of the Act, the provisions of this Agreement shall control and take precedence.
Section 15.10. Invalidity of Provisions; Consent to Jurisdiction; Waiver of Jury Trial
A. If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.
B. EACH PARTNER AND ASSIGNEE HEREBY (I) SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN THE STATE OF DELAWARE (COLLECTIVELY, THE “DELAWARE COURTS”), WITH RESPECT TO ANY DISPUTE ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY TO THE EXTENT SUCH COURTS WOULD HAVE SUBJECT MATTER JURISDICTION WITH RESPECT TO SUCH DISPUTE, (II) TO THE FULLEST EXTENT PERMITTED BY LAW, IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT BY WAY OF MOTION, DEFENSE, OR OTHERWISE, IN ANY SUCH ACTION, ANY CLAIM THAT IT IS NOT SUBJECT PERSONALLY TO THE JURISDICTION OF ANY OF THE DELAWARE COURTS, THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE ACTION IS BROUGHT IN AN INCONVENIENT FORUM, OR THAT THE VENUE OF THE ACTION IS IMPROPER, (III) TO THE FULLEST EXTENT PERMITTED BY LAW, AGREES THAT NOTICE OR THE SERVICE OF PROCESS IN ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE PROPERLY SERVED OR DELIVERED IF DELIVERED TO SUCH PARTNER OR ASSIGNEE AT SUCH PARTNER’S OR ASSIGNEE’S LAST KNOWN ADDRESS AS SET FORTH IN THE PARTNERSHIP’S BOOKS AND RECORDS, AND (IV) TO THE FULLEST EXTENT PERMITTED BY LAW, IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 15.11. Entire Agreement
This Agreement contains the entire understanding and agreement among the Partners with respect to the subject matter hereof and supersedes the Original Agreement and any other prior written or oral understandings or agreements among them with respect thereto.
Section 15.12. Legal Counsel Relationships
The Partners acknowledge and agree that Winston & Strawn LLP has only represented the Company in connection with this Agreement and the other transactions related hereto (the “Transactions”). Each Limited Partner, other than the Company, is relying solely on his or its own tax and legal advisors, and not Winston & Strawn LLP, with respect to the tax and other legal aspects of his, her or its investment in the Partnership. Further, except for Winston & Strawn LLP’s representation of the Company with respect to the Transactions, or as may otherwise expressly be agreed in writing by Winston & Strawn LLP, in no event shall an attorney-client relationship exist between Winston & Strawn LLP on the one hand and any other Limited Partner and/or their Affiliates, on the other hand. The Limited Partners further agree and consent that Winston & Strawn LLP shall be permitted to render legal advice and to provide legal services to any Limited Partner or the Partnership from time to time, and each Limited Partner covenants and agrees that such representation of a Limited Partner or the Partnership by such firm from time to time shall not disqualify such firm from providing legal advice and legal services to their respective client Limited Partners or Affiliates in matters related or unrelated to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
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GENERAL PARTNER:
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NexPoint Diversified Real Estate Trust OP GP, LLC
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By: NexPoint Diversified Real Estate Trust, its sole member |
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By:
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/s/ Matt McGraner
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Name:
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Matt McGraner
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Title:
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Executive VP and Chief Investment Officer
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
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LIMITED PARTNER:
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NexPoint Diversified Real Estate Trust
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By:
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/s/ Matt McGraner
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Name:
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Matt McGraner
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Title:
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Executive VP and Chief Investment Officer
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EXHIBIT A
[RESERVED]
EXHIBIT B
[RESERVED]
EXHIBIT C
NOTICE OF REDEMPTION
The undersigned Limited Partner hereby irrevocably requests NexPoint Diversified Real Estate Trust Operating Partnership, L.P., a Delaware limited partnership (the “Partnership”), to redeem Partnership Units in the Partnership in accordance with the terms of the Amended and Restated Limited Partnership Agreement of the Partnership and the Redemption Right referred to therein; and the undersigned Limited Partner irrevocably (i) surrenders such Partnership Units and all right, title and interest therein; and (ii) directs that the Cash Amount or REIT Shares Amount (as determined by the Company) deliverable upon exercise of the Redemption Right be delivered to the address specified below, and if REIT Shares are to be delivered, such REIT Shares be registered or placed in the name(s) and at the address(es) specified below. The undersigned hereby represents, warrants, and certifies that the undersigned (a) has marketable and unencumbered title to such Partnership Units, free and clear of the rights or interests of any other person or entity; (b) has the full right, power, and authority to request such redemption and surrender such Partnership Units as provided herein; and (c) has obtained the consent or approval of all persons or entities, if any, having the right to consent or approve such redemption and surrender of Units. The undersigned Limited Partner further agrees that, in the event that any state or local property tax is payable as a result of the transfer of its Partnership Units to the Partnership or the Company, the undersigned Limited Partner shall assume and pay such transfer tax.
Dated: |
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Name of Limited Partner: |
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Please Print |
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(Signature of Limited Partner) |
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(Street Address) |
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(City) (State) (Zip Code) |
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Signature Guaranteed by: |
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If REIT Shares are to be issued, issue to: |
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Name: |
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Please insert social security or identifying number: |
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EXHIBIT D
CONSTRUCTIVE OWNERSHIP DEFINITION
The term “Constructively Owns” means ownership determined through the application of the constructive ownership rules of Section 318 of the Code, as modified by Section 856(d)(5) of the Code. Generally, as of the date first set forth above, these rules provide the following:
a. an individual is considered as owning the Ownership Interest that is owned, actually or constructively, by or for his spouse, his children, his grandchildren, and his parents;
b. an Ownership Interest that is owned, actually or constructively, by or for a partnership, limited liability company or estate is considered as owned proportionately by its partners or beneficiaries;
c. an Ownership Interest that is owned, actually or constructively, by or for a trust is considered as owned by its beneficiaries in proportion to the actuarial interest of such beneficiaries (provided, however, that in the case of a “grantor trust” the Ownership Interest will be considered as owned by the grantors);
d. if ten (10) percent or more in value of the stock in a corporation is owned, actually or constructively, by or for any person, such person shall be considered as owning the Ownership Interest that is owned, actually or constructively, by or for such corporation in that proportion which the value of the stock which such person so owns bears to the value of all the stock in such corporation;
e. an Ownership Interest that is owned, actually or constructively, by or for a partner or member which actually or constructively owns a 25% or greater capital interest or profits interest in a partnership or limited liability company, or by or to or for a beneficiary of an estate or trust shall be considered as owned by the partnership, limited liability company, estate, or trust (or, in the case of a grantor trust, the grantors);
f. if ten (10) percent or more in value of the stock in a corporation is owned, actually or constructively, by or for any person, such corporation shall be considered as owning the Ownership Interest that is owned, actually or constructively, by or for such person;
g. if any person has an option to acquire an Ownership Interest (including an option to acquire an option or any one of a series of such options), such Ownership Interest shall be considered as owned by such person;
h. an Ownership Interest that is constructively owned by a person by reason of the application of the rules described in paragraphs (a) through (g) above shall, for purposes of applying paragraphs (a) through (g), be considered as actually owned by such person; provided, however, that (i) an Ownership Interest constructively owned by an individual by reason of paragraph (a) shall not be considered as owned by him for purposes of again applying paragraph (a) in order to make another person the constructive owner of such Ownership Interest, (ii) an Ownership Interest constructively owned by a partnership, estate, trust, or corporation by reason of the application of paragraphs (e) or (f) shall not be considered as owned by it for purposes of applying paragraphs (b), (c), or (d) in order to make another person the constructive owner of such Ownership Interest, (iii) if an Ownership Interest may be considered as owned by an individual under paragraph (a) or (g), it shall be considered as owned by him under paragraph (g), and (iv) for purposes of the above described rules, an S corporation shall be treated as a partnership and any shareholder of the S corporation shall be treated as a partner of such partnership except that this rule shall not apply for purposes of determining whether stock in the S corporation is constructively owned by any person.
