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Section 1: 8-K (8-K)

8-K
false 0001585219 0001585219 2020-08-28 2020-08-28

 

 

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):

August 28, 2020

 

 

STEADFAST APARTMENT REIT, INC.

(Exact Name of Registrant as Specified in Charter)

 

 

 

Maryland   000-55428   36-4769184

(State or Other Jurisdiction of

Incorporation or Organization)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

18100 Von Karman Avenue, Suite 200

Irvine, California 92612

(Address of Principal Executive Offices, including Zip Code)

Registrant’s Telephone Number, Including Area Code: (949) 569-9700

Not applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

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

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act: None

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

N/A   N/A   N/A

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

Operating Partnership Mergers

On August 28, 2020, pursuant to an Agreement and Plan of Merger (the “SIR OP/STAR OP Merger Agreement”), Steadfast Apartment REIT Operating Partnership, L.P. (“STAR OP”), a Delaware limited partnership that is a subsidiary of Steadfast Apartment REIT, Inc., a Maryland corporation (the “Company”), merged with and into Steadfast Income REIT Operating Partnership, L.P. (“SIR OP”), a Delaware limited partnership that is a subsidiary of the Company (the “SIR OP/STAR OP Merger”). The SIR OP/STAR OP Merger will be treated for U.S. federal income tax purposes as a tax-deferred contribution by the Company of all of the assets and liabilities of STAR OP to SIR OP under Section 721(a) of the Internal Revenue Code of 1986, as amended.

Immediately following the consummation of the SIR OP/STAR OP Merger, on August 28, 2020, pursuant to an Agreement and Plan of Merger (the “Operating Partnership Merger Agreement”), Steadfast Apartment REIT III Operating Partnership, L.P. (“STAR III OP”), a Delaware limited partnership and subsidiary of the Company, merged with and into SIR OP (the “Operating Partnership Merger” and together with the SIR OP/STAR OP Merger, the “Operating Partnership Mergers”). The Operating Partnership Merger will be treated as an “assets over partnership merger” governed by Treasury Regulations Section 1.708-1(c)(3)(i), with SIR OP being the “resulting partnership” and STAR III OP terminating.

On August 28, 2020, SIR OP changed its name to “Steadfast Apartment REIT Operating Partnership, L.P.” (the “Operating Partnership”).

In addition, on August 28, 2020, prior to completion of the Operating Partnership Mergers described above, the Company acquired SIII Subsidiary, LLC, a Maryland limited liability company and subsidiary of the Company.

On August 28, 2020, SI Subsidiary, LLC, a Maryland limited liability company and wholly owned subsidiary of the Company, as the initial general partner of the Operating Partnership, transferred all of its general partnership interests to the Company, and the Company was admitted as a substitute general partner of the Operating Partnership.

On August 28, 2020, the Company, Steadfast Income Advisor, LLC, the initial limited partner of the Operating Partnership (“SIR Advisor”), Steadfast Apartment Advisor III, LLC, a Delaware limited liability company and the special limited partner of the Operating Partnership (“STAR III Advisor”), Wellington V V M, LLC, a Delaware limited liability company and limited partner of the Operating Partnership (“Wellington”), and Copans V V M, LLC, a Delaware limited liability company and limited partner of the Operating Partnership (“Copans” and together with “Wellington”, “VV&M”), entered into a Second Amended and Restated Agreement of Limited Partnership of Steadfast Apartment REIT Operating Partnership, L.P. (the “Second A&R Partnership Agreement”) in order to, among other things, reflect the consummation of the Operating Partnership Mergers.

The descriptions of the SIR OP/STAR OP Merger Agreement, the Operating Partnership Merger Agreement and the Second A&R Partnership Agreement are summaries and each is qualified in its entirety by the terms of the SIR/STAR OP Merger Agreement, the Operating


Partnership Merger Agreement, and the Second A&R Partnership Agreement attached as Exhibit 2.1, Exhibit 2.2, and Exhibit 10.1, respectively, to this Current Report on Form 8-K and are each incorporated herein by reference.

Pre-Internalization Advisory Agreement Amendment and Joinder

On August 31, 2020, prior to the Closing (as defined below), the Company, Steadfast Apartment Advisor, LLC, a Delaware limited liability company (“STAR Advisor”), and the Operating Partnership entered into a Joinder Agreement (the “Joinder Agreement”) pursuant to which the Operating Partnership became a party to the Company’s Amended and Restated Advisory Agreement, dated as of March 5, 2020 (the “Advisory Agreement”). On August 31, 2020, prior to the Closing, the Advisor, the Operating Partnership and the Company entered into the First Amendment to the Amended and Restated Advisory Agreement in order to remove certain restrictions in the Advisory Agreement related to business combinations and to provide that any amounts accrued to the Advisor commencing on or after September 1, 2020 will be paid by the Operating Partnership in cash (the “First Amendment”).

The descriptions of the Joinder Agreement and the First Amendment are summaries and are qualified in their entirety by the terms of the Joinder Agreement and First Amendment attached as Exhibit 10.2 and Exhibit 10.3, respectively, to this Current Report on Form 8-K and incorporated herein by reference.

Internalization Transaction

On August 31, 2020, the Operating Partnership, as contributee, and the Company, as the general partner of the Operating Partnership, entered into a Contribution and Purchase Agreement (the “Contribution & Purchase Agreement”) with Steadfast REIT Investments, LLC, a Delaware limited liability company (“SRI”), which provided for the internalization of the Company’s external management functions provided by STAR Advisor and its affiliates.

A special committee (the “Special Committee”) comprised entirely of independent and disinterested members of the Company’s board of directors (the “Board”), negotiated the Internalization Transaction (as defined below) and, after consultation with its independent legal and financial advisors, determined that the Internalization Transaction is advisable, fair and reasonable to and in the best interests of the Company and on terms and conditions no less favorable to the Company than those available from unaffiliated third parties, and recommended that the Board authorize and approve the Internalization Transaction. Upon the recommendation from the Special Committee, the Board unanimously authorized and approved the Internalization Transaction. Approval by the Company’s stockholders is not required under Maryland law or the Company’s governing documents for the execution of the Contribution & Purchase Agreement or the consummation of the Internalization Transaction.

As a result of the Internalization Transaction, the Company is now self-managed.

All transactions contemplated by the Contribution & Purchase Agreement, including the series of agreements as further described below, are collectively referred to herein as the “Internalization Transaction.”


Contribution and Purchase Agreement

Prior to the closing of the Contribution (as defined herein), which took place contemporaneously with the execution of the Contribution & Purchase Agreement on August 31, 2020 (the “Closing”), Steadfast Investment Properties, Inc., a California corporation (“SIP”), Steadfast REIT Services, Inc., a California corporation (“REIT Services”), and their respective affiliates owned and operated all of the assets necessary to operate the business of the Company and its subsidiaries (the “Business”) and employed all the employees necessary to operate the Business.

Pursuant to the Contribution & Purchase Agreement, SRI contributed (the “Contribution”) to the Operating Partnership all of the membership interests in STAR RS Holdings, LLC, a Delaware limited liability company (“SRSH”), and the assets, properties and rights necessary to operate the Business in all material respects, and the Assumed Liabilities (as defined in the Contribution & Purchase Agreement) in exchange for $124,999,000 (the “Contribution Value”), which was paid as follows: (i) $31,249,000 in cash (the “Cash Consideration”) and (ii) 6,155,613.92 Class B units of limited partnership interests in the Operating Partnership (the “Class B OP Units”) having the agreed value set forth in the Contribution & Purchase Agreement (the “OP Unit Consideration”). In addition, the Company purchased all of the Class A convertible shares of the Company held by STAR Advisor for $1,000 (the “Purchase Price”).

As part of the Internalization Transaction, the Company, through STAR REIT Services, LLC, a Delaware limited liability company and indirect subsidiary of the Company (“SRS”), hired the Transferring Employees (as defined in the Contribution & Purchase Agreement), who comprise the workforce necessary for the management and day-to-day real estate and accounting operations of the Company and the Operating Partnership.

Concurrently with, and as a condition to the execution and delivery of the Contribution & Purchase Agreement, the Company, through SRS, entered into employment agreements with certain key executives as described in Item 5.02 of this Current Report on Form 8-K.

In addition, SIP granted to the Operating Partnership a five-year, non-exclusive, non-transferable, non-sublicenseable, royalty-free license to use the name, trademark, and service mark “Steadfast,” and certain domain names, as set forth and subject to the terms and conditions of a certain trademark license agreement. In addition, SIP, as licensor, has the right to immediately terminate the trademark license agreement, including the license to use the mark “Steadfast” upon the Operating Partnership’s or its affiliates’ material breach of any provision of the trademark license agreement, which remains uncured after forty-five (45) days of receipt of written notice provided by SIP, (b) Rodney F. Emery ceasing to serve as Chairman of the Board of the Company without his consent or due to cause; (c) a change of control of the Company; (d) the Company ceases substantive commercial use of the “Steadfast” mark; or (e) the Operating Partnership or its affiliates do or cause to be done any action that, in SIP’s reasonable discretion, brings the name and goodwill of SIP or the marks under the trademark license agreement into public disrepute or disfavor.

The Contribution & Purchase Agreement contains customary representations, warranties, covenants and agreements of the Company, the Operating Partnership and SRI.

The foregoing summary of the material terms of the Contribution & Purchase Agreement is qualified in its entirety by reference to the Contribution & Purchase Agreement, which is attached hereto as Exhibit 2.3 and incorporated by reference herein.


Transition Services Agreement

As a condition to the Closing, on August 31, 2020, the Company and SIP entered into a Transition Services Agreement (the “Transition Services Agreement”), pursuant to which, commencing on August 31, 2020 until March 31, 2021, unless earlier terminated pursuant to the Transition Services Agreement or extended by mutual consent, SIP will continue to provide certain operational and administrative support at cost plus 15% to the Company, which may include support relating to, without limitation, the shared information technology, human resources and legal, and tax support as set forth in the Transition Services Agreement. Similarly, the Company agreed to provide certain services to SIP at cost plus 15%, which may include acquisition, disposition and financing support and legal support. The Transition Services Agreement enables each party to manage its operations and retain the benefit of operational efficiencies created by access to such services and to assure a smooth transition following the Closing.

The foregoing summary of the material terms of the Transition Services Agreement is qualified in its entirety by reference to the Transition Services Agreement, which is attached hereto as Exhibit 10.4 and incorporated by reference herein.

Registration Rights Agreement

As a condition to the Closing, on August 31, 2020, the Company, the Operating Partnership and SRI entered into a registration rights agreement (the “Registration Rights Agreement”). Upon the terms and conditions in the Third A&R Partnership Agreement (as defined below), the Class B OP Units will be redeemable for shares of common stock of the Company, par value $0.01 per share. Pursuant to the Registration Rights Agreement, SRI (or any successor holder) has the right after August 31, 2022 (the “Lock-Up Expiration”) to request the Company to register for resale under the Securities Act of 1933, as amended (the “Securities Act”), shares of the Company’s common stock issued or issuable to such holder. The Company will use commercially reasonable efforts to file a registration statement on Form S-3 within 30 days of such request and within 60 days of such request in the case of a registration statement on Form S-11 or such other appropriate form. The Company will cause such registration statement to become effective as soon as reasonably practicable thereafter. The Registration Rights Agreement also grants SRI (or any successor holder) certain “piggyback” registration rights after the Lock-Up Expiration.

The foregoing summary of the material terms of the Registration Rights Agreement is qualified in its entirety by reference to the Registration Rights Agreement, which is attached hereto as Exhibit 10.5 and incorporated by reference herein.

Non-Competition Agreement

As a condition to the Closing, on August 31, 2020, the Company entered into a Non-Competition Agreement (the “Non-Competition Agreement”) with Rodney F. Emery, the majority indirect owner of SRI and Chairman and Chief Executive Officer of the Company, providing that from the date of the Closing until the date that is 30 months from August 31, 2020 (the “Restricted Period”), in general, Mr. Emery shall not, directly or indirectly, (i) solicit certain employees or service providers of the Company, subject to certain exceptions or (ii) solicit certain customers, vendors, suppliers, agents, partners or other similar parties with the purpose of causing such parties or their affiliates to cease doing business with the Company or otherwise interfere with the Company’s business relationships with third parties.


Further, during the Restricted Period, Mr. Emery, subject to limited exceptions provided in the Non-Competition Agreement, in general (i) shall not, and shall cause his respective affiliates not to, engage in the business of managing, operating, directing and supervising the operations and administration of multifamily assets of the class and type owned by the Company as of August 31, 2020 (the “Assets”) (such business activities described in this subsection (i) being the “Restricted Business”), (ii) shall, consistent with past practice, present each opportunity and investment fully and accurately to the Board prior to his or his affiliates acquisition of any Assets and only make such investment on behalf of himself or his affiliates if the Board declines the opportunity; and (iii) shall not engage with or otherwise acquire an interest in, directly or indirectly, any business or enterprise that primarily engage in the Restricted Business in an area within a two-mile radius of each Asset owned or managed by the Company as of the Closing.

Further, each of SRS, the Company and the Operating Partnership agreed that, in general, during the Restricted Period, each will not solicit any employee of SRI or its affiliates or attempt to assist any such employee to enter into any other consulting or business relationship with SRS, the Company and the Operating Partnership, subject to certain limitations.

The foregoing summary of the material terms of the Non-Competition Agreement is qualified in its entirety by reference to the Non-Competition Agreement, which is attached hereto as Exhibit 10.6 and incorporated by reference herein.

Third A&R Partnership Agreement

As a condition to the Closing, on August 31, 2020, the Company, as the general partner and parent of the Operating Partnership, SRI and VV&M entered into a Third Amended and Restated Agreement of Limited Partnership of the Operating Partnership (the “Third A&R Partnership Agreement”) to restate the Second A&R Partnership Agreement in order to, among other things, remove references to the limited partner interests previously held by SIR Advisor and STAR III Advisor, reflect the consummation of the Contribution, and designate Class B OP Units that were issued as the OP Unit Consideration.

The foregoing summary of the material terms of the Third A&R Partnership Agreement is qualified in its entirety by reference to the Third A&R Partnership Agreement, which is attached hereto as Exhibit 10.7 and incorporated by reference herein.


Property Management Agreements

In connection with the Internalization Transaction, the Company terminated its existing property-level property management agreements with an affiliate of SIP. On August 31, 2020, SRS entered into property management agreements (each, a “Property Management Agreement”) to provide property management services in connection with certain properties owned by SIP or its affiliates. Pursuant to each Property Management Agreement, SRS will receive a monthly management fee equal to 2.0% of each property’s gross collections for such month. Each Property Management Agreement has an initial one-year term and will continue thereafter on a month-to-month basis unless the owner of the property terminates the Property Management Agreement with 60 days’ prior written notice or upon the determination of gross negligence, willful misconduct or bad acts of SRS or its employees with 30 days’ prior written notice to SRS. After the first one-year term, either party may terminate the Property Management Agreement in the event of a material breach that remains uncured for a period of 30 days after written notification of such breach.

The foregoing summary of the material terms of the Property Management Agreement is qualified in its entirety by reference to the form of Property Management Agreement, which is attached hereto as Exhibit 10.8 and incorporated by reference herein.

 

Item 2.01.

Completion of Acquisition or Disposition of Assets

The information provided in Item 1.01 regarding the Internalization Transaction is incorporated by reference into this Item 2.01.

 

Item 3.01

Unregistered Sale of Securities.

The Class B OP Units issued to SRI, as described in Item 1.01 of this Current Report, were issued as the OP Unit Consideration pursuant to the Contribution & Purchase Agreement. Such Class B OP Units were issued in a private placement in reliance on Section 4(a)(2) of the Securities Act. The information set forth under Item 1.01 of this Current Report relating to the Class B OP Units is hereby incorporated by reference into this Item 3.01.

 

Item 5.02

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Resignation of Officer

On September 1, 2020, Ana Marie del Rio resigned as the Secretary of the Company, effectively immediately. As noted below, the Board elected Gustav Bahn to serve as the Corporate Secretary of the Company effective on September 1, 2020.


Appointment of Officers

In connection with the Internalization Transaction, the Board elected the following individuals to serve in the position designated by his or her name:

 

Name    Age      Position

Tim Middleton

   49     

Chief Investment Officer

Jason Stern

   46     

Chief Strategy & Administrative Officer

Gustav Bahn

   49     

Chief Legal Officer and Corporate Secretary

Tiffany Stanley

   47     

EVP, Property Management

There is no family relationship between any of the individuals listed above, on the one hand, and any of the Company’s other directors or executive officers, on the other hand.

Descriptions of the newly appointed executive officer’s biographical information are included below:

Tim Middleton has served as the Company’s Chief Investment Officer since September 2020, and is responsible for the Company’s acquisition, disposition, real estate finance, asset management and risk management activities. Prior to joining the Company, Mr. Middleton spent 16 years with Steadfast Companies and was appointed Chief Investment Officer in 2017. During his time at Steadfast Companies Mr. Middleton closed over $4 billion in transactions. Before joining Steadfast Companies, Mr. Middleton worked for Trammell Crow Company where he provided real estate advisory services to major corporate clients in the Los Angeles area. Mr. Middleton graduated from the University of New Hampshire with a B.A. in Political Science and received his MBA from Vanderbilt University.

Jason Stern has served as the Chief Strategy & Administrative Officer of the Company since September 2020 and is responsible for developing and executing the Company’s corporate strategies & key initiatives. In this position, he oversees many of the corporate service teams including, Human Resources, Learning & Development, Information Technology, and Marketing & Experience. Mr. Stern held the same role with Steadfast Companies since January 2019.

Before joining Steadfast, Mr. Stern was a turnaround executive and served as President/CEO of the following companies: Gift of Time, a change management consulting firm, Paul’s TV & Appliances, a 48-store consumer electronics retailer, Xceliware, a warehouse management software company, and Adopt A High Maintenance Corporation. Mr. Stern earned his bachelor’s degree from Washington University in St. Louis and his MBA degree from Harvard Business School.


Gustav Bahn has served as the Company’s Chief Legal Officer and Corporate Secretary since September 2020. Mr. Bahn also oversees the Company’s Investor Relations Department. Prior to joining the Company, Mr. Bahn served as Associate General Counsel, Securities & Investments for Steadfast Companies, a position he held since July 2016. Prior to joining Steadfast Companies, Mr. Bahn was a partner at the law firm of Alston & Bird LLP where his practice focused on securities law, private equity and mergers and acquisitions. Prior to joining Alston & Bird LLP in 2006, Mr. Bahn was an associate in the capital markets group of Paul, Weiss, Rifkind, Wharton & Garrison LLP in both the New York and London offices from 2000 to 2006. Mr. Bahn holds a B.A. in Economics and Political Science from the University of Tennessee, an M.Sc. from the London School of Economics and Political Science and a J.D. from Tulane Law School.

Tiffany Stanley has served as the Company’s Executive Vice President of Property Management since September 2020. Prior to joining the Company, Ms. Stanley held multiple positions with Steadfast Companies, including Executive Vice President of Property Management from October 2019 and Vice President of Operational Initiatives from November 2018. Prior to joining Steadfast Companies, Ms. Stanley oversaw all regional operations in Colorado for Camden Property Trust. Ms. Stanley has over 25 years of operational multifamily experience with all asset classes.

The Special Committee engaged FPL Associates L.P., a nationally-recognized compensation consulting firm specializing in the real estate industry, as an executive compensation consultant with respect to the Offer Letter and Employment Agreements (each as defined below). The Special Committee negotiated the Offer Letter and Employment Agreements and unanimously determined that each, including the compensation arrangements contemplated therein, are in the best interests of the Company, and recommended that the Board determine the same. The Board unanimously approved and authorized the Offer Letter and Employment Agreements, including the compensation arrangements contemplated therein.

Emery Offer Letter

On September 1, 2020, Rodney F. Emery accepted an offer letter of employment, which sets forth the terms and conditions of Mr. Emery’s service as the Company’s Chief Executive Officer (the “Offer Letter”). The Offer Letter provides that Mr. Emery’s employment with SRS will be at-will. Mr. Emery’s annual base salary will be $55,000, which will be subject to applicable deductions and withholdings and paid in accordance with the Company’s regular payroll practices. Mr. Emery will be eligible for the same benefit programs as the Company offers to similarly situated employees from time to time, subject to eligibility requirements and the terms of those programs.

Employment Agreements

On September 1, 2020, SRS entered into employment agreements (collectively, the “Employment Agreements”) with each of Messrs. Middleton, Stern and Bahn and Ella S. Neyland, the Company’s President, Chief Financial Officer and Treasurer, and Ms. Stanley (collectively, the “Executives”).

Term. The Employment Agreements will become effective as of the Closing and will continue in effect through the third anniversary of the Closing (the “Initial Term”), unless terminated sooner pursuant to the Employment Agreements. Commencing on the last day of the Initial Term and on each subsequent anniversary of such date, the term of the Employment


Agreements shall be automatically extended for successive one-year periods; provided, however, that either the Company or the Executive may elect not to extend the term of employment by giving at least 180 days prior written notice.

Compensation. The Employment Agreements provide that Messrs. Middleton, Stern and Bahn, and Mses. Neyland and Stanley will receive an annual base salary of $450,000, $400,000, $400,000, $450,000 and $300,000, respectively. Messrs. Middleton, Stern, Bahn and Mses. Neyland and Stanley will be eligible to receive an annual cash bonus with a target amount of at least 50% of his or her annual base salary (each, a “Target Annual Bonus”), based on criteria and goals established by the Board or a Board committee; provided that their 2020 annual bonuses will be not less than the full Target Annual Bonuses.

The Executives will also be eligible to receive equity and/or other long-term incentive awards, in the discretion of the Board or a Board committee.

Subject to each Executive’s continued employment through the grant date, in the first quarter of calendar year 2021, Messrs. Middleton, Stern and Bahn and Mses. Neyland and Stanley will receive an award of time-based restricted stock (the “Time-Based 2021 Award”) with a grant date fair value of $225,000, $200,000, $200,000, $225,000, and $120,000, respectively, each to be granted under and subject to the terms of the Company’s Amended and Restated 2013 Incentive Plan (the “Plan”) and award agreements. The Time-Based 2021 Awards will vest ratably over three years following the grant date, subject to the Executive’s continuous employment through the applicable vesting dates, with certain exceptions.

The Executives will also be eligible to participate in all employee benefit programs made available to the Company’s employees generally from time to time and to receive certain other perquisites, each as described in their respective Employment Agreement.

Severance. If the Executive’s employment is terminated by the Company without “cause” or by the Executive for “good reason” (as each term is defined in the Employment Agreements) and the Executive executes a release of claims, the Executive will be entitled to (1) a series of cash payments totaling a multiple of one if the termination does not occur within 12 months after a Change in Control of the Company (as defined in the Executive’s Employment Agreement) and one and one half if the termination occurs within 12 months after a Change in Control of the sum of his or her then-current base salary and Target Annual Bonus for the then-current calendar year (annualized if the termination occurs in 2020); (2) vesting of all outstanding equity-based awards that are subject solely to time-based vesting conditions and (3) if the Executive elects continuation of coverage under the Company’s group health plan, continuation of subsidized health care coverage for 12 months (or 18 months in the case of a Change of Control) or, if earlier, until the Executive becomes eligible for health care coverage from another employer or eligibility for continuation of coverage under any Company group health plan ends.


Each Employment Agreement also contains covenants relating to the treatment of confidential information and intellectual property matters and restrictions on the ability of each of the Executives on the one hand and the Company on the other hand to disparage the other.

The foregoing description of the Offer Letter and the Employment Agreements does not purport to be complete and is qualified in its entirety by reference to the Offer Letter, which is filed as Exhibit 10.9 hereto and is incorporated herein by reference and the form of Employment Agreement, which is filed as Exhibit 10.10 hereto and is incorporated herein by reference.

Restricted Stock Grants

On September 1, 2020, the Executives and certain other key employees of the Company were issued restricted stock grants under the terms of the Plan, which grants had been approved by the Special Committee and the Board. The grants to the Executives were made pursuant to a Restricted Stock Grant Agreement. The grants vest 50% on the second anniversary of the Closing and 50% on the third anniversary of the Closing (collectively, the “2020 Restricted Stock Awards”).

The 2020 Restricted Stock Award agreements provide that vesting is subject to the Executive’s continued employment with the Company through each applicable vesting date, except in the event of the Executive’s death or disability, in which case, any unvested portion of the awards will become fully vested. In addition, the 2020 Restricted Stock Award agreements provide the Executive with rights as a stockholder in respect of the awards’ vested and unvested shares, including the right to vote and the right to dividends.

In the event of a termination of the Executive’s employment by the Company without “cause” or by the Executive for “good reason” within 12 months following a Change in Control, any unvested portion of the 2020 Restricted Stock Awards will become fully vested at the time of such termination, provided that if the 2020 Restricted Stock Awards are unvested at the time of a Change in Control of the Company and are not assumed or substituted for equivalent awards as part of the Change in Control transaction, the 2020 Restricted Stock Awards will become fully vested at the time of the Change in Control transaction.

This summary is qualified in its entirety by reference to the full text of the Form of Steadfast Apartment REIT, Inc. Restricted Stock Award Agreement attached as Exhibit 10.11 hereto, which is hereby incorporated by reference.


The number of shares of restricted stock granted to each of the Company’s Executives, as set forth below, was determined by dividing the value of the 2020 Restricted Stock Award for the Executive as pursuant to the terms of his or her Employment Agreement by the most recent publicly disclosed estimated value per share as the determined by the Board.

 

Executive

   Number of Shares of 2020 Restricted
Stock Awards vesting over 3 years

Ella Neyland

   29,546.95

Tim Middleton

   29,546.95

Gustav Bahn

   19,697.96

Jason Stern

   13,131.98

Tiffany Stanley

   13,131.98


Item 9.01

Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired

The Company intends to file any financial statements required by this Item 9.01(a) in a Form 8-K/A that will be filed not later than 71 days after the date that this Form 8-K is required to be filed.

(b) Pro Forma Financial Information

The Company intends to file any pro forma financial information required by this Item 9.01(b) in a Form 8-K/A that will be filed not later than 71 days after the date that this Form 8-K is required to be filed.

(d) Exhibits

 

  2.1    Agreement and Plan of Merger dated as of August 28, 2020, by and between Steadfast Income REIT Operating Partnership, L.P. and Steadfast Apartment REIT Operating Partnership, L.P.*
  2.2    Agreement and Plan of Merger dated as of August 28, 2020, by and between Steadfast Apartment REIT Operating Partnership, L.P. f/k/a Steadfast Income REIT Operating Partnership, L.P. and Steadfast Apartment REIT III Operating Partnership, L.P.*
  2.3    Contribution and Purchase Agreement by and among Steadfast Apartment REIT Operating Partnership, L.P., as Contributee, Steadfast Apartment REIT, Inc. and Steadfast REIT Investments, LLC, as Contributor, dated as of August 31, 2020.*
10.1    Second Amended and Restated Limited Partnership of Steadfast Apartment REIT Operating Partnership, L.P., dated as of August 28, 2020.
10.2    Joinder Agreement made and entered into as of August 31, 2020, by and among Steadfast Apartment Advisor, LLC, Steadfast Apartment REIT, Inc. and Steadfast Apartment REIT Operating Partnership, L.P. f/k/a Steadfast Income REIT Operating Partnership, L.P.
10.3    Amendment No. 1 to the Amended and Restated Advisory Agreement made and entered into as of August 31, 2020, by and among Steadfast Apartment REIT, Inc., Steadfast Apartment Advisor, LLC, and Steadfast Apartment REIT Operating Partnership, L.P. f/k/a Steadfast Income REIT Operating Partnership, L.P.
10.4    Transition Services Agreement, by and between Steadfast Apartment REIT, Inc. and Steadfast Income Properties, Inc., dated as of August 31, 2020.
10.5    Registration Rights Agreement, dated as of August 31, 2020, by and among Steadfast Apartment REIT, Inc., Steadfast Apartment REIT Operating Partnership, L.P. and Steadfast REIT Investments, LLC.
10.6    Non-Competition Agreement, dated as of August 31, 2020, by and among Rodney F. Emery, STAR REIT Services, LLC, Steadfast Apartment REIT, Inc. and Steadfast Apartment REIT Operating Partnership, L.P.
10.7    Third Amended and Restated Limited Partnership Agreement of Steadfast Apartment REIT Operating Partnership, L.P. f/k/a Steadfast Income REIT Operating Partnership, L.P., dated as of August 31, 2020.
10.8    Form of Property Management Agreement
10.9    Offer Letter from STAR REIT Services, LLC to Rodney F. Emery, dated as of September 1, 2020.
10.10    Form of Employment Agreement
10.11    Form of Restricted Stock Award Agreement
104    Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

*

Schedules omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish a supplemental copy of any omitted schedule to the Securities and Exchange Commission (“SEC”) upon request.


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.

 

    STEADFAST APARTMENT REIT, INC.
Date: September 3, 2020     By:  

/s/ Ella S. Neyland

      Ella S. Neyland
      President, Chief Financial Officer and Treasurer
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Section 2: EX-2.1 (EX-2.1)

EX-2.1

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger (this “Agreement”), dated as of August 28, 2020, by and between Steadfast Income REIT Operating Partnership, L.P., a Delaware limited partnership (the “Acquiror”), Steadfast Apartment REIT Operating Partnership, L.P., a Delaware limited partnership (the “Company”).

WHEREAS, Steadfast Apartment REIT, Inc. a Maryland corporation and the general partner of the Acquiror and the Company have each approved and adopted this Agreement and the transactions contemplated by this Agreement, in each case after making a determination that this Agreement and such transactions are advisable and fair to, and in the best interests of, such party and its limited partners;

WHEREAS, pursuant to the transactions contemplated by this Agreement and on the terms and subject to the conditions set forth herein, the Company, in accordance with the Delaware Limited Partnership Act (the “DLPA”), will merge with and into the Acquiror, with the Acquiror as the Surviving Partnership (the “Merger”); and

WHEREAS, for U.S. federal and applicable state income tax purposes, the Company is an entity disregarded from Steadfast Apartment REIT, Inc. (“STAR”), and the Merger will be treated as a tax-deferred contribution by STAR of all the assets and liabilities of the Company to the Acquiror under Section 721(a) of the Internal Revenue Code, as amended (the “Code”).

NOW, THEREFORE, in consideration of the mutual covenants, terms and conditions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with Section 17-211 of the DLPA the Company shall be merged with and into the Acquiror at the Effective Time (as hereinafter defined). Following the Effective Time, the separate existence of the Company shall cease, and the Acquiror shall continue as the surviving entity (the “Surviving Partnership”). The effects and consequences of the Merger shall be as set forth in this Agreement and the DLPA.

2. Effective Time.

(a) Subject to the provisions of this Agreement, on the date hereof, the parties shall duly prepare, execute and file a a certificate of merger (the “Certificate of Merger”) complying with Section 17-211 of the DLPA with the Secretary of State of the State of Delaware with respect to the Merger. The Merger shall become effective at 9:02 A.M. EST as set forth in the Certificate of Merger (the “Effective Time”).

(b) The Merger shall have the effects set forth in the DLPA. Without limiting the generality of the foregoing, from the Effective Time: (i) all the properties, rights, privileges, immunities, powers and franchises of the Company shall vest in the Acquiror, as the Surviving Partnership, and (ii) all debts, liabilities, obligations and duties of the Company shall become the debts, liabilities, obligations and duties of the Acquiror, as the Surviving Partnership.


3. Organizational Documents. The limited partnership agreement of the Acquiror in effect at the Effective Time shall be amended and restated into substantially the form attached hereto as Exhibit A (the “Surviving LPA”) immediately prior to the Effective Time and shall become the limited partnership agreement of the Surviving Partnership until thereafter amended as provided therein or by the DLPA, and the certificate of formation of the Acquiror in effect at the Effective Time shall be the certificate of information of the Surviving Partnership until thereafter amended as provided therein or by the DLPA.

4. Directors and Officers. The directors and officers of the Acquiror immediately prior to the Effective Time shall be the directors of the Surviving Partnership from and after the Effective Time and shall hold office until the earlier of their respective death, resignation or removal or their respective successors are duly elected or appointed and qualified in the manner provided for in the certificate of incorporation and by-laws of the Surviving Partnership or as otherwise provided by the DLPA.

5. Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of the Acquiror or the Company:

(a) All of the partnership interests of the Company (the “Company Partnership Interests”), issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive the partnership interests in Acquiror in accordance with the Surviving LPA, of the Surviving Partnership having the substantially the same rights, privileges and obligations as provided by the Company (the “Surviving Partnership Interests”); each Company Partnership Interests that is owned by the Acquiror or the Company will automatically be canceled and retired and will cease to exist, and no consideration will be delivered in exchange therefor; and

(b) each partnership interests of Acquiror issued and outstanding immediately prior to the Effective Time shall remain outstanding following the consummation of the Merger.

6. Income Tax Treatment. The parties intend that, for U.S. federal and applicable state income tax purposes, the Merger will be treated as a tax-deferred contribution by STAR of all the assets and liabilities of the Company to the Acquiror under Section 721(a) of the Internal Revenue Code, as amended (the “Code”).