i. For purposes of the above summary of the constructive ownership rules, the term “Ownership Interest” means the ownership of stock with respect to a corporation and, with respect to any other type of entity, the ownership of an interest in either its assets or net profits.
EXHIBIT E
SCHEDULE OF PARTNERS’ OWNERSHIP
WITH RESPECT TO TENANTS
NONE
EXHIBIT F
[RESERVED]
EXHIBIT G
[RESERVED]
Annex A
DESIGNATION OF THE SERIES A PREFERRED UNITS
OF
NEXPOINT DIVERSIFIED REAL ESTATE TRUST OPERATING PARTNERSHIP, L.P.
Section 1. Designation and Number.
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A.
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A series of Preferred Units (as defined below) of NexPoint Diversified Real Estate Trust Operating Partnership, L.P., a Delaware limited partnership (the “Partnership”), designated the “5.50% Series A Cumulative Preferred Units” (the “Series A Preferred Units”), is hereby established in accordance with the terms of the Agreement. The number of authorized Series A Preferred Units shall be 4,800,000.
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B.
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Series A Preferred Units which at any time have been redeemed or purchased by the Partnership shall, after such redemption or purchase, have the status of unissued Series A Preferred Shares.
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Section 2. Defined Terms. Capitalized terms used herein and not otherwise defined shall have the meanings given to such terms in the Amended and Restated Limited Partnership Agreement of the Partnership, dated as of January 30, 2025 (as now or hereafter amended, restated, modified, supplemented, or replaced, the “Agreement”). In addition to the capitalized terms defined elsewhere, the following defined terms used in this Annex A shall have the meanings specified below:
“Business Day” shall mean a day on which the NYSE is open for trading and that is neither a Saturday nor a Sunday.
“NYSE” means the New York Stock Exchange.
“Person” means and includes an individual, a partnership, the Partnership, a trust, a corporation, a limited liability company, an unincorporated association, a joint venture or other entity or a government or any agency or political subdivision thereof.
“Preferred Units” means all series of the preferred units of the Partnership and includes the Series A Preferred Units.
“Series A Preferred Shares” shall mean the 5.50% Series A Cumulative Preferred Shares, par value $0.001 per share, of the Company.
Section 3. Distributions.
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A.
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Holders of Series A Preferred Units shall be entitled to receive, when, as and if declared by, or under authority granted by, the General Partner, out of funds legally available therefor, cumulative cash distributions at the rate of 5.50% per annum (computed on the basis of a 360-day year consisting of twelve 30-day months) of the Liquidation Preference (as defined below) on the Series A Preferred Shares and no more, payable quarterly on March 31, June 30, September 30 and December 31 in each year (each a “Distribution Payment Date”) (or, if any such day is not a Business Day, then on the next succeeding Business Day). Distributions will be payable to holders of record of Series A Preferred Units as they appear in the records of the Partnership at the close of business on the fifth preceding Business Day (each, a “Record Date”) in preference to distributions on Common Units and any other Partnership Units ranking junior to the Series A Preferred Units in payment of distributions. Distributions on Series A Preferred Units shall accumulate from (i) the date on which such shares are originally issued if such date is a Distribution Payment Date, (ii) the immediately preceding Distribution Payment Date if the date on which such shares are originally issued is other than a Distribution Payment Date and is on or before a Record Date or (iii) the immediately following Distribution Payment Date if the date on which such shares are originally issued is during the period between a Record Date and a Distribution Payment Date. Each period beginning on and including a Distribution Payment Date and ending on but excluding the next succeeding Distribution Payment Date is referred to herein as a “Distribution Period.” Distributions on account of arrears for any past Distribution Period or in connection with the redemption of Series A Preferred Units may be declared and paid at any time, without reference to any Distribution Payment Date, to holders of record on such date not exceeding 30 days preceding the payment date thereof as shall be fixed by the General Partner.
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B.
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(i) No full distributions shall be declared or paid on Series A Preferred Units for any Distribution Period or part thereof unless full cumulative distributions due through the most recent Distribution Payment Dates therefor for all series of Preferred Units ranking on a parity with the Series A Preferred Units as to the payment of distributions have been or contemporaneously are declared and paid through the most recent Distribution Payment Dates therefor. If full cumulative distributions due have not been paid on all such outstanding Preferred Units, any distributions being paid on such Preferred Units (including the Series A Preferred Units) will be paid as nearly pro rata as possible in proportion to the respective amounts of distributions accumulated but unpaid on each such series of Preferred Units on the relevant Distribution Payment Date. No holders of Series A Preferred Units shall be entitled to any distributions, whether payable in cash, property or shares, in excess of full cumulative distributions as provided in this Section 2(B)(i) on Series A Preferred Units. No interest or sum of money in lieu of interest shall be payable in respect of any distribution payments on any Series A Preferred Units that may be in arrears.
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(ii) For so long as Series A Preferred Units are outstanding, the Partnership shall not declare or pay any distribution (other than a distribution paid in Common Units, or options, warrants or rights to subscribe for or purchase Common Units or other shares, if any, ranking junior to the Series A Preferred Units as to distribution of assets upon liquidation) in respect of the Common Units or any other Partnership Units ranking junior to the Series A Preferred Units as to the payment of distributions and the distribution of assets upon liquidation, or call for redemption, redeem, purchase or otherwise acquire for consideration any Common Units or any other Partnership Units ranking junior to the Series A Preferred Units as to the payment of distributions and the distribution of assets upon liquidation (except by conversion into or exchange for Partnership Units ranking junior to the Series A Preferred Units as to the payment of distributions and the distribution of assets upon liquidation), unless, in each case, (A) all cumulative dividends and distributions on all Series A Preferred Units due on or prior to the date of the transaction have been declared and paid (or shall have been declared and sufficient funds for the payment thereof set aside and (B) the Partnership has redeemed the full number of Series A Preferred Units to be redeemed mandatorily pursuant to any provision contained herein for mandatory redemption.