7. Entire Agreement. This Agreement together with the Certificate of Merger constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings, representations and warranties, and agreements, both written and oral, with respect to such subject matter.

 

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8. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

9. No Third-Party Beneficiaries. This Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Agreement.

10. Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

11. Amendment and Modification; Waiver. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. Except as otherwise set forth in this Agreement, no failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

12. Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

13. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than those of the State of Delaware

 

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14. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, email or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

[SIGNATURE PAGE FOLLOWS]

 

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

 

STEADFAST INCOME REIT OPERATING PARTNERSHIP, L.P., a Delaware limited partnership
By: STEADFAST APARTMENT REIT, INC., its general partner
By:  

/s/ Ella S. Neyland

Name: Ella S. Neyland
Title: President and Chief Financial Officer
STEADFAST APARTMENT REIT OPERATING PARTNERSHIP, LP, a Delaware limited partnership
By: STEADFAST APARTMENT REIT, INC., its general partner
By:  

/s/ Ella S. Neyland

Name: Ella S. Neyland
Title: President and Chief Financial Officer

 

5


Exhibit A

Surviving Partnership Agreement

 

6

(Back To Top)

Section 3: EX-2.2 (EX-2.2)

EX-2.2

Exhibit 2.2

AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger (this “Agreement”), dated as of August 28, 2020, by and between Steadfast Apartment REIT Operating Partnership, L.P., f/k/a Steadfast Income REIT Operating Partnership, L.P. a Delaware limited partnership (the “Acquiror”), and Steadfast Apartment REIT III Operating Partnership, L.P., a Delaware limited partnership (the “Company”).

WHEREAS, Steadfast Apartment REIT, Inc., a Maryland corporation and the general partner of the Acquiror and the Company have each approved and adopted this Agreement and the transactions contemplated by this Agreement, in each case after making a determination that this Agreement and such transactions are advisable and fair to, and in the best interests of, such party and its limited partners;

WHEREAS, pursuant to the transactions contemplated by this Agreement and on the terms and subject to the conditions set forth herein, the Company, in accordance with the Delaware Limited Partnership Act (the “DLPA”), will merge with and into the Acquiror, with the Acquiror as the Surviving Partnership (the “Merger”); and

WHEREAS, for U.S. federal and applicable state income tax purposes, the Merger will be treated as an “assets over” “partnership merger” governed by Treasury Regulations Section 1.708-1(c)(3)(i), with Acquiror being the “resulting partnership” and the Company terminating.

NOW, THEREFORE, in consideration of the mutual covenants, terms and conditions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with Section 17-211 of the DLPA the Company shall be merged with and into the Acquiror at the Effective Time (as hereinafter defined). Following the Effective Time, the separate existence of the Company shall cease, and the Acquiror shall continue as the surviving entity (the “Surviving Partnership”). The effects and consequences of the Merger shall be as set forth in this Agreement and the DLPA.

2. Effective Time.

(a) Subject to the provisions of this Agreement, on the date hereof, the parties shall duly prepare, execute and file a certificate of merger (the “Certificate of Merger”) complying with Section 17-211 of the DLPA with the Secretary of State of the State of Delaware with respect to the Merger. The Merger shall become effective at 9:04 A.M. EST as set forth in the Certificate of Merger (the “Effective Time”).

(b) The Merger shall have the effects set forth in the DLPA. Without limiting the generality of the foregoing, from the Effective Time: (i) all the properties, rights, privileges, immunities, powers and franchises of the Company shall vest in the Acquiror, as the Surviving Partnership, and (ii) all debts, liabilities, obligations and duties of the Company shall become the debts, liabilities, obligations and duties of the Acquiror, as the Surviving Partnership.


3. Organizational Documents. The limited partnership agreement of the Acquiror in effect at the Effective Time shall be amended and restated into substantially the form attached hereto as Exhibit A (the “Surviving LPA”) immediately prior to the Effective Time and shall become the limited partnership agreement of the Surviving Partnership until thereafter amended as provided therein or by the DLPA, and the certificate of formation of the Acquiror in effect at the Effective Time shall be the certificate of information of the Surviving Partnership until thereafter amended as provided therein or by the DLPA.

4. Directors and Officers. The directors and officers of the Acquiror immediately prior to the Effective Time shall be the directors of the Surviving Partnership from and after the Effective Time and shall hold office until the earlier of their respective death, resignation or removal or their respective successors are duly elected or appointed and qualified in the manner provided for in the certificate of incorporation and by-laws of the Surviving Partnership or as otherwise provided by the DLPA.

5. Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of the Acquiror or the Company:

(a) All of the partnership interests of the Company (the “Company Partnership Interests”), issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive the partnership interests in Acquiror in accordance with the Surviving LPA, of the Surviving Partnership having the substantially the same rights, privileges and obligations as provided by the Company (the “Surviving Partnership Interests”); each Company Partnership Interests that is owned by the Acquiror or the Company will automatically be canceled and retired and will cease to exist, and no consideration will be delivered in exchange therefor; and

(b) each partnership interests of Acquiror issued and outstanding immediately prior to the Effective Time shall remain outstanding following the consummation of the Merger.

6. Income Tax Treatment. The parties intend that, for U.S. federal and applicable state income tax purposes, the Merger will be treated as an “assets over” “partnership merger” governed by Treasury Regulations Section 1.708-1(c)(3)(i), with Acquiror being the “resulting partnership” and the Company terminating.

7. Entire Agreement. This Agreement together with the Certificate of Merger constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings, representations and warranties, and agreements, both written and oral, with respect to such subject matter.

 

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8. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

9. No Third-Party Beneficiaries. This Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Agreement.

10. Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

11. Amendment and Modification; Waiver. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. Except as otherwise set forth in this Agreement, no failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

12. Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

13. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than those of the State of Delaware

14. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, email or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

[SIGNATURE PAGE FOLLOWS]

 

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

 

STEADFAST INCOME REIT OPERATING PARTNERSHIP, L.P., a Delaware limited partnership
By: STEADFAST APARTMENT REIT, INC., its general partner
By:  

/s/ Ella S. Neyland

Name: Ella S. Neyland
Title: President and Chief Financial Officer
STEADFAST APARTMENT REIT III OPERATING PARTNERSHIP, L.P., a Delaware limited partnership
By: STEADFAST APARTMENT REIT, INC., its general partner
By:  

/s/ Ella S. Neyland

Name: Ella S. Neyland
Title: President and Chief Financial Officer

 

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Exhibit A

Surviving Partnership Agreement

 

5

(Back To Top)

Section 4: EX-2.3 (EX-2.3)

EX-2.3

Exhibit 2.3

CONTRIBUTION AND PURCHASE AGREEMENT

BY AND AMONG

STEADFAST APARTMENT REIT OPERATING PARTNERSHIP, L.P.,

AS CONTRIBUTEE,

STEADFAST APARTMENT REIT, INC.

AND

STEADFAST REIT INVESTMENTS, LLC,

AS CONTRIBUTOR

DATED AS OF AUGUST 31, 2020

CONTRIBUTION AND PURCHASE AGREEMENT

This CONTRIBUTION AND PURCHASE AGREEMENT (this “Agreement”) is entered into as of August 31, 2020, by and among Steadfast Apartment REIT Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership” or the “Contributee”), and Steadfast Apartment REIT, Inc., a Maryland corporation (“STAR”), as the general partner of the Contributee, on the one hand, and Steadfast REIT Investments, LLC, a Delaware limited liability company (the “Contributor”), on the other hand. Contributee, STAR and Contributor are collectively referred to as the “Parties”, and each, a “Party”. Capitalized terms used in this Agreement shall have the meanings ascribed to such terms in Article 9 to this Agreement.

R E C I T A L S

WHEREAS, prior to the date hereof Steadfast Investment Properties, Inc., a California corporation (“SIP”), Steadfast REIT Services, Inc., a California corporation (“REIT Services”), and their respective Affiliates, owned and operated the Business (as defined below) and employed all the employees necessary to operate the Business;

WHEREAS, immediately prior to the transactions contemplated hereby, SIP, REIT Services and their respective Affiliates will transfer the Transferring Employees and Contributed Assets to STAR REIT Services, LLC, a Delaware limited liability company (“SRS”);

WHEREAS, Steadfast REIT Holdings, LLC, a Delaware limited liability company (“SRH”), and Crossroads Capital Multifamily, LLC, a Delaware limited liability company, are the sole owners of Contributor;

WHEREAS, the Contributor is the sole owner of STAR RS Holdings, LLC, a Delaware limited liability company (“SRSH”);

WHEREAS, SRSH is the sole owner of STAR TRS, Inc., a Delaware corporation (“STAR TRS”);

[Signature page to Contribution Agreement]


WHEREAS, SRSH is the 99% owner of SRS and STAR TRS is the 1% owner of SRS;

WHEREAS, the Contributor and its Affiliates is engaged in the business of serving as the advisor and property manager to STAR (the “Business”) and owns certain assets including, but not limited to, the Contributed Assets (as defined below);

WHEREAS, Steadfast Apartment Advisor, LLC, a Delaware limited liability company (“STAR Advisor”), is a wholly-owned indirect subsidiary of the Contributor;

WHEREAS, STAR Advisor owns the Convertible Shares;

WHEREAS, concurrently with this Agreement, certain of the Parties are entering into the Transaction Documents (as defined below); and

WHEREAS, the Contributee and the Contributor desire to enter into a self-administration transaction in which the Contributor contributes and the Contributee receives and accepts the Contributed Assets.

NOW, THEREFORE, in consideration of the above recitals, the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:

ARTICLE 1

CONTRIBUTION OF ASSETS

1.1 Contribution of the Contributed Assets and Purchase of the Convertible Shares. On and subject to the terms and conditions of this Agreement, at the Closing (a) the Contributor agrees to contribute, convey, transfer, irrevocably assign and deliver to the Contributee all of the membership interests of SRSH, which owns all of the assets set forth on Schedule 1.1 (collectively, the “Contributed Assets”) in exchange for the Contribution Value, except as provided herein, free and clear of all Encumbrances, and at the Closing, the Contributee agrees to accept contribution of the Contributed Assets and assume the Assumed Liabilities, if any, in exchange for the Contribution Value and (b) the Contributor agrees to cause STAR Advisor to sell, irrevocably assign, transfer, convey and deliver to STAR all of the Convertible Shares in exchange for the Purchase Price, free and clear of all Encumbrances, and at the Closing, STAR agrees to purchase the Convertible Shares for the Purchase Price.

1.2 Excluded Assets. Notwithstanding anything to the contrary contained herein, the Contributed Assets shall not include any of the rights, properties or assets set forth on, or described in Schedule 1.2 (collectively, the “Excluded Assets”).

1.3 Assumed Liabilities. On the terms and subject to the conditions set forth in this Agreement, including without limitation Section 7.2, at the Closing, the Contributee shall assume from the Contributor the liabilities and obligations of the Contributor solely to the extent set forth on, or described in, Schedule 1.3 (each an “Assumed Liability” and, collectively, the “Assumed Liabilities”) and thereafter pay, perform and otherwise discharge the Assumed Liabilities in accordance with their terms. Except for the Assumed Liabilities, nothing contained in any Transaction Document shall be interpreted or construed to result in the assumption by the Contributee, or result in the Contributee becoming in any way liable for, any Liabilities of the Contributor (each an “Excluded Liability” and, collectively, the “Excluded Liabilities”).

 

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1.4 Consideration. The aggregate consideration for the Contributed Assets shall be $124,999,000 (the “Contribution Value”), to be delivered at Closing as (a) a cash payment of $31,249,000 (the “Cash Consideration”) and (b) 6,155,613.92 units of Class B limited partnership interests in the Contributee (the “Class B OP Units”) having the agreed value set forth on Schedule 1.4(b) (the “OP Unit Consideration”). The aggregate consideration for the Convertible Shares shall be $1,000 (the “Purchase Price”), to be delivered at closing as a cash payment.

1.5 Contributor Assignment of Certain Contracts. Subject to Section 1.6, at the Closing, effective as of the Effective Date, the Contributee shall succeed to the rights and privileges of the Contributor and its Affiliates, and shall perform, or cause its subsidiaries to perform, at and after the Effective Date, all Contracts and Permits related to the Business, each of which set forth on Schedule 1.5 (the “Assigned Contracts”).

1.6 Consent of Third Parties. Notwithstanding anything to the contrary contained in any Transaction Document, to the extent that the assignment of all or any portion of any of the Assigned Contracts shall require the consent of the other party thereto or any third Person, or if any Permit is non-assignable or assignable only with the consent of the Governmental Entity issuing the same or any third Person, then in any and all such instances, this Agreement shall not constitute an agreement to assign any such Assigned Contracts or Permits, if such an assignment would constitute a breach or violation thereof. In order, however, to provide the Contributee the full realization and value of such Assigned Contracts and Permits, the Contributor and the Contributee shall take all commercially reasonable actions and do or cause to be done all commercially reasonable things in cooperation with one another as shall be necessary or proper to assure that the rights of each of SRSH, STAR TRS and SRS under such Assigned Contracts or Permits shall be preserved for the benefit of the Contributee and transferred or issued to the Contributee when such third Person consent, or in the case of Permits consent of the applicable Governmental Entity, or the issuance of a replacement Permit in the name of the Contributee, is received.

1.7 Income Tax Treatment. The receipt of the Contributed Assets by the Contributee from the Contributor in exchange for the Contribution Value is intended to qualify as (a) with respect to the OP Unit Consideration a tax-deferred contribution of assets to the Contributee in exchange for Class B OP Units under Code Section 721, and (b) with respect to the Cash Consideration, a sale of assets from the Contributor to the Contributee under Code Section 707. The Contribution Value shall be allocated among the Contributed Assets in the manner as reasonably agreed to by the Parties after Closing for federal income tax purposes. Unless otherwise required by applicable Law, the Contributee and the Contributor each hereby agree to report the transactions contemplated herein for all income tax purposes (including for purposes of reporting on any income tax returns filed by the Contributor) in a manner that is consistent with the provisions of this Section 1.7, and none of the Parties shall take any position (whether in audits, or Tax Returns or otherwise) that is inconsistent with the provisions of this Section 1.7 unless required to do so by applicable Law. STAR and the Contributee agree to take such actions as may be necessary (including amending the Operating Partnership Agreement) so as to cause the Contributee to elect to use the “traditional method” described in Treasury Regulations Section 1.704-3(b) of allocating (pursuant to Section 704(c) of the Code) any tax items relating to those Contributed Assets to which the OP Unit Consideration is allocated in accordance with this Section 1.7.

 

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1.8 Contributor Name. From and after the Closing Date, the Contributor, on its own behalf and on behalf of its Affiliates, grants to the Contributee a five-year, non-exclusive, non-transferable, non-sublicenseable, royalty-free license to use the name, trademark, and service mark “Steadfast,” and certain domain names, as set forth and subject to the terms and conditions of the Trademark License Agreement.

ARTICLE 2

CLOSING

2.1 Closing. The closing of the contribution and exchange of the Contributed Assets and the purchase of the Convertible Shares (the “Closing”), is taking place contemporaneously with the execution and delivery of this Agreement and all other Transaction Documents by the Parties, and the other parties who or which are parties thereto, at the offices of Contributor, 18100 Von Karman Avenue, Suite 500, Irvine, California 92612 at 11:59p.m., local time on Monday, August 31, 2020 (the “Closing Date”).

2.2 Closing Deliveries by the Contributor. On the Closing Date, the Contributor shall deliver or cause to be delivered to the Contributee:

(a) a Bill of Sale, Assignment and Assumption Agreement, substantially in the form set forth as Exhibit A (the “Bill of Sale and Assumption Agreement”), duly executed by the Contributor, assigning and transferring Contributor’s Personal Property used in the Business and effecting the assumption of the Assumed Liabilities;

(b) an Assignment of Contracts, substantially in the form set forth as Exhibit B (an “Assignment of Contracts Agreement”), duly executed by the Contributor and any of its Affiliates, assigning and transferring the Assigned Contracts;

(c) the Trademark License Agreement, substantially in the form set forth as Exhibit C (the “Trademark License Agreement”), duly executed by SIP;

(d) an assignment in form and substance reasonably acceptable to the Contributee of the Contributor’s right, title and interest in all of the membership interests in SRSH;

(e) any Contributor Required Third Party Consents received on or before the Closing Date;

(f) employment agreements between the individuals listed on Schedule 2.2(g) and SRS, substantially in the form set forth as Exhibit D, duly executed by such individuals and SRS (the “Key Person Employment Agreements”);

(g) the Transition Services Agreement, substantially in the form set forth as Exhibit E (the “Transition Services Agreement”), duly executed by SIP;

 

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(h) the Property Management Agreements, substantially in the form set forth as Exhibit F (the “Property Management Agreement”), duly executed by SRS and each respective property owner.

(i) a certificate of the Secretary of the Contributor, certifying as to:

(A) resolutions of the Contributor’s, SRSH’s, STAR TRS’s and SRS’s managers and members, if necessary, authorizing the execution, delivery and performance of the Transaction Documents to which any of the Contributor and its Affiliates is a party, and

(B) the incumbency of any and all of the Contributor’s officers or managers, executing the Transaction Documents on behalf of the Contributor;

(j) a good standing certificate, dated not earlier than ten (10) days next preceding the Closing Date, for Contributor, SRSH, SRS and STAR TRS from their respective jurisdiction of formation or organization;

(k) a stock power evidencing the transfer of the Convertible Shares, free and clear of Encumbrances, substantially in the form set forth as Exhibit G;

(l) the Registration Rights Agreement, substantially in the form set forth as Exhibit H (the “Registration Rights Agreement”), duly executed by the Contributee;

(m) a certificate of non-foreign status of the Contributor (or, if Contributor is an entity disregarded from its owner for U.S. federal income tax purposes, its regarded owner), in form and substance reasonably satisfactory to the Contributee, in accordance with Treasury Regulations Section 1.1445-2(b);

(n) the Third Amended and Restated Limited Partnership Agreement of the Operating Partnership, substantially in the form set forth as Exhibit I (“Operating Partnership Agreement”), duly executed by STAR as general partner and Contributor, Wellington V V M, LLC and Copans V V M, LLC as limited partners;

(o) a Non-Compete and Non-Solicit Agreement and STAR, substantially in the form set forth as Exhibit J (the “Non-Compete and Non-Solicit Agreement”), duly executed by Rodney Emery;

(p) the Property Lease Agreement, substantially in the form set forth as Exhibit K (the “Property Lease Agreement”), duly executed by SIP and Steadfast Management Company Inc., a California corporation;

(q) such other certificates, opinions, documents or instruments as may reasonably be requested of the Contributor, SRSH, SRS and STAR TRS by the Contributee, consistent with the terms of and transactions contemplated by this Agreement; and

 

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(r) proof reasonably acceptable to the Contributee that (i) the employment of all Transferring Employees, (ii) except as may be limited by applicable Law, any related personnel records (including all human resources and other records), and (iii) all employee handbooks, training materials and other marketing and expense management programs and materials that pertain to the Business, have been properly transferred to, or established at, SRSH, SRS or STAR TRS prior to the Closing, with all necessary third Person consents (except that the Contributor may retain copies of such records or files, to the extent it determines, in its reasonable discretion, it is necessary to satisfy its obligations under Law).

2.3 Closing Deliveries by the Contributee. On the Closing Date, STAR or the Contributee, as the case may be, shall deliver to the Contributor:

(a) payment of the Cash Consideration and the Purchase Price to an account specified in writing by Contributor;

(b) issuance of the Class B OP Units to the Contributor, in accordance with Section 1.4(b);

(c) the Bill of Sale, Assignment and Assumption Agreement, duly executed by the Contributee;

(d) the Assignment of Contracts Agreement, duly executed by the Contributee;

(e) the Trademark License Agreement, duly executed by the Contributee;

(f) the Property Lease Assignment Agreement, duly executed by SIP and Steadfast Management Company, Inc.;

(g) the assignment referred to in Section 2.2(d), duly executed by the Contributee;

(h) the Property Management Agreement, duly executed by SRS;

(i) the Transition Services Agreement, duly executed by SRS;

(j) a certificate of the Secretary of STAR, certifying as to:

(A) resolutions of the board of directors of STAR on behalf of STAR itself and as general partner of the Contributee authorizing the execution, delivery and performance of the Transaction Documents to which STAR and the Contributee, respectively, is a party, and

(B) the incumbency of any and all STAR officers, executing the Transaction Documents on behalf of STAR as the general partner of Contributee;

(k) a certificate of the Secretary of the general partner of the Contributee, certifying as to:

 

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(A) resolutions of the general partner of the Contributee and the limited partners, if necessary, authorizing the execution, delivery and performance of the Transaction Documents to which the Contributee is a party, and

(B) the incumbency of any and all officers of the general partner of the Contributee, executing the Transaction Documents on behalf of the Contributee;

(l) good standing certificates, dated not earlier than ten (10) days next preceding the Closing Date, for STAR and the Contributee, respectively, from their respective jurisdictions of incorporation, formation or organization;

(m) the Registration Rights Agreement, duly executed by STAR;

(n) the Operating Partnership Agreement, duly executed by STAR; and

(o) such other certificates, opinions, documents or instruments as may reasonably be requested of STAR and/or the Contributee by the Contributor, consistent with the terms of, and the transactions contemplated by, this Agreement.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR

Except as set forth in, or qualified by any matter set forth in, the Schedules (it being agreed that the disclosure of any matter in any section in the Schedules shall be deemed to have been disclosed in any other section in the Schedules to which the applicability of such disclosure is reasonably apparent), the Contributor represents and warrants to the Contributee as follows:

3.1 Organization and Good Standing of the Contributor and SRSH, SRS and STAR TRS. Each of the Contributor, SRSH and SRS is a limited liability company duly organized, validly existing, and in good standing under the Limited Liability Company Act of the State of Delaware as amended. STAR TRS is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Each of the Contributor, SRSH, SRS and STAR TRS is duly authorized to conduct its business and is in good standing under the applicable Laws of each jurisdiction where such qualification is required, except where the failure to be so qualified would not, individually or in the aggregate, have a Contributor Material Adverse Effect. Each of the Contributor, SRSH, SRS and STAR TRS has the requisite power and authority necessary to own or lease its properties and to carry on the Business as presently conducted. Each of the Contributor, SRSH, SRS and STAR TRS has delivered to STAR or the Contributee complete and correct copies of its Organizational Documents, as amended to date. Each of the Contributor, SRSH, SRS and STAR TRS is in compliance with its Organizational Documents. There is no pending or, to the Contributor’s Knowledge, threatened Action for the dissolution, liquidation or insolvency of the Contributor, SRSH, SRS or STAR TRS.

 

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3.2 Contributor Power and Authority; Enforceability. Each of the Contributor and its Affiliates has all requisite limited liability company power and authority to enter into each of the Transaction Documents to which it is a party and to consummate the transactions contemplated hereby or thereby. The execution and delivery of each of the Transaction Documents by the Contributor and its Affiliates and the consummation by the Contributor and its Affiliates of the transactions contemplated hereby or thereby have been duly authorized by all necessary limited liability company action on their respective parts. Each of the Transaction Documents has been, or upon execution and delivery will be, duly executed and delivered by the Contributor and its Affiliates, as applicable, and assuming the due authorization, execution and delivery of such Transaction Documents by the other Parties thereto, will constitute, the valid and binding obligations of the Contributor and its Affiliates, enforceable against the Contributor and Affiliates in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

3.3 No Conflicts; Required Consents. Except as provided in Schedule 3.3, the execution and delivery of the Transaction Documents by the Contributor and its Affiliates does not, and the performance by the Contributor and its Affiliates of the transactions contemplated hereby or thereby will not, (a) violate, conflict with, or result in any breach of any provision of their respective Organizational Documents, (b) violate, conflict with, or result in a violation or breach of, or constitute a default (with or without due notice or lapse of time or both) under, or permit the termination of, or result in the acceleration of, or entitle any Person to accelerate any obligation of the Contributor or its Affiliates, or result in the loss of any benefit, or give rise to the creation of any Encumbrance on any property or asset of SRSH, SRS or STAR TRS or otherwise used in the Business under any of the terms, conditions or provisions of any material instrument or obligation to which any property or asset of SRSH, SRS or STAR TRS or otherwise used in the Business may be bound or subject, or (c) violate any material Law applicable to the Contributor or its Affiliates or by which or to which any property or asset of SRSH, SRS or STAR TRS or otherwise used in the Business is bound or subject. Schedule 3.3 sets forth a complete and accurate list of each material consent, approval, waiver and authorization that is required to be obtained by any of the Contributor or its Affiliates from, and each material notice that is required to be made by any of the Contributor or its Affiliates, as applicable, to any Person in connection with the execution, delivery and performance by the Contributor and its Affiliates of this Agreement (the “Contributor Required Third Party Consents”).

3.4 Capitalization. The equity capitalization of SRSH, SRS and STAR TRS is as set forth on Schedule 3.4 hereto. Except as set forth on Schedule 3.4, there are no rights of any kind, written or oral, granted by the Contributor to acquire any interest in SRSH, SRS or STAR TRS.

3.5 Financial Statements; Absence of Changes or Events.

(a) Schedule 3.5 contains: the unaudited balance sheet of the Contributor and the Affiliates set forth on Schedule 3.5(a) as of June 30, 2020 (the “Contributor Financial Statements”). Except as set forth therein or in Schedule 3.5(a), the Contributor Financial Statements have been prepared in accordance with GAAP, applied on a basis consistent with Contributor’s prior practice, are consistent with Contributor’s books and records, and in all material respects present accurately and fairly the financial position of the Contributor and its subsidiaries as of their respective dates and for the respective periods covered thereby in accordance with GAAP; provided, however, that such unaudited balance sheet is subject to year-end adjustments, none of which are expected as of the date hereof to be material.

 

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(b) Except as set forth in Schedule 3.5(b), since June 30, 2020, each of the Contributor and its Affiliates as set forth in Schedule 3.5(b), SRSH, SRS and STAR TRS has conducted its Business only in the ordinary course of business, consistent with past practice. Without limiting the foregoing, since such date, with respect to the Business, there has not occurred a Contributor Material Adverse Effect.

(c) The Net Working Capital of the Business, as of the date of this Agreement, is $25,995.

3.6 Absence of Undisclosed Liabilities. Except as set forth in Schedule 3.6, each of SRSH, SRS and STAR TRS has no material obligation or Liability (whether known or unknown, accrued, absolute, contingent, unliquidated or otherwise, whether due or to become due and regardless of when asserted), other than (a) Liabilities set forth on the Liabilities side of the Contributor Financial Statements, (b) Liabilities which have arisen after June 30, 2020 in the ordinary course of business (none of which is a material Liability resulting from breach of Contract or violation of Law) and (c) Liabilities that are disclosed on any Schedule.

3.7 Compliance with Applicable Laws. Except as set forth in Schedule 3.7, (a) SRSH, SRS and STAR TRS possess, and each is in compliance in all material respects with, all Permits, approvals, franchises, Laws and registrations with Governmental Entities required to operate the Business and own, lease or otherwise hold the Contributed Assets under applicable Law; (b) Contributor, its Affiliates, SRSH, SRS and STAR TRS each has conducted the Business and are now doing so in compliance in all material respects with all applicable Laws; (c) all material Permits required for the conduct of the Business in the ordinary course of business, consistent with past practices, are in force and effect, and there are no Actions pending, or to the Contributor’s Knowledge threatened, that seek the revocation, cancellation, suspension or any adverse modification of any such Permits; and (d) as of the Closing Date, none of the Contributor, its Affiliates, SRSH, STAR TRS, or SRS have received any written notice of any investigation commenced or pending by any Governmental Entity with respect to SRSH, STAR TRS, SRS, the Business, or the Contributed Assets. The Permits included in the Contributed Assets constitute all of the Permits required for the Contributee to own and use the Contributed Assets and operate the Business in the ordinary course of business, consistent with past practices commencing the Effective Date.

3.8 Legal Proceedings. Except as set forth in Schedule 3.8, (a) there are no Actions pending, or to the Contributor’s Knowledge threatened, against the Contributor, SRSH, SRS, STAR TRS, the Business, or any material property or asset of SRSH, SRS or STAR TRS by or before any arbitrator or Governmental Entity with respect to the Business, nor is there any material investigation relating to SRSH, SRS, STAR TRS, any property or asset of SRSH, SRS or STAR TRS pending, or to the Contributor’s Knowledge threatened, by or before any arbitrator or Governmental Entity with respect to the Business; (b) there is no Order outstanding against SRSH, SRS or STAR TRS or affecting any property or asset of SRSH, SRS or STAR TRS relating in any way to the Business; and (c) there is no Action pending, or to the Contributor’s Knowledge threatened, against SRSH, SRS or STAR TRS with respect to the Business.

3.9 Real Property. None of SRSH, SRS or STAR TRS owns or leases any real property.

 

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3.10 Availability, Title to and Condition of Contributed Assets and the Convertible Shares.

(a) Other than with respect to assets, properties, and rights subject to the Property Lease Assignment Agreement, the Trademark Assignment Agreement and the Transition Services Agreement, the Contributed Assets constitute all the assets, properties, and rights necessary for the conduct of the Business in all material respects as presently conducted in the ordinary course of business, consistent with past practices. All of the material Personal Property used in the Business and included in the Contributed Assets, whether owned or leased, has been maintained in accordance with reasonable and customary business practice and is in good operating condition, ordinary wear and tear excepted. The Contributor has good and valid title to all Contributed Assets that it purports to own, free and clear of any Encumbrances. Except as set forth in Schedule 3.10, none of SRSH, SRS or STAR TRS is in default under any lease agreement for Personal Property included in the Contributed Assets to which such entity is a party.

(b) STAR Advisor is the sole lawful and beneficial owner of the Convertible Shares recorded in the name of STAR Advisor, and the Convertible Shares are free and clear of any Encumbrance whatsoever, except for any restrictions on transfer arising pursuant to the Securities Act, and the delivery to STAR of the Convertible Shares in the manner set forth in this Agreement will convey to STAR lawful, valid, and indefeasible title thereto, free and clear of any Encumbrance whatsoever, except for any restrictions on transfer arising pursuant to the Securities Act. The Convertible Shares are not subject to preemptive rights and have not been previously transferred, pledged, hypothecated or conveyed, and are not subject to purchase rights in favor of any other party.

3.11 Taxes. Except as set forth on Schedule 3.11:

(a) each of SRSH, SRS and STAR TRS has timely and properly filed all Tax Returns required to be filed by it (after giving effect to any filing extension properly granted by a Taxing Authority having authority to do so) and each such Tax Return is true, correct and complete in all material respects;

(b) each of SRSH, SRS and STAR TRS has paid all Taxes required to be paid by it, other than any such Taxes that are being contested in good faith;

(c) no deficiencies for any Taxes have been proposed, asserted, assessed or, to the knowledge of the Contributor, threatened against SRSH, SRS, STAR TRS, or any other Contributed Asset, and no requests for waivers of the time to assess any such Taxes are pending;

(d) there are no liens or encumbrances for Taxes (other than Taxes not yet due and payable or which are being contested in good faith) upon any of the Contributed Assets, and no action, proceeding or investigation has been instituted against the Contributor, SRSH, SRS or STAR TRS that would give rise to any such liens or encumbrance;

(e) each of the Contributor and its Affiliates, SRSH, SRS and STAR TRS has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, member or other third party, and all Forms W-2 and 1099 required with respect thereto have been properly completed and timely filed;

 

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(f) there are no pending or, to the knowledge of the Contributor, threatened audits, assessments or other actions for or relating to any liability in respect of income or material non-income Taxes of SRSH, SRS or STAR TRS, there are no matters under discussion with any Tax authority with respect to income or material non-income Taxes that are likely to result in an additional liability for Taxes with respect to SRSH, SRS or STAR TRS and none of SRSH, SRS or STAR TRS is, or has ever been, a party to or bound by any Tax indemnity agreement, Tax sharing agreement, tax allocation agreement or similar contract;

(g) any and all indebtedness assumed or treated as assumed, directly or indirectly, by the Contributor or its Affiliates pursuant to the transaction contemplated herein are “qualified liabilities” within the meaning of the Treasury Regulations Section 1.707(5(a)(5);

(h) each of SRSH, SRS and STAR TRS was formed in connection with the transactions contemplated hereby, and is not liable for the Taxes of another person as a transferee or successor, by operation of law, by contract or otherwise;

(i) The Contributee shall not become liable for the Taxes of another person as a transferee or successor, by operation of law, by contract or otherwise as a result of the contribution of the Contributed Assets to the Contributee;

(j) since its formation, for U.S. federal income Tax purposes, (i) each of the Contributor, SRSH and SRS has been treated as a partnership or a disregarded entity and not as a corporation or an association taxable as a corporation and will continue to be so treated immediately after the Closing, and (ii) STAR TRS has been treated as a corporation and will continue to be so treated immediately after the Closing;

(k) The Contributor has obtained from its own tax advisors advice regarding the tax consequences of (i) the transfer of the Contributed Assets to the Contributee and the receipt of Class B OP Units and cash as the consideration therefor, (ii) its admission as a limited partner of the Contributee, (iii) any other transaction contemplated by this Agreement and (iv) ownership of Class B OP Units, including the effect of Section 704(c) of the Code; and

(l) neither the Contributee nor STAR has made any representation to the Contributor regarding the tax treatment of the transactions contemplated by this Agreement, the Contributor further represents and warrants that it has not relied on the Contributee or STAR representatives or counsel for any tax advice.

3.12 Contracts. Schedule 3.12 contains a list of Contracts exceeding $10,000 in value necessary for the continued operation of the Business in the ordinary course of business, consistent with past practices immediately prior to the Closing (irrespective of whether SRSH, SRS or STAR TRS is a party thereto) (collectively, the “SRSH Contracts”). The Contributor has delivered to the Contributee a correct and complete copy of each written agreement listed in Schedule 3.12 and a written summary setting forth the terms and conditions of each oral agreement referred to therein. With respect to each SRSH Contract listed on Schedule 3.12, except as disclosed on Schedule 3.12, (i) the agreement is legal, valid, binding and in force and effect in accordance with its terms; (ii)

 

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SRSH, SRS and STAR TRS is not, and to the Contributor’s Knowledge, no other Person who or which is a party to a SRSH Contract listed on Schedule 3.12, is in breach or default, and no event has occurred (or is reasonably likely to occur) which with notice or lapse of time (or both) would constitute a breach or default, or permit termination, modification, or acceleration under, such SRSH Contract; (iii) to the Contributor’s Knowledge, no party to a SRSH Contract listed on Schedule 3.12 has repudiated or threatened to repudiate any provision of any such SRSH Contract; and (iv) the Contributee’s acquisition of the Contributed Assets at the Closing, effective as of the Effective Date, will not give rise to a material breach, default or violation by the Contributor, SRSH, SRS or STAR TRS of any SRSH Contract listed on Schedule 3.12 and will not require the consent or approval of any Third Party except as otherwise set forth on Schedule 3.12. Except as set forth on Schedule 3.12, there are no SRSH Contracts (A) relating to the acquisition or disposition of any business or operations (whether by merger, sale of equity interests, sale of assets, outsourcing or otherwise) with material ongoing obligations, (B) relating to a joint venture, partnership, strategic alliance, teaming, cooperation or similar Contract, (C) that is an employment agreement, or restricting the employment, of any Transferring Employee (other than offer letters for “at-will” employment that do not contain severance), (D) that limits or purports to limit (or that following Closing would limit) the ability of SRSH, SRS, STAR TRS and/or their respective Affiliates (i) to compete in any line of business, with any Person, in any geographic area or during any period of time or (ii) to solicit any customers or employees, (E) that grants any right of first refusal, right of first offer or option to acquire or similar right in respect of the Contributed Assets, (F) that contains any exclusivity restriction or a “most favored nation” clause, (G) that is a settlement agreement, assurance of discontinuance, consent agreement, or memorandum of understanding with respect to any Action, in each such case, with material continuing obligations thereunder or involving material injunctive or nonmonetary relief, (H) entered into with any Governmental Entity with continuing obligations thereunder, (I) to enter into any of the foregoing, or (J) otherwise necessary for the Business.

3.13 Employee Benefit Matters.

(a) Schedule 3.13(a) sets forth a list, as of the date of this Agreement, of each material Employee Plan, (other than offer letters for “at-will” employment that do not contain severance and that are substantially consistent with a form of offer letter listed on Schedule 3.13(a) and made available to Contributee pursuant to this Section 3.13(a), identifying each of such Employee Plans that are sponsored, maintained or contributed to SRSH, SRS or STAR TRS (each a “Transferring Employee Plan” and collectively, the “Transferring Employee Plans”). The Contributor has made available to the Contributee a current, accurate and complete copy (or, to the extent no such copy exists, an accurate description) of each such Transferring Employee Plan and, to the extent applicable: (i) any related trust agreement or other funding instrument; (ii) the most recent IRS determination letter, opinion letter or advisory letter, if applicable; (iii) any summary plan description; and (iv) for the three most recent years, the Form 5500 and attached schedules and audited financial statements.

(b) Following the Closing Date, except as otherwise provided in the Transition Services Agreement or in this Agreement, none of STAR or its Affiliates, SRSH, SRS or STAR TRS will have any Liability (i) with respect to any of the Employee Plans other than the Transferring Employee Plans, (ii) with respect to any Non-Transferring Employees, or (iii) with respect to any Transferring Employee Plans to the extent such Liability relates to any Non-Transferring Employee (or any of their respective dependents, spouses, or beneficiaries).

 

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(c) None of SRSH, SRS or STAR TRS, or any ERISA Affiliate has ever maintained, established, sponsored, participated in, or contributed to, or has ever had any Liability with respect to, any employee benefit plan that: (i) is subject to Title IV or Section 302 of ERISA or Section 412 of the Code; (ii) is a “multiemployer plan” within the meaning of Section 3(37) of ERISA; (iii) is a “multiple employer welfare arrangement” within the meaning of Section 3(40) of ERISA; (iv) is a “multiple employer plan” within the meaning of Section 413(c) of the Code; or (v) promises or provides retiree medical or other retiree welfare benefits to any Person other than as required under COBRA or other applicable legal requirements. No Employee Plan has ever been funded through a “welfare benefit fund” as defined in Code Section 419(e), and no benefits under any Employee Plan are or at any time have been provided through a voluntary employees’ beneficiary association (within the meaning of Code Section 501(c)(9)) or a supplemental unemployment benefit plan (within the meaning of Code Section 501(c)(17)).

(d) No actions, suits, or claims (other than routine claims for benefits in the ordinary course of business) are pending or, to the Knowledge of the Contributor, threatened with respect to any Employee Plan. No audit or investigation by the IRS, the DOL or other Governmental Entity is pending or, to the Knowledge of the Contributor, threatened with respect to any Employee Plan. Each Employee Plan has been maintained and administered in all material respects in compliance with its terms and the applicable provisions of ERISA, the Code and other applicable Laws. With respect to each Employee Plan that is intended to meet the requirements of a “qualified plan” under Code Section 401(a), the Employee Plan has received and is entitled to rely on a determination from the Internal Revenue Service that such Employee Plan is so qualified (or if it is a prototype plan, it has a favorable opinion letter; or if it is a volume submitter, it has a favorable advisory letter), the Contributor, SRSH, SRS, STAR TRS or the ERISA Affiliate (as applicable) has properly adopted such Employee Plan. No event or documentation defect with respect to any Employee Plan has occurred which would reasonably expected to cause such Employee Plan to become disqualified for purposes of Code Section 401(a). The Contributor and any member of its controlled group that maintains a “group health plan” within the meaning of Section 5000(b)(1) of Code has complied in all material aspects with the requirements of the Affordable Care Act and the notice and continuation requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle I of ERISA and the regulations thereunder. There have been no non-exempt “prohibited transactions” within the meaning of Section 4975 of the Code or Section 406 of ERISA and no breach of fiduciary duty has occurred with respect to any Employee Plans that would reasonably be expected to result in any material Liability to the Contributee or its Affiliates, SRSH, SRS or STAR TRS. None of the Employee Plans are subject to any Law or applicable custom or rule of any jurisdiction outside of the United States.

(e) All contributions and other payments required to be made at or before the Effective Date with respect to, or on behalf of, any Employee Plan, have been paid or accrued.

(f) Each Employee Plan that is a nonqualified deferred compensation plan within the meaning of Section 409A of the Code is either in material compliance with, or meets an exemption from, Section 409A of the Code.

 

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(g) Except as set forth in Schedule 3.13(g), neither the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated herein, either alone or in connection with any other event, will (i) entitle any Transferring Employee to any severance pay or any increase in severance pay upon any termination of employment or service after the date hereof under any Employee Plan, (ii) accelerate the time of payment or vesting or trigger any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable under, or trigger any other obligation pursuant to, any Transferring Employee Plan, or (iii) result in the payment of any “excess parachute payments” within the meaning of Section 280G of the Code. None of SRSH, SRS or STAR TRS have any Liability or are a party with respect to any gross-up provision or agreement in connection with Section 280G of the Code or excise Taxes under Section 409A or Section 4999 of the Code.

(h) Each Transferring Employee Plan (other than individual agreements that by their terms require consent of any amendment or termination) may be amended or terminated without the consent of the participants and without the imposition of any material additional liability or penalties upon STAR, the Contributee or their respective Affiliates, SRSH, SRS or STAR TRS (other than the obligation to pay accrued benefits and administrative costs, associated with such amendment or termination). None of the Contributor or its Affiliates, SRSH, SRS or STAR TRS has (i) announced its intention, made any amendment or any binding commitment, or given written or oral notice providing that it shall increase benefits under any Transferring Employee Plan, (ii) created or adopted any arrangement that would be considered an Transferring Employee Plan once established (other than the Transferring Employee Plans identified on Schedule 3.13(a), or (iii) agreed not to (or agreed to cause STAR, the Contributee or any STAR Affiliate not to) exercise any right or power to amend, suspend or terminate any Transferring Employee Plan.

3.14 Labor. Except as set forth on Schedule 3.14, (a) none of the Contributor, SRSH, SRS nor STAR TRS is, nor has ever been, a party to any collective bargaining agreement with respect to the Transferring Employees; (b) no application or petition for an election, or for certification, of a collective bargaining agent with respect to the Transferring Employees is pending; (c) there has not been in the three (3) years preceding the date of this Agreement, there is not presently pending or existing, and to the Contributor’s Knowledge, there is not threatened, any strike, slowdown, picketing or work stoppage or employee grievance process involving the Transferring Employees; (d) no Action is pending or, to the Contributor’s Knowledge, threatened against or affecting the Contributor, SRSH, SRS or STAR TRS, nor has there been any such actual or, to the Contributor’s Knowledge, threatened Action in the three (3) years preceding the date of this Agreement, relating to the alleged violation of any Law pertaining to labor relations by or with respect to any of the Transferring Employees, including any charge or complaint filed with the National Labor Relations Board, and there is no organizational activity or other labor dispute against or affecting the Contributor, SRSH, SRS or STAR TRS by or with respect to any of the Transferring Employees; and (e) there is no and has never been any lockout of any employees by the Contributor, SRSH, SRS or STAR TRS.

 

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3.15 Employees.

(a) All material payments of compensation, including wages, commissions, and bonuses, and related Taxes that were required to be made by the Contributor, SRSH, SRS or STAR TRS on or before the Closing Date were made or accrued in full as of such date with respect to, or on behalf of, any Transferring Employee in accordance with applicable Laws. As of the date hereof, there are no outstanding agreements, understandings or commitments of the Contributor or its Affiliates with respect to any compensation, including commissions and bonuses, or to modify the conditions or terms of employment or service, of any Transferring Employee except increases occurring in the customary practices or as reflected in such Transferring Employee’s “at will” offer letter, this Agreement and the Schedules hereto, or except for coverage under the Employee Plans or substantially similar plans, programs or arrangements, or except for any captive insurance arrangement.

(b) Except as listed on Schedule 3.15(b), as of the date hereof, (i) no Transferring Employees are on a leave of absence for any reason, including without limitation a leave of absence for short or long term disability or a leave of absence under the Family Medical Leave Act of 1993, as amended, or the Uniformed Services Employment and Reemployment Rights Act of 1994, as amended, and (ii) no Transferring Employee has given notice that he or she has planned a leave of absence that would commence after the Closing Date.

(c) Schedule 3.15(c) sets forth for each Transferring Employee the aggregate vacation, leave or other paid time-off (other than unlimited PTO) they have accrued but not used as of the Closing Date (together, “PTO”), and identifies each Transferring Employee entitled to unlimited PTO as of the Closing Date. The Contributor has properly accrued all such PTO on the Contributor Financial Statements, provided that accruals for those Transferring Employees entitled to unlimited PTO has been accrued solely at the grandfathered accrual level in effect at the date they converted to unlimited days (“Grandfathered PTO”). Except for such PTO and any unlimited PTO rights of Transferring Employees as listed on Schedule 3.15(c), no other PTO, vacation, or other paid leave obligations have been accrued by the Transferring Employees as of the Closing Date, whether directly by the Contributor or indirectly through its payroll service provider.

(d) Each of the Contributor and its Affiliates where any Transferring Employee was employed is, and has been for the three (3) years preceding the date of this Agreement, in compliance in all material respects with all Laws and Orders regarding the terms and conditions of employment or other labor related matters with respect to the Transferring Employees, including but not limited to Laws and Orders relating to discrimination, harassment, retaliation, fair labor standards, occupational health and safety, or wrongful discharge, whistleblower, accommodation or disability, leaves, immigration, pay equity, wages, hours, overtime, background checks, workers compensation, worker classification, collective bargaining, plant closing, and the payment and withholding of Taxes with respect to their employees. With respect to the Transferring Employees and any independent contractors who provide services to the Business, there are no, and there has not been for the three (3) years preceding the date of this Agreement, Actions pending or, to the Contributor’s Knowledge, threatened against the Contributor and its Affiliates, SRSH, SRS or STAR TRS relating to any Laws or Orders referenced in the foregoing sentence; alleging breach of any express or implied contract of employment, wrongful termination of employment or service; alleging any other discriminatory, wrongful or tortious conduct in connection with the employment or service relationship; in respect of which any director, officer, member, employee or agent may be entitled to claim indemnification from SRSH, SRS or STAR TRS; or any other employment-related matter arising under applicable Laws or Orders.

 

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(e) All Transferring Employees who have been classified as exempt under the FLSA have been properly classified and treated as such, and all Persons who have provided services in connection with the Business to SRSH, SRS or STAR TRS as independent contractors or consultants have been properly classified as independent contractors rather than employees.

(f) To Contributor’s Knowledge, all Transferring Employees who work in the United States are legally authorized to work in the United States. Each of the Contributor, SRSH, SRS or STAR TRS has completed and retained the necessary employment verification paperwork under the Immigration Reform and Control Act of 1986 (“IRCA”) for all such Transferring Employees.

(g) Except as disclosed on Schedule 3.15(g), as of the date hereof, none of the Contributor and its Affiliates where any Transferring Employee was employed, SRSH, SRS or STAR TRS has outstanding any commitment or agreement to increase the compensation payable, or to modify the conditions or terms of employment or service of, any Transferring Employee, or in accordance with existing agreements and changes required by applicable Law.

(h) Except as disclosed on Schedule 3.15(h), the execution, delivery and performance of this Agreement by the Contributor, the Contributee or STAR, alone or in combination with any other event, will not (i) constitute a triggering event that will result in any payment (whether of severance pay or otherwise) becoming due from SRS or any Employee Plan to or (ii) accelerate the time of payment or vesting or increase the amount of compensation due to, any Transferring Employee, or any independent contractor, officer, or director (or dependents of such Persons) of the Business.

(i) For the three (3) years preceding this Agreement, the Contributor and its Affiliates where any Transferring Employee was employed, STAR TRS, SRSH or SRS has complied in all material respects with the Worker Adjustment and Retraining Notification Act (“WARN Act”), and any applicable state mini-WARN Act, and they have no plans to undertake any action before or within three (3) months of the Closing Date that would trigger the WARN Act or any applicable mini-WARN Act

(j) To the Knowledge of the Contributor, in the three (3) years preceding this Agreement:

(A) no allegations of sexual harassment or sexual misconduct have been made involving any Transferring Employee; and

(B) none of the Contributor and its Affiliates where any Transferring Employee was employed, SRSH, SRS or STAR TRS entered into any settlement agreements related to allegations of sexual harassment or sexual misconduct by any Transferring Employee.

 

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3.16 Insurance.

(a) Schedule 3.16(a) accurately sets forth, with respect to each insurance policy maintained by, or at the expense of, or for the direct benefit of, SRSH, SRS, STAR TRS, the Business or the Contributed Assets: (i) the name of the insurance carrier that issued such policy and the policy number of such policy; (ii) whether such policy is a “claims made” or an “occurrences” policy; (iii) a description of the coverage provided by such policy and the material terms and provisions of such policy (including all applicable coverage limits, deductible amounts and co-insurance arrangements and any non-customary exclusions from coverage); (iv) the annual premium payable with respect to such policy, and the cash value (if any) of such policy; and (v) a description of any material claims pending, and any material claims that have been asserted since January 1, 2019, with respect to such policy or any predecessor insurance policy. Each of the policies identified in Schedule 3.16(a) is valid, enforceable and in force and effect and has been issued by an insurance carrier that is to the Contributor’s Knowledge solvent, financially sound and reputable. All of the information contained in the applications submitted in connection with said policies to the Knowledge of the Contributor was (at the times said applications were submitted) accurate and complete in all material respects, and to the Contributor’s Knowledge, all premiums and other amounts owing with respect to said policies were paid in full on a timely basis.

(b) Schedule 3.16(b) identifies each insurance claim made by the Contributor, its Affiliates, SRSH, SRS or STAR TRS in connection with the Business or the Contributed Assets since January 1, 2018. To Contributor’s Knowledge, except as set forth on Schedule 3.16(b), no event has occurred, and no condition or circumstance exists, that might (with or without notice or lapse of time) directly or indirectly give rise to or serve as a basis for any such insurance claim. The Contributor has not received: (i) any written notice or other communication from the applicable insurance carrier regarding the actual or possible cancellation or invalidation of any of the policies identified in Schedule 3.16(b); (ii) any written notice or other communication from the applicable insurance carrier regarding any actual or possible refusal of coverage under, or any actual or possible rejection of any claim under, any of the policies identified in Schedule 3.16(b); or (iii) any written indication from the issuer of any of the policies identified in Schedule 3.16(b) that it may be unwilling or unable to perform any of its obligations thereunder.

3.17 Subsidiaries. Except for its direct or indirect ownership interests in SRS and STAR TRS, SRSH does not directly or indirectly own any equity or similar interest in, or any interest convertible into, or exchangeable or exercisable for, any equity or similar interest in, any limited liability company, corporation, partnership, joint venture or other business entity that is necessary for the conduct of the Business.

3.18 Intellectual Property.

(a) Schedule 3.18(a) lists each Mark in the operation of the Business in the ordinary course of business, consistent with past practices. To Contributor’s Knowledge, unless otherwise set forth on Schedule 3.18(a), all such Marks (i) have been registered with the United States Patent and Trademark Office or with a corresponding state office, (ii) are currently in compliance in all material respects with all formal legal requirements (including the timely post-registration filing of affidavits of use and incontestability and renewal applications), (iii) are valid and enforceable, and (iv) not subject to any Actions or maintenance fees or Taxes that are or will become due within 90 days after the Closing Date. To Contributor’s Knowledge, no Mark listed on Schedule 3.18(a) and except as otherwise described on such Schedule 3.18(a) has been, or is now involved in any pending Action that opposes or seeks invalidation or cancellation of any such Mark, and to the Contributor’s Knowledge without independent investigation, no such Action is threatened. To the Contributor’s Knowledge, all products and materials used by the Contributor and its Affiliates in connection with the Business and containing one or more of the Marks bear any legal notice required by applicable Law, except where the failure to do so would not have a Contributor Material Adverse Effect.

 

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(b) Schedule 3.18(b) lists each Domain Name used by the Contributor and its Affiliates, SRSH, SRS or STAR TRS in the operation of the Business in the ordinary course of business, consistent with past practices. To Contributor’s Knowledge, all Domain Names listed on Schedule 3.18(b) that have been registered are (i) currently in compliance in all material respects with all formal legal requirements, (ii) valid and enforceable, and (iii) not subject to any Actions or maintenance fees or Taxes that are or will become due within 90 days after the Closing Date.

(c) The Contributor, its Affiliates, STAR TRS, SRSH and SRS, as applicable, owns or has the right to use pursuant to Contract or otherwise all Intellectual Property necessary to operate the Business in the ordinary course of business, consistent with past practices immediately prior to the Closing. Each such item of Intellectual Property that is used by the Contributor, its Affiliates, SRSH, SRS and STAR TRS in the operation of the Business will be owned or available for use by the Contributee on or immediately after the Effective Date on the same material terms and conditions. To Contributor’s Knowledge, it has taken all reasonably necessary action to maintain and protect each such item of Intellectual Property included in the Contributed Assets, except where the failure do so would not have a Contributor Material Adverse Effect.

(d) The Contributor has delivered to the Contributee copies of all written documentation in its possession that evidences the ownership (or other right to use), the right to maintain and prosecute (if applicable), and support, each item of Intellectual Property used by the Contributor, its Affiliates, SRSH, SRS or STAR TRS in the operation of the Business. With respect to each such item of Intellectual Property, to the Contributor’s Knowledge: (i) Contributor and its Affiliates possesses all right, title, and interest in and to the item, free and clear of any Encumbrance; (ii) each item is not subject to any outstanding Order; (iii) no Action is pending, or threatened (and there is no basis therefor), which challenges the enforceability, use, or ownership of the item; and (iv) except as set forth on Schedule 3.18(d)(iv), none of the Contributor, SRSH, SRS or STAR TRS has agreed to indemnify any Person for, or against, any interference, infringement, misappropriation, or other conflict with respect to each such item.

(e) There is no pending or, to Contributor’s Knowledge, threatened claim or litigation against Contributor, its Affiliates, SRSH, SRS or STAR TRS relating to the Intellectual Property included in the Contributed Assets. To Contributor’s Knowledge, no Person is infringing, misappropriating, diluting or violating any Intellectual Property used in the operation of the Business.

(f) Contributor and its Affiliates have, to the extent possible, each taken reasonable security measures to protect the secrecy, confidentiality and value of all Trade Secrets protectable under applicable trade secrets Laws and embodied in the Intellectual Property.

3.19 Brokers, Finders and Advisors. None of the Contributor nor any of its Affiliates has entered into any agreement resulting in, or which will result in, any of SRSH, SRS or STAR TRS having any obligation or liability as a result of the execution and delivery of this Agreement, or the consummation of the Transactions, for any brokerage, finder or advisory fees or charges of any kind whatsoever, except that the Contributor has employed SunTrust Robinson Humphrey, Inc., the fees and expenses in respect of which shall be included in the Contributor’s transaction expenses and be payable by the Contributor in accordance with Section 8.12.

 

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3.20 Environmental Liability. There are no pending legal, administrative, arbitral or other proceedings, or, to the Knowledge of the Contributor, claims, actions, causes of action, private environmental investigations or remediation activities or governmental investigations of any nature seeking to impose, or that are reasonably likely to result in the imposition, on Contributor, SRSH, SRS or STAR TRS, of any liability or obligation arising under common law or under any local, state or federal environmental statute, regulation or ordinance pending or threatened against the Contributor, SRSH, SRS or STAR TRS. None of the Contributor, SRSH, SRS or STAR TRS is subject to any agreement, order, judgment, decree, letter or memorandum by or with any Governmental Entity or third party imposing any liability or obligation with respect to the foregoing.

3.21 Securities Law Matters; Transfer Restrictions.

(a) The Contributor acknowledges that the Contributee intends the offer and issuance of the Class B OP Units to be exempt from registration under the Securities Act and applicable state securities Laws by virtue of (i) the status of the Contributor as an “accredited investor” within the meaning of the federal securities Laws, and (ii) Regulation D promulgated under Section 4(a)(2) of the Securities Act (“Regulation D”), and that the Contributee will rely in part upon the representations and warranties made by the Contributor in this Agreement in making the determination that the offer and issuance of the Class B OP Units qualify for exemption under Rule 506 of Regulation D as an offer and sale only to “accredited investors.”

(b) The Contributor is an “accredited investor” within the meaning of the federal securities Law, particularly Regulation D.

(c) The Contributor will acquire the Class B OP Units for its own account and not with a view to, or for sale in connection with, any “distribution” thereof within the meaning of the Securities Act. The Contributor does not intend or anticipate that Contributor will rely on this investment as a principal source of income.

(d) The Contributor has sufficient knowledge and experience in financial, Tax, and business matters to enable it to evaluate the merits and risks of investment in the Class B OP Units. The Contributor has the ability to bear the economic risk of acquiring the Class B OP Units. The Contributor acknowledges that (i) the transactions contemplated by this Agreement involve complex Tax consequences for Contributor and that the Contributor is relying solely on the advice of the Contributor’s own Tax advisors in evaluating such consequences; (ii) the Contributee has not made (nor shall it be deemed to have made) any representations or warranties as to the Tax consequences of such transaction to the Contributor; and (iii) references in this Agreement to the intended Tax effect of the transactions contemplated hereby shall not be deemed to imply any representation by the Contributee as to a particular Tax effect that may be obtained by the Contributor. The Contributor remains solely responsible for all Tax matters relating to the Contributor.

 

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(e) The Contributor has been supplied with, or had access to, information to which a reasonable investor would attach significance in making an investment decision to acquire the Class B OP Units and any other information the Contributor has requested. The Contributor has had an opportunity to ask questions of, and receive information and answers from, the Contributee and STAR concerning the Contributee, STAR, the Class B OP Units, the contribution of the Contributed Assets and the shares of STAR common stock into which the Class B OP Units may be exchanged, and to assess and evaluate any information supplied to the Contributor by the Contributee or STAR, and all such questions have been answered, and all such information has been provided to the satisfaction of the Contributor.

(f) The Contributor acknowledges that it is aware that there are substantial restrictions on the transferability of the Class B OP Units and that the Class B OP Units will not be registered under the Securities Act or any state securities Laws, and the Contributor has no right to require that they be so registered. The Contributor agrees that any Class B OP Units it acquires will not be sold in the absence of registration unless such sale is exempt from registration under the Securities Act and applicable state securities Laws. The Contributor acknowledges that Contributor shall be responsible for compliance with all conditions on transfer imposed by any Governmental Entity or self-regulatory entity administering the securities Laws and for any expenses incurred by the Contributee for legal or accounting services in connection with reviewing a proposed transfer or issuing opinions in connection therewith.

(g) The Contributor understands that no Governmental Entity (including the United States Securities and Exchange Commission (the “SEC”)) has made, or will make, any finding or determination as to the fairness of an investment in the Class B OP Units.

(h) The Contributor understands that there is no established public, private or other market for the Class B OP Units to be issued to the Contributor hereunder, and it is not anticipated that there will be any public, private or other market for such Class B OP Units in the foreseeable future.

(i) The Contributor understands that Rule 144 promulgated under the Securities Act is not currently available with respect to the sale of Class B OP Units.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTEE AND STAR

Except as set forth in, or qualified by any matter set forth in, the Schedules (it being agreed that the disclosure of any matter in any section in the Schedules shall be deemed to have been disclosed in any other section in the Schedules to which the applicability of such disclosure is reasonably apparent), the Contributee and STAR, jointly and severally, represent and warrant to the Contributor, as follows:

4.1 Organization and Related Matters. Each of the Contributee and STAR is a limited partnership or corporation, respectively, duly organized or incorporated, validly existing and in good standing under the Laws of its jurisdiction of organization or incorporation. Each of Contributee and STAR is duly authorized to conduct its business and is in good standing under the applicable Law of each jurisdiction where such qualification is required, except where the failure to be so qualified would not, individually or in the aggregate, have a STAR Material Adverse Effect. Each of the Contributee and STAR has all necessary limited partnership or corporate power and authority to carry on its business as presently conducted.

 

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4.2 Authority. Each of the Contributee and STAR has all requisite limited partnership or corporate power and authority to enter into each of the Transaction Documents to which the Contributee and STAR is a party and to consummate the transactions contemplated hereby or thereby. The execution and delivery of each of the Transaction Documents by the Contributee and STAR and the consummation by the Contributee and STAR of the transactions contemplated hereby or thereby have been duly authorized by all necessary limited partnership or corporate action on the part of the Contributee and STAR, respectively. Each of the Transaction Documents has been, or upon execution and delivery will be, duly executed and delivered and constitute, or upon execution and delivery will constitute, the valid and binding obligations of the Contributee and STAR, enforceable against the Contributee and STAR in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

4.3 No Conflicts; Required Consents. Except as provided in Schedule 4.3, the execution and delivery of the Transaction Documents by the Contributee and STAR do not, and the performance by the Contributee and STAR of the transactions contemplated hereby or thereby will not, (a) violate, conflict with, or result in any breach of any provision of the Contributee’s and STAR’s respective Organizational Documents, (b) violate, conflict with, or result in a violation or breach of, or constitute a default (with or without due notice or lapse of time or both) under, or permit the termination, or result in the acceleration, of, or entitle any party to accelerate, any obligation of the Contributee and STAR, or result in the loss of any benefit, or give rise to the creation of any Encumbrance on any property or asset of the Contributee or STAR under any of the terms, conditions or provisions of any material instrument or obligation to which any property or asset of the Contributee or STAR may be bound or subject, or (c) violate any Law applicable to the Contributee or STAR or by or to which any property or asset of the Contributee or STAR is bound or subject, except, in each case of clause (b) or (c), which, individually or in the aggregate, would not have a STAR Material Adverse Effect. Schedule 4.3 sets forth a complete and accurate list of each material consent, approval, waiver and authorization that is required to be obtained by the Contributee and STAR from, and each material notice that is required to be made by the Contributee and STAR to, any Person in connection with the execution, delivery and performance by the Contributee and STAR of this Agreement (the “STAR Required Third Party Consents”).

4.4 Issuance of Units. The Class B OP Units, when issued and delivered in compliance with the provisions of this Agreement, will be duly authorized, validly issued, fully paid and, except as provided in the Operating Partnership Agreement and except as affected by Section 17-607 of the Delaware Revised Uniform Limited Partnership Act, non-assessable. The Class B OP Units, at the time of issuance, will be free of any Encumbrances; provided, however, that the Class B OP Units are subject to restrictions on transfer under federal and state securities Laws and as otherwise set forth in the Contributee’s Limited Partnership Agreement. The Class B OP Units will not be issued in violation of any preemptive rights or rights of first refusal granted by STAR or the Contributee.

 

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4.5 Tax Status of the Contributee. The Contributee has at all times during its existence been properly treated as either a “disregarded entity” or a partnership for federal income tax purposes and not as an association or publicly traded partnership taxable as a corporation for such purposes.

4.6 REIT Status. STAR elected to be treated as a REIT for federal income tax purposes beginning with its taxable year ended December 31, 2014. Commencing with such taxable year, STAR has at all times been organized and operated in such a manner so as to qualify for taxation as a REIT under the Code, and its current and proposed method of operation is expected to enable it to continue to meet the requirements for qualification as a REIT.

4.7 Legal Proceedings. Except as set forth on Schedule 4.7, there are no Actions pending, or to the Knowledge of STAR or the Contributee threatened, against the Contributee or STAR, their respective businesses or any of their respective material properties or assets by, or before any arbitrator or Governmental Entity, and there are no investigations relating to the Contributee or any property or asset of the Contributee pending, or to the Knowledge of STAR or the Contributee threatened, by or before any arbitrator or Governmental Entity, in each case which would reasonably be expected to have a STAR Material Adverse Effect. There is no Order of any Governmental Entity or arbitrator outstanding against the Contributee or STAR or any property or asset of the Contributee or STAR which would reasonably be expected to have a STAR Material Adverse Effect. There is no Action pending, or to the Knowledge of STAR or the Contributee threatened, against the Contributee or STAR that in any way relates to the Contributed Assets or the transactions contemplated by this Agreement, including without limitation any such Action seeking to enjoin in any way the consummation thereof.

4.8 Disclosure. Each of the Contributee and STAR has fully provided Contributor with all the information that the Contributor has requested for deciding whether to acquire the Class B OP Units. Neither this Agreement (including all the exhibits and schedules hereto) nor any other statements or certificates made or delivered in connection with the offering or issuance of the Class B OP Units pursuant hereto contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading in light of the circumstances under which they were made.

4.9 Brokers, Finders and Advisors. None of the Contributee nor STAR has entered into any agreement resulting in, or which will result in, Contributee or STAR having any obligation or liability as a result of the execution and delivery of this Agreement, or the consummation of the Transactions, for any brokerage, finder or advisory fees or charges of any kind whatsoever, except that the Contributee has employed Robert A. Stanger & Co., Inc., the fees and expenses in respect of which shall be included in the Contributee’s transaction expenses and be payable by the Contributee in accordance with Section 8.12.

 

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ARTICLE 5

COVENANTS

5.1 Covenants Against Disclosure.

(a) Except as may be required by Law, the Contributor shall not, and shall not permit its Affiliates to (i) disclose to any Person in any manner, directly or indirectly, any confidential information or data, whether of a technical or commercial nature, the ownership of which is transferred to the Contributee pursuant to this Agreement, or (ii) use, or permit or assist, by acquiescence or otherwise, any Person to use, in any manner, directly or indirectly, any such information or data, except to the extent that Contributor or such Affiliates have retained rights therein as provided herein and excepting disclosure of such data or information as is at the time generally known to the public or otherwise in the public domain and which did not become so generally known or a part of the public domain through any breach of any provision of this Section 5.1(a) hereof by the Contributor.

(b) The initial press release and public disclosures, including a Form 8-K to be filed with the SEC by STAR, relating to this Agreement and the transactions contemplated herein shall be made solely by STAR; provided, however, that STAR shall provide Contributor a reasonable period of time to review and comment on such press release and disclosures, and in good faith take into account any comment made by the Contributor during such period; provided further, however, that the Parties shall be permitted to make any public disclosures regarding this Agreement or the transactions contemplated hereby that are necessary to fulfill public disclosure requirements of any Governmental Entity or required to be made by applicable Law or Order.