(iii) Any distribution payment made on the Series A Preferred Units shall first be credited against the dividends and distributions accumulated with respect to the earliest Distribution Period for which distributions have not been paid.
Section 4. Liquidation Rights.
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A.
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In the event of any liquidation, dissolution or winding up of the affairs of the Partnership, whether voluntary or involuntary, the holders of Series A Preferred Units shall be entitled to receive out of the assets of the Partnership available for distribution to Partners, after satisfying claims of creditors but before any distribution or payment shall be made in respect of the Common Units or any other Partnership Units ranking junior to the Series A Preferred Units as to liquidation payments, a liquidation distribution in the amount of $25.00 per unit (the “Liquidation Preference”), plus an amount equal to all unpaid distributions accumulated to and including the date fixed for such distribution or payment (whether or not earned or declared by the Partnership, but excluding interest thereon), and such holders shall be entitled to no further participation in any distribution or payment in connection with any such liquidation, dissolution or winding up of the Partnership.
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B.
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If, upon any liquidation, dissolution or winding up of the affairs of the Partnership, whether voluntary or involuntary, the assets of the Partnership available for distribution among the holders of all outstanding Series A Preferred Units, and any other outstanding class or series of Preferred Units ranking on a parity with the Series A Preferred Units as to payment upon liquidation, shall be insufficient to permit the payment in full to such holders of Series A Preferred Units of the Liquidation Preference plus accumulated and unpaid dividends and distributions and the amounts due upon liquidation with respect to such other Preferred Shares, then such available assets shall be distributed among the holders of Series A Preferred Units and such other Preferred Units ratably in proportion to the respective preferential liquidation amounts to which they are entitled. Unless and until the Liquidation Preference plus accumulated and unpaid dividends and distributions has been paid in full to the holders of Series A Preferred Units, no distributions will be made to holders of the Common Units or any other shares of the Partnership ranking junior to the Series A Preferred Units as to liquidation.
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Section 5. Redemptions. The Partnership shall redeem a number of Series A Preferred Units equal to the number of Series A Preferred Shares redeemed by the Company, on such dates as the Company may from time to time redeem such Series A Preferred Shares. The redemption price per Series A Preferred Unit shall be equal to the redemption price paid by the Company per Series A Preferred Share. To the extent the redemption price paid by the Company to redeem shares of Series A Preferred Shares constitutes a payment of accrued and unpaid dividends on such shares, the redemption price paid by the Partnership to redeem Series A Preferred Units shall to the same extent constitute a payment of accrued but unpaid distributions on such Series A Preferred Units. Distributions on Series A Preferred Units to be redeemed shall cease to accrue when dividends and distributions shall cease to accrue on the Series A Preferred Shares to be redeemed by the Company in connection with the redemption of such Series A Preferred Units. All Series A Preferred Units redeemed, repurchased or otherwise acquired in any manner by the Partnership shall constituted authorized but unissued Series A Preferred Units.
Section 6. Voting Rights.
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A.
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Holders of the Series A Preferred Units shall not have any voting or consent rights.
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B.
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When reference is made to Percentage Interest or holdings of Partnership Units as a threshold for voting, consent, approval or any similar requirement in the Agreement, such reference shall not include the Series A Preferred Units, except as required by applicable law.
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Section 7. Construction. The Series A Preferred Units have been created and are intended to have designations, preferences and other rights and terms that are substantially the same as those of the Series A Preferred Shares, all such that the economic interests of the Series A Preferred Units and the Series A Preferred Shares are substantially identical, and the provisions, terms and conditions of this Agreement, shall be interpreted in a fashion consistent with this intent.
Annex B
DESIGNATION OF THE SERIES B PREFERRED UNITS
OF
NEXPOINT DIVERSIFIED REAL ESTATE TRUST OPERATING PARTNERSHIP, L.P.
Section 1. Designation and Number. A series of Preferred Units (as defined below) of NexPoint Real Estate Finance Operating Partnership, L.P., a Delaware limited partnership (the “Partnership”), designated the “9.00% Series B Cumulative Redeemable Preferred Units” (the “Series B Preferred Units”), is hereby established in accordance with the terms of the Agreement. The number of authorized Series B Preferred Units shall be 16,000,000.
Section 2. Defined Terms. Capitalized terms used herein and not otherwise defined shall have the meanings given to such terms in the Second Amended and Restated Limited Partnership Agreement of the Partnership, dated as of September 8, 2021 (as now or hereafter amended, restated, modified, supplemented, or replaced, the “Agreement”). In addition to the capitalized terms elsewhere defined herein, the following defined terms used herein shall have the meanings specified below:
“Business Day” shall mean each day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in Texas or New York are authorized or required by law, regulation or executive order to close.
“liquidation preference” shall mean $25.00 per Series B Preferred Units, subject to appropriate adjustment in relation to any recapitalizations, unit distributions, unit splits, unit combinations, statutory unit exchanges, reclassifications or other similar events which affect the Series B Preferred Shares.
“Series B Preferred Shares” shall mean the 9.00% Series B Cumulative Redeemable Preferred Shares, par value $0.01 per share, of the Company.
Section 3. Rank. The Series B Preferred Units, with respect to priority of payment of distributions and rights upon voluntary or involuntary liquidation, dissolution, termination, cancellation or winding up of the affairs of the Partnership, shall rank (a) senior to all classes or series of Common Units, and to any other class or series of Partnership Units issued in the future (together with the Common Units, the “Junior Units”), unless the terms of such Partnership Units expressly provide that it ranks senior to, or on parity with, the Series B Preferred Units with respect to priority of payment of distributions or rights upon voluntary or involuntary liquidation, dissolution, termination, cancellation or winding up of the affairs of the Company; (b) on parity with the Series A Preferred Units and any other class or series of Partnership Units the terms of which expressly provide that it ranks on parity with the Series B Preferred Units with respect to priority of payment of distributions or rights upon voluntary or involuntary liquidation, dissolution, termination, cancellation or winding up of the affairs of the Partnership (collectively, the “Parity Units”); and (c) junior to any class or series of Partnership Units, the terms of which expressly provide that it ranks senior to the Series B Preferred Units with respect to priority of payment of distributions or rights upon voluntary or involuntary liquidation, dissolution, termination, cancellation or winding up of the affairs of the Partnership. The term “Partnership Units” as used in this Section does not include convertible or exchangeable debt securities, including convertible or exchangeable debt securities which rank senior to the Series B Preferred Units prior to conversion or exchange. The Series B Preferred Units shall also rank junior in right to payment to the Partnership’s other existing and future indebtedness.