5.2 Notification of Certain Matters. Following the Closing, except as prohibited by Law, each of the Contributor, STAR, and the Contributee shall promptly notify the other parties in writing of:

(a) any inaccuracy of any representation or warranty contained in this Agreement, provided, however, that obligations under this Section 5.2(a) shall expire on that date that is forty-five (45) days after the completion of the first full calendar year audit of STAR following the Closing, other than as relates to Section 3.1, Section 3.2, Section 3.4 and Section 3.11, which obligation shall expire as set forth in Section 7.4 herein;

(b) the failure of such party to perform in any material respect any obligation to be performed by it under this Agreement, provided, however, that obligations under this Section 5.2(b) shall expire on that date that is forty-five (45) days after the completion of the first full calendar year audit of STAR following the Closing;

(c) any notice or other communication from any person alleging that notice to or consent of such person is required in connection with the transactions contemplated by this Agreement;

(d) any notice or other communication from any counterparty of STAR to the effect that such counterparty is, or is contemplating, terminating or otherwise materially adversely modifying its relationship with STAR as a result of the transactions contemplated by this Agreement;

(e) any material notice or other material communication from any Governmental Entity in connection with the transactions contemplated by this Agreement;

 

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(f) any filing or notice made by such party with any Governmental Entity in connection with the transactions contemplated by this Agreement;

(g) any actions, suits, claims, investigations or proceedings commenced or, to the knowledge of such Party, threatened against, relating to or involving or otherwise affecting such Party or SRS or STAR TRS that relate to the transactions contemplated by this Agreement; and

(h) the occurrence of any matters or events that individually or in the aggregate would be reasonably likely to result in the failure to complete the transactions contemplated by this Agreement.

5.3 Tax Matters.

(a) Tax Returns.

(A) The Contributee shall prepare and timely file all Tax Returns of STAR TRS and SRS for any Pre-Closing Tax Periods that are due after the Closing Date, the Contributor shall remit or cause to be remitted any Taxes due in respect of such Pre-Closing Tax Periods. To the extent that such returns related to a Pre-Closing Tax Period, such Tax Returns shall be prepared in a manner consistent with past practice, except as otherwise required by law. For the avoidance of doubt, the Contributee will have authority to sign any Tax Returns relating to STAR TRS and SRS that are filed after the Closing Date.

(B) The Contributee shall prepare and timely file all Tax Returns of STAR TRS and SRS for all taxable periods other than the Pre-Closing Tax Periods, and the Contributee shall remit or cause to be remitted any Taxes due in respect to such taxable periods.

(b) Except as otherwise provided herein, the Contributor shall be liable for, and shall pay any transfer Taxes or other similar Tax customarily imposed on a contributor in an asset contribution transaction, and the Contributee shall be liable for, and shall pay any transfer Taxes or other similar Tax customarily imposed on a contributee in an asset contribution transaction, that are imposed in connection with the transfer of the Contributed Assets pursuant to this Agreement and each shall timely file all Tax Returns required with respect thereto.

(c) The Contributor and the Contributee shall cooperate, to the extent reasonably requested by the other Party, in connection with the preparation and filing of Tax Returns and any audit, Action, or other proceeding involving Taxes. Cooperation shall include the retention and, upon the other Party’s request, the provision of records and other information reasonably relevant to the preparation of a Tax Return or the conduct of an audit, litigation, or other proceeding. The Contributee shall promptly notify Contributor upon receipt by the Contributor or its Affiliates of notice of (i) any pending or threatened Tax audits or assessments with respect to the income, properties or operations of STAR TRS, SRS or any other Contributed Assets and (ii) any pending or threatened federal, state, local or foreign Tax audits or assessments of the Contributee or its Affiliates, in each case, which may affect the liabilities for Taxes of the Contributor with respect to any Tax period ending on or before the Closing Date. The Contributor

 

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shall promptly notify the Contributee in writing upon receipt by the Contributor or its Affiliates of notice of any pending or threatened federal, state, local or foreign Tax audits or assessments relating to the income, properties or operations of STAR TRS, SRS or any other Contributed Assets. Each of the Contributee the Contributor may participate at its own expense in the prosecution of any claim or audit with respect to Taxes attributable to any taxable period ending on or before the Closing Date; provided that Contributor shall have the right to control the conduct of any such audit or proceeding or portion thereof for which such the Contributor has acknowledged liability (except as a partner of the Contributee) for the payment of any additional Tax liability, and the Contributee shall have the right to control any other audits and proceedings. Notwithstanding the foregoing, neither the Contributee nor Contributor may settle or otherwise resolve any such claim, suit or proceeding which could have an adverse Tax effect on the other party or its affiliates (other than on Contributor as a partner of the Contributee) without the consent of the other party, such consent not to be unreasonably withheld. The Contributor and the Contributee shall retain all Tax Returns, schedules and work papers with respect to STAR TRS, SRS or any other Contributed Assets, and all material records and other documents relating thereto, until the expiration of the statute of limitations (and, to the extent notified by any party, any extensions thereof) of the taxable years to which such Tax Returns and other documents relate and until the final determination of any Tax in respect of such years.

5.4 Employee Matters.

(a) Transferring Employees. The Contributor shall cause the employment of those individuals set forth on Schedule 5.4(a) (the “Transferring Employees”) to be transferred to SRS on or prior to the Closing. STAR or the Contributee shall cause to be provided to the Transferring Employees while employed during the period commencing on the Effective Date through the first anniversary thereof (i) at an annual base salary or wage level, as applicable, and bonus or commission opportunity that is substantially comparable to the annual base salary or wage level, as applicable, and bonus or commission opportunity provided to each such Transferring Employee immediately prior to the Closing Date and as reflected in SRS’s budget as of immediately prior to the Closing Date, and (ii) employee benefits that are substantially comparable in the aggregate to those provided to each such Transferring Employee immediately prior to the Closing Date; provided, however, that nothing in this Agreement shall be deemed to limit the right of SRS or an Affiliate thereof to terminate the employment of any Transferring Employee at any time or construed as altering the at-will nature of any Transferring Employee’s employment; and provided further that nothing in this Agreement shall be deemed to limit the right of STAR or its Affiliates to change, modify, or terminate any employee benefit plan or arrangement in accordance with its terms. At the time of the Closing or immediately thereafter, the Contributor shall cause all personnel files, including but not limited to all records relating to immigration, benefits, payroll, personnel actions, and accommodations relating to Transferring Employees to be transferred to SRS, or to a separate data location designated by STAR or an Affiliate thereof; provided Contributee and STAR agree to make such files available to Contributor as reasonably requested.

 

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(b) Liabilities with Respect to Transferring Employees. The Parties agree that, subject to Section 6.3 below, the Contributor and its Affiliates (other than SRSH, SRS or STAR TRS) shall be solely responsible for, and shall satisfy all obligations, claims and Liabilities accrued (or, as applicable, relating to claims incurred) prior to the Closing (or, as it relates to bonuses for the 2020 calendar year, for the period prior to the Closing) relating to the Transferring Employees, including but not limited to (i) payroll and fringe benefits, (ii) earned bonuses, bonuses for the 2020 calendar year for the period prior to the Closing, and earned incentive compensation, (iii) workers’ compensation, (iv) premiums under insured employee benefit plans or claims incurred under non-insured employee benefit plans and (v) Grandfathered PTO, but not other accrued PTO. Conversely, subject to the terms of the preceding sentence and Section 6.3 below, SRS or an Affiliate thereof shall be solely responsible for, and shall satisfy all such obligations and Liabilities accrued (or, as applicable, relating to claims incurred) at or after the Closing relating to the Transferring Employees. For clarity, a claim or expense shall be deemed to have been incurred as follows: (A) for health, dental and prescription drug claims (including continuous hospitalization), upon provision of each such service, (B) for life, accidental death and dismemberment and business travel accident insurance claims, upon the death or accident giving rise to such claims, and (C) for short-term and long-term disability claims, upon the date of an individual’s disability, as determined by the disability benefit insurance carrier or claim administrator, giving rise to such claim or expense.

(c) 401(k) Plans.

(A) Establishment of Plan. Prior to the Closing, the Contributor shall cause SRS to establish a defined contribution retirement plan (the “SRS 401(k) Plan”) and a related trust, which will be intended to meet the qualification requirements of Section 401(a) of the Code (including under Sections 401(k) and (m) of the Code). The SRS 401(k) Plan will contain substantially the same terms as the Steadfast 401(k) Plan and it will become effective as of Closing. The Contributor shall continue to process and deposit, or shall cause to be processed and deposited, to the Steadfast 401(k) Plan all salary deferrals elected by Transferring Employees with respect to their eligible compensation with Contributor or its Affiliates through the Closing. The Contributor shall also be responsible for timely making, or causing to be made, all employer contributions (including matching contributions) to the Steadfast 401(k) Plan on behalf of Transferring Employees with respect to their eligible compensation with Contributor or its Affiliates through the Closing, consistent with similarly-situated employees of the Contributor or its Affiliates who are not Transferring Employees and consistent with past practice [and disregarding any requirement that any such Transferring Employee be employed on the last day of the plan year]. Transferring Employees who were participants in the Steadfast 401(k) Plan immediately prior to the Closing shall be eligible to become participants in the SRS 401(k) Plan effective as of Closing and, except with respect to their accrued account balances as of the Closing and any contributions to be made by SRS or an Affiliate thereof after Closing with respect to services and compensation relating to the pre-Closing period, the Transferring Employees shall cease to participate in the Steadfast 401(k) Plan as of Closing.

 

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(B) Transfer of Account Balances. Following the Closing, the Parties shall reasonably cooperate with each other to take all steps necessary to spin off or transfer, in accordance with applicable Law, the accounts (including any outstanding promissory note held as an asset) of Transferring Employees from the Steadfast 401(k) Plan to the SRS 401(k) Plan. Such transfers will be made in kind, including promissory notes evidencing the transfer of outstanding loans. The Contributor and SRS shall take any action necessary to prevent the transactions contemplated by this Agreement from triggering a default of any Transferring Employee’s outstanding participant loan under the Steadfast 401(k) Plan. Any asset and Liability transfers pursuant to this Section 5.4(c)(B) will comply in all respects with Sections 414(l) and 411(d)(6) of the Code, as amended to the date hereof and from time to time hereafter, and any successor statute.

(C) Plan Fiduciaries. For all periods on and after the Closing, the Parties agree that the fiduciaries of the SRS 401(k) Plan will have the authority with respect to the SRS 401(k) Plan and the fiduciaries of the Steadfast 401(k) Plan will have the authority with respect to the Steadfast 401(k) Plan, respectively, to determine the investment alternatives, the terms and conditions with respect to those investment alternatives and such other matters as are within the scope of their duties under ERISA and the terms of the applicable plan documents.

(D) Limitation of Liability. None of STAR or its Affiliates, SRSH, STAR TRS or SRS shall have any Liability for any failure of the Steadfast 401(k) Plan to be administered in accordance with its terms and applicable Law, the Contributor and its Affiliates (other than SRSH, SRS or STAR TRS shall have no Liability for any failure of the SRS 401(k) Plan to be administered in accordance with its terms and applicable Law.

(d) TSA Employee Plans. Effective at Closing through December 31, 2020, the Contributor shall cause SRS to become a participating employer in the Employee Plans identified on Schedule 5.3(d) (the “TSA Employee Plans”). The Contributor agrees to cooperate in good faith to provide SRS or an Affiliate thereof to provide such reports and other information as may be reasonably requested by SRS or an Affiliate thereof regarding the Transferring Employees and their participation in the Employee Plans, as permitted by applicable Law, including information needed for SRS or an Affiliate thereof to satisfy its reporting obligations under the Patient Protection and Affordable Care Act, as amended. Except as otherwise provided in the Transition Services Agreement, the Contributor and its Affiliates (other than SRSH, SRS or STAR TRS) shall be solely responsible for, and shall satisfy and indemnify and hold harmless each Contributee Indemnified Party in accordance with Article 7 from, all obligations, claims and Liabilities relating to the TSA Employee Plans.

(e) Flexible Spending Accounts. As of the Closing, SRS shall establish a flexible spending account plan under Section 125 of the Code, assume all outstanding elections and account balances of Transferring Employees, and be solely responsible for all Liabilities with respect to Transferring Employees in such flexible spending account plan (the “FSA Plan”). In the event that the aggregate amount withheld from the Transferring Employees’ compensation with respect to the FSA Plan exceeds the amount reimbursed to them, the Contributor shall remit such excess amount to SRS. In the event that the aggregate amount withheld from Transferring Employees compensation with respect to the FSA Plan is less than the amount reimbursed to them, SRS shall remit to Contributor the amount of the unfunded reimbursements.

 

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(f) COBRA. To the extent applicable to the employee, (i) Contributor or one or more of its Affiliates (other than SRSH, SRS or STAR TRS) shall be responsible for providing continuation group health plan coverage in accordance with the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) to each current or former employee of the Contributor or its Affiliates (excluding Transferring Employees) who did not perform services for the benefit of the Business, and each spouse or dependent thereof, who qualifies as a “qualified beneficiary” or “M&A qualified beneficiary” (both, as defined by COBRA) at any time before Closing, and (ii) SRS, or an Affiliate thereof shall be responsible for providing COBRA continuation group health plan coverage to each Transferring Employee, and each former employee who performed services for the benefit of the Business, and each spouse or dependent thereof, who qualifies as a “qualified beneficiary” or “M&A qualified beneficiary” (both, as defined by COBRA) at any time on or after Closing.

(g) PTO. Prior to the Closing, the Contributor shall pay, or cause to be paid, all Transferring Employees any Grandfathered PTO to which they are entitled and shall transfer all PTO liabilities other than Grandfathered PTO to SRS or an Affiliate thereof, subject to Section 6.3 below. Until at least the end of the first calendar year commencing after the Effective Date, SRS or an Affiliate shall continue to allow Transferring Employees to use such PTO (other than Grandfathered PTO) and to accrue additional paid time off in accordance with Contributor’s PTO policy as in effect immediately prior to the Closing Date.

(h) Service Credit. SRS shall credit any service by Transferring Employees to SRS or an Affiliate thereof, or otherwise recognized for Assumed Employee Plan purposes, as of immediately prior to the Closing for all purposes, including eligibility, vesting, determining the amount of payments and benefits and determining the number of vacation days to which each such employee shall be entitled following the Closing and for determining severance, in each case to the same extent recognized under the corresponding Employee Plan as of immediately prior to the Closing, except to the extent such credit would result in a duplication of benefits for the same period of service.

(i) Payroll and Related Taxes. SRS shall be responsible for all payroll obligations, Tax withholding and reporting obligations, and associated government audit assessments and shall furnish a Form W-2 or similar earnings statement, in each case, for all Transferring Employees with respect to the 2020 calendar year and when administering payroll taxes for the 2020 year shall take such action necessary to avoid the restart of FICA and FUTA wage base. The Contributor agrees to cooperate in good faith to provide SRS or an Affiliate thereof with such reports and other information as may be reasonably requested by SRS or an Affiliate thereof regarding the Transferring Employees, as permitted by applicable Law, to assist SRS or an Affiliate thereof in satisfying its reporting obligations under this Section 5.4(i).

(j) This Section 5.4 shall be binding upon and inure solely to the benefit of each of the Parties to this Agreement, and nothing in this Section 5.4 shall confer upon any Transferring Employee, or any legal representative or beneficiary thereof, any rights or remedies, including any right to employment or continued employment for any specified period, or compensation or benefits of any nature or kind whatsoever under this Agreement. Nothing in this Section 5.4, express or implied, shall be deemed an amendment of any plan providing benefits to any Transferring Employee or as altering the at-will nature of any Transferring Employee’s employment.

 

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5.5 Required Third Party Consents. From and after the Closing, the Contributor shall cooperate with the Contributee and STAR and shall take all steps reasonably necessary to obtain each of the Contributor Required Third Party Consents and STAR Required Third Party Consents not obtained prior to the Closing Date; provided, that Contributor shall not be required to pay any amounts or provide other consideration to any third party in obtaining any such consents.

5.6 Reasonable Efforts. Upon the terms and subject to the conditions set forth in this Agreement, each of the Parties agrees to use their respective commercially reasonable efforts to take, or cause to be taken, or as appropriate to refrain from taking, all actions, and to do, or cause to be done, or as appropriate to refrain from doing, all things reasonably necessary, proper or advisable to consummate, in the most expeditious manner practicable, the transactions contemplated by the Transaction Documents, including, but not limited to, defending any Actions challenging this Agreement or otherwise seeking to enjoin or delay the consummation of the transactions contemplated by the Transaction Documents.

5.7 Further Assurances. At and after the Effective Date, the Contributee shall be authorized to execute and deliver, in the name and behalf of SRSH, SRS or STAR TRS, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of SRSH, SRS or STAR TRS any other actions and things to vest, perfect or confirm of record or otherwise in the Contributee any and all right, title and interest in, to and under any of the Contributed Assets.

5.8 Lease Agreement. The Parties shall use their commercially reasonable efforts to cause the execution of, on or prior to the Closing Date, the Property Lease Agreement pursuant to which the Contributee shall agree to lease a portion of the premises by leased by SRS located at 18100 Von Karman Avenue, Irvine, California 92612. The Contributors shall cause SIP and Steadfast Management Company, Inc. to rent such portion of the premises to the Contributee, all upon terms substantially similar to those of the master lease at such property in place as of the Closing Date, allocated based upon Contributee’s actual use of the property.

ARTICLE 6

ADDITIONAL AGREEMENTS

6.1 Cooperation. At all times following the Closing Date, each Party agrees (a) to furnish upon request to each other Party such further information, (b) to execute and deliver to each other Party such other documents, and (c) to do such other acts and things, all as another Party may reasonably request for the purpose of carrying out the intent of this Agreement, the other Transaction Documents, and the transactions contemplated by this Agreement and the other Transaction Documents.

6.2 [Reserved.]

 

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6.3 Access. The Parties agree to furnish or cause to be furnished to each other, upon request, as promptly as practicable, such information and assistance relating to the Business, Contributed Assets and Assumed Liabilities (including access to books and records) as is reasonably necessary for the filing of all Tax Returns, the making of any election relating to Taxes, the preparation for any audit by any Governmental Entity, and the prosecution or defense of any claims, suits or proceedings relating to any Tax, without charge or expense to the requesting Party.

6.4 Holding Period. In addition to any restrictions on transfer contained in the Operating Partnership Agreement, until the later of (a) the date two years from the date hereof and (b) the end of the Indemnification Period, the Contributor shall not (i) exchange the Class B OP Units it receives pursuant to Section 1.4 of this Agreement for REIT Shares pursuant to the provisions of the Operating Partnership Agreement or (ii) offer, pledge, sell, contract to sell, announce the intention to

6.5 sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option right or warrant for the sale of, make any short sale or otherwise transfer, dispose or encumber (collectively, “Transfer”) the Class B OP Units it receives pursuant to Section 1.4 of this Agreement; provided, however, after the Indemnification Period, the provisions of this Section 6.4 shall no longer apply (i) with respect to any of the Class B Units if Rod Emery involuntarily, without cause, ceases to serve as the chairman of the board of directors of STAR or (ii) if there is a sale or merger of STAR in which its common stockholders receive (or have the option to receive) cash and/or liquid securities, with respect to a percentage of the Class B OP Units equal to the ratio of (x) the cash or liquid securities received by common stockholders of STAR in such sale or merger to (y) the total consideration received by common stockholders of STAR in such sale or merger.

ARTICLE 7

INDEMNIFICATION

7.1 Contributor Indemnification. From and after the Closing, subject to the other provisions of this Article 7, the Contributor agrees to indemnify, defend, and hold Contributee, STAR, and each of their respective Affiliates, and their respective officers, directors, stockholders, partners, managers, and members and their respective heirs, legatees, devisees, executors, administrators, trustees, personal representatives, successors and assigns (each, a “Contributee Indemnified Party”), harmless from and against any and all Losses incurred by any Contributee Indemnified Party arising from, as a result of, in connection with, or relating to:

(a) the breach of any representation or warranty made by the Contributor or any of its Affiliates and contained in this Agreement or the other Transaction Documents;

(b) the breach or failure to perform any covenant or agreement made or undertaken by the Contributor or any of its Affiliates in this Agreement or any other Transaction Documents;

(c) the Excluded Assets;

(d) the Excluded Liabilities; and

 

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(e) the failure to obtain any Contributor Required Third Party Consents, which failure results in the acceleration of payment by STAR or the Contributee pursuant to any loan, mortgage, deed to secure debt, or other debt obligation in effect as of the Closing Date, provided, however, that such failure to obtain such Contributor Required Third Party Consent was not the direct result of STAR’s or the Contributee’s gross negligence or willful act or failure to act.

7.2 Contributee Indemnification. From and after the Closing, subject to the other provisions of this Article 7, the Contributee and STAR jointly and severally agree to indemnify, defend and hold the Contributor and its Affiliates, and their respective officers, directors, stockholders, partners, managers, and members and its respective heirs, legatees, devisees, executors, administrators, trustees, personal representatives, successors and assigns (each, a “Contributor Indemnified Party”), harmless from and against any and all Losses incurred by any Contributor Indemnified Party arising from, as a result of, in connection with, or relating to:

(a) the breach by the Contributee or STAR of any representation or warranty made by the Contributor or STAR and contained in this Agreement or any other Transaction Documents;

(b) the breach or failure to perform any covenant or agreement made or undertaken by the Contributee or STAR in this Agreement or any other Transaction Documents;

(c) the ownership or operation of the Contributed Assets after the Closing; and

(d) the Assumed Liabilities.

7.3 Indemnifying Procedures.

(a) Upon receipt by a Contributor Indemnified Party or a Contributee Indemnified Party, as the case may be (the “Indemnified Party”), of notice from a Third Party of any action, suit, proceeding, claim, demand or assessment against such Indemnified Party that might give rise to a claim for Losses under this Article 7, the Indemnified Party shall promptly give written notice thereof to the Contributee, on the one hand, or the Contributor, on the other hand, as the case may be (the “Indemnifying Party”), indicating the nature of such claim and the basis therefor; provided, however, that failure to give such notice shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been prejudiced as a result of such failure. The Indemnifying Party will have thirty (30) days after such notice is given (the “Notice Period”) to notify the Indemnified Party (i) whether or not it disputes the liability of the Indemnifying Party to the Indemnified Party hereunder with respect to such claim or demand, and (ii) whether or not it desires, at the cost and expense of the Indemnifying Party, to defend the Indemnified Party with respect to the Third Party claim; provided, however, that any Indemnified Party is hereby authorized, but is not obligated, prior to and during the Notice Period, to file any motion, answer or other pleading that it reasonably shall deem necessary or appropriate to protect its interests or those of the Indemnifying Party. If the Indemnifying Party notifies the Indemnified Party within the Notice Period that it desires to defend the Indemnified Party against the Third Party claim, the Indemnifying Party will have the right to control the defense of such matter by all appropriate proceedings and with counsel of its own choosing and at its sole cost and expense. If the Indemnified Party desires to participate in any such defense, it may

 

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do so at its sole cost and expense, and in a manner so as not to unreasonably interfere with the defense of such matter by the Indemnifying Party. If the Indemnifying Party fails to respond to the Indemnified Party within the Notice Period, elects not to defend the Indemnified Party, or after electing to defend fails to commence or reasonably pursue such defense, then the Indemnified Party shall have the right, but not the obligation, to undertake or continue the defense of, and to compromise or settle (exercising reasonable business judgment), the matter all on behalf, for the account, and at the risk, of the Indemnifying Party; provided, however, that any such compromise or settlement consists solely of money damages to be borne by the Indemnifying Party and otherwise shall be reasonably satisfactory to the Indemnifying Party and shall contain as an unconditional term thereof a full and complete release of the Indemnifying Party by the Third Party in form and substance reasonably satisfactory to the Indemnifying Party. Payments to the Indemnified Party for Losses for Third Party claims which are otherwise covered by the indemnification obligations herein shall not be required except to the extent that the Indemnified Party has expended or simultaneously with such payment will expend, out-of-pocket sums. If the Indemnifying Party has assumed the defense of a Third Party claim, it shall reasonably proceed with such defense and promptly notify the Indemnified Party if it proposes to compromise or settle such Third Party claim for the account, and at the risk, of the Indemnifying Party in accordance with this Section 7.3. In any event in which the Indemnifying Party has assumed the defense of a Third Party claim, the Indemnified Party and its counsel shall cooperate with the Indemnifying Party and its counsel; provided, however, that the foregoing shall not prevent the Indemnified Party from taking the position that it is entitled to indemnification hereunder.

(b) In the event any Indemnified Party should have an indemnification claim against any Indemnifying Party under a Transaction Document that does not involve a claim by a Third Party, the Indemnified Party, as quickly as is practicable (but in any event within thirty (30) days after becoming aware of an indemnification claim) and by the most expeditious means available (promptly confirmed in writing), shall deliver notice of such claim to the Indemnifying Party in reasonable detail. The failure by any Indemnified Party to so notify the Indemnifying Party shall relieve the Indemnifying Party from any liability that it may have to such Indemnified Party to the extent that the Indemnifying Party has been prejudiced by such failure, unless such prejudice can be reasonably cured without expense to the Indemnified Party. If the Indemnifying Party disputes its liability with respect to such claim in a timely manner, the Indemnifying Party and the Indemnified Party shall proceed in good faith to negotiate a resolution of such dispute and, if not resolved through negotiations, such dispute may be resolved by litigation before an appropriate Governmental Entity of competent jurisdiction.

(c) STAR and the Contributee shall, and shall instruct their respective directors, officers, partners, and employees and the Contributee’s attorneys, accountants and agents to, at the request of the Contributor, cooperate with Contributor as may be reasonably required in connection with the investigation and defense of any Third Party claim, Action or investigation relating to the Contributor business, the Excluded Assets or the Excluded Liabilities that is brought against the Contributor or any of its Affiliates relating in any way to the Business at any time on or after the Closing. Likewise, the Contributor shall, and shall instruct its, and its Affiliates’, directors, managers, officers, employees, attorneys, accountants and agents to, at the Contributee’s request, cooperate with Contributee as may be reasonably required in connection with the investigation and defense of any Third Party claim, Action, or investigation relating to the Contributed Assets or the Assumed Liabilities that is brought against the Contributee or STAR or any of their respective Affiliates at any time on or after the Closing.

 

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7.4 Survival.

(a) All covenants, agreements, representations and warranties of any party under this Agreement, subject to the limitations specified in Section 7.4(b), (c) and (d), shall survive the Closing, and any indemnification claim asserted in accordance with Section 7.3 prior to the expiration of the applicable survival period shall continue in effect with respect to such claim until such claim shall have been finally resolved or settled.

(b) Except as otherwise provided in Section 7.4(d) or (e), the obligations of the Contributor under Section 7.1(a) shall survive the Closing until the expiration of forty-five (45) days after the completion of the first full calendar year audit of STAR after the Closing (the “Indemnification Period”), with respect to claims made by the Contributor Indemnified Parties by notice in writing to the Contributee, received on or before such last day.

(c) Except as otherwise provided in Section 7.4(d) or (e), the obligations of the Contributee and STAR under Section 7.2(a) shall survive the Closing until the expiration of the Indemnification Period, with respect to claims made by the Contributor Indemnified Parties by notice in writing to the Contributee, received on or before such last day.

(d) Notwithstanding the provisions of Section 7.4(b) and (c), the obligations of:

(A) Contributor in accordance with Section 7.1(a) with respect to the warranties and representations contained in Sections 3.1, 3.2, 3.4 and 3.11 shall survive the Closing until the expiration of the applicable statutes of limitations;

(B) Contributor in accordance with Section 7.1(b) with respect to the covenant contained in 5.3 shall survive the Closing indefinitely;

(C) Contributor in accordance with Section 7.1(b) with respect to the covenant contained in 5.4 shall survive the Closing until the expiration of the applicable statutes of limitations;

(D) Contributee and STAR in accordance with Section 7.2(a) with respect to the warranties and representations contained in Sections 4.1, 4.2, 4.5 and 4.6 shall survive until the expiration of the applicable statutes of limitations;

(E) Contributor in accordance with Section 7.1(b), (c) and (d) with respect to any other covenants and agreements to be performed and complied with following the Closing and with respect to the Excluded Assets and the Excluded Liabilities, in each case, shall survive the Closing indefinitely; and

(F) Contributee and STAR in accordance with Section 7.2(b), (c) and (d) with respect to any other covenants and agreements to be performed and complied with following the Closing and with respect to the Contributed Assets and the Assumed Liabilities, in each case, shall survive the Closing indefinitely.

 

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(e) The limitations under Sections 7.4(b) and (c) shall not apply in respect of claims for Fraud.

7.5 Limitations. Notwithstanding anything to the contrary contained in this Agreement or in any other Transaction Document:

(a) (i) No Indemnified Party will be entitled to indemnification under Section 7.1(a) or Section 7.2(a) of this Agreement, as applicable, unless such Indemnified Party has incurred Losses in excess of $625,000 in the aggregate (the “Deductible”), in which case such Indemnified Party will be entitled to indemnification under Section 7.1(a) or Section 7.2(a) of this Agreement, as applicable, for the aggregate Losses with respect to such claims, including those incurred prior to exceeding the Deductible; and (ii) the maximum aggregate liability of the Indemnifying Party for Losses to which the Indemnified Party is entitled to indemnification under Section 7.1(a) or Section 7.2(a) of this Agreement, as applicable, shall be limited to $12,500,000 in the aggregate; provided, however, that neither the Deductible nor the maximum aggregate liability provided in (ii) herein shall apply to any claims of, or causes of action arising out of, involving, or otherwise in respect of (1) any Fundamental Representation, (2) the representations in Section 3.5, or (3) Fraud.

(b) If Contributor breaches any representation or warranty for which indemnification may be provided under Section 7.1(a), then, solely for purposes of calculating the dollar amount of Losses for which any Contributee Indemnified Party is entitled to indemnification for such breach, each of such representations and warranties that contain any qualification as to materiality will be deemed and interpreted to be a representation or warranty made without such qualification.

(c) If Contributee or STAR breaches any representation or warranty for which indemnification may be provided under Section 7.2(a), then, solely for purposes of calculating the dollar amount of Losses for which any Contributor Indemnified Party is entitled to indemnification for such breach, each of such representations and warranties that contain any qualification as to materiality will be deemed and interpreted to be a representation or warranty made without such qualification.

(d) The amount of any Loss for which indemnification is provided under this Article 7 shall be net of (i) any amounts recovered by the Indemnified Party pursuant to any indemnification by, or indemnification agreement with, any Third Party or, (ii) third party insurance proceeds (for the avoidance of doubt, not including self-insurance or insurance with a captive insurance Affiliate) or other sources of reimbursement received, which shall be an offset against such Loss. The Indemnified Party shall use commercially reasonable efforts to seek recovery from all such sources to minimize any Loss for which indemnification is provided under this Article 7. If the amount to be netted hereunder from any payment required under this Article 7 is determined after payment by the Indemnifying Party of any amount otherwise required to be paid to an Indemnified Party pursuant to this Article 7, the Indemnified Party shall repay to the Indemnifying Party, promptly after such determination, any amount that the Indemnifying Party would not have had to pay pursuant to this Article 7 had such determination been made at the time of such payment.

 

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7.6 Exclusive Remedy. The Parties hereto acknowledge and agree that the remedies provided for in this Agreement and the other Transaction Documents shall be the Parties’ sole and exclusive remedies with respect to the subject matter of this Agreement and of the other Transaction Documents, other than for a claim of Fraud or willful misconduct and further that nothing in this Agreement shall operate to limit the rights of the parties to seek equitable remedies (including injunctive relief or specific performance). No amount shall be recoverable under this Agreement by any Indemnified Party to the extent such party has asserted a claim and received indemnification for such Loss under any Transaction Document other than this Agreement or under applicable Law. It is the Parties’ intention that the indemnification provisions set forth in this Agreement and the other Transaction Documents shall control and determine the Parties’ respective rights and obligations concerning any claims with respect to the Contributed Assets, the Excluded Assets, the Assumed Liabilities or the Excluded Liabilities.

7.7 Nature of Damages. Notwithstanding anything to the contrary contained in this Agreement or any other Transaction Document, in no event shall any Indemnifying Party be liable to any Indemnified Party for any consequential, punitive, indirect, incidental or other similar damages, including lost profits, for any breach or default under, or any act or omission arising out of, or in any way relating to, this Agreement or any other Transaction Document, or the transactions contemplated hereby or thereby, under any form of action whatsoever, whether in contract or otherwise, except to the extent awarded to a Third Party in connection with a claim by such Third Party.

7.8 Method of Payment. All amounts due and payable from an Indemnifying Party to an Indemnified Party shall be paid 75% in Class B OP Units and 25% in cash, other than amounts due pursuant to a breach of the representations set forth in Section 3.5, which shall be paid 100% in cash, within five (5) Business Days following final determination of a claim pursuant to Section 7.3, with (i) payment of the cash portion made by wire transfer of immediately available funds and (ii) delivery of a number of Class B OP Units (or such securities into which the Class B OP Units were then converted, if applicable) based upon the then-current value of the Class B OP Units (or such securities into which the Class B OP Units were then converted, if applicable); provided, however, that at Contributor’s sole discretion, any amount payable to a Contributee Indemnified Party pursuant to this Article 7, other than due to a breach of the representations set forth in Section 3.5, may be satisfied by delivery by the Contributor solely, or in greater proportion, of an amount of Class B OP Units (or such securities into which the Class B OP Units were then converted, if applicable), in each event equal in value to such claim (or portion thereof payable in Class B OP Units) determined upon the then-current value of the Class B OP Units (or such securities into which the Class B OP Units were then converted, if applicable), provided, further, that in Contributee’s sole discretion any amount payable to a Contributee Indemnified Party pursuant to a breach of the representations set forth in Section 3.5 may be satisfied by deliver by the Contributor solely, or in greater proportion, of an amount of Class B OP Units (or such securities into which the Class OP Units were then converted, if applicable), in each event equal in value to such claim determined upon the then-current value of the Class B OP Units (or such securities into which the Class B OP Units were then converted, if applicable).

 

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ARTICLE 8

GENERAL

8.1 Schedules; Exhibits; Integration. Each schedule and exhibit delivered pursuant to the terms of this Agreement shall be in writing and shall constitute a part of this Agreement. This Agreement, together with such schedules and exhibits, constitutes the entire agreement among the Parties pertaining to the subject matter hereof and supersedes all prior agreements and understandings of the Parties in connection therewith.

8.2 Interpretation. For all purposes of the Transaction Documents, except as otherwise specifically stated therein:

(a) the terms defined in Article 9 have the meanings assigned to them in Article 9 and include the plural as well as the singular;

(b) all accounting terms not otherwise defined herein have the meanings assigned under GAAP;

(c) pronouns of either gender or neuter shall include, as appropriate, the other pronoun forms;

(d) the words “include” and “including” shall be without limitation and shall be construed to mean “include, but not be limited to” or “including, without limitation;”

(e) references to exhibits, schedules, Articles, Sections and paragraphs shall be references to the exhibits, schedules, Articles, Sections and paragraphs of this Agreement; and

(f) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision.

8.3 Submission to Jurisdiction; Governing Law. The Parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state and federal courts located in Wilmington, Delaware for the purpose of any Action arising out of or based upon any of the Transaction Documents (“Covered Matters”), (b) agree not to commence any Action arising out of, or based upon, any Covered Matters except in the state courts or federal courts located in Wilmington, Delaware, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such Action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the Action is brought in an inconvenient forum, that the venue of the Action is improper or that this Agreement or the subject matter of any Covered Matter may not be enforced in or by such court. All Covered Matters shall be governed by, interpreted and construed in accordance with the Laws of the State of Delaware without regard to conflict of law principles that would result in the application of any Law other than the law of the State of Delaware.

8.4 Amendment. Subject to compliance with applicable Law, the provisions of this Agreement may not be amended, modified or supplemented without the prior written consent of the Contributor, the Contributee and STAR.

 

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8.5 Specific Performance. The Parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the Parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in any federal or state court located in Wilmington, Delaware in addition to any other remedy to which they are entitled at law or in equity. Any requirements for the securing or posting of any bond with such remedy are hereby waived.

8.6 Time of the Essence. Time is of the essence with regard to all obligations under this Agreement.

8.7 Assignment. No Transaction Document or any rights or obligations under any of them are assignable without the prior written consent of all of the Parties.

8.8 Headings. The descriptive headings of the articles, sections and subsections of this Agreement are for convenience only and do not constitute a part of this Agreement.

8.9 Recitals. The recitals are fully incorporated into this Agreement by reference.

8.10 Parties in Interest. This Agreement shall be binding upon, and inure to the benefit of, each Party, and nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Nothing in this Agreement is intended to relieve or discharge the obligation of any third Person to any Party to this Agreement.

8.11 Notices. Any notice or other communication hereunder must be given in writing and either (a) delivered in Person, (b) transmitted by electronic mail or facsimile, (c) transmitted by telefax or telecommunications mechanism provided, that receipt is confirmed and any notice so given is also mailed as provided in the following clause (d), or (d) mailed by certified or registered mail, postage prepaid, return receipt requested as follows:

 

If to the Contributor, addressed to:
Steadfast REIT Investments, LLC
18100 Von Karman Avenue, Suite 500
Irvine, CA 90245
Attention: Ana Marie del Rio
Email:
With a copy (which shall not constitute notice) to:

DLA Piper LLP (US)

4141 Parklake Ave., Suite 300

Raleigh, NC 27612

Attention: Robert H. Bergdolt, Esq.
Email: [email protected]

 

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If to the Contributee, addressed to:
Steadfast Apartment REIT, Inc.
18100 Von Karman Ave, Suite 500
Irvine, CA 92612
Attention: Thomas Purcell, Chairman of the Special Committee
Email: [email protected]
With a copy (which shall not constitute notice) to:

Venable LLP

750 E. Pratt Street, Suite 900

Baltimore, MD 21202

Attention: Sharon A. Kroupa, Esq.

Email: [email protected]

and a copy (which shall not constitute notice) to:
Morrison & Foerster LLP
3500 Lenox Road, NE , Suite 1500
Atlanta, GA 30326
Attention: Heath D. Linsky, Esq.
Email: [email protected]

or to such other address or to such other Person as each Party shall have last designated by such notice to the other Parties. Each such notice or other communication shall be effective (i) when delivered in Person, (ii) if given by telecommunication, when transmitted to the applicable number so specified in (or pursuant to) this Section 8.11 and an appropriate confirmation is received, and (iii) if given by mail, three (3) Business Days after delivery or the first attempted delivery.

8.12 Expenses. Except as otherwise set forth in this Agreement, the Contributor and the Contributee shall pay its own expenses incident to the negotiation, preparation and performance of this Agreement and the transactions contemplated hereby, including, but not limited to, the fees, expenses and disbursements of its accountants and counsel and of securing third party consents and approvals required to be obtained by it.

8.13 Representation By Counsel; Interpretation. Each of the Contributor and the Contributee acknowledges that each Party to this Agreement has been represented by counsel in connection with this Agreement and the transactions contemplated by this Agreement. Accordingly, any rule of Law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the Party that drafted it has no application and is expressly waived. The provisions of this Agreement shall be interpreted in a reasonable manner to effect the intent of the Contributee and the Contributor.

 

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8.14 Severability. If any provision of this Agreement is determined to be invalid, illegal or unenforceable by any Governmental Entity, the remaining provisions of this Agreement shall remain in full force and effect; provided that the essential terms and conditions of this Agreement for all Parties remain valid, binding and enforceable. In the event of any such determination, the Parties agree to negotiate in good faith to modify this Agreement to fulfill as closely as possible the original intents and purposes hereof. To the extent permitted by Law, the Parties hereby to the same extent waive any provision of Law that renders any provision hereof prohibited or unenforceable in any respect.

8.15 Counterparts. This Agreement may be executed in any number of counterparts, any of which may be executed and transmitted by facsimile, and each of which shall be deemed an original of this Agreement, and all of which, when taken together, shall be deemed to constitute one and the same Agreement.

ARTICLE 9

DEFINITIONS

For all purposes of the Transaction Documents, except as otherwise expressly provided or unless the context in which a term is used clearly requires otherwise:

“Action” means any action, complaint, petition, suit or other legal proceeding, whether civil or criminal, in law or in equity, or before any arbitrator or Governmental Entity.

“Affiliate” means with respect to any Person, any other Person that controls, is controlled by or is under common control with such Person. For purposes of this definition, “control” (including, with its correlative meanings, the terms “controlling,” “controlled by,” and “under common control with”) as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through ownership of voting securities or equity interests, by Contract or otherwise.

“Agreement” has the meaning as set forth in the introductory paragraph.

“Applicable Person” means the people listed on Schedule 9.1.

“Assigned Contracts” has the meaning as set forth in Section 1.5.

“Assignment of Contracts Agreement” has the meaning as set forth in Section 2.2(b).

“Assumed Liabilities” has the meaning as set forth in Section 1.3.

“Bill of Sale and Assumption Agreement” has the meaning as set forth in Section 2.2(a).

“Business” has the meaning as set forth in the Recitals.

“Business Day” means any day other than (i) a Saturday or a Sunday or (ii) a day on which banking and other deposit gathering institutions in the Borough of Manhattan, City and State of New York are authorized or required by applicable Law to be closed.

“Cash Consideration” has the meaning as set forth in Section 1.4.

 

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“Class B OP Units” has the meaning as set forth in Section 1.4.

“Closing” has the meaning as set forth in Section 2.1.

“Closing Date” has the meaning as set forth in Section 2.1.

“COBRA” has the meaning as set forth in Section 5.4(f).

“Code” means the Internal Revenue Code of 1986, as amended, and all regulations and formal guidance promulgated thereunder.

“Contract” means any binding agreement or contract, including any understanding, arrangement, instrument, note, guaranty, indemnity, representation, warranty, deed, lease, assignment, power of attorney, certificate, purchase order, work order, insurance policy, benefit plan, commitment, covenant, assurance or obligation of any kind or nature.

“Contributed Assets” means the membership interests of SRSH and the assets described or listed on Schedule 1.1.

“Contributee” has the meaning as set forth in the introductory paragraph of this Agreement.

“Contributee Indemnified Party” has the meaning as set forth in Section 7.1.

“Contribution Value” has the meaning as set forth in Section 1.4(a).

“Contributor” has the meaning as set forth in the introductory paragraph to this Agreement.

“Contributor Financial Statements” has the meaning as set forth in Section 3.5(a).

“Contributor Indemnified Party” has the meaning as set forth in Section 7.2.

“Contributor Material Adverse Effect” means an event, change, condition or occurrence, individually or in the aggregate, that has or could reasonably be expected to have a material adverse impact or effect on SRSH, SRS, STAR TRS, the Contributed Assets, the Assumed Liabilities, the Business or the results of operations of Contributor, taken as a whole; provided thatContributor Material Adverse Effect” shall neither be deemed to include the impact or effect of: (a) changes in Laws or interpretations thereof or binding directives of Governmental Entities, (b) the announcement of this Agreement and the transactions contemplated hereby or the taking of any action contemplated by the Transaction Documents or any of them, (c) changes in GAAP or the interpretations thereof, (d) compliance with, and performance of, this Agreement and the transactions contemplated by this Agreement, (e) changes affecting general economic conditions or the industry in which Contributor operates, (f) the failure of the Contributor to meet projections of earnings, revenues or other financial measures (whether such projections were made by the Contributor or any independent Third Parties), (g) national or international political or social conditions, including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist

 

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attack within or upon the United States, or any of its territories, possessions, or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States, (h) changes in financial, banking, or securities markets (including any disruption thereof and any decline in the price of any security or any market index) and (i) pandemics, earthquakes, hurricanes, floods or other natural disasters; provided, however, that any “Contributor Material Adverse Effect” shall not be excluded if, and to the extent such effect disproportionately affects the Contributor and the Business, as compared to other persons engaged in businesses similar to the Business.

“Contributor Required Third Party Consents” has the meaning as set forth in Section 3.3.

“Convertible Shares” means 1,000 shares of STAR’s Class A non-participating, non-voting convertible stock, par value $0.01 per share, that is held by STAR Advisor.

“Copyrights” means copyrights, whether registered or unregistered, in published works and unpublished works, and pending applications to register the same.

“Covered Matters” has the meaning as set forth in Section 8.3.

“Current Assets” means the consolidated amount of current assets of the Business, as defined by and determined in accordance with GAAP (excluding any (a) any Cash and (b) any current or deferred Tax assets).

“Current Liabilities” means the consolidated amount of current liabilities of the Business, as defined by and determined in accordance with GAAP (excluding (a) any indebtedness or transaction expenses related to the transaction contemplated hereby) and (b) any current or deferred Tax liabilities.

“Deductible” has the meaning as set forth in Section 7.5(a).

“Domain Names” means websites or domain names.

Effective Date” means 11:59PM, Pacific Daylight Time on August 31, 2020.

“Employee Plan” means each employee benefit plan (within the meaning of Section 3(3) of ERISA, whether or not subject to ERISA) and each bonus, profits interest, restricted capital interest, phantom equity, profit participation, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree health or life insurance, supplemental retirement, employment, offer letter, consulting, severance, retention, termination, change in control, welfare, profit-sharing, disability, health, vacation, sick leave benefits, fringe benefits or other compensation or benefit agreement, plan, program or arrangement (i) that is sponsored, maintained or contributed to by SRSH, SRS or STAR TRS or to which SRSH, SRS or STAR TRS is a party, (ii) that is sponsored, maintained or contributed to by the Contributor or an ERISA Affiliate (other than SRSH, SRS or STAR TRS) for the benefit of any Transferring Employee, or (iii) with respect to which SRSH, SRS or STAR TRS has any Liability.

 

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“Encumbrance” means any lien, encumbrance, security interest, charge, mortgage, deed of trust, deed to secure debt, option, pledge or restriction (whether on voting, sale, transfer, disposition or otherwise) on transfer of title other than (i)(a) Encumbrances for Taxes not yet subject to penalties for nonpayment or which are being actively contested in good faith by appropriate proceedings, (b) statutory liens of landlords, mechanics, materialmen, carriers, workmen, warehousemen, repairmen and other like Encumbrances and security obligations that are not delinquent, (c) rights granted to any licensee of any Intellectual Property in the ordinary course of business and (d) requirements and restrictions of zoning, land use, building, environmental and other Laws, (ii) Encumbrances and other recorded and unrecorded monetary and non-monetary Encumbrances set forth in any title policy or title report or survey (or any update of a title policy, title report or survey) received by the Contributor with respect to the property that is the subject of the Property Lease Agreement that affect the underlying fee simple interest to such property and that do not materially impair the operations of the Business as currently conducted thereon.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and all regulations and formal guidance promulgated thereunder.

ERISA Affiliate” shall mean any other corporation or trade or business that would be treated as a single employer with Contributor under Code Section 414 or Section 4001(a)(14) or 4001(b) of ERISA.

“Excluded Assets” has the meaning as set forth in Section 1.2.

“Excluded Liabilities” has the meaning as set forth in Section 1.3.

“FICA” means the Federal Insurance Contributions Act, as amended.

“Fraud” means, with respect to the making of any representation or warranty set forth in this Agreement or any Transaction Document, or in any certificate delivered pursuant to this Agreement or any Transaction Document, an act, committed by a party hereto, with intent to deceive another party hereto, or to induce that party to enter into this Agreement or the other Transaction Documents and requires (i) a false representation of material fact made in this Agreement, a Transaction Document, or such certificate, (ii) with knowledge that such representation is false, (iii) with an intention to induce the party to whom such representation is made to act or refrain from acting in reliance upon it, (iv) causing that party, in justifiable reliance upon such false representation and with ignorance to the falsity of such representation, to take or refrain from taking action, and (v) causing such party to suffer damage by reason of such reliance.

“Fundamental Representation” means the representations and warranties set forth in Section 3.1, Section 3.2, Section 3.4, Section 3.11, Section 4.1, Section 4.2, Section 4.5, and Section 4.6.

“FUTA” means the Federal Unemployment Tax Act, as amended.

“FSA Plans” has the meaning as set forth in Section 5.4(e).

“GAAP” means United States generally accepted accounting principles.

 

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“Governmental Entity” means any government or any agency, bureau, board, commission, court, department, official, political subdivision, tribunal or other instrumentality in each case of any government, whether federal, state or local, domestic or foreign.

“Grandfathered PTO” has the meaning as set forth in Section 3.15(c).

“Indemnification Period” has the meaning as set forth in Section 7.4(b).

“Indemnified Party” has the meaning as set forth in Section 7.3(a).

“Intellectual Property” means any rights in, including but not limited to the right to all past and future income, royalties, damages and payments due, licenses or Encumbrances of, equities in, and other claims that any Person may have to claim ownership, authorship or invention or the use of, or to object to, or prevent the modification of, or to withdraw from circulation, or control the publication or distribution, of any Marks, Patents, Copyrights, Trade Secrets, Software or Domain Names.

“IRS” means the Internal Revenue Service or any successor entity.

“Key Person Employment Agreements” has the meaning as set forth in Section 2.2(i).

“Knowledge” means actual knowledge of an Applicable Person and the knowledge that such Applicable Person without independent inquiry would reasonably be expected to obtain in the course of diligently performing his or her duties.

“Law” means any constitutional provision, statute or other law, rule, regulation, or interpretation of any Governmental Entity, and any Order.

“Liability” means all indebtedness, obligations and other liabilities of a Person (whether absolute, accrued, contingent, fixed or otherwise, or whether due or to become due), including those arising under any Law, Action, investigation, inquiry or Order and those arising under any Contract.

“Loss or “Losses” means any and all costs, expenses, direct losses or damages, fines, penalties or liabilities (including interest which may be imposed or incurred in connection therewith, court costs, litigation expenses, reasonable attorneys’ fees and costs).

“Mark” means any brand name, logos, service mark, trademark, trade name, trade dress, design rights and other similar designations of source, sponsorship, association or origin, together with the goodwill connected with the use of and symbolized by, and all registrations or application for registration of, any of the foregoing.

“Net Working Capital” means (a) Current Assets minus (b) Current Liabilities.

“Non-Transferring Employee” means each current or former employee, director or consultant of the Contributor or its Affiliates, other than a Transferring Employee.

 

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“Non-Assumed Employee Plan” has the meaning as set forth in Section 5.4(d).

“Notice Period” has the meaning as set forth in Section 7.3(a).

“Operating Partnership” has the meaning as set forth in the introductory paragraph of this Agreement.

“Operating Partnership Agreement” has the meaning as set forth in Section 2.2(n).

“Order” means any decree, injunction, judgment, order, ruling, assessment or writ of a Governmental Entity or arbitration award.

“Organizational Documents” means the articles of incorporation, certificate of incorporation, charter, bylaws, articles of formation or organization, certificate of formation or organization, regulations, operating agreement, limited liability company agreement, certificate of limited partnership, partnership agreement, and all other similar documents, instruments, or certificates executed, adopted, or filed in connection with the creation, formation, or organization of a Person, including any amendments thereto.

“Parties” has the meaning as set forth in the introductory paragraph.

“Party” has the meaning as set forth in the introductory paragraph.

“Patents” means all (a) patents and patent applications, and (b) business methods, inventions, and discoveries that may be patentable.

“Permit” means any license, permit, franchise, certificate of authority, approval, registration, or authorization, or any waiver of the foregoing, required to be issued by any Governmental Entity.

“Person” means an association, a corporation, an individual, a limited liability company, a partnership (whether general or limited), a trust (whether inter vivos or testamentary) or any other entity or organization, whether organized for profit or not for profit, and including a Governmental Entity.

“Personal Property” means machinery, computer programs, computer software, tools, motor vehicles, office equipment, inventories, supplies, plant, spare parts, and other tangible or intangible personal property, excluding, however, furniture, fixtures, and equipment, and Contracts, Permits, Marks, Patents, Copyrights, Trade Secrets, Domain Names and Intellectual Property.

“Pre-Closing Tax Period” means any taxable period (or portion thereof) ending on or before the end of the Closing Date.

“Property Lease Agreement” has the meaning set forth in Section 2.2(p).

“Property Management Agreement” has the meaning set forth in Section 2.2(h).

 

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“PTO” has the meaning as set forth in Section 3.15(c).

Purchase Price” has the meaning as set forth in Section 1.4.

“Registration Rights Agreement” has the meaning as set forth in Section 2.2(l).

“Regulation D” has the meaning as set forth in Section 3.21(a).

“REIT” means a “real estate investment trust” within the meaning of Code Section 856.

“REIT Shares” means shares of common stock, par value $0.001 per share, in STAR (or successor entity, as the case may be), the terms and conditions of which are set forth in the Fourth Articles of Amendment and Restatement of STAR filed with the Maryland State Department of Assessments and Taxation, as amended, supplemented, or restated from time to time.

“SEC” has the meaning as set forth in Section 3.21(g).

“Securities Act” means the Securities Act of 1933, as amended.

“Software” means computer software or middleware.

“SRS 401(k) Plan” has the meaning as set forth in Section 5.3(c).

“SRSH Contracts” has the meaning as set forth in Section 3.13.

“SRSH Financial Statements” has the meaning set forth in Section 3.6(b).

“STAR” has the meaning as set forth in the introductory paragraph of this Agreement.

“STAR Advisor” has the meaning as set forth in the recitals of this Agreement.

“STAR Material Adverse Effect” means an event, change, condition or occurrence, individually or in the aggregate, that has or could reasonably be expected to have a material adverse impact or effect on the business of STAR and Contributee taken as a whole; provided thatContributor Material Adverse Effect” shall neither be deemed to include the impact or effect of: (a) changes in Laws or interpretations thereof or binding directives of Governmental Entities, (b) the announcement of this Agreement and the transactions contemplated hereby or the taking of any action contemplated by the Transaction Documents or any of them, (c) changes in GAAP or the interpretations thereof, (d) compliance with, and performance of, this Agreement and the transactions contemplated by this Agreement, (e) changes affecting general economic conditions or the industry in which Contributor operates, (f) the failure of the Contributor to meet projections of earnings, revenues or other financial measures (whether such projections were made by the Contributor or any independent Third Parties), (g) national or international political or social conditions, including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack within or upon the United States, or any of its territories, possessions, or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States, (h) changes in financial, banking, or securities markets (including any disruption thereof and any

 

45


decline in the price of any security or any market index) and (i) pandemics, earthquakes, hurricanes, floods or other natural disasters; provided, however, that any “STAR Material Adverse Effect” shall not be excluded if, and to the extent such effect disproportionately affects STAR and Contributee, taken as a whole, as compared to other persons engaged in a similar business.

“STAR Required Third Party Consents” has the meaning as set forth in Section 4.3.

Tax” or “Taxes” means any and all taxes, duties, assessments or governmental charges, imposts, levies or other assessments, fees or other charges imposed by any Governmental Entity, including federal, state, provincial, local or foreign income, gross receipts, license, payroll, employment-related, excise, goods and services, harmonized sales, severance, stamp, occupation, premium, windfall profits, customs duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not.

“Tax Return” means any return (including any information return), report, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, any Taxing Authority in connection with the determination, assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any Law relating to any Tax, including any amendment thereof.

“Taxing Authority” means the IRS or any other Governmental Entity responsible for the administration of any Tax.

“Third Party” means any Person other than any Party.

“Trade Secrets” means all know-how, trade secrets, confidential information, customer lists, Software (source code and object code), technical information, data, process technology, plans, drawings, and blue prints.

“Trademark License Agreement” has the meaning as set forth in Section 2.2(c).

“Transaction Documents” means this Agreement, the Bill of Sale and Assumption Agreement, the Assignment of Contracts Agreement, the Trademark License Agreement, the Transition Services Agreement, the Property Management Agreement, the Property Lease Assignment Agreement, Non-Compete and Non-Solicit Agreement, the Key Person Employment Agreements, the Registration Rights Agreement, the Operating Partnership Agreement, and any amendments to any of them.

“Transition Services Agreement” has the meaning as set forth in Section 2.2(g).

“Transfer” has the meaning as set forth in Section 6.4.

“Transferring Employee” has the meaning as set forth in Section 5.3(a).

[Remainder of page left intentionally blank]

 

46


IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above.

 

Contributor:
STEADFAST REIT INVESTMENTS, LLC
a Delaware limited liability company
By:  

/s/ Dinesh K. Davar

  Dinesh K. Davar
  Manager
STAR:
STEADFAST APARTMENT REIT, INC.
a Maryland corporation
By:  

/s/ Ella S. Neyland

  Ella S. Neyland
  Chief Financial Officer
CONTRIBUTEE/OPERATING PARTNERSHIP:
STEADFAST APARTMENT REIT OPERATING PARTNERSHIP, L.P.
a Delaware limited partnership for itself and as general partner of the Contributee
By: STEADFAST APARTMENT REIT, INC.
Its General Partner
By:  

/s/ Ella S. Neyland

  Ella S. Neyland
  Chief Financial Officer

[Signature page to Contribution Agreement]


Exhibit A

BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT

THIS BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Agreement”), dated as of August 31, 2020 is entered into by and between Steadfast Apartment REIT Operating Partnership, L.P., a Delaware limited partnership (“Contributee”), and Steadfast REIT Investments, LLC, a Delaware limited liability company (“Contributor” and together with the Contributee, the “Parties”). Capitalized terms used but not otherwise defined herein shall have the meaning ascribed to them in the Contribution Agreement (defined below).

RECITALS

WHEREAS, Contributor and Contributee are parties to that certain Contribution and Purchase Agreement (the “Contribution Agreement”), dated as of even date herewith, by and among Contributor, Contributee and Steadfast Apartment REIT, Inc., a Maryland corporation, pursuant to which, among other things, Contributor has agreed to contribute, convey, transfer, irrevocably assign and deliver to Contributee all of Contributor’s Personal Property used in the Business, free and clear of all Encumbrances (“Transferred Assets”), and Contributee has agreed to acquire and accept the Transferred Assets from Contributor, in each case on the terms and subject to the conditions set forth in the Contribution Agreement; and

WHEREAS, pursuant to the Contribution Agreement, Contributee has agreed to assume the Assumed Liabilities, on the terms and subject to the conditions set forth in the Contribution Agreement.

NOW, THEREFORE, in consideration of the foregoing, and the premises and mutual covenants, representations, warranties and agreements in the Contribution Agreement, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Parties desire to enter into this Agreement on the terms set forth herein.

Intending to be legally bound, the Parties agree as follows:

1. Effective as of the Closing Date, on the terms and subject to the conditions set forth in the Contribution Agreement, Contributor hereby contributes, conveys, transfers, irrevocably assigns and delivers to Contributee, and Contributee hereby acquires and accepts from Contributor, all of Contributee’s right, title and interest in and to the Transferred Assets.

2. Effective as of the Closing Date, on the terms and subject to the conditions set forth in the Contribution Agreement, Contributee hereby assumes the Assumed Liabilities.

3. This Agreement shall be binding upon and inure to the benefit of Contributor and Contributee and their respective successors and permitted assigns. This Agreement shall not confer any rights or remedies upon any Person, other than Contributor and Contributee and their respective successors and permitted assigns.

4. No provision of this Agreement may be amended, supplemented or modified except by a written instrument making specific reference hereto or thereto signed by all the Parties.


5. This Agreement is executed and delivered pursuant to the Contribution Agreement. Nothing in this Agreement shall alter any liability or obligations arising under the Contribution Agreement, which shall (without limiting the generality of the foregoing) govern, and shall contain the sole and exclusive representations, warranties and obligations of the Parties with respect to such Transferred Assets and Assumed Liabilities. In the event of a conflict between the terms and conditions of this Agreement and the terms and conditions of the Contribution Agreement, the terms and conditions of the Contribution Agreement shall govern, supersede and prevail. Notwithstanding anything to the contrary in this Agreement, nothing herein is intended to, nor shall it, extend, amplify or otherwise alter any representation, warranty, covenant or obligation contained in the Contribution Agreement.

6. This Agreement may be executed in one or more counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement electronically (including portable document format (.pdf)) or by facsimile shall be as effective as delivery of a manually executed counterpart of this Agreement.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

A-2


IN WITNESS WHEREOF, Contributor and Contributee have caused this Agreement to be executed by their duly authorized representatives as of the date first above written.

 

CONTRIBUTOR:
STEADFAST REIT INVESTMENTS, LLC
By:  

             

  Ella S. Neyland
  Chief Financial Officer

 

CONTRIBUTEE:
STEADFAST APARTMENT REIT OPERATING PARTNERSHIP, L.P.

By: STEADFAST APARTMENT REIT, INC.

Its General Partner

By:  

                 

  Ella S. Neyland
  Chief Financial Officer

[Signature Page to Bill Of Sale and Assignment and Assumption Agreement]


Exhibit B

ASSIGNMENT OF CONTRACTS AGREEMENT

This Assignment of Contracts Agreement (this “Agreement”) is entered into as of August 31, 2020 (the “Effective Date”) by and among Steadfast Apartment REIT Operating Partnership, L.P., a Delaware limited partnership (“Assignee”), and Steadfast REIT Investments, LLC, a Delaware limited liability company (“Assignor”). Assignor and Assignee are referred to, collectively, as the “Parties” and each, individually, as a “Party.” Capitalized terms used but not defined herein shall have the meanings set forth in the Contribution Agreement (as defined below).

RECITALS

WHEREAS, Assignor and its Affiliates are party to the Assigned Contracts;

WHEREAS, Assignor, Assignee and Steadfast Apartment REIT, Inc., a Maryland corporation, are parties to that certain Contribution and Purchase Agreement, dated as of even date herewith (together with all of the exhibits and schedules related thereto, the “Contribution Agreement”), pursuant to which, among other things, Assignor has agreed to sell and transfer (or cause its Affiliates to sell or transfer), and Assignee agreed to acquire, the Assigned Contracts;

WHEREAS, pursuant to and in accordance with this Agreement and the Contribution Agreement, Assignor desires to assign all of the right, title and interest in and to the Assigned Contracts to Assignee and Assignee desires to accept such assignment from Assignor.

NOW, THEREFORE, in consideration of the representations, warranties and covenants set forth herein and in the Contribution Agreement and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties covenant and agree as follows:

1. Transfer and Assignment.

1.1 In accordance with and subject to the terms of this Agreement and the Contribution, Assignor (on behalf of itself and its applicable Affiliates) hereby assigns, transfers, conveys and delivers to Assignee all of Assignor’s right, title and interest in and to the Assigned Contracts.

1.2 In accordance with and subject to the terms of this Agreement and the Contribution Agreement, Assignee hereby accepts the foregoing assignment, transfer and conveyance and assumes and agrees to observe and perform all of the duties, obligations, terms, provisions and covenants in connection with the Assigned Contracts.

2. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the successors and permitted assigns of the Parties.

3. Further Assurances. Each of Assignor and Assignee covenants and agrees that it will, at the request of any other Party hereto or such other Party’s Affiliates and without any additional consideration, execute and deliver (and cause its Affiliates to execute and deliver) such other instruments of assignment and assumption as may be reasonably necessary to effect the assignment and transfer of the Assigned Contracts as provided for in and contemplated by the Contribution Agreement.

 

B-1


4. Contribution Agreement. This Agreement is made pursuant to and is subject to the terms and conditions of the Contribution Agreement. Notwithstanding anything to the contrary contained herein, nothing contained herein is intended to or shall be deemed to limit, restrict, modify, alter, amend or otherwise change in any manner the rights and obligations of the Parties hereto under the Contribution Agreement and each of the Parties hereto acknowledges and agrees that the representations, warranties, covenants, agreements, indemnities and survival periods contained in the Contribution Agreement are not superseded hereby but remain in full force and effect to the full extent provided therein. In the event of any conflict or inconsistency between the terms and provisions of this Agreement and the terms and provisions of the Contribution Agreement, the terms and provisions of the Contribution Agreement shall control.

5. Counterparts. This Agreement and any amendment hereby may be executed in any number of counterparts, any of which may be executed and transmitted by facsimile, and each of which shall be deemed an original of this Agreement, and all of which, when taken together, shall be deemed to constitute one and the same agreement.

6. Governing Law. This Agreement shall be governed by, interpreted and construed in accordance with the Laws of the State of Delaware without regard to conflict of law principles that would result in the application of any Law other than the law of the State of Delaware.

7. Severability. In case any one or more of the provisions contained in this Agreement should be found invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby, and the Parties shall enter into good faith negotiations to replace the invalid, illegal or unenforceable provision.

8. Integration; Amendment. This Agreement, together with the Contribution Agreement, contains the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior or contemporaneous oral statements or written instruments with respect to the subject matter hereof. This Agreement may be amended, supplemented or modified only by an instrument signed by the Parties to this Agreement.

[Signature pages follow]

 

B-2


IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized representative of each Party as of the date first written above.

 

ASSIGNOR:

STEADFAST REIT INVESTMENTS, LLC

a Delaware limited liability company

By:  

             

  Dinesh K. Davar
  Manager
ASSIGNEE:
STEADFAST APARTMENT REIT OPERATING PARTNERSHIP, L.P.
a Delaware limited partnership
By: STEADFAST APARTMENT REIT, INC.
Its General Partner
By:  

                 

  Ella S. Neyland
  Chief Financial Officer
 

[Signature Page to Assignment of Contracts]


Exhibit C

TRADEMARK LICENSE AGREEMENT

This TRADEMARK LICENSE AGREEMENT (this “Agreement”) is made and entered into as of August 31, 2020, by and among Steadfast Investment Properties, Inc., a California corporation (“Licensor”), on the one hand, and Steadfast Apartment REIT, Inc., a Maryland corporation (“STAR”), Steadfast Apartment REIT Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”), and STAR REIT Services, LLC, a Delaware limited liability company (“SRS” and, together with STAR and the Operating Partnership, the “Licensees”), on the other hand.