Section 4. Distributions.
A. Subject to the preferential rights of the holders of any class or series of Partnership Units ranking senior to the Series B Preferred Units with respect to priority of distributions, holders of the Series B Preferred Units are entitled to receive, when, as and if authorized by the General Partner in accordance with the Agreement and declared by the Partnership, out of funds legally available therefor, cumulative cash distributions on such Series B Preferred Unit at the rate of 9.00% per annum of the liquidation preference (each, a “Cash Distribution”). If a Series B Preferred Unit has a date of original issuance (the “Original Issue Date”) prior to the Distribution Record Date (defined below) for the Distribution Period (defined below) in which such Series B Preferred Unit is issued, the Cash Distributions payable on such Series B Preferred Unit shall begin accruing on, and be cumulative from and including, the first day of the Distribution Period in which such Series B Preferred Unit is issued. If a Series B Preferred Unit has an Original Issue Date after the Distribution Record Date for the Distribution Period in which such Series B Preferred Unit is issued, the Cash Distributions payable on such Series B Preferred Unit shall begin accruing on, and be cumulative from and including, the first day of the first Distribution Period commencing after its issuance. Cash Distributions shall be payable monthly in arrears on or about the fifth day of each calendar month or, if such date is not a Business Day, on the next succeeding Business Day, with the same force and effect as if paid on such date (each, a “Distribution Payment Date”), and no interest or additional distributions or other sums shall accrue on the amount so payable from such Distribution Payment Date to such next succeeding Business Day. A “Distribution Period” is the respective period commencing on and including the first day of each calendar month and ending on and including the day preceding the first day of the next succeeding Distribution Period. Cash Distributions shall be payable to holders of record of the Series B Preferred Units as they appear in the records of the Partnership at the close of business on the 25th day of the calendar month preceding the applicable Distribution Payment Date or, if such date is not a Business Day, on the immediately preceding Business Day (each, a “Distribution Record Date”). Any distribution payable on the Series B Preferred Units for any Distribution Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months.
B. No distributions on Series B Preferred Units shall be authorized by the General Partner or declared, paid or set apart for payment by the Partnership at such time as the terms and provisions of any agreement of the Company or the Partnership, including any agreement relating to the indebtedness of any of them, prohibits such authorization, declaration, payment or setting apart for payment or provides that such authorization, declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such authorization, declaration, payment or setting apart for payment shall be restricted or prohibited by law.
C. Notwithstanding anything to the contrary contained herein, distributions on the Series B Preferred Units shall accrue whether or not the restrictions referred to in Section 5(B) exist, whether or not the Partnership has earnings, whether or not there are assets legally available for the payment of such distributions and whether or not such distributions are authorized or declared. No interest, or sum of money in lieu of interest, shall be payable in respect of any distribution payment or payments on the Series B Preferred Units which may be in arrears. When cumulative distributions are not paid in full (or a sum sufficient for such full payment is not so set apart) upon the Series B Preferred Units and the Parity Units, all distributions declared upon the Series B Preferred Units and any Parity Units shall be declared as nearly pro rata as possible in proportion to the respective amounts of distributions accumulated but unpaid on each such series of Parity Units (which shall not include any accrual in respect of unpaid distributions for prior Distribution Periods if such Parity Units do not have a cumulative distribution) on the relevant Distribution Payment Date.
D. Except as provided in the foregoing Section 5(C), unless full cumulative distributions on the Series B Preferred Units have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof in full is set apart for payment for all past Distribution Periods that have ended, no distributions of cash or other property may be declared and paid or declared and set apart for payment, directly or indirectly, on or with respect to the Junior Units or the Parity Units (other than distributions in Junior Units or in options, warrants or rights to subscribe for or purchase Junior Units), nor shall any Junior Units or Parity Units be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Units or Parity Units made for purposes of and in compliance with requirements of any incentive, benefit or equity purchase plan of the Partnership or the Company or any subsidiary thereof) for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any such Partnership Units), directly or indirectly, by the Partnership (except by conversion into or exchange for Junior Units, or options, warrants or rights to subscribe for or purchase Junior Units, and except for purchases or exchanges pursuant to a purchase or exchange offer made on the same terms to all holders of Series B Preferred Units and all holders of Parity Units).
E. Holders of Series B Preferred Units shall not be entitled to any distribution, whether payable in cash, property or Partnership Units, in excess of full cumulative distributions on the Series B Preferred Units as described above. Any distribution made on the Series B Preferred Units shall first be credited against the earliest accrued but unpaid distributions due with respect to such Series B Preferred Units which remain payable. Accrued but unpaid distributions on the Series B Preferred Units shall accumulate as of the Distribution Payment Date on which they first become payable or on the date of redemption, as the case may be.
F. “Set apart for payment” shall be deemed to include (without limitation): the recording by the Partnership in its accounting ledgers of any accounting or bookkeeping entry which indicates, in accordance with the Agreement, the allocation of funds to be so paid on any series or class of Partnership Units; provided, however, that if any funds for any class or series of Junior Units or Parity Units are placed in a separate account of the Partnership or delivered to a disbursing, paying or other similar agent, then “set apart for payment” with respect to the Series B Preferred Units shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent.
Section 5. Liquidation Preference.
A. Upon any voluntary or involuntary liquidation, dissolution, termination, cancellation or winding up of the affairs of the Partnership, the holders of Series B Preferred Units then outstanding are entitled to be paid, or have the Partnership declare and set apart for payment, out of the assets of the Partnership legally available for distribution to its holders of Partnership Units, after payment of or provision for payment of the Partnership’s debts and other liabilities, the liquidation preference per Series B Preferred Unit, plus an amount equal to any accrued and unpaid Cash Distributions (whether or not authorized or declared) thereon to but not including the date of payment or the date the amount for payment is set apart (collectively, the “Liquidating Distributions”), before any distribution or payment of assets is made to holders of Junior Units. If the assets of the Partnership legally available for distribution to holders of Partnership Units are insufficient to pay in full the Liquidating Distributions on all outstanding Series B Preferred Units and the corresponding amounts payable on all outstanding Parity Units, then all assets distributed to the holders of the Series B Preferred Units and any class or series of Parity Units shall be distributed ratably in proportion to the respective preferential liquidation amounts to which they are entitled. Written notice of the effective date of any such liquidation, dissolution, termination, cancellation or winding up of the affairs of the Partnership, stating the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable, shall be given by first class mail, postage pre-paid, not fewer than 30 nor more than 60 days prior to the payment date stated therein, to each record holder of the Series B Preferred Units at the respective addresses of such holders as the same shall appear on the transfer records of the Partnership.