RECITALS

WHEREAS, Steadfast REIT Investments, LLC, an affiliate of Licensor, and STAR and the Operating Partnership have entered into that certain Contribution Agreement, dated as of even date herewith (as such agreement may be amended, modified or supplemented, the “Contribution Agreement”);

WHEREAS, Licensor owns certain rights, title and interest in and to certain trademarks, tradenames, service marks, logos and domain names, including “Steadfast,” which are used in connection with Licensor’s real estate investment activities;

WHEREAS, pursuant to that certain Amended and Restated Advisory Agreement, by and among Steadfast Apartment Advisor, LLC, a Delaware limited liability company (the “Advisor”), and STAR, effective as of March 6, 2020, as amended from time to time (the “Advisory Agreement”), Licensees and their Affiliates received a limited license to use the name “Steadfast”;

WHEREAS, pursuant to the Advisory Agreement, the Advisor also manages, on its behalf and on behalf of its Affiliates, certain administrative functions related to the operation of Licensees’ business, including the operation and maintenance of the Websites (as defined below);

WHEREAS, in connection with the transactions contemplated in the Contribution Agreement, Licensees desires to obtain (i) a royalty-free license from Licensor to use the “Steadfast” name in the conduct of Licensees’ business as Licensees discontinue any use of the Marks (as defined below), and (ii) the control of the Websites and the Email Accounts (as defined below), solely for the duration of the Term (as defined below); and

WHEREAS, Licensor and Licensees wish to set forth herein the terms and conditions with respect to the licensing of the Marks and operation and control of the Websites and the E-Mail Accounts by Licensees solely during the Term, including the utilization by Licensees of the Marks, and the utilization and reference by Licensees of and to related trademarks and service marks of Licensor that contain the Marks.

NOW, THEREFORE, in consideration of the premises and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as set forth herein.


DEFINED TERMS

Defined terms in the recitals and the preamble to this Agreement are used as so defined and, as used in this Agreement, the following terms shall have the following meanings:

Affiliate” shall mean with respect to any Person, (i) any other Person directly or indirectly owning, controlling or holding, with the power to vote, ten percent (10%) or more of the outstanding voting securities of such Person; (ii) any other Person ten percent (10%) or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with the power to vote, by such Person; (iii) any other Person directly or indirectly controlling, controlled by or under common control with such Person; (iv) any executive officer, director, trustee or general partner of such Person; and (v) any legal entity for which such Person acts as an executive officer, director, trustee or general partner. For purposes of this definition, the terms “controls,” “is controlled by,” or “is under common control with” shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an entity, whether through ownership or voting rights, by contract or otherwise.

Change of Control” shall mean any transaction or series of related transactions (whether by merger, consolidation or sale or transfer of voting shares, capital stock, assets, or otherwise) as a result of which a Person not an Affiliate of a Licensee obtains ownership, directly or indirectly, (i) of shares or other capital stock which represent more than fifty percent (50%) of the total voting power in a Licensee or (ii) by lease, license, sale or otherwise, of all, or substantially all, of the assets of a Licensee.

E-Mail Accounts” shall mean all corporate e-mail accounts used by or related to Licensees’ business that feature the Marks.

Marks” shall mean the trademarks and service marks set forth on Schedule A hereto, along with any variations and translations thereof requested by Licensees and approved in writing by Licensor.

Person(s)” shall mean any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, governmental authority or other entity.

Term” shall have the meaning as set forth in Section 2.

Territory” shall mean throughout the world or worldwide.

Websites” shall mean the web domains listed on Schedule B, including all sub-domains thereof.

OPERATIVE PROVISIONS

1) GRANT

 

  a)

Licensor hereby grant to Licensees and each of Licensees’ Affiliates, solely during the Term and in the Territory, subject to the terms and conditions herein, a non-exclusive, non-transferable, non-sublicensable, royalty-free, fully paid-up, right and license to use the Marks in connection with Licensees’ existing business.

 

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  b)

Without limiting the foregoing, Licensor also hereby grants to Licensees and each of Licensees’ Affiliates, solely during the Term and in the Territory, a non-exclusive, non-transferrable, non-sublicensable, royalty-free, fully paid-up, right and license to use the Marks in connection with the Websites and the E-Mail Accounts, provided that all such uses shall be in accordance with the terms of this Agreement.

2) TERM; EFFECT OF TERMINATION

a) The “Term” of this Agreement shall commence on the date hereof and shall continue for a period of five (5) years, after which this Agreement and the licenses described herein shall expire, unless earlier terminated pursuant to Section 8.

b) Except as otherwise expressly provided herein, upon the expiration of the Term or the earlier termination of this Agreement pursuant to Section 8, (i) all rights granted to Licensees and their Affiliates by Licensor hereunder shall automatically revert to Licensor; (ii) Licensees and their Affiliates shall cease the use of any materials or corporate names bearing or incorporating the Marks or any similar derivation thereof; and (iii) Licensees and their Affiliates shall cease the use of the Websites and E-Mail Accounts within thirty (30) days.

c) Prior to expiration of this Agreement, or within ten (10) days of the effective date of termination of this Agreement if this Agreement is terminated pursuant to Section 8(a), Licensees and their Affiliates shall effect a change of their corporate names to corporate names that do not include, and are not confusingly similar to, the Marks and shall promptly provide evidence of such name changes to Licensor. Except as otherwise expressly provided herein, in no event shall Licensees or their Affiliates take any action to deceive as to the affiliation, connection, or association of Licensor with Licensees and their Affiliates, or as to the origin from, sponsorship by or approval by Licensor of Licensees’ products or services. Notwithstanding the foregoing or anything to the contrary contained in this Agreement, Licensees and their Affiliates shall be able to continue to utilize the Marks solely in the names of any subsidiaries of Licensees after the expiration of the Term for an additional thirty (30) days and solely to the extent Licensees are not able to obtain any material third-party consent with respect to the change in name to any such subsidiary prior to the expiration of the Term. Licensees and their Affiliates shall use commercially reasonable efforts to obtain all such consents prior to the expiration of the Term.

d) Notwithstanding the foregoing or anything to the contrary contained in this Agreement, Licensees and their Affiliates shall be able to continue to reference the Marks in a historical context as the former names of Licensees and/or their Affiliates and in the names of such entities pursuant to documents, media, and contracts existing prior to the date hereof (and such references shall not be deemed to be in breach or violation of this Agreement or the rights of Licensor to the Marks).

3) RESERVATION OF RIGHTS

Licensor reserves all rights in connection with the Marks, now known or hereafter developed, that are not expressly granted to Licensees and their Affiliates herein.

 

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4) WEBSITE OBLIGATIONS

i) As of the date hereof and for the Term, Licensees and their Affiliates shall have the right (but not the obligation) to host, operate, maintain, and provide the technology and other related functions and services for the Websites. If Licensees or any of their Affiliates elect to operate the Websites, Licensees and their Affiliates shall use commercially reasonable efforts to operate the Websites in a manner that ensures that the Websites are compliant in all material respects with all “safe harbors” provided under the Communications Decency Act and Digital Millennium Copyright Act, and similar laws designed to minimize liability of websites and interactive properties for third party content.

ii) In the event that Licensees or any of their Affiliates elect to operate the Websites, then Licensees and their Affiliates shall operate the Websites such that Licensees remain in compliance in all material respects with all applicable laws, rules and regulations relating to the operation of the Website.

5) TRADEMARK OWNERSHIP AND PROTECTION

a) All ownership rights, title and interest in the Marks, including any goodwill generated in connection with Licensees’ use of the Marks in the Territory, shall inure to the sole benefit of Licensor.

b) Nothing contained in this Agreement shall be construed to confer upon Licensees or their Affiliates, or to vest in Licensees or their Affiliates, any right of ownership to the Marks. At no time shall Licensees or their Affiliates directly or indirectly attempt to register or cause to be registered any rights in the Marks in the Territory. Moreover, at no time shall Licensees or their Affiliates directly or indirectly attempt to register or cause to be registered in the Territory any names, logos or other materials identical or substantially or confusingly similar to the Marks without the prior written approval of Licensor. It is understood and agreed that Licensees and their Affiliates shall not acquire and shall not claim any title to the Marks by virtue of the license granted to Licensees and their Affiliates or through Licensees’ and their Affiliates’ use of the Marks. Licensees further acknowledge the validity of the Marks, and agrees not to institute or participate in any proceedings which challenge the validity, or Licensor’s ownership, of the Marks.

6) QUALITY CONTROL; TRADEMARK APPROVALS

a) Licensees and their Affiliates acknowledge the high level of goodwill in the Marks and shall, at all times throughout the Term, use the Marks in a manner materially consistent with the uses made by it prior to the date hereof and shall only use the Marks in connection with the provision of services of a quality at least as high as those offered by Licensor prior to the date hereof.

b) Licensees and their Affiliates shall neither do nor permit to be done any act or thing which would have a material adverse effect on a Mark or materially reduce the value of a Mark or detract from its reputation.

c) Licensees and their Affiliates shall comply in all material respects with all applicable laws and regulations and obtain all necessary or appropriate government approvals and permits pertaining to the business activities it seeks to engage in under the Marks.

 

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7) REPRESENTATIONS, WARRANTIES AND COVENANTS

a) Licensees represent, warrant and covenant on behalf of Licensees and their Affiliates that:

i) this Agreement is a legal, valid and binding obligation of Licensees; and

ii) each Licensee has full power and authority to enter into, and perform its obligations under, this Agreement in accordance with its terms.

b) Licensor represents, warrants and covenants that:

i) this Agreement is a legal, valid and binding obligation of Licensor;

ii) Licensor has full power and authority to enter into, and perform its obligations under, this Agreement in accordance with its terms; and

iii) Licensor is not aware of any pending claims or litigation or of any claims threatened in writing regarding the use or ownership of the Marks.

c) Licensees shall be responsible and liable to Licensor for (i) the use of the Marks by their Affiliates and such Affiliates’ compliance with the provisions of this Agreement and (ii) any acts and omissions of any of Licensees’ Affiliates as if Licensees had performed those acts or made those omissions.

8) TERMINATION

In addition to any and all other remedies available to it hereunder, Licensor shall have the right to immediately terminate this Agreement, including the license to use the Marks as set forth in this Agreement, upon written notice to Licensees upon (a) Licensees’ (or their Affiliates’) material breach of any provision of this Agreement, which remains uncured by Licensees or such Affiliates after forty-five (45) days of receipt of written notice provided by any Licensor; (b) Rodney F. Emery ceasing to serve as Chairman of the Board of STAR without his consent or due to cause; (c) a Change of Control of STAR; (d) STAR ceases substantive commercial use of the STEADFAST mark; or (e) Licensees do or cause to be done any action that, in Licensor’s reasonable discretion, brings the name and goodwill of Licensor or the Marks into public disrepute or disfavor.

9) LIMITATION OF LIABILITY

NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN AND TO THE MAXIMUM EXTENT ALLOWED BY APPLICABLE LAW, IN NO EVENT SHALL ANY PARTY OR ITS AFFILIATES BE LIABLE FOR ANY LOSS OF PROFITS, LOSS OF BUSINESS, LOSS OF USE OR DATA, OR INTERRUPTION OF BUSINESS, OR FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OF ANY KIND RELATED TO OR ARISING OUT OF THIS AGREEMENT, HOWEVER CAUSED, ON ANY THEORY OF LIABILITY, WHETHER OR NOT THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

 

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10) LAW AND JURISDICTION

This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware without giving effect to conflicts of laws principles (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.

11) NOTICES

Any notice, report or other communication required or permitted to be given hereunder shall be given in the manner, and to such addresses of the parties, specified in the Contribution Agreement.

12) SEVERABILITY

In the event that any phrase, clause, sentence, paragraph, section, article or other portion of this Agreement shall become illegal, null or void or against public policy, for any reason, or shall be held by any court of competent jurisdiction to be illegal, null or void or against public policy, the remaining portions of this Agreement shall not be affected thereby and shall remain in force and effect to the full extent permissible by law.

13) ENTIRE AGREEMENT

This Agreement (together with the Contribution Agreement and any other transaction documents contemplated thereby) contains the entire agreement among the parties hereto with respect to the subject matter hereof, and shall supersede all previous oral and written agreements and all contemporaneous oral negotiations, commitments and understandings between the parties.

14) NO WAIVER

A waiver by any party hereto of a breach of or failure to perform any of the covenants, agreements, restrictions or conditions in this Agreement to be performed by any other party shall not be construed as a waiver of any succeeding breach of or failure to perform the same or other covenants, agreements, restrictions or conditions of this Agreement. No waiver shall be effective unless duly authorized and memorialized in a writing signed by the party against whom such waiver is to be effective.

15) FURTHER ASSURANCES

Each party hereto agrees, and, as applicable, shall cause their respective Affiliates, to execute any and all further documents and writings and perform such other reasonable actions that may be or become necessary or expedient to effectuate and carry out the purposes of this Agreement.

 

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16) SURVIVAL

Sections 5, 8-15, and this Section 16 shall survive the expiration or termination of this Agreement, as shall any other of the provisions of this Agreement that by their terms or by implication are to have continuing effect after any such expiration or termination.

17) COUNTERPARTS

This Agreement may be executed in a number of identical counterparts, each of which shall be deemed an original and all of which, collectively, shall constitute one (1) agreement.

[SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first written above.

 

LICENSOR:

STEADFAST INVESTMENT PROPERTIES, INC.

By:  

         

  Dinesh Davar
  Manager

[Signature Page to Trademark License Agreement]


LICENSEES:
STEADFAST APARTMENT REIT, INC.
By:  

             

 

Ella S. Neyland

Chief Financial Officer

STEADFAST APARTMENT REIT OPERATING PARTNERSHIP, L.P.

By: STEADFAST APARTMENT REIT, INC.,

its General Partner

By:  

             

 

Ella S. Neyland

Chief Financial Officer

[Signature Page to Trademark License Agreement]


STAR REIT SERVICES, LLC
By:  

 

  Dinesh Davar
  Chief Financial Officer

[Signature Page to Trademark License Agreement]

 

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SCHEDULE A

MARKS

SCHEDULE B

WEB DOMAINS


Exhibit G

STOCK POWER

FOR VALUE RECEIVED, Steadfast Apartment Advisor, LLC, a Delaware limited liability company, hereby sells, assigns and transfers unto Steadfast Apartment REIT, Inc., a Maryland corporation (the “Company”), 1000 shares of the Class A Common non-participating, non-voting convertible stock, par value $0.01 per share (the “Shares”), of the Company, standing in its name on the books of the Company, and does hereby irrevocably constitute and appoint the Secretary of the Company as attorney-in-fact to transfer the said Shares on the books of the Company maintained for that purpose, with full power of substitution in the premises.

Dated: August 31, 2020

 

STEADFAST APARTMENT ADVISOR, LLC, a Delaware limited liability company
By:  

 

  Ella S. Neyland
  Chief Financial Officer


Exhibit K

SUBLEASE AGREEMENT

THIS SUBLEASE AGREEMENT (this “Sublease”) dated as of September 1, 2020 (the “Effective Date”) is entered into by and between STEADFAST INVESTMENT PROPERTIES, INC. and STEADFAST MANAGEMENT COMPANY, INC., each a California corporation (together, “Sublandlord”), and STAR REIT SERVICES, LLC, a Delaware limited liability company (“Subtenant”), with reference to the following:

A. Sublandlord is party to that certain Lease dated January 1, 2010, as amended by that certain First Amendment to Lease (the “First Amendment”) dated October 14, 2013, that certain Second Amendment (the “Second Amendment”) dated June 4, 2015, and that certain Third Amendment dated May 31, 2019 (collectively, the “Master Lease”) entered into with Irvine Office Towers 1, LLC, a Delaware limited liability company, successor to The Irvine Company LLC, a California limited liability company (“Landlord”), respecting those premises (the “Master Premises”) consisting of approximately 45,261 rentable square feet of space commonly known as Suite 200 and Suite 500 and located on the Second and Fifth Floors of 18100 Von Karman Avenue, Irvine, CA 92660 (the “Building”). The Master Premises is more particularly described in the Master Lease. A copy of the Master Lease is attached to this Sublease as Exhibit C.

B. Sublandlord desires to sublet to Subtenant, and Subtenant desires to sublet from Sublandlord, a portion of the Master Premises (as described below) on the terms and conditions set forth in this Sublease. The portion of the Master Premises not being subleased to Subtenant shall be referred to herein as the “Remaining Premises.”

NOW, THEREFORE, in consideration of the mutual covenants contained in this Sublease and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows:

Agreement

1. Sublease. Sublandlord subleases to Subtenant, and Subtenant hereby subleases from Sublandlord, on the terms and conditions set forth in this Sublease, a portion of the Master Premises comprised of approximately 24,376 square feet of area, consisting of the Second Floor and a portion of the Fifth Floor, as further described in Exhibit A attached hereto (the “Subleased Space”), together with the non-exclusive use from time to time of certain 5th floor common areas, including the reception area, conference rooms and kitchen areas, and use of a mailbox in the Building designated “Suite 200.” Subtenant shall have the right, as appurtenant to its sublease of the Subleased Space during the Sublease Term (as defined in Section 2 below) to use the appurtenant areas (as described in Section 6.3 of the Master Lease) in common with Sublandlord in accordance with and subject to the terms of the Master Lease (including without limitation the reservations therein contained).

2. Term. The term of this Sublease shall be for the period commencing on September 1, 2020 and shall expire on May 31, 2022 (the “Term”) unless sooner terminated under the provisions of this Sublease or unless the Master Lease is sooner terminated.


3. Rent and Other Charges.

A. On or before the first day of the Term, Subtenant will deposit with Sublandlord the amount of Eighty-Five Thousand and 00/100 Dollars ($85,000.00) as a security deposit (“Security Deposit”) to be held by Sublandlord as security for the full and faithful performance of Subtenant’s obligations under this Sublease. Subtenant shall have no right to reduce the amount of the Security Deposit during the Term. If Subtenant fails to pay any Rent or additional rent, or otherwise defaults with respect to any of its obligations under this Sublease, Sublandlord may (but shall not be obligated to), and without prejudice to any other remedy to Sublandlord, use, apply or retain all or any portion of the Security Deposit for the payment of any Rent or additional rent in default or for the payment of any other sum to which Sublandlord may become obligated by reason of Subtenant’s default, or to compensate Sublandlord for any loss or damage or Sublandlord may suffer thereby, including, without limitation, prospective damages and damages recoverable pursuant to California Civil Code Section 1951.2. Subtenant waives the provisions of California Civil Code Section 1950.7, and all other provisions of law now in force or that become in force after the date of execution of this Sublease, that provide that Sublandlord may claim from the Security Deposit only those sums reasonably necessary to remedy defaults in the payment of rent, to repair damage caused by Subtenant, or to clean the Subleased Space or to pay any amount due Sublandlord hereunder. Sublandlord’s application of such a cash Security Deposit shall not contribute to the cure of any default unless and until Subtenant reinstates the Security Deposit to its full amount (either in the form of cash or a new Letter of Credit Security Deposit compliant with the provisions of this Section). If Sublandlord uses or applies all or any portion of the Security Deposit as provided above, Subtenant shall, within five (5) days after demand therefor, deposit cash with Sublandlord in an amount sufficient to restore the Security Deposit to the full amount thereof, and Subtenant’s failure to do so shall, at Sublandlord’s option, be an event of default under this Sublease. If the Subtenant performs all of Subtenant’s obligations hereunder, the Security Deposit, or so much thereof that has not theretofore been applied by Sublandlord, shall be returned to Subtenant within sixty (60) days following the latest of (i) the expiration of the Sublease Term, (ii) the date that Subtenant has vacated the Subleases Space in compliance with the provisions of this Sublease, and (iii) the date Tenant’s Share of Operating Expenses for the calendar year in which the Sublease Term expired are finally computed by Landlord and Sublandlord and Subtenant’s Share (as defined in Section 9(b) below) of Operating Expenses is paid by Subtenant to Sublandlord. Sublandlord shall not be deemed to hold the Security Deposit in trust nor be required to keep the Security Deposit separate from its general funds, and Subtenant shall not be entitled to any interest on the Security Deposit.

B. Commencing on the first day of the Term and continuing throughout the Sublease Term, Subtenant will pay to Sublandlord the following (collectively, “Rent”):

 

  i.

monthly rent (“Monthly Rent”) in an amount equal to Seventy-One Thousand Six Hundred Sixty-Five and 44/100 Dollars ($71,665.44), representing $2.94 per rentable square foot of the Subleased Space per month, until June 1, 2021; thereafter and until the end of the Term, monthly rent in an amount equal to Seventy-Four Thousand Eight Hundred Thirty-Five and 32/100 Dollars ($74,835.32), representing $3.07 per rentable square foot of the Subleased Space per month, in accordance with the terms and conditions of this Sublease and the Master Lease, as incorporated herein;

 

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  ii.

all costs and expenses due under the Master Lease and related to the Subleased Space, including Subtenant’s Share (as defined in Section 9(b) below) of Operating Expenses (including Property Taxes and Project Costs) as each is defined in the Master Lease. Without limiting the generality of the foregoing, if Sublandlord is required by Landlord to make advance payments, estimated payments or deposits, Subtenant shall pay Sublandlord the Subtenant’s Share of them in advance;

 

  iii.

parking costs, as additional rent, in an amount equal to Seven Thousand Forty and 00/100 Dollars ($7,040.00), representing 88 allotted unreserved parking stalls at $50.00 each per month, 12 converted parking stalls at $125.00 each per month, and 6 VIP converted parking stalls at each $190.00 per month; parking spaces may be assigned by Subtenant from time-to-time upon notice to the Sublandlord’s Office Manager, who shall maintain a current list of the users of reserved and VIP spaces (Subtenant acknowledges it is using a subset of Sublandlord’s parking spaces allocated to Sublandlord under the Master Lease, and Subtenant shall pay Sublandlord for use of the same at Landlord’s quoted monthly contract rate (as set from time to time) for each permit, plus any taxes thereon);

 

  iv.

an amount equal to One Thousand and Twenty and 00/100 Dollars ($1,020.00) per month, as additional rent, for the use and maintenance of office furniture and furnishings, (exclusive of all wall art located in common areas), as set forth in Exhibit B attached hereto (the “Furniture”); provided that at the end of the Term such Furniture shall be the property of Subtenant and shall be properly removed as proved in Section 4 below; and

 

  v.

an amount equal to Ten Thousand Five Hundred and 00/100 Dollars ($10,500.00) per month, as additional rent, to reimburse Sublandlord for costs related to the shared office services, including but not limited to reception services, handling of incoming and outgoing mail and packages, maintaining records and distributing access and parking fobs, inventory and ordering of supplies, coordination of vendors and service providers, and other tasks as reasonably agreed upon by the parties.

All Rent, additional rent and all other amounts payable to Sublandlord under this Sublease shall be payable on the date that is three (3) days prior to the first (1st) day of each calendar month without deduction, setoff, notice, or demand, or at such other times as invoiced by Landlord under the terms of the Master Lease, in lawful money of the United States of America by electronic fund transfer debit transactions through the Automated Clearing House network (“ACH”) or other reasonable method required in advance by Sublandlord. Rent shall be prorated for any partial

 

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month during the Term. All obligations to pay Rent, additional rent, and all other amounts that become due under this Sublease shall survive the expiration or earlier termination of this Sublease. Without limiting the foregoing, except as expressly set forth in this Sublease, Subtenant’s obligation to pay Rent, additional rent and all other amounts under this Sublease shall not be discharged or otherwise affected by any law or regulation now or hereafter applicable to the Subleased Space, or any other restriction on Subtenant’s use, or any casualty or taking, or any failure by Sublandlord to perform any covenant contained herein, or any other occurrence; and, except as expressly set forth in this Sublease, Subtenant waives all rights now or hereafter existing to terminate or cancel this Sublease or quit or surrender the Subleased Space or any part thereof, or to assert any defense in the nature of constructive eviction to any action seeking to recover Rent.

C. In addition, Subtenant will reimburse Sublandlord for any and all direct costs and expenses paid on its behalf (e.g. postage, overnight delivery charges, supplies, etc.) upon receipt of invoice therefor reflecting such costs and expenses. Such invoice will be paid promptly upon receipt, and in no case later than 15 days after receipt of such invoice. Sublandlord and Subtenant agree that this Sublease is intended to pass through to Subtenant all financial obligations imposed on Sublandlord pursuant to the Master Lease relating to the Subleased Space, except for the Basic Rent (as defined in the Master Lease) that Sublandlord pays to Landlord for the Subleased Space. Any ambiguity in the terms of this Sublease shall be construed in accordance with such intention.

4. Use of Subleased Space. The Subleased Space will be used solely for Permitted Uses (as defined in Article 1 of the Master Lease), specifically as general office uses and legally related purposes, all in accordance with and subject to the provisions of the Master Lease. Subtenant shall use the areas appurtenant to the Subleased Space solely in accordance with the provisions of the Master Lease. At the end of the Term, Subtenant shall surrender possession of the Subleased Space to Sublandlord in as good order, condition and repair as when received and shall remove all furniture, belongings and installations as set forth in Section 15.3 of the Master Lease.

5. Assignment and Subletting. Subtenant shall have no right to assign this Sublease or sublet all or any portion of the Subleased Space, or voluntarily, by operation of law, or otherwise, directly or indirectly assign or permit to be assigned this Sublease or any interest herein, or allow the Subleased Space to be occupied by persons other than the employees of Subtenant. Any assignment or sublease in violation of this Section 6 shall be deemed void and shall constitute a default by Subtenant under this Sublease.

6. Master Lease. Subtenant acknowledges that it has received a copy of the Master Lease, including Exhibits thereto, also attached hereto as Exhibit C, and agrees that it shall not take any action, or omit to take any action, necessary to comply with the terms of the Master Lease.

a. Except as expressly set forth below in Section 8(b), the Master Lease is incorporated herein in its entirety by this reference. For the purpose of this Sublease, all references in the Master Lease to “Landlord” shall be deemed to mean Sublandlord, all references to “Tenant” shall be deemed to mean Subtenant and all references to “Lease” shall mean this Sublease, all references to “Basic Rent”, “Commencement Date”, and “Term” shall be deemed to mean the Monthly Rent, the Commencement Date, and the Term under this Sublease. Notwithstanding the

 

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foregoing incorporation of the terms and conditions of the Master Lease, Sublandlord shall not be responsible for the performance of any obligations to be performed by Landlord under the Master Lease (including without limitation for services, utilities, parking, work alterations, repairs or maintenance to be provided by Landlord under the Master Lease), and Subtenant agrees to look solely to Landlord for the performance of such obligations. Sublandlord shall not be liable to Subtenant for any failure by Landlord to perform its obligations under the Master Lease, nor shall such failure by Landlord excuse performance by Subtenant of its obligations hereunder. Without limiting the generality of the foregoing, all references in the Master Lease to Landlord-provided services or Landlord insurance requirements, and any other references which by their nature relate to the owner or operator of the Building, rather than to a tenant of the Building subleasing space to a subtenant, shall continue to be references to Landlord and not to Sublandlord. In the event of a conflict between the express provisions of this Sublease and the Master Lease, as between Sublandlord and Subtenant, the express provisions of this Sublease shall control.

b. Sublandlord and Subtenant agree that as between Sublandlord and Subtenant the following terms of the Master Lease shall not be incorporated into this Sublease:

i. The defined economic terms for “Basic Rent”, “Term”, “Premises” and the like are inapplicable except in the case of Subtenant’s holding over in the Subleased Space following the expiration or sooner termination of the Sublease Term, in which event Subtenant shall be liable for, and shall forthwith pay to Sublandlord, any and all Basic Rent and Additional Rent as may be due and owing from Sublandlord to Landlord as a result of such holding over and;

ii. Article 1 (except for defined terms of the address of the Building, the Project Description, the Floor Area of the Building, and the applicable definitions in clause 7) Article 2, Article 3, Section 4.1, Section 4.3, The 6th, 7th, 9th and 10th sentences of Section 5.1, Section 5.2, Section 5.4, Article 6, Section 7.2, Section 7.3, Article 8, Article 9, Article 10.2, Article 11, Article 12, Section 13.1, the last four sentences of Article 16, Article 18, Article 22 confidentiality and financial statements, Subsection (h) of Exhibit B, Section 8 of Exhibit C, Exhibit F (except that Subtenant shall observe all rules and regulations of the Parking Area set forth therein), Sections 1-8 of Exhibit G, Section 9 of Exhibit G, Section 11 of Exhibit G (except that Subtenant shall observe all rules and regulations for the Building promulgated by Landlord in accordance with the Master Lease), Sections 12-23 of Exhibit G, Exhibit X, the First Amendment, the Second Amendment, and the Third Amendment to Lease (except the modifications to the Master Lease in Section III A. 3 and III C., as the same affect the Master Lease provisions as incorporated herein and applicable to the Subleased Space).

c. Except as otherwise specifically set forth in this Sublease, the time limits set forth in the Master Lease for the giving of notices, making demands, performance of any act, condition or covenant, or the exercise of any right, remedy or option, are changed for the purpose of this Sublease by shortening the same in each instance so that notices shall be given, demands made, or any act, condition or covenant performed, or any right, remedy or option hereunder exercised by Subtenant as the case may be within three (3) business days prior to the expiration of the time limit, taking into account the maximum grace period, if any, relating thereto contained in the Master Lease with respect to such matter. Each party shall promptly deliver to the other party copies of all notices, requests or demands which relate to the Subleased Space or the use or occupancy thereof after receipt of the same from Landlord.

 

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d. Subtenant agrees that neither it nor any of its employees, agents, contractors, or invitees will do anything, and will not suffer anything to be done, in, on or about the Subleased Space which would result in the breach by Sublandlord of its undertakings and obligations under the Master Lease. Except as set forth in this Section 8, this Sublease shall be subject to and on all of the terms and conditions as are contained in the Master Lease.

e. Capitalized terms used in this Sublease, but not defined herein, shall have the meanings given them in the Master Lease.

7. Condition and Acceptance of the Subleased Space. By execution of this Sublease, Subtenant accepts the Subleased Space and all appurtenant areas in its “AS IS, WHERE IS, WITH ALL FAULTS” condition, and Sublandlord makes no representations or warranties to Subtenant, express or implied, with respect to any matter relating to the zoning, legal compliance or physical condition of the Subleased Space, or as to the use or occupancy which may be made thereof. Sublandlord shall have no obligation to perform any improvements, alterations or repairs to the Subleased Space or any appurtenant areas prior to delivery thereof to Subtenant. Subtenant hereby waives, disclaims and renounces any representation or warranty. The Subleased Space is not currently separately demised from the Remaining Premises, and Subtenant hereby releases Sublandlord from, and waives any claims against Sublandlord for, matters arising out of the absence of such separate demising.

a. Subtenant shall keep and maintain the Subleased Space and all fixtures and equipment therein clean and in substantially in the same condition as existing upon their delivery to Subtenant hereunder, except for reasonable wear and tear, damage by fire or other casualty, or damage as a result of acts or omissions by Sublandlord or Landlord, and in all events in the condition required under the Master Lease.

b. For purposes of this Sublease, “Subtenant’s Share” shall mean the rentable square feet of the Subleased Space divided by the rentable square feet of the Master Premises. Subtenant’s Share on the Effective Date is 53.86%. Sublandlord and Subtenant agree that Sublandlord shall not prepare Landlord’s estimates or statements but shall forward copies of Landlord’s estimates and statements after receipt, and the definition of Tenant’s Share shall be, as between Sublandlord and Subtenant, Subtenant’s Share as set forth above.

8. Alterations. Subtenant shall not make any alteration, addition, improvement or change to the Subleased Space (including, but not limited to any alteration of the paint color or carpeting in the Subleased Space) without the prior written consent of Sublandlord, which consent shall be given or withheld or conditioned in Sublandlord’s sole and absolute discretion and by Landlord (if required). Any alterations permitted by Sublandlord pursuant to this Section 10 shall be made by Subtenant in accordance with all of the terms and conditions of the Master Lease relating to alterations. Subtenant shall reimburse Sublandlord and Landlord for any costs incurred in connection with the review of any proposed alterations by Subtenant. Without limiting any restrictions contained in the Master Lease, Subtenant shall restrict all noisy and intrusive work to

 

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non-business hours. Subtenant hereby agrees to indemnify, defend and hold harmless Sublandlord, the Sublandlord Entities and Landlord from all damages, costs, losses and liabilities arising from such alterations or improvements or the construction thereof by Subtenant or its agents, employees, contractors or invitees.

9. Notices. All notices, demands or requests which may be or are required to be given under this Sublease shall be in writing and shall be given by personal delivery, or by electronic mail (receipt confirmed), or certified or registered mail, return receipt requested, postage prepaid, and addressed as follows:

 

  Sublandlord:    Steadfast Companies
     18100 Von Karman Avenue, Suite 500
     Irvine, CA 92612
                                  Attention: Dinesh Davar, CFO
     Dinesh. [email protected]
  Subtenant:    STAR REIT Services, LLC
     18100 Von Karman Avenue, Suite 200
     Irvine, CA 92612
     Attention: Ella Neyland, President/CFO
     [email protected]

The addresses of the parties may be changed from time to time by notice given in the manner set forth in this Section 11. Each notice, request, demand, advice or designation given under this Sublease shall be deemed properly given only upon actual receipt or refusal of delivery.

10. Termination of Master Lease. This Sublease is, and shall at all times remain, subordinate to the Master Lease and to any mortgage financing of Landlord or superior lease, and to all other matters, instruments or agreements to which the Master Lease is or shall be subject or subordinate, and to all renewals, modifications, consolidations, replacements and extensions thereof. In the event the Master Lease expires or is terminated for any reason, then, on the date of such expiration or termination, this Sublease shall automatically terminate and be of no further force or effect as if such expiration or termination date had been specified in this Sublease as the expiration date hereof. If the expiration or termination of the Master Lease (and resulting termination of this Sublease) occurs, Sublandlord shall have no liability to Subtenant for the resultant termination of this Sublease, notwithstanding the reason for such expiration or termination, including without limitation, any such expiration or termination caused by (i) the exercise of any termination right by Landlord or Sublandlord under the Master Lease, including without limitation on account of a casualty or condemnation, (ii) the agreement of Landlord and Sublandlord, or (iii) the default of Sublandlord under the Master Lease. Sublandlord shall have no obligation to obtain any non-disturbance agreements from Landlord or any mortgagees or ground lessors. Subtenant agrees that in the event of termination, reentry or dispossession by Landlord under the Master Lease, Landlord may, at its option, take over all of the right, title and interest of Sublandlord under this Sublease, and Subtenant shall, at Landlord’s option, attorn to Landlord pursuant to the provisions of this Sublease.

 

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11. Subtenant’s Covenants. Subtenant covenants to Sublandlord to perform all of the covenants and obligations to be performed by Sublandlord as tenant under the Master Lease as the same relate to the Subleased Space and to comply with this Sublease and the applicable provisions of the Master Lease, as modified by this Sublease, in all respects (including, without limitation, complying with all OSHA, environmental and other applicable laws, regulations and standards, and complying with Exhibit D of the Master Lease). If Subtenant shall fail to make any payment or perform any act required to be made or performed by Subtenant under the Master Lease pursuant to Subtenant’s assumption of Sublandlord’s obligations thereunder as they relate to the Subleased Space, and such default is not cured by Subtenant by the first to occur of (i) one-half of the period specified in the Master Lease for curing such default, or (ii) five (5) days prior to the expiration of such Master Lease cure period, then Subtenant shall be deemed to be in default under this Sublease and Sublandlord, without waiving or releasing any obligation or default hereunder, may (but shall be under no obligation to) make such payment or perform such act for the account and at the expense of Subtenant, and may take any and all such actions as Sublandlord in its sole discretion deems necessary or appropriate to accomplish such cure. If Sublandlord shall reasonably incur any expense in remedying such default, Sublandlord shall be entitled to recover such sums upon demand from Subtenant as Additional Rent under this Sublease.

12. Default. In the event that Subtenant shall fail to timely perform any of its obligations under this Sublease other than those referred to in Section 14 above and such failure continues (i) in the case of the payment of any amounts payable to Sublandlord for more than three (3) days, or (ii) in the case of obligations referred to in Section 14 above, for more than the applicable cure period specified in Section 14, or (iii) in the case of any other obligation hereunder (except under Section 19 below, as to which there is no cure period), for more than twenty five (25) days after written notice thereof, or (iv) if Subtenant becomes insolvent, fails to pay its debts as they fall due, files a petition under any chapter of the U.S. Bankruptcy Code (or similar petition under any insolvency law of any jurisdiction), or if such petition is filed against Subtenant and such proceeding is not dismissed within ninety (90) days after the filing thereof, or Subtenant proposes any dissolution, liquidation, composition, financial reorganization or recapitalization with creditors, makes an assignment for the benefit of creditors, or if a receiver trustee or similar agent is appointed or takes possession with respect to any property of the Subtenant, or if the leasehold hereby created is taken on execution or other process of law in any action against Subtenant, then Subtenant shall be deemed to be in default under this Sublease. In the event of a default by Subtenant, Sublandlord shall have (a) the right to terminate this Sublease by written notice to Subtenant and enforce, with respect to this Sublease and the Subtenant hereunder, (b) any and all of the rights and remedies available to Landlord under the Master Lease on account of a default by the tenant thereunder, and (c) all other rights and remedies to which Sublandlord is entitled under this Sublease and under applicable law (including, without limitation, the remedies of Civil Code Section 1951.4 and any successor statute or similar law).

Sublandlord will not be in default in the performance of any obligation required to be performed by Sublandlord under this Sublease unless Sublandlord fails to perform such obligation within thirty (30) days after the receipt of written notice from Subtenant specifying in detail Sublandlord’s failure to perform; provided however, that if the nature of Sublandlord’s obligation is such that more than thirty (30) days are required for performance, then Sublandlord will not be deemed in default if it commences such performance within such thirty (30) day period and thereafter diligently pursues the same to completion. Upon any default by Sublandlord, Subtenant may exercise any of its rights provided in this Sublease, at law or in equity, subject to the limitations on liability set forth in this Sublease.

 

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13. Indemnification. Subtenant shall indemnify Sublandlord, Sublandlord’s affiliates and the trustees, directors, officers, managers, partners, beneficiaries, stockholders, employees and agents of each of them (“Sublandlord Entities”) and defend and hold Sublandlord and the other Sublandlord Entities harmless from and against any and all claims, demands, suits, judgments, liabilities, costs and expenses, including reasonable attorneys’ fees, arising out of or in connection with (a) Subtenant’s use and possession of the Subleased Space, or (b) arising out of the failure of Subtenant, its agents, contractors, employees, licensees or invitees to perform any covenant, term or condition of this Sublease or of the Master Lease to be performed by Subtenant hereunder, or (c) the negligence or willful misconduct of Subtenant or Subtenant’s its agents, contractors, employees, licensees or invitees. In no event shall either party be liable to the other for consequential, indirect, exemplary, or punitive damages except that Subtenant shall be liable for all damages that are not limited by the terms of the Master Lease as incorporated in this Sublease, and except for damages under Section 18 below.

Sublandlord agrees to indemnify and defend Subtenant against, and agrees to hold Subtenant harmless of and from, all liabilities, obligations, actions, suits, proceedings or claims, and all costs and expenses, including but not limited to reasonable attorneys’ fees, arising out of or incurred in connection with the use and occupancy of the Subleased Space prior to the date of this Sublease.

14. Insurance. Subtenant shall maintain all insurance required in respect of the Subleased Space during the Sublease Term under the terms of the Master Lease, including without limitation as set forth in Section 10.1 and Exhibit D thereof. Such insurance shall list Sublandlord (and all other entities and individuals reasonably requested by Sublandlord from time to time) and Landlord as additional insureds. Subtenant shall furnish Sublandlord and Landlord with certificates of insurance evidencing the coverages maintained by Subtenant with respect to the Subleased Space in accordance with the Master Lease at execution and upon each renewal of the policy(ies). The provisions of Sections 10.4 and 10.5 (Waiver of Claims and Waivers of Subrogation) of the Master Lease are incorporated by reference into this Sublease and shall apply as between Sublandlord and Subtenant with all references in the Master Lease to “Landlord” being deemed to mean Sublandlord, all references to “Tenant” shall be deemed to mean Subtenant, and all references to “Lease” shall be deemed to mean this Sublease.

If a fire or other casualty occurs, and if Subtenant is required or entitled under the Master Lease and this Sublease to repair or restore the damaged property, then Subtenant shall be entitled to the proceeds from any property insurance policies carried by Subtenant. Sublandlord shall have no obligation to cause Landlord to repair or restore alterations made by or on behalf of Tenant in the Subleased Space in accordance with the terms of the Master Lease and Sublandlord shall have no obligation to repair or restore alterations in the Subleased Space. Notwithstanding the foregoing, if Sublandlord is required under the Master Lease and/or by Landlord to repair or restore damaged property (and Subtenant is not permitted to perform such work), then Subtenant shall turn over all insurance proceeds to Sublandlord within five (5) business days of Sublandlord’s notice to Subtenant. All insurance policies required of Subtenant hereunder shall provide that Sublandlord and Landlord will be given at least thirty (30) days’ prior written notice of any

 

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cancellation or amendment in the policy, or any other expiration or defaults thereunder. To the extent the Master Lease has requirements that are more restrictive or more expansive than the requirements of this Sublease with respect to insurance, Subtenant shall comply with those requirements as well. All insurance maintained by Subtenant shall be primary to, and not contributory with, any insurance carried by Sublandlord, whose insurance shall be considered excess only. To the extent permitted by applicable law, Subtenant’s insurance policies shall contain endorsements pursuant to which the insurance company waives subrogation against (i) Sublandlord and any entities required by Sublandlord to be listed by Subtenant as additional insureds and (ii) Landlord and any entities required to be named under the terms of the Master Lease (“Waiver Entities”). In addition to the waivers of claims between Sublandlord and Subtenant as expressly incorporated into this Sublease from Section 10.4 of the Master Lease and any such waivers under this Sublease, Subtenant hereby releases the Waiver Entities to the extent of the limits of the coverage of the insurance policies required to be maintained hereunder with respect to any claim (including a claim for negligence) which it might otherwise have against the Waiver Entities.

15. Fire or Casualty; Eminent Domain. In the event the Subleased Space (or access thereto or systems serving the same) are the subject of a fire or other casualty or a taking by eminent domain that interferes with the use and enjoyment by Subtenant of a material portion of the Subleased Space, Subtenant shall be entitled to an equitable adjustment of the Sublease Monthly Rent set forth in Section 3(B)(i) above until tenantable occupancy is restored, to the extent such rent is abated under the Master Lease. Notwithstanding anything contained in the Master Lease to the contrary, as between Sublandlord and Subtenant only, all insurance proceeds or condemnation awards received by Sublandlord under the Master Lease shall be deemed property of Sublandlord. Sublandlord shall not be liable to Subtenant by reason of a termination of the Master Lease by either Landlord or Sublandlord pursuant to Article 11 of the Master Lease. If the term of the Master Lease is terminated as provided therein, or at the election of either party thereto pursuant to the terms thereof, as a result of any casualty or condemnation affecting the Building or any portion thereof, this Sublease shall thereupon be terminated ipso facto without any liability of Sublandlord to Subtenant by reason of such early termination. Notwithstanding the terms of Article 11 of the Master Lease, to the extent that the same requires Sublandlord to restore the Subleased Space, Sublandlord shall only be required to restore the leasehold improvements in the Subleases Space that exist as of the Commencement Date (other than leasehold improvements or alterations installed by or on behalf of it at Subtenant’s expense), with Subtenant being responsible for restoration of any leasehold improvements or alterations installed by or on behalf of it at Subtenant’s expense.

16. Holding Over. If Subtenant continues to occupy the Subleased Space after the expiration of the Term without the express written consent of Sublandlord, such occupancy by Subtenant shall automatically, without notice, constitute a default and breach of this Sublease by Subtenant. Subtenant shall pay Sublandlord Two Hundred Percent (200%) of the monthly Rent payable for the month immediately preceding the holding over (including, in addition to Monthly Base Rent, all amounts payable for Tenant’s Share of Operating Expenses which Landlord or Sublandlord may reasonably estimate and all other additional rent) for each month or portion thereof that Subtenant retains possession of the Subleased Space, or any portion thereof, after expiration or earlier termination of the Term (without reduction for any partial month that Subtenant retains possession). Subtenant shall also pay all damages sustained by Sublandlord by reason of such retention of possession. The provisions of this Section shall not constitute a waiver by Sublandlord of any re-entry rights of Sublandlord and Subtenant’s continued occupancy of the Subleased Space shall be as a tenancy in sufferance.

 

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17. Inspection; Entry. Sublandlord shall have the right, at all reasonable times after reasonable notice (except in an emergency in which case no notice must be given until reasonably convenient after such entry) to enter upon the Subleased Space and to examine and inspect the Subleased Space, or to perform work therein or in portions or Sublandlord’s premises requiring access through the Subleased Space, or to exercise any other rights under this Sublease. Except in the case of emergencies, in the event the nature of Subtenant’s work in or about the Subleased Space reasonably precludes any access by Sublandlord to a particular area of Sublandlord’s premises at any given time, Sublandlord and Subtenant agree to cooperate in mutual good faith to arrange a reasonable alternative time.

18. Exhibits. All exhibits attached hereto are incorporated in this Sublease, except as expressly excluded herein.

19. Surrender of Subleased Space. At the expiration or earlier termination of the Sublease Term, Subtenant shall quit and surrender the Subleased Space in the condition required under this Sublease and under the Master Lease as if the Master Lease term had expired or been earlier terminated. Without limitation of any of the foregoing, Subtenant shall on or before the expiration or termination of this Sublease, remove all of Subtenant’s personal property, any subleasehold improvements, alterations and additions as Sublandlord has directed Subtenant to remove when Subtenant requested Sublandlord’s approval for such improvements, alterations and additions, and all tel/data cabling and equipment installed by or for Subtenant, and repair any damage caused by such removal. If any personal property of Subtenant shall remain in the Subleased Space after the termination of this Sublease, at the election of Sublandlord, (i) it shall be deemed to have been abandoned by Subtenant and may be retained by Sublandlord as its own property or (ii) such property may be removed and disposed of by Sublandlord at the expense of Subtenant. The rights of Sublandlord shall be in addition to the rights of Landlord under Section 15.3 of the Master Lease and Subtenant shall be responsible for all of the obligations of Tenant under such Section 15.3. Subtenant’s obligation to observe or perform under this Section shall survive the expiration or termination of this Sublease.

20. Jury Trial. THE PARTIES DO HEREBY EXPRESSLY WAIVE ALL RIGHTS TO TRIAL BY JURY ON ANY CAUSE OF ACTION DIRECTLY OR INDIRECTLY INVOLVING THE TERMS, COVENANTS, OR CONDITIONS OF THIS SUBLEASE OR ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANYWAY CONNECTED WITH THIS SUBLEASE.

 

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21. Miscellaneous.

a. Counterparts. This Sublease may be executed in any number of counterparts, each of which shall be deemed an original, and when taken together they shall constitute one and the same sublease. Without limiting the generality of the foregoing, the parties agree that counterparts may be exchanged by electronic “.pdf” signature and when both Sublandlord and Subtenant have signed and delivered at least one such electronic counterpart, each shall be deemed an original and, when taken together with the other, shall constitute one and the same Sublease which shall be binding upon and effective as to Sublandlord and Subtenant.

b. No Waiver. The failure of either party to insist on strict performance of any covenant or condition hereof, or to exercise any option contained herein, shall not be construed as a waiver of such covenant, condition or option in any other instance.

c. Memorandum of Lease. Subtenant shall not record this Sublease or any memorandum or notice hereof.

d. Severability. The invalidity of any of the provisions of this Sublease will not impair or affect in any manner the validity, enforceability or effect of the rest of this Sublease.

e. Relationship Between the Parties. This Sublease does not create the relationship of principal and agent, nor does it create any partnership, joint venture, or any association or relationship between Sublandlord and Subtenant other than as and to the extent specifically provided in this Sublease, the sole relationship of Sublandlord and Subtenant being that of sublandlord and subtenant as provided in this Sublease.

f. Remedies Cumulative. Except as specifically provided herein, all rights and remedies of Sublandlord under this Sublease shall be cumulative and none shall exclude any other rights and remedies allowed by law.

g. Liability. No partner, member, shareholder, beneficial owner, officer, director, manager or other beneficial owner in either party hereto shall have any liability to the other party for any matters arising under or in connection with this Sublease.

22. Use of Furniture. During the Sublease Term, Sublandlord hereby leases to Subtenant and Subtenant hereby accepts from Sublandlord, for the monthly charge set forth in Section 3(B)(iv) above, the Furniture. The FF&E shall be leased in its “AS-IS, WHERE IS, WITH ALL FAULTS” condition and Sublandlord makes no representations or warranties to Subtenant of any kind with respect thereto. Subtenant shall maintain the FF&E in its existing condition and repair, ordinary wear and tear and damage by casualty excepted, and shall pay all FF&E taxes associated with the FF&E. No alterations or changes shall be made to the FF&E except with Sublandlord’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed. Upon expiration of the Sublease Term or earlier termination of this Sublease, such Furniture shall be conveyed to Subtenant in consideration of Subtenant’s payment to Sublandlord in the amount of One Dollar ($1.00), receipt of which is hereby acknowledged. The foregoing provision shall be self-operative, but in confirmation thereof, upon the request of Sublandlord, Subtenant shall execute and deliver a bill of sale, on a form provided by Sublandlord, pursuant to which Sublandlord shall transfer and convey such furniture to Subtenant. Sublandlord makes no

 

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representations or warranties as to the condition or suitability of such Furniture for Subtenant’s use. Sublandlord shall have no other obligation or liability with respect to any such Furniture, and such Furniture shall constitute Subtenant’s property for all purposes under the Sublease and Master Lease.

23. Signage. Sublandlord shall have no obligation to furnish or permit any signage to be installed by Subtenant and any such signage for Subtenant shall be installed only with the prior approval of Sublandlord and Landlord and in accordance with the provisions of the Master Lease.

24. Security Measures. Subtenant hereby acknowledges that Sublandlord shall have no obligation whatsoever to provide guard service or other security measures for the benefit of the Subleased Space.

25. Attorney Fees. If either party commences an action against the other in connection with this Sublease, the prevailing party will be entitled to recover costs of suit and reasonable attorney fees.

26. Successors and Assigns. This Sublease will be binding on and inure to the benefit of the parties to it, their heirs, executors, administrators and successors in interest.

27. Entire Agreement. This Sublease sets forth all the agreements between Sublandlord and Subtenant concerning the Subleased Space, and there are no other agreements either oral or written other than as set forth in this Sublease.

28. Time of Essence. Time is of the essence in this Sublease.

29. Certified Access Specialist. Pursuant to California Civil Code Section 1938, Sublandlord hereby notifies Subtenant that, to Sublandlord’s knowledge, as of the Effective Date, the Subleased Space have not undergone inspection by a “Certified Access Specialist” (“CASp”) to determine whether the Subleases Space meet all applicable construction-related accessibility standards under California Civil Code Section 55.53.

30. Governing Law. This Sublease will be governed by and construed in accordance with the laws of the State of California.

[Remainder of page intentionally left blank.]

 

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

 

SUBLANDLORD:
STEADFAST INVESTMENT PROPERTIES, INC.
By:  

 

  Authorized Officer
STEADFAST MANAGEMENT COMPANY, INC.
By:  

 

  Authorized Officer
SUBTENANT:
STAR REIT SERVICES, LLC
By:  

 

  Authorized Officer

 

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Exhibit K

EXHIBIT A

THE SUBLEASED SPACE


EXHIBIT B

FURNITURE LIST


EXHIBIT C

MASTER LEASE

(Back To Top)

Section 5: EX-10.1 (EX-10.1)

EX-10.1

Exhibit 10.1

SECOND AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP

OF

STEADFAST APARTMENT REIT OPERATING PARTNERSHIP, L.P.

 

 

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 IN THE OPINION OF COUNSEL SATISFACTORY TO THE PARTNERSHIP 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.

 

 

Dated as of August 28, 2020


TABLE OF CONTENTS

 

         Page  

ARTICLE I DEFINED TERMS

     2  

ARTICLE II ORGANIZATIONAL MATTERS

     15  

Section 2.1

  Organization      15  

Section 2.2

  Name      16  

Section 2.3

  Registered Office and Agent; Principal Office      16  

Section 2.4

  Term      16  

Section 2.5

  Partnership Interests as Securities      16  

Section 2.6

  Certificates Describing Partnership Units      17  

ARTICLE III PURPOSE

     17  

Section 3.1

  Purpose and Business      17  

Section 3.2

  Powers      17  

ARTICLE IV CAPITAL CONTRIBUTIONS AND ISSUANCES OF PARTNERSHIP INTERESTS

     18  

Section 4.1

  Capital Contributions of the Partners      18  

Section 4.2

  Issuances of Partnership Interests      18  

Section 4.3

  No Preemptive Rights      19  

Section 4.4

  Other Contribution Provisions      19  

Section 4.5

  No Interest on Capital      20  

Section 4.6

  LTIP Units      20  

Section 4.7

  Conversion of LTIP Units      23  

ARTICLE V DISTRIBUTIONS

     26  

Section 5.1

  Requirement and Characterization of Distributions      26  

Section 5.2

  Amounts Withheld      27  

Section 5.3

  Distributions Upon Liquidation      27  

Section 5.4

  Revisions to Reflect Issuance of Partnership Interests      27  

ARTICLE VI ALLOCATIONS

     28  

Section 6.1

  Allocations for Capital Account Purposes      28  

Section 6.2

  Revisions to Allocations to Reflect Issuance of Partnership Interests or Future Agreements to Bear Disproportionate Losses      30  

ARTICLE VII MANAGEMENT AND OPERATIONS OF BUSINESS

     31  

Section 7.1

  Management      31  

Section 7.2

  Certificate of Limited Partnership      34  

Section 7.3

  Title to Partnership Assets      35  

Section 7.4

  Reimbursement of the General Partner      35  

Section 7.5

  Outside Activities of the General Partner; Relationship of Shares to Partnership Units; Funding Debt      38  

Section 7.6

  Transactions with Affiliates      40  

Section 7.7

  Indemnification      41  

 

i


TABLE OF CONTENTS

(continued)

 

         Page  

Section 7.8

  Liability of the General Partner      42  

Section 7.9

  Other Matters Concerning the General Partner      44  

Section 7.10

  Reliance by Third Parties      44  

Section 7.11

  Restrictions on General Partner’s Authority      45  

Section 7.12

  Loans by Third Parties      45  

ARTICLE VIII RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS

     45  

Section 8.1

  Limitation of Liability      45  

Section 8.2

  Management of Business      45  

Section 8.3

  Outside Activities of Limited Partners      46  

Section 8.4

  Return of Capital      46  

Section 8.5

  Rights of Limited Partners Relating to the Partnership      46  

Section 8.6

  Redemption Right      47  

ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS

     51  

Section 9.1

  Records and Accounting      51  

Section 9.2

  Fiscal Year      52  

Section 9.3

  Reports      52  

ARTICLE X TAX MATTERS

     52  

Section 10.1

  Preparation of Tax Returns      52  

Section 10.2

  Tax Elections      52  

Section 10.3

  Partnership Representative      53  

Section 10.4

  Organizational Expenses      56  

Section 10.5

  Withholding      56  

ARTICLE XI TRANSFERS AND WITHDRAWALS

     57  

Section 11.1

  Transfer      57  

Section 11.2

  Transfers of Partnership Interests of General Partner      57  

Section 11.3

  Limited Partners’ Rights to Transfer      58  

Section 11.4

  Substituted Limited Partners      59  

Section 11.5

  Assignees      60  

Section 11.6

  General Provisions      60  

ARTICLE XII ADMISSION OF PARTNERS

     62  

Section 12.1

  Admission of a Successor General Partner      62  

Section 12.2

  Admission of Additional Limited Partners      62  

Section 12.3

  Amendment of Agreement and Certificate of Limited Partnership      63  

Section 12.4

  Limit on Number of Partners      63  

ARTICLE XIII DISSOLUTION AND LIQUIDATION

     63  

Section 13.1

  Dissolution      63  

Section 13.2

  Winding Up      64  

Section 13.3

  Compliance with Timing Requirements of Regulations; Restoration of Deficit Capital Accounts      65  

 

ii


TABLE OF CONTENTS

(continued)

 

         Page  

Section 13.4

  Rights of Limited Partners      66  

Section 13.5

  Notice of Dissolution      66  

Section 13.6

  Cancellation of Certificate of Limited Partnership      66  

Section 13.7

  Reasonable Time for Winding Up      66  

Section 13.8

  Waiver of Partition      66  

Section 13.9

  Liability of Liquidator      67  

ARTICLE XIV AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS

     67  

Section 14.1

  Amendments      67  

Section 14.2

  Meetings of the Partners      69  

ARTICLE XV GENERAL PROVISIONS

     70  

Section 15.1

  Addresses and Notice      70  

Section 15.2

  Titles and Captions      70  

Section 15.3

  Pronouns and Plurals      70  

Section 15.4

  Further Action      70  

Section 15.5

  Binding Effect      70  

Section 15.6

  Creditors      71  

Section 15.7

  Waiver      71  

Section 15.8

  Counterparts      71  

Section 15.9

  Applicable Law      71  

Section 15.10

  Invalidity of Provisions      71  

Section 15.11

  Power of Attorney      71  

Section 15.12

  Entire Agreement      72  

Section 15.13

  No Rights as Stockholders      73  

Section 15.14

  Limitation to Preserve REIT Status      73  

List of Exhibits:

 

Exhibit A

     

Partner Registry

Exhibit B

     

Capital Account Maintenance

Exhibit C

     

Special Allocation Rules

Exhibit D

     

Notice of Redemption

Exhibit E

     

Notice of Election by Partner to Convert LTIP Units into Class A Common Units

Exhibit F

     

Notice of Election by Partnership to Force Conversion of LTIP Units into Class A Common Units

 

iii


SECOND AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP

OF

STEADFAST APARTMENT REIT OPERATING PARTNERSHIP, L.P.

THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF STEADFAST APARTMENT REIT OPERATING PARTNERSHIP, L.P., dated as of August 28, 2020 (the “Agreement”), is entered into by and among Steadfast Apartment REIT, Inc., a Maryland corporation (“STAR REIT”), as the General Partner and the Parent, the Initial Limited Partner, the Special Limited Partner, and the Contributors, together with any other Persons who become Partners in Steadfast Apartment REIT Operating Partnership, L.P. (the “Partnership”) as provided herein.

WHEREAS, SI Subsidiary, LLC (as successor to Steadfast Income REIT, Inc., as successor to Steadfast Secure Income REIT, Inc.), a Maryland limited liability company (the “Initial General Partner”), and the Initial Limited Partner entered into that certain Limited Partnership Agreement of Steadfast Income REIT Operating Partnership, L.P., dated as of July 6, 2009, as amended by that certain Amended and Restated Limited Partnership Agreement of Steadfast Income REIT Operating Partnership, L.P., dated as of September 28, 2009 (as so amended and restated, the “Initial Agreement”);

WHEREAS, on August 28, 2020, pursuant to Section 6.1(a)(xxi) of the Initial Agreement, Steadfast Apartment REIT Operating Partnership, L.P. merged with and into the Partnership with the Partnership surviving (the “STAR Merger”);

WHEREAS, on August 28, 2020, the Partnership changed its name from “Steadfast Income REIT Operating Partnership, L.P.” to “Steadfast Apartment REIT Operating Partnership, L.P.”;

WHEREAS, on August 28, 2020, pursuant to Section 6.1(a)(xxi) of the Initial Agreement, Steadfast Apartment REIT III Operating Partnership, L.P. merged with and into the Partnership with the Partnership surviving (the “STAR III Merger” and, together with the STAR Merger, the “OP Mergers”);

WHEREAS, on August 28, 2020, (x) pursuant to Section 7.1(c) of the Initial Agreement, the Initial General Partner transferred all of its General Partnership Interest (as defined in the Initial Agreement) to STAR REIT, the owner of all of the ownership interests of the Initial General Partner; and (y) pursuant to Section 7.2 of the Initial Agreement, STAR REIT was admitted as a substitute General Partner of the Partnership; and

WHEREAS, the General Partner and Parent, the Initial Limited Partner, the Special Limited Partner and the Contributors desire to amend and restate the Initial Agreement to reflect the OP Mergers and provide for certain other matters as set forth herein.

 

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NOW, THEREFORE, in consideration of the mutual covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

ARTICLE I

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, as it may be amended from time to time, and any successor to such statute.

Additional Limited Partner” means a Person admitted to the Partnership as a Limited Partner pursuant to Section 12.2 and who is shown as a Limited Partner on the Partner Registry.

Adjusted Capital Account” means the Capital Account maintained for each Partner as of the end of each Fiscal Year (i) increased by any amounts which such Partner is obligated to restore pursuant to any provision of this Agreement or is deemed to be obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) and (ii) decreased by the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

Adjusted Capital Account Deficit” means, with respect to any Partner, the deficit balance, if any, in such Partner’s Adjusted Capital Account as of the end of the relevant Fiscal Year.

Adjusted Property” means any property the Carrying Value of which has been adjusted pursuant to Exhibit B.

Adjustment Event” has the meaning set forth in Section 4.6.A(i).

Affiliate” means, with respect to any Person, (i) any Person directly or indirectly controlling, controlled by or under common control with such Person, (ii) any Person owning or controlling ten percent (10%) or more of the outstanding voting interests of such Person, (iii) any Person of which such Person owns or controls ten percent (10%) or more of the voting interests or (iv) any officer, director, general partner or trustee of such Person or any Person referred to in clauses (i), (ii), and (iii) above. For purposes of this definition, “control,” when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

 

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Agreed Value” means (i) in the case of any Contributed Property, the Section 704(c) Value of such property as of the time of its contribution to the Partnership, reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed as determined under Section 752 of the Code and the Regulations thereunder; and (ii) in the case of any property distributed to a Partner by the Partnership, the Partnership’s Carrying Value of such property at the time such property is distributed, reduced by any indebtedness either assumed by such Partner upon such distribution or to which such property is subject at the time of distribution.

Agreement” means this Second Amended and Restated Agreement of Limited Partnership, as it may be amended, supplemented or restated from time to time.

Assignee” means a Person to whom one or more Partnership Units have 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:

(a) all cash revenues and funds received by the Partnership from whatever source (excluding the proceeds of any Capital Contribution, unless otherwise determined by the General Partner in its sole and absolute discretion) plus the amount of any reduction (including, without limitation, a reduction resulting because the General Partner determines such amounts are no longer necessary) in reserves of the Partnership, which reserves are referred to in clause (b)(iv) below;

(b) less the sum of the following (except to the extent made with the proceeds of any Capital Contribution):

(i) all interest, principal and other debt-related payments made during such period by the Partnership,

(ii) all cash expenditures (including capital expenditures) made by the Partnership during such period,

(iii) investments in any entity (including loans made thereto) to the extent that such investments are permitted under this Agreement and are not otherwise described in clauses (b)(i) or (ii), and

(iv) the amount of any increase in reserves established during such period which the General Partner determines is necessary or appropriate in its sole and absolute discretion (including any reserves that may be necessary or appropriate to account for distributions required with respect to Partnership Interests having a preference over other classes of Partnership Interests);

(c) with any other adjustments as determined by the General Partner, in its sole and absolute discretion.

Notwithstanding the foregoing, after commencement of the dissolution and liquidation of the Partnership, Available Cash shall not include any cash received or reductions in reserves and shall not take into account any disbursements made or reserves established.

 

3


BBA Rules means the partnership tax audit rules enacted under the Bipartisan Budget Act of 2015 and all effective Regulations and other guidance issued thereunder or with respect thereto.

Book-Tax Disparities” means, with respect to any item of Contributed Property or Adjusted Property, as of the date of any determination, the difference between the Carrying Value of such Contributed Property or Adjusted Property and the adjusted basis thereof for U.S. federal income tax purposes as of such date. A Partner’s share of the Partnership’s Book-Tax Disparities in all of its Contributed Property and Adjusted Property will be reflected by the difference between such Partner’s Capital Account balance as maintained pursuant to Exhibit B and the hypothetical balance of such Partner’s Capital Account computed as if it had been maintained strictly in accordance with U.S. federal income tax accounting principles.

Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in New York, NY are authorized or required by law to close.

Capital Account” means the Capital Account maintained for a Partner pursuant to Exhibit B. The initial Capital Account balance for each Partner who is a Partner on the date hereof shall be the amount set forth opposite such Partner’s name on the Partner Registry.

Capital Account Limitation” has the meaning set forth in Section 4.7.B.

Capital Contribution” means, with respect to any Partner, any cash and the Agreed Value of Contributed Property which such Partner contributes or is deemed to contribute to the Partnership.

Carrying Value” means (i) with respect to a Contributed Property or Adjusted Property, the Section 704(c) Value of such property reduced (but not below zero) by all Depreciation with respect to such Contributed Property or Adjusted Property, as the case may be, charged to the Partners’ Capital Accounts and (ii) with respect to any other Partnership property, the adjusted basis of such property for U.S. federal income tax purposes, all as of the time of determination. The Carrying Value of any property shall be adjusted from time to time in accordance with Exhibit B, and to reflect changes, additions (including capital improvements thereto) or other adjustments to the Carrying Value for dispositions and acquisitions of Partnership properties, as deemed appropriate by the General Partner.

Cash Amount” means an amount of cash equal to the Value on the Valuation Date of the Shares Amount.

Certificate of Limited Partnership” means the Certificate of Limited Partnership relating to the Partnership filed in the office of the Delaware Secretary of State, as amended from time to time in accordance with the terms hereof and the Act.

Charter” means the Articles of Incorporation of the Parent, as amended or restated from time to time, as filed with the Maryland State Department of Assessments and Taxation.

Class A” has the meaning set forth in Section 5.1.C.

 

4


Class A Common Unit” means any Partnership Unit that is not specifically designated by the General Partner as being of another specified class of Partnership Units.

Class A Common Unit Distribution” has the meaning set forth in Section 4.6.A.

Class A Common Unit Economic Balance” has the meaning set forth in Section 6.1.E.

Class A Common Unit Transaction” has the meaning set forth in Section 4.7.F.

Class A-2 Common Unit” means a Partnership Unit that is specifically designated by the General Partner as being a Class A-2 Common Unit.

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.

Consent” means the consent or approval of a proposed action by a Partner given in accordance with Article XIV.