B. After payment of the full amount of the Liquidating Distributions to which they are entitled, the holders of Series B Preferred Units shall have no right or claim to any of the remaining assets of the Partnership.
C. For the avoidance of doubt, the consolidation, merger or conversion of the Partnership with or into another entity, the merger of another entity with or into the Partnership, a statutory unit exchange by the Partnership, the conversion of the Partnership into another form of organization, the change of the Partnership’s jurisdiction of organization, or the sale, lease, transfer or conveyance of all or substantially all of the assets or business of the Partnership shall not be considered a liquidation, dissolution, termination, cancellation or winding up of the affairs of the Partnership.
Section 6. Redemptions. The Partnership shall redeem a number of Series B Preferred Units equal to the number of Series B Preferred Shares redeemed by the Company, on such dates as the Company may from time to time redeem such Series B Preferred Stock. The redemption price per Series B Preferred Unit shall be equal to the redemption price paid by the Company per share of Series B Preferred Stock. If the Company pays the redemption price for the redemption of any Series B Preferred Shares by issuing Common Shares, the Partnership shall pay the redemption price for the redemption of the same number of Series B Preferred Units by issuing Common Units in an amount equal to the number of shares of Common Stock the Company issues in connection with the redemption. Each holder of Series B Preferred Units that shall be redeemed by the Partnership shall be entitled to an amount equal to the distributions accruing after the end of the Distribution Period to which such Distribution Payment Date relates, up to but not including, the redemption date. To the extent the redemption price paid by the Company to redeem Series B Preferred Shares constitutes a payment of accrued and unpaid dividends and distributions on such shares, the redemption price paid by the Partnership to redeem Series B Preferred Units shall to the same extent constitute a payment of accrued and unpaid distributions on such Series B Preferred Units. Distributions on Series B Preferred Units to be redeemed shall cease to accrue when dividends and distributions shall cease to accrue on the shares of Series B Preferred Shares to be redeemed by the Company in connection with the redemption of such Series B Preferred Units.
Section 7. Voting Rights.
A. Holders of the Series B Preferred Units shall not have any voting or consent rights.
B. When reference is made to Percentage Interest or holdings of Partnership Units as a threshold for voting, consent, approval or any similar requirement in the Agreement, such reference shall not include Series B Preferred Units, except as required by applicable law.
Section 8. Conversions. The Partnership shall convert a number of Series B Preferred Units equal to the number of Series B Preferred Shares converted by the Company, on such dates as the Company may from time to time convert such Series B Preferred Shares. The conversion ratio per Series B Preferred Unit shall be equal to the conversion ratio per Series B Preferred Share converted by the Company. The Partnership shall convert the same number of Series B Preferred Units by issuing Common Units in an amount equal to the number of Common Shares the Company issues in connection with the conversion.
Section 9. Term. The Series B Preferred Units have no stated maturity date and shall not be subject to any sinking fund and, except as otherwise set forth herein, is not subject to mandatory redemption. The Partnership shall not be required to set aside funds to redeem the Series B Preferred Units.
Section 10. Status of Redeemed or Repurchased Series B Preferred Units. All Series B Preferred Units redeemed, repurchased or otherwise acquired in any manner by the Partnership shall constitute authorized but unissued Series B Preferred Units.
Section 11. Construction. The Series B Preferred Units have been created and are being issued in connection with the Company’s Series B Preferred Shares, and as such, the Series B Preferred Units are intended to have designations, preferences and other rights and terms that are substantially the same as those of the Series B Preferred Shares, all such that the economic interests of the Series B Preferred Units and the Series B Preferred Shares are substantially identical, and the provisions, terms and conditions of this Agreement, shall be interpreted in a fashion consistent with this intent.
Exhibit 99.1
NexPoint Diversified Real Estate Trust Launches $400 Million Continuous Offering of 9.00% Series B Cumulative Redeemable Preferred Shares
Dallas, TX, January 30, 2025 – NexPoint Diversified Real Estate Trust (NYSE: NXDT) ("NXDT" or the "Company") announced today the launch of a continuous public offering of up to 16,000,000 shares of its newly designated 9.00% Series B Cumulative Redeemable Preferred Shares (the "Series B Preferred Shares") at a price to the public of $25.00 per share, for gross proceeds of $400 million.
NXDT is a diversified real estate investment trust (REIT) that is focused on the acquisition, development, and management of opportunistic and value-add investments throughout the United States across multiple sectors where NexPoint and its affiliates have operational expertise. The Company intends to use the net proceeds to fund investment opportunities within the core sectors where our Adviser and its affiliates have operational expertise and for general corporate purposes.
The Series B Preferred Shares are being offered by NexPoint Securities, Inc., an affiliate of the Company that is serving as the Company's dealer manager, on a “reasonable best efforts” basis.
The Company expects that the offering will terminate on the earlier of the date the Company sells all 16,000,000 of the Series B Preferred Shares in the offering or August 1, 2027 (which is the third anniversary of the effective date of the Company’s registration statement), which may be extended by the Company’s board of trustees in its sole discretion. The board of trustees may elect to terminate this offering at any time.
The offering is being conducted as a public offering under the Company’s effective shelf registration statement, filed with the SEC (File No. 333-280954), which became effective on August 1, 2024. There is no public market for the Series B Preferred Shares and the Company does not intend to apply for a listing of the Series B Preferred Shares on any national securities exchange. To obtain a copy of the final prospectus supplement and the related base prospectus for this offering, please contact by mail, telephone or email: NexPoint Securities, Inc., member FINRA/SIPC, 200 Crescent Court, Suite 700, Dallas, Texas, 75201, Attn: Investor Relations, telephone: (833) 697-7253, or email: ir@nexpoint.com. You may also get these documents for free by visiting EDGAR on the SEC’s website at www.sec.gov.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or other jurisdiction.
About NexPoint Diversified Real Estate Trust
NexPoint Diversified Real Estate Trust is an externally advised, publicly traded, diversified REIT focused on the acquisition, development, and management of opportunistic and value-add investments throughout the United States across multiple sectors where NexPoint and its affiliates have operational expertise. NXDT is externally advised by NexPoint Real Estate Advisors X, L.P. For more information, please visit nxdt.nexpoint.com.
About NexPoint
NexPoint is a multibillion-dollar alternative investment firm based in Dallas, Texas. The firm is structured around three major business areas: real estate, corporate credit and equities, and insurance solutions. NexPoint's businesses span asset classes, industries, and strategies, providing the flexibility to invest across capital structures and market environments. Serving a diverse client base, NexPoint's investment strategies are offered in a range of vehicles and fund structures, including mutual funds, public and private REITs, tax-advantaged vehicles, private funds, and separate accounts. For more information, visit nexpoint.com.