Consent of the Outside Limited Partners” means the Consent of Limited Partners (excluding for this purpose (i) any Limited Partner Interests held by the General Partner, (ii) any Person of which the General Partner directly or indirectly owns or controls more than fifty percent (50%) of the voting interests and (iii) any Person directly or indirectly owning or controlling more than fifty percent (50%) of the outstanding voting interests of the General Partner) holding Partnership Interests representing more than fifty percent (50%) of the aggregate Percentage Interests of the Class A Common Units and the Class A-2 Common Units of all Limited Partners which are not excluded pursuant to (i), (ii) and (iii) above.

Constituent Person” has the meaning set forth in Section 4.7.F.

Contributed Property” means each property or other asset contributed to the Partnership, in such form as may be permitted by the Act, but excluding cash contributed or deemed contributed to the Partnership. Once the Carrying Value of a Contributed Property is adjusted pursuant to Exhibit B, such property shall no longer constitute a Contributed Property for purposes of Exhibit B, but shall be deemed an Adjusted Property for such purposes.

Contributors” means Wellington V V M, LLC, a Delaware limited liability company, and Copans V V M, LLC, a Delaware limited liability company.

Conversion Date” has the meaning set forth in Section 4.7.B.

Conversion Factor” means 1.0; provided, however, that, if the Parent (i) declares or pays a dividend on its outstanding Shares in Shares or makes a distribution to all holders of its outstanding Shares in Shares and does not make corresponding distributions on Class A Common Units and Class A-2 Common Units in their respective classes of Partnership Units, (ii) subdivides its outstanding Shares, or (iii) combines its outstanding Shares into a smaller number of Shares, the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the

 

5


numerator of which shall be the number of Shares issued and outstanding on the record date for such dividend, distribution, subdivision or combination (assuming for such purposes that such dividend, distribution, subdivision or combination has occurred as of such time) and the denominator of which shall be the actual number of Shares (determined without the above assumption) issued and outstanding on the record date for such dividend, distribution, subdivision or combination; and provided further that in the event that an entity other than an Affiliate of the Parent shall become General Partner pursuant to any merger, consolidation or combination of the General Partner or the Parent with or into another entity (the “Successor Entity”), the Conversion Factor shall be adjusted by multiplying the Conversion Factor by the number of shares of the Successor Entity into which one Share is converted pursuant to such merger, consolidation or combination, determined as of the date of such merger, consolidation or combination. Any adjustment to the Conversion Factor shall become effective immediately after the effective date of the event retroactive to the record date, if any, for the event giving rise thereto, it being intended that (x) adjustments to the Conversion Factor are to be made to avoid unintended dilution or anti-dilution as a result of transactions in which Shares are issued, redeemed or exchanged without a corresponding issuance, redemption or exchange of Partnership Units and (y) if a Specified Redemption Date shall fall between the record date and the effective date of any event of the type described above, that the Conversion Factor applicable to such redemption shall be adjusted to take into account such event.

Conversion Notice” has the meaning set forth in Section 4.7.B.

Conversion Right” has the meaning set forth in Section 4.7.A.

Convertible Funding Debt” has the meaning set forth in Section 7.5.F.

Current Quarter” means, as of any date, the most recently completed calendar quarter prior to such date for which the General Partner has declared a record date for the payment of dividends in respect of Shares.

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 generally accepted accounting principles, should be capitalized.

Depreciation” means, for each Fiscal Year, an amount equal to the U.S. federal income tax depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such year, except that if the Carrying Value of an asset differs from its adjusted basis for U.S. federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Carrying Value as the U.S. federal income tax depreciation, amortization, or other cost recovery deduction for such year bears to such beginning adjusted tax basis; provided, however, that if the U.S. federal income tax depreciation, amortization, or other cost recovery deduction for such year is zero, Depreciation shall be determined with reference to such beginning Carrying Value using any reasonable method selected by the General Partner.

 

6


Distribution Period” has the meaning set forth in Section 5.1.C.

Dividend Equivalent” for any quarter as to any Partner means the amount of distributions such Partner would have received for the quarter in respect of Shares if such Partner owned the number of Shares equal to the product obtained by multiplying the number of such Partner’s Partnership Units by the Conversion Factor for the Partnership Record Date pertaining to such quarter; provided, however, that for purposes of determining any Partner’s Dividend Equivalent for any period for which the General Partner pays a dividend in respect of Shares in which holders of Shares have an option to elect to receive such dividend in cash or additional Shares (other than pursuant to a dividend reinvestment program), the amount of distributions such Partner shall be deemed to have received with respect to such dividend (if such Partner owned the specified number of Shares) shall be equal to the product obtained by multiplying (i) the specified number of Shares deemed to be owned by such Partner by (ii) the quotient obtained by dividing (a) the aggregate amount of cash dividends paid by the General Partner to all holders of Shares for such quarter by (b) the aggregate number of Shares outstanding as of the close of business on the record date for such dividend, and the Conversion Factor shall be adjusted in connection with such dividend in the manner provided in the definition thereof.

Economic Capital Account Balances” has the meaning set forth in Section 6.1.E.

Equity Incentive Plan” means any equity incentive or equity compensation plan hereafter adopted by the Partnership or the Parent.

ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

Exchange Act” means the Securities Exchange Act of 1934, as amended.

Fiscal Year” means the fiscal year of the Partnership, which shall be the calendar year as provided in Section 9.2.

Forced Conversion” has the meaning set forth in Section 4.7.C.

Forced Conversion Notice” has the meaning set forth in Section 4.7.C.

Funding Debt” means any Debt incurred for the purpose of providing funds to the Partnership by or on behalf of the Parent or any wholly owned subsidiary of the Parent.

General Partner” means initially STAR REIT and any Person who becomes a substitute General Partner as provided herein, and any of their successors as General Partner.

General Partner Interest” means the Partnership Interest held by the General Partner, which Partnership Interest is an interest as a general partner under the Act. The General Partner will not be required to make a Capital Contribution to the Partnership in exchange for the General Partner Interest. A General Partner Interest may be expressed as a number of Partnership Units.

 

7


IRS” means the Internal Revenue Service, which administers the internal revenue laws of the United States.

Immediate Family” means, with respect to any natural Person, such natural Person’s spouse, parents, descendants, nephews, nieces, brothers, and sisters.

Incapacity” or “Incapacitated” means, (i) as to any individual who is a Partner, death, total physical disability or entry by a court of competent jurisdiction adjudicating such Partner incompetent to manage his or her Person or 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 nonappealable 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 under any bankruptcy, insolvency or other similar law now or hereafter in effect has not been dismissed within one hundred twenty (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 ninety (90) days of such appointment or (h) an appointment referred to in clause (g) is not vacated within ninety (90) days after the expiration of any such stay.

Indemnitee” means (i) any Person made a party to a proceeding by reason of its status as (A) the General Partner, (B) a Limited Partner or (C) a director or officer of the Partnership, the General Partner and (ii) such other Persons (including Affiliates of the General Partner, a Limited 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.

Initial General Partner” has the meaning set forth in the recitals hereto.

Initial Agreement” has the meaning set forth in the recitals hereto.

Initial Limited Partner” means Steadfast Income Advisor, LLC f/k/a Steadfast Secure Income Advisor, LLC and any permitted transferee of its Limited Partnership Interests.

 

8


Initial General Partner” has the meaning set forth in the recitals hereto.

Limited Partner” means any Person named as a Limited Partner in the Partner Registry or any Substituted Limited Partner or Additional Limited Partner, in such Person’s capacity as a Limited Partner in the Partnership.

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 expressed as a number of Partnership Units.

Liquidating Event” has the meaning set forth in Section 13.1.

Liquidating Gains” has the meaning set forth in Section 6.1.E.

Liquidator” has the meaning set forth in Section 13.2.A.

LTIP Units” means a Partnership Unit which is designated as an LTIP Unit and which has the rights, preferences and other privileges designated in Section 4.6 and elsewhere in this Agreement in respect of holders of LTIP Units. The allocation of LTIP Units among the Partners shall be set forth in the Partner Registry, as it may be amended or restated from time to time.

LTIP Unitholder” means a Partner that holds LTIP Units.

LV Safe Harbor” “LV Safe Harbor Election” and “LV Safe Harbor Interest” each has the meaning set forth in Section 10.2.B.

National Securities Exchange” means the New York Stock Exchange, the NYSE American LLC, the NASDAQ Stock Market or any successor to any of the foregoing.

Net Income” means, for any taxable period, the excess, if any, of the Partnership’s items of income and gain for such taxable period over the Partnership’s items of loss and deduction for such taxable period. The items included in the calculation of Net Income shall be determined in accordance with Exhibit B. If an item of income, gain, loss or deduction that has been included in the initial computation of Net Income is subjected to the special allocation rules in Exhibit C, Net Income or the resulting Net Loss, whichever the case may be, shall be recomputed without regard to such item.

Net Loss” means, for any taxable period, the excess, if any, of the Partnership’s items of loss and deduction for such taxable period over the Partnership’s items of income and gain for such taxable period. The items included in the calculation of Net Loss shall be determined in accordance with Exhibit B. If an item of income, gain, loss or deduction that has been included in the initial computation of Net Loss is subjected to the special allocation rules in Exhibit C, Net Loss or the resulting Net Income, whichever the case may be, shall be recomputed without regard to such item.

 

9


New Securities” means (i) any rights, options, warrants or convertible or exchangeable securities having the right to subscribe for or purchase Shares, excluding grants under any Equity Incentive Plan, or (ii) any Debt issued by the Parent that provides any of the rights described in clause (i).

Nonrecourse Built-in Gain” means, with respect to any Contributed Properties or Adjusted Properties that are subject to a mortgage or negative pledge securing a Nonrecourse Liability, the amount of any taxable gain that would be allocated to the Partners pursuant to Section 2.B of Exhibit C if such properties were disposed of in a taxable transaction in full satisfaction of such liabilities and for no other consideration.

Nonrecourse Deductions” has the meaning set forth in Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(c).

Nonrecourse Liability” has the meaning set forth in Regulations Section 1.752-1(a)(2).

Notice of Redemption” means a Notice of Redemption substantially in the form of Exhibit D.

Offering” means the public offering of Shares pursuant to a Registration Statement.

OP Mergers” has the meaning set forth in the recitals hereto.

Operating Entity” has the meaning set forth in Section 7.4.F.

Parent” means STAR REIT.

Parent Payments” has the meaning set forth in Section 15.14.

Partner” means the General Partner or a Limited Partner, and “Partners” means the General Partner and the Limited Partners.

Partner Minimum Gain” means an amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulations Section 1.704-2(i)(3).

Partner Nonrecourse Debt” has the meaning set forth in Regulations Section 1.704-2(b)(4).

Partner Nonrecourse Deductions” has the meaning set forth in Regulations Section 1.704-2(i), and the amount of Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(i)(2).

 

10


Partner Registry” means the Partner Registry maintained by the General Partner in the books and records of the Partnership, which contains substantially the same information as would be necessary to complete the form of the Partner Registry attached hereto as Exhibit A.

Partnership” has the meaning set forth in the recitals hereto.

Partnership Interest” means a Limited Partner Interest, a General Partner Interest or LTIP Units, 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 expressed as a number of Partnership Units.

Partnership Minimum Gain” has the meaning set forth in Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as any net increase or decrease in Partnership Minimum Gain, for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(d).

Partnership Record Date” means the record date established by the General Partner either (i) 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 Parent for a distribution to its stockholders of some or all of its portion of such distribution, or (ii) if applicable, for determining the Partners entitled to vote on or Consent to any proposed action for which the Consent or approval of the Partners is sought pursuant to Section 14.2.

Partnership Redemption Price” has the meaning set forth in Section 8.6.G.

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 Class A Common Units, Class A-2 Common Units, LTIP Units and any other classes or series of Partnership Units established after the date hereof. The number of Partnership Units outstanding and the Percentage Interests in the Partnership represented by such Partnership Units are set forth in the Partner Registry.

Percentage Interest” means, as to a Partner holding a class of Partnership Interests, its interest in such class, determined by dividing the Partnership Units of such class owned by such Partner by the total number of Partnership Units of such class then outstanding.

Person” means a natural person, partnership (whether general or limited), trust, estate, association, corporation, limited liability company, unincorporated organization, custodian, nominee or any other individual or entity in its own or any representative capacity.

Publicly Traded” means listed or admitted to trading on any National Securities Exchange or over-the-counter market.

Qualified Assets” means any of the following assets: (i) interests, rights, options, warrants or convertible or exchangeable securities of the Partnership; (ii) Debt issued by the Partnership or any Qualified REIT Subsidiary thereof in connection with the incurrence of Funding Debt; (iii) equity interests in Subsidiaries and limited liability companies (or other entities disregarded from their sole owner for U.S. federal income tax purposes, including wholly owned

 

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grantor trusts) whose assets consist solely of Qualified Assets; (iv) up to a one percent (1%) equity interest in any partnership or limited liability company at least ninety-nine percent (99%) of the equity of which is owned, directly or indirectly, by the Partnership; (v) cash held for payment of administrative expenses or pending distribution to security holders of the Parent or any wholly owned Subsidiary thereof or pending contribution to the Partnership; and (vi) other tangible and intangible assets that, taken as a whole, are de minimis in relation to the net assets of the Partnership and its Subsidiaries.

Qualified REIT Subsidiaries” means any Subsidiary of the Parent that is a “qualified REIT subsidiary” within the meaning of Section 856(i) of the Code.

Recapture Income” means any gain recognized by the Partnership (computed without regard to any adjustment pursuant to Section 754 of the Code) upon the disposition of any property or asset of the Partnership, which gain is characterized either as ordinary income or as “unrecaptured Section 1250 gain” (as defined in Section 1(h)(6) of the Code) because it represents the recapture of depreciation deductions previously taken with respect to such property or asset.

Recourse Liabilities” means the amount of liabilities owed by the Partnership (other than Nonrecourse Liabilities and liabilities to which Partner Nonrecourse Deductions are attributable in accordance with Section 1.704-(2)(i) of the Regulations).

Redeeming Partner” has the meaning set forth in Section 8.6.A.

Redemption Amount” means either the Cash Amount or the Shares Amount, as determined by the General Partner, in its sole and absolute discretion. A Redeeming Partner shall have no right, without the General Partner’s consent, in its sole and absolute discretion, to receive the Redemption Amount in the form of the Shares Amount.

Redemption Right” has the meaning set forth in Section 8.6.A.

Registration Statement” means a Registration Statement relating to an Offering filed by the General Partner with the Securities and Exchange Commission, and any amendments thereto at any time made.

Regulations” means the Treasury Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

REIT” means an entity that qualifies as a real estate investment trust under the Code.

REIT Requirements” has the meaning set forth in Section 5.1.A.

Residual Gain” or “Residual Loss” means any item of gain or loss, as the case may be, of the Partnership recognized for U.S. federal income tax purposes resulting from a sale, exchange or other disposition of Contributed Property or Adjusted Property, to the extent such item of gain or loss is not allocated pursuant to Section 2.B.1(a) or 2.B.2(a) of Exhibit C to eliminate Book-Tax Disparities.

 

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Safe Harbor” has the meaning set forth in Section 11.6.F.

Securities Act” means the Securities Act of 1933, as amended.

Section 704(c) Value” of any Contributed Property or Adjusted Property means the fair market value of such property at the time of contribution or adjustment, as the case may be, as determined by the General Partner using such reasonable method of valuation as it may adopt; provided, however, subject to Exhibit B, the General Partner shall, in its sole and absolute discretion, use such method as it deems reasonable and appropriate to allocate the aggregate of the Section 704(c) Value of Contributed Properties or Adjusted Properties in a single or integrated transaction among each separate property on a basis proportional to its fair market values.

Share” means a share of common stock (or other comparable equity interest) of the Parent (or the Successor Entity, as the case may be). Shares may be issued in one or more classes or series in accordance with the terms of the Charter. Shares issued in lieu of the Cash Amount by the Partnership or the Parent may be either registered or unregistered Shares at the option of the Parent. If there is more than one class or series of Shares, the term “Shares” shall, as the context requires, be deemed to refer to the class or series of Shares that corresponds to the class or series of Partnership Interests for which the reference to Shares is made. When used with reference to Class A Common Units and Class A-2 Common Units, the term “Shares” refers to shares of common stock (or other comparable equity interest) of the Parent.

Shares Amount” means a number of Shares equal to the product of the number of Partnership Units offered for redemption by a Redeeming Partner times the Conversion Factor; provided, however, that, if the Parent issues to holders of Shares securities, rights, options, warrants or convertible or exchangeable securities entitling such holders to subscribe for or purchase Shares or any other securities or property (collectively, the “rights”), then the Shares Amount shall also include such rights that a holder of that number of Shares would be entitled to receive unless the Partnership issues corresponding rights to holders of Partnership Units.

Special Fees” means fees or expenses that are required or intended to be borne entirely or disproportionately by one or more particular Classes of OP Units, including but not limited to, selling commissions, dealer manager fees and distribution and shareholder servicing fees.

Special Limited Partner” means Steadfast Apartment Advisor III, LLC, a Delaware limited liability company, and any Person who becomes a substitute Special Limited Partner as provided herein, and any of their successors as Special Limited Partner.

Specified Redemption Date” means the day of receipt by the General Partner of a Notice of Redemption.

STAR Merger” has the meaning set forth in the recitals hereto.

STAR III Merger” has the meaning set forth in the recitals hereto.

STAR REIT” has the meaning set forth in the recitals hereto.

 

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Subsidiary” means, with respect to any Person, any corporation, limited liability company, trust, partnership or joint venture, or other entity of which 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.

Substituted Limited Partner” means a Person who is admitted as a Limited Partner to the Partnership pursuant to Section 11.4 and who is shown as a Limited Partner in the Partner Registry.

Successor Entity” has the meaning set forth in the definition of “Conversion Factor” herein.

Termination Transaction” has the meaning set forth in Section 11.2.B.

Unrealized Gain” attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (i) the fair market value of such property (as determined under Exhibit B) as of such date, over (ii) the Carrying Value of such property (prior to any adjustment to be made pursuant to Exhibit B) as of such date.

Unrealized Loss” attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (i) the Carrying Value of such property (prior to any adjustment to be made pursuant to Exhibit B) as of such date, over (ii) the fair market value of such property (as determined under Exhibit B) as of such date.

Unvested LTIP Units” has the meaning set forth in Section 4.6.C.

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 one Share of a class of outstanding Shares of the Parent that are Publicly Traded, the average of the daily market price for the ten consecutive trading days immediately preceding the date with respect to which value must be determined. The market price for each such trading day shall be: (i) if the Shares are listed or admitted to trading on any National Securities Exchange, the closing price, regular way, on such day or, if no such sale takes place on such day, the average of the closing bid and asked prices on such day; (ii) if the Shares are not listed or admitted to trading on any National Securities Exchange, the last reported sale price on such day or, if no such sale price takes place on such date, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the General Partner; (iii) if the Shares are not listed or admitted to trading on any National Securities Exchange and no such last reported sale price or 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 thirty (30) days prior to the date in question) for which prices have been so reported; or (iv) if the Shares are not listed or admitted to trading on any National Securities Exchange and no such last reported sale price or closing bid and asked prices are available during the immediately-preceding thirty (30) day period, the Value of a Share as determined by the board of directors of the Parent in its reasonable discretion. If the outstanding Shares of the Parent are Publicly Traded and the

 

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Shares Amount includes, in addition to the Shares, rights or interests that a holder of Shares has received or would be entitled to receive, then the Value of such rights shall be determined by the Parent acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. If the Shares of the Parent are not Publicly Traded, the Value of the Shares Amount per Partnership Unit tendered for redemption (which will be the Cash Amount per Partnership Unit offered for redemption payable pursuant to Section 8.6.A) means the amount that a holder of one Partnership Unit would receive if each of the assets of the Partnership were to be sold for its fair market value on the Specified Redemption Date, the Partnership were to pay all of its outstanding liabilities, and the remaining proceeds were to be distributed to the Partners in accordance with the terms of this Agreement. Such Value shall be determined by the General Partner, acting in good faith and based upon a commercially reasonable estimate of the amount that would be realized by the Partnership if each asset of the Partnership (and each asset of each partnership, limited liability company, trust, joint venture or other entity in which the Partnership owns a direct or indirect interest) were sold to an unrelated purchaser in an arm’s-length transaction where neither the purchaser nor the seller were under economic compulsion to enter into the transaction (without regard to any discount in value as a result of the Partnership’s minority interest in any property or any illiquidity of the Partnership’s interest in any property).

Vested LTIP Units” has the meaning set forth in Section 4.6.C.

Vesting Agreement” means each or any, as the context implies, agreement or instrument entered into by a holder of LTIP Units upon acceptance of an award of LTIP Units under an Equity Incentive Plan.

ARTICLE II

ORGANIZATIONAL MATTERS

Section 2.1 Organization

A. Organization, Status and Rights. The Partnership is a limited partnership organized pursuant to the provisions of the Act. The Partners hereby confirm and agree to their status as partners of the Partnership and to continue the business of the Partnership on the terms set forth in this Agreement. Except as expressly provided herein, 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.

B. Qualification of Partnership. The Partners (i) agree that if the laws of any jurisdiction in which the Partnership transacts business so require, the appropriate officers or other authorized representatives of the Partnership shall file, or shall cause to be filed, with the appropriate office in that jurisdiction, any documents necessary for the Partnership to qualify to transact business under such laws; and (ii) agree and obligate themselves to execute, acknowledge and cause to be filed for record, in the place or places and manner prescribed by law, any amendments to the Certificate of Limited Partnership as may be required, either by the Act, by the laws of any jurisdiction in which the Partnership transacts business, or by this Agreement, to reflect changes in the information contained therein or otherwise to comply with the requirements of law for the continuation, preservation and operation of the Partnership as a limited partnership under the Act.

 

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C. Representations. Each Partner represents and warrants that such Partner is duly authorized to execute, deliver and perform its obligations under this Agreement and that the Person, if any, executing this Agreement on behalf of such Partner is duly authorized to do so and that this Agreement is binding on and enforceable against such Partner in accordance with its terms.

Section 2.2 Name

The name of the Partnership is Steadfast Apartment REIT Operating Partnership, L.Pf. The Partnership’s business may be conducted under any other name or names deemed advisable by the General Partner, including the name of any 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 located at Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, New Castle County, Delaware 19808 and the registered agent for service of process on the Partnership in the State of Delaware at such registered office is Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, New Castle County, Delaware 19808. The principal office of the Partnership is 4343 Von Karman Avenue, Suite 300, Newport Beach, California 92660, or shall be 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 Term

The term of the Partnership commenced on July 6, 2009, and shall continue until dissolved pursuant to the provisions of Article XIII or as otherwise provided by law.

Section 2.5 Partnership Interests as Securities

All Partnership Interests shall be securities within the meaning of, and governed by, (i) Article 8 of the Delaware Uniform Commercial Code and (ii) Article 8 of the Uniform Commercial Code of any other applicable jurisdiction.

 

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Section 2.6 Certificates Describing Partnership Units

The General Partner shall have the authority to issue certificates evidencing the Limited Partnership Interests in accordance with Section 17-702(b) of the Act. Any such certificate (i) shall be in form and substance as approved by the General Partner, (ii) shall not be negotiable and (iii) shall bear a legend to the following effect:

THIS CERTIFICATE IS NOT NEGOTIABLE. THE PARTNERSHIP UNITS REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY AND TRANSFERABLE ONLY IN ACCORDANCE WITH (A) THE PROVISIONS OF THE AGREEMENT OF LIMITED PARTNERSHIP OF STEADFAST APARTMENT REIT OPERATING PARTNERSHIP, L.P., AS AMENDED, SUPPLEMENTED OR RESTATED FROM TIME TO TIME AND (B) ANY APPLICABLE FEDERAL OR STATE SECURITIES OR BLUE SKY LAWS.

ARTICLE III

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 organized pursuant to the Act; (ii) to enter into any corporation, partnership, joint venture, trust, limited liability company or other similar arrangement to engage in any of the foregoing or the ownership of interests in any entity engaged, directly or indirectly, in any of the foregoing; and (iii) to do anything necessary or incidental to the foregoing; provided, however, that any business shall be limited to and conducted in such a manner as to permit the Parent at all times to be classified as a REIT, unless the Parent, in its sole and absolute discretion, has chosen to cease to qualify as a REIT or has chosen not to attempt to qualify as a REIT for any reason or reasons whether or not related to the business conducted by the Partnership. In connection with the foregoing, and without limiting the Parent’s right, in its sole and absolute discretion, to cease qualifying as a REIT, the Partners acknowledge that the status of the Parent as a REIT inures to the benefit of all the Partners and not solely to the Parent or its Affiliates.

Section 3.2 Powers

The Partnership is 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, including, without limitation, full power and authority, directly or through its ownership interest in other entities, to enter into, perform and carry out contracts of any kind, borrow money and issue evidences of indebtedness, whether or not secured by mortgage, deed of trust, pledge or other lien, acquire, own, manage, improve and develop real property, and lease, sell, transfer and dispose of real property; provided, however, that the Partnership shall not take, or shall refrain from taking, any action which, in the judgment of the General Partner, in its sole and absolute discretion, (i) could adversely affect the ability of the Parent to qualify or continue to qualify as a REIT (unless the Parent has decided to terminate or revoke its election to be taxed as a REIT), (ii) could subject the Parent to any taxes under Sections 857 or 4981 of the Code, or (iii) could violate any law or regulation of any governmental body or agency having jurisdiction over the Parent and the General Partner or their securities, unless such action (or inaction) shall have been specifically consented to by the Parent and the General Partner in writing.

 

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ARTICLE IV

CAPITAL CONTRIBUTIONS AND ISSUANCES OF PARTNERSHIP INTERESTS

Section 4.1 Capital Contributions of the Partners

A. Capital Contributions. Prior to or concurrently with the execution of this Agreement, the Partners have made or are deemed to have made the Capital Contributions as set forth in the Partner Registry. On the date hereof, the Partners own Partnership Units in the amounts set forth in the Partner Registry and have Percentage Interests in the Partnership as set forth in the Partner Registry. The number of Partnership Units and Percentage Interest shall be adjusted in the Partner Registry from time to time by the General Partner to the extent necessary to reflect accurately exchanges, redemptions, Capital Contributions, the issuance of additional Partnership Units or similar events having an effect on a Partner’s Percentage Interest in accordance with the terms of this Agreement.

B. General Partnership Interest. Except for any Partnership Units designated as Limited Partner Interests by the General Partner, the Partnership Units held by the General Partner shall be the General Partner Interest of the General Partner.

C. Except as provided in Sections 7.5, 10.5, and 13.3, the Partners shall have no obligation to make any additional Capital Contributions or provide any additional funding to the Partnership (whether in the form of loans, repayments of loans or otherwise). Except as otherwise set forth in Section 13.3, no Partner shall have any obligation to restore any deficit that may exist in its Capital Account, either upon a liquidation of the Partnership or otherwise.

Section 4.2 Issuances of Partnership Interests

A. General. The General Partner is hereby authorized to cause the Partnership from time to time to issue to Partners (including the General Partner and its Affiliates) or other Persons (including, without limitation, in connection with the contribution of property to the Partnership or any of its Subsidiaries) Partnership Units or other Partnership Interests in one or more classes, or in one or more series of any of such classes, with such designations, preferences and relative, participating, optional or other special rights, powers and duties, including rights, powers and duties senior to one or more other classes of Partnership Interests, all as shall be determined, subject to applicable Delaware law, by the General Partner in its sole and absolute discretion, 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, (iii) the rights of each such class or series of Partnership Interests upon dissolution and liquidation of the Partnership, (iv) the rights, if any, of each such class to vote on matters that require the vote or Consent of the Limited Partners, and (v) the consideration, if any, to be received by the Partnership; provided, however, that no such Partnership Units or other Partnership Interests shall be issued to the General Partner unless (a) the Partnership Interests are issued in connection with the grant, award or

 

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issuance of Shares or other equity interests in the General Partner (including a transaction described in Section 7.4.F) having designations, preferences and other rights such that the economic interests attributable to such Shares or other equity interests are substantially similar to the designations, preferences and other rights (except voting rights) of the Partnership Interests issued to the General Partner in accordance with this Section 4.2.A, and the General Partner contributes to the Partnership the proceeds (if any) from the issuance of Shares or equity received by the General Partner as required pursuant to Section 7.5.D, (b) the General Partner makes an additional Capital Contribution to the Partnership, or (c) the additional Partnership Interests are issued to all Partners holding Partnership Interests in the same class in proportion to their respective Percentage Interests in such class. If the Partnership issues Partnership Interests pursuant to this Section 4.2.A, the General Partner shall make such revisions to this Agreement (including but not limited to the revisions described in Section 5.4, Section 6.2 and Section 8.6) as it deems necessary to reflect the issuance of such Partnership Interests. The designation of any newly issued class or series of Partnership Interests may provide a formula for treating such Partnership Interests solely for purposes of voting on or consenting to any matter that requires the vote or Consent of the Limited Partners as set forth in one or more of Sections 7.1, 7.5.A, 7.11, 13.1(i), 13.1(vi), 14.1.A, 14.1.C, 14.2.A, and 14.2.B of this Agreement as the equivalent of a specified number (including any fraction thereof) of Class A Common Units. Nothing in this Agreement shall prohibit the General Partner from issuing Partnership Units for less than fair market value if the General Partner concludes in good faith that such issuance is in the best interests of the Partnership.

B. Classes of Partnership Units. The Partnership shall have three authorized classes of Partnership Units, entitled “Class A Common Units,” “Class A-2 Common Units,” and “LTIP Units,” and, thereafter, such additional classes of Partnership Units as may be created by the General Partner pursuant to Section 4.2.A and this Section 4.2.B. Class A Common Units, Class A-2 Common Units, or a class of Partnership Interests created pursuant to Section 4.2.A or this Section 4.2.B, at the election of the General Partner, in its sole and absolute discretion, may be issued to newly admitted Partners in exchange for the contribution by such Partners of cash, real estate partnership interests, stock, notes or other assets or consideration; provided, however, that any Partnership Unit that is not specifically designated by the General Partner as being of a particular class shall be deemed to be a Class A Common Unit. The issuance and terms of any LTIP Units shall be in accordance with Section 4.6.

Section 4.3 No Preemptive Rights

Except to the extent expressly granted by the Partnership pursuant to another agreement, 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) issuance or sale of any Partnership Units or other Partnership Interests.

Section 4.4 Other Contribution Provisions

A. General. If any Partner is admitted to the Partnership and is given a Capital Account with an initial balance greater than zero in exchange for services rendered to the Partnership, such transaction shall be treated by the Partnership and the affected Partner (and set forth in the Partner Registry) as if the Partnership had compensated such Partner in cash, and the Partner had made a Capital Contribution of such cash to the capital of the Partnership. The Partnership shall be entitled to deduct and withhold taxes with respect to any such transaction and the recipient Partner shall indemnify and hold harmless the Partnership from any such taxes.

 

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B. Mergers. To the extent the Partnership acquires any property (or an indirect interest therein) by the merger of any other Person into the Partnership or with or into a Subsidiary of the Partnership, Persons who receive Partnership Interests in exchange for their interest in the Person merging into the Partnership or with or into a Subsidiary of the Partnership shall be deemed to have been admitted as Additional Limited Partners pursuant to Section 12.2 and shall be deemed to have made Capital Contributions as provided in the applicable merger agreement (or if not so provided, as determined by the General Partner in its sole and absolute discretion) and as set forth in the Partner Registry.

Section 4.5 No Interest on Capital

No Partner shall be entitled to interest on its Capital Contributions or its Capital Account.

Section 4.6 LTIP Units

A. Issuance of LTIP Units. The General Partner may from time to time, for such consideration as the General Partner may determine to be appropriate, issue LTIP Units to Persons who provide services to the Partnership or the General Partner and admit such Persons as Limited Partners. Subject to the following provisions of this Section 4.6 and the special provisions of Sections 4.7 and 6.1.E, LTIP Units shall be treated as Class A Common Units, with all of the rights, privileges and obligations attendant thereto. For purposes of computing the Partners’ Percentage Interests, holders of LTIP Units shall be treated as Class A Common Unit holders and LTIP Units shall be treated as Class A Common Units. In particular, the Partnership shall maintain at all times a one-to-one correspondence between LTIP Units and Class A Common Units for conversion, distribution and other purposes, including, without limitation, complying with the following procedures:

(i) If an Adjustment Event (as defined below) occurs, then the General Partner shall make a corresponding adjustment to the LTIP Units to maintain a one-for-one conversion and economic equivalence ratio between Class A Common Units and LTIP Units. The following shall be “Adjustment Events”: (A) the Partnership makes a distribution on all outstanding Class A Common Units in Partnership Units, (B) the Partnership subdivides the outstanding Class A Common Units into a greater number of units or combines the outstanding Class A Common Units into a smaller number of units, or (C) the Partnership issues any Partnership Units in exchange for its outstanding Class A Common Units by way of a reclassification or recapitalization of its Class A Common Units. If more than one Adjustment Event occurs, the adjustment to the LTIP Units need be made only once using a single formula that takes into account each and every Adjustment Event as if all Adjustment Events occurred simultaneously. For the avoidance of doubt, the following shall not be Adjustment Events: (x) the issuance of Partnership Units in a financing, reorganization, acquisition or other similar business Class A Common Unit Transaction, (y) the issuance of Partnership Units pursuant to any employee benefit