Forward-Looking and Cautionary Statements
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding the termination of the offering, the Company’s intent not to list the Series B Preferred Shares and other statements identified by words such as "expect," "intend," the negative version of these words and similar expressions that do not relate solely to historical matters. Forward-looking statements are based on NXDT’s current expectations and assumptions regarding capital market conditions, NXDT’s business, the economy and other future conditions. Forward-looking statements are subject to risks, uncertainties and assumptions and may be affected by known and unknown risks, trends, uncertainties and factors that are beyond NXDT’s control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions, and those described in greater detail in our filings with the Securities and Exchange Commission, particularly those described in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers should not place undue reliance on any forward-looking statements and are encouraged to review the Company’s Annual Report on Form 10-K and the Company's other filings with the SEC for a more complete discussion of risks and other factors that could affect any forward-looking statement. Any forward-looking statement made in this press release speaks only as of the date on which it is made. NXDT undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
CONTACTS:
Investor Relations
Kristen (Thomas) Griffith
IR@nexpoint.com
Media Relations
Prosek Partners for NexPoint
pro-nexpoint@prosek.com
Exhibit 99.2
We, NexPoint Diversified Real Estate Trust, a Delaware statutory trust (the “Company”), are selling up to a maximum of 16,000,000 shares of Series B Cumulative Redeemable Preferred Shares (the “Share(s)”) in connection with this offering (the “Offering”). Each Share will be sold at a public offering price of $25.00 per Share and will not be certificated.
This subscription agreement (the “Subscription Agreement”) is to be completed by the individual who will be signing the Subscription Agreement. Please complete all applicable sections in their entirety.
The undersigned hereby tenders this Subscription Agreement and applies for the purchase of the dollar amount and Shares set forth below. The undersigned acknowledges that the Company, at its own discretion from time to time, may initiate, without warning, blackout periods where no closings or settlement may take place. If any orders are submitted during a blackout period they will not be settled and will not earn any dividends.
Purchase Price Per Share (minimum initial purchase of at least $5,000) $ |
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Number of Shares to Purchase (no fractional shares will be issued) |
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Aggregate Purchase Amount $ |
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☐ Check here if additional purchase and provide the investor information in Section 4
Account # (if applicable) |
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☐ Check here if the investor qualifies for the Company’s “friends and family” program as described in the prospectus and any supplements thereto.
2.
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OWNERSHIP (select only one)
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☐ Individual |
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☐ Joint Tenants with Right of Survivorship |
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☐ Community Property ☐ Tenants in Common |
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☐ Non-Profit Organization |
☐ Trust |
ADDITIONAL REQUIRED DOCUMENTATION: |
ADDITIONAL REQUIRED DOCUMENTATION: |
Formation document or other document evidencing authorized |
Trustee Certification of Investment Powers form |
signers |
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☐ Estate |
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ADDITIONAL REQUIRED DOCUMENTATION: |
☐Profit Sharing Plan ☐ KEOGH Plan |
Documents evidencing individuals authorized to act on |
ADDITIONAL REQUIRED DOCUMENTATION: |
behalf of the estate |
Pages of plan document that list plan name, date, |
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trustee name(s) and signatures |
☐ Partnership |
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ADDITIONAL REQUIRED DOCUMENTATION: |
☐ Other (please specify) |
Partnership Certification of Powers or Certificate of Limited |
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Partnership |
CUSTODIAL QUALIFIED ACCOUNT |
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☐ UGMA: State of |
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☐ Traditional IRA ☐ SEP IRA |
☐ UTMA: State of |
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☐ Rollover IRA ☐ Roth IRA |
☐ Corporation ☐ C Corp ☐ S Corp |
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☐ SIMPLE IRA ☐ Defined Benefit Plan |
ADDITIONAL REQUIRED DOCUMENTATION: |
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Articles of Incorporation or Corporate Resolution |
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☐ Limited Liability Company |
For Inherited IRA indicate Decedent's name: ________________ |
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___________________________________________________ |
☐ Inherited/Beneficial IRA |
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Enter Tax Classification below |
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(C= C Corp, S=S Corp, P=Partnership): ______ |
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ADDITIONAL REQUIRED DOCUMENTATION: LLC Operating Agreement or Resolution, Partnership Certification of Powers or |
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Certificate of Limited Partnership |
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For help completing this form, please call Investor Services at 833-697-7253
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CUSTODIAN ARRANGEMENT (if applicable)
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Name of Custodian |
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Custodian Tax ID # |
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Custodian Account # |
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Custodian Phone # |
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Mailing Address |
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(street) |
(city) |
(state) |
(zip) |
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4.
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INVESTOR INFORMATION (please print name(s) in which Shares are to be registered)
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A.
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INDIVIDUAL OWNER/BENEFICIAL OWNER/TRUSTEE
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Name |
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Date of Birth |
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(first, middle, last) |
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(mm/dd/yyyy) |
Tax ID or SS# |
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If non-U.S. Citizen, specify country of Citizenship |
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Street Address |
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(must include a permanent U.S. street address even if mailing address is a P.O. Box) |
(city) |
(state) |
(zip) |
Mailing Address |
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(leave blank if your U.S. street address and mailing address are the same) |
(city) |
(state) |
(zip) |
Daytime Phone # |
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Email address |
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B.
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JOINT OWNER/BENEFICIAL OWNER/TRUSTEE
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Name |
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Date of Birth |
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(first, middle, last) |
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(mm/dd/yyyy) |
Tax ID or SS# |
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If non-U.S. Citizen, specify country of Citizenship |
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Street Address |
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(must include a permanent U.S. street address even if mailing address is a P.O. Box) |
(city) |
(state) |
(zip) |
Mailing Address |
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(leave blank if your U.S. street address and mailing address are the same) |
(city) |
(state) |
(zip) |
Daytime Phone # |
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Email address |
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C.
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TRUST/CORPORATION/PARTNERSHIP/OTHER (Trustee(s)/Authorized Person(s) information must be provided in Sections 4A and 4B)
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Entity Name/Title of Trust |
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Date of formation |
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Tax ID # |
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(mm/dd/yyyy) |
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Street Address |
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(must include a permanent U.S. street address even if mailing address is a P.O. Box) |
(city) |
(state) |
(zip) |
Mailing Address |
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(leave blank if your U.S. street address and mailing address are the same) |
(city) |
(state) |
(zip) |
Officer Name and Title |
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Email |
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Phone |
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For help completing this form, please call Investor Services at 833-697-7253
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5.
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DISTRIBUTIONS (select only one)
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COMPLETE THIS SECTION TO ELECT HOW TO RECEIVE YOUR DIVIDEND DISTRIBUTIONS. If this section is not completed, the Company will default to sending the investor’s cash distributions out by check to his or her address of record provided in Section 4 or to the custodian indicated in Section 3, as applicable.
PLEASE SELECT ONE OF THE FOLLOWING OPTIONS/PAYMENT METHODS
Payment by check or electronic deposit
I (We) choose to have distributions paid using the payment method selected below. If no payment method is selected, the Company will mail a check to the address or custodian of record.
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Mail Check to the address of record.
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For custodial accounts, funds will be sent to custodian of record.
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I (We) choose to have distributions electronically deposited in a checking, savings or brokerage account.
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In order to receive distributions electronically, you must also complete the direct deposit enrollment form found on the Company’s website and return it to the address set forth in the form.
I (We) authorize the Company or its agent to deposit my distribution/dividend to my brokerage, checking or savings account. This authority will remain in force until I notify the Company in writing to cancel. If the Company deposits funds erroneously into my account, they are authorized to debit my account for an amount not to exceed the amount of the erroneous deposit.
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TRANSFER ON DEATH BENEFICIARY INFORMATION
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(Individual or Joint Account with rights of survivorship only.) (Not available for Louisiana and North Carolina Residents.) (Beneficiary Date of Birth required. Whole percentages only; must equal 100%.) ** Please note that such transfer is still subject to the transfer restrictions set forth in the Company’s charter.
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First Name |
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Last Name |
SSN |
Date of Birth (MM/DD/YYYY) |
☐ Primary
☐ Secondary ___%
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First Name |
(MI) |
Last Name |
SSN |
Date of Birth (MM/DD/YYYY) |
☐ Primary
☐ Secondary ___%
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First Name |
(MI) |
Last Name |
SSN |
Date of Birth (MM/DD/YYYY) |
☐ Primary
☐ Secondary ___%
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First Name |
(MI) |
Last Name |
SSN |
Date of Birth (MM/DD/YYYY) |
☐ Primary
☐ Secondary ___%
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For help completing this form, please call Investor Services at 833-697-7253
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7.
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SUBSCRIBER ACKNOWLEDGEMENTS AND SIGNATURES
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The Company is required by law to obtain, verify and record certain personal information from you or persons on your behalf in order to establish the account. Required information includes name, date of birth, permanent residential address and social security/taxpayer identification number. We may also ask to see other identifying documents. If you do not provide the information (to the extent not already provided in this Subscription Agreement), the Company may not be able to open your account. By signing the Subscription Agreement, you agree to provide this information and confirm that this information is and will be true and correct. If we are unable to verify your identity, or that of another person(s) authorized to act on your behalf, or if we believe we have identified potentially criminal activity, we reserve the right to take action as we deem appropriate which may include closing your account.
Please carefully read and separately initial each of the representations below (a)-(g). The undersigned hereby confirms this Subscription Agreement to purchase the Shares on the terms and conditions set forth herein and acknowledges and/or represents (or in the case of fiduciary accounts, the person authorized to sign on the subscriber's behalf) the following:
All Items in this Section Must be Read and Initialed
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Owner
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Co-Owner
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(a) I (We) have received and read the prospectus and any supplements thereto (which incorporates by reference various Securities and Exchange Commission-filed documents) wherein the terms and risks of the offering are described.
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(b) I am (We are) purchasing Shares for my (our) own account.
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(c) I am (We are) in compliance with the USA PATRIOT Act and not on any governmental authority watch list.
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(d) I (We) acknowledge that the Shares are not liquid, there is no public market for the Shares, and I (we) may not be able to sell the Shares.
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(e) My (Our) purchasing and holding of the Shares hereto is not in excess of the Aggregate Share Ownership Limit contained in, and as defined in, the Company’s Agreement and Declaration of Trust.
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(f) I (We) am (are) either (i) a “U.S. person(s)” for U.S. federal income tax purposes and represent that I (we) have completed, signed, dated and returned to the Company either (1) an Internal Revenue Service (“IRS”) Form W-9 “Request for Taxpayer Identification Number and Certification” in accordance with the instructions accompanying such form, or (2) the Substitute IRS Form W-9 Certification below, or (ii) not a “U.S. person(s)” for U.S. federal income tax purposes and represent that I (we) have completed, signed, dated and returned to the Company an applicable IRS Form W-8 (either a W-8BEN, W-8BEN-E, W-8IMY, W-8EXP, or a W-8ECI) in accordance with the instructions accompanying such form, and to the extent I (we) have provided an IRS Form W-8IMY, I (we) further have provided to the Company properly completed and executed withholding certificates for my (our) beneficial owners, as well as a withholding statement prepared in accordance with the instructions to the IRS Form W-8IMY (which such withholding statement shall describe, among other things, how items of income shall be allocated among such beneficial owners).
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(g) To the extent applicable, I (we) agree to provide and periodically update any information the Company deems necessary to comply with any requirement imposed by Sections 1471 – 1474 of the Internal Revenue Code and the Treasury regulations and other guidance thereunder, and take any other actions required by such provisions, in order to reduce withholding taxes. I (We) acknowledge that if I (we) fail to comply with the preceding requirement on a timely basis, I (we) may be subject to a 30% U.S. federal withholding tax on (1) U.S. source dividends, interest and certain other income and (2) gross proceeds from the sale or other disposition of U.S. stocks, debt instruments and certain other assets.
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Substitute Internal Revenue Service (“IRS”) Form W-9 Certification
I (We) declare that the information supplied in this Subscription Agreement is true and correct and may be relied upon by the Company in connection with my (our) investment in the Company. I hereby certify, under penalty of perjury, that (i) the taxpayer identification number shown on the Subscription Agreement is correct; (ii) that I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I have not been notified by the IRS that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding; (iii) I am a U.S. citizen or other U.S. person (including a U.S. resident alien); and (iv) the FATCA code I have entered below (if applicable) exempting me from FATCA withholding is correct.
For help completing this form, please call Investor Services at 833-697-7253
Definition of a U.S. person – For U.S. federal tax purposes, you are considered a U.S. person if you are:
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(1)
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an individual citizen or resident of the United States,
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(2)
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a partnership or any entity taxable as a partnership created or organized in or under the laws of the United States, any state or political subdivision thereof or the District of Columbia,
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(3)
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a corporation or any entity taxable as a corporation created or organized in or under the laws of the United States, any state or political subdivision thereof or the District of Columbia,
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(4)
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an estate the income of which is subject to U.S. federal income taxation regardless of its source, or
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(5)
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a trust (a) if it is subject to the primary supervision of a U.S. court and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (b) that has a valid election in effect under applicable Treasury regulations to be treated as a U. S. person.
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Certification instructions: You must cross out item (ii) above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax return. A list of exempt payee codes and exemption from FATCA reporting codes can be found in the instructions to the Form W-9, located at https://www.irs.gov/forms-pubs/about-form-w-9.
Exempt Payee Code (If Any): _________ Exemption from FATCA Reporting Code (If Any): _________
We have the right to accept or reject this subscription in whole or in part. As used above, the singular includes the plural in all respects if Shares are being acquired by more than one person. This Subscription Agreement and all rights hereunder shall be governed by, and interpreted in accordance with, the laws of the State of Delaware without giving effect to the principles of conflict of laws.
By executing this Subscription Agreement, the subscriber is not waiving any rights under federal or state law.
The IRS does not require your consent to any provision of this document other than the certifications required to avoid backup withholding.
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Owner (or fiduciary authorized to sign for subscriber) Signature |
Date |
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Co-Owner Signature |
Date |
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For help completing this form, please call Investor Services at 833-697-7253
8.
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FINANCIAL REPRESENTATIVE (all fields must be completed)
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The undersigned confirm(s) on behalf of the broker-dealer, financial institution or Registered Investment Advisor (collectively, the “Firm”) that they (i) are registered and/or properly licensed in the state in which the sale of the Shares to the investor executing this Subscription Agreement will be made and that the offering of the Shares is registered for sale, or exempt from registration, in such state; (ii) have reasonable grounds to believe that the information and representations concerning the investor identified herein are true, correct and complete in all respects; (iii) have discussed such investor's prospective purchase of Shares with such investor; (iv) have advised such investor of all pertinent facts with regard to the fundamental risks of the investment, including the lack of liquidity and marketability of the Shares; (v) have delivered a current prospectus and related supplements, if any, to such investor; (vi) have reasonable grounds to believe that the investor is purchasing these Shares for his or her own account; (vii) have reasonable grounds to believe that the purchase of Shares is a suitable investment for such investor; (vii) have reasonable grounds to believe that the undersigned will obtain and retain records relating to such investor's suitability for a period of six years; (ix) have reasonable grounds to believe that such investor meets the suitability standards applicable to such investor set forth in the Prospectus and related supplements, if any; (x) have reasonable grounds to believe that such investor is in a financial position to enable such investor to realize the benefits of such an investment and to suffer any loss that may occur with respect thereto and that such investor has an understanding of the fundamental risks of the investment, the background and qualifications of the persons managing the Company and the tax consequences of purchasing and owning Shares. The undersigned represents and certifies that, if the investor is a “retail customer” as defined in Regulation Best Interest, (i) the undersigned has a reasonable basis to believe that (a) a purchase of Shares would be in the best interest of the investor based upon the investor's investment profile and the potential risks, rewards, and costs associated with such an investment and (b) the undersigned has not placed his or her interests or those of the Firm ahead of the interest of the investor in recommending such investment and (ii) the undersigned and the Firm have complied with any applicable enhanced standard of conduct, including, but not limited to, the other requirements of Regulation Best Interest, including providing Form CRS to the investor, in relation to the proposed purchase of Shares. The undersigned financial representative further represents and certifies that in connection with this subscription for Shares, he or she has complied with and has followed all applicable policies and procedures under his or her firm's existing Anti-Money Laundering Program and Customer Identification Program.
Broker-Dealer or RIA Firm Name |
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Financial Representative Name |
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Mailing Address |
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(street) |
(city) |
(state) |
(zip) |
Email Address |
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Business Phone # |
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Fax# |
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Broker-Dealer CRD # |
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Branch # |
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Advisor CRD # |
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☐
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Check this box to indicate that the subscription is made through the Registered Investment Advisor (RIA) in its capacity as the RIA and not in its capacity as a Registered Representative of a Broker-Dealer, and if applicable, whose agreement with the subscriber includes a fixed or “wrap” fee feature for advisory and related brokerage services. I understand that by checking the above box, I will not receive a selling commission.
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Financial Representative Signature |
Date |
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Principal Signature (if applicable) |
Date |
For help completing this form, please call Investor Services at 833-697-7253
9.
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INVESTMENT INSTRUCTIONS
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BY WIRE TRANSFER
UMB Bank, N.A., Escrow Agent for NexPoint
Diversified Real Estate Trust
928 Grand Blvd
Kansas City, MO 64106
ABA Routing No: 101000695
Account Number: 9800006823
Account Name: Trust Clearance
Ref: NexPoint RE Diversified Escrow 165055
Attn: Lara Stevens
For Further Credit: Investor Name
Note: All wires must be received by the escrow agent no later
than 2 business days before closing.
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FOR CUSTODIAN ACCOUNTS:
Forward Subscription Agreement to the Custodian
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PLEASE SEND ALL PAPERWORK ELECTRONICALLY OR BY MAIL TO THE ESCROW AGENT:
UMB Bank, National Association
928 Grand Blvd, 12th Floor
Corporate Trust & Escrow Services
Kansas City, MO 64106
Attention: Lara L. Stevens
Telephone: 816-860-3017
Fax: 816-860-3029
Email: escrows@umb.com
For help completing this form, please call Investor Services at 833-697-7253
v3.24.4
Document And Entity Information
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Jan. 30, 2025 |
Document Information [Line Items] |
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Entity, Registrant Name |
NEXPOINT DIVERSIFIED REAL ESTATE TRUST
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Current Fiscal Year End Date |
--12-31
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Document, Type |
8-K
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Document, Period End Date |
Jan. 30, 2025
|
Entity, Incorporation, State or Country Code |
DE
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Entity, File Number |
001-32921
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Entity, Tax Identification Number |
80-0139099
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Entity, Address, Address Line One |
300 Crescent Court
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Entity, Address, Address Line Two |
Suite 700
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Entity, Address, City or Town |
Dallas
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Entity, Address, State or Province |
TX
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Entity, Address, Postal Zip Code |
75201
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City Area Code |
214
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Local Phone Number |
276-6300
|
Written Communications |
false
|
Soliciting Material |
false
|
Pre-commencement Tender Offer |
false
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Pre-commencement Issuer Tender Offer |
false
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Entity, Emerging Growth Company |
false
|
Amendment Flag |
false
|
Entity, Central Index Key |
0001356115
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CommonSharesParValue0001PerShare Custom [Member] |
|
Document Information [Line Items] |
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Title of 12(b) Security |
Common Shares, par value $0.001 per share
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Trading Symbol |
NXDT
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Security Exchange Name |
NYSE
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SeriesACumulativePreferredSharesParValue0001PerShare2500LiquidationPreferencePerShare550 Custom [Member] |
|
Document Information [Line Items] |
|
Title of 12(b) Security |
5.50% Series A Cumulative Preferred Shares, par value $0.001 per share ($25.00 liquidation preference per share)
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Trading Symbol |
NXDT-PA
|
Security Exchange Name |
NYSE
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NexPoint Diversified Rea... (NYSE:NXDT)
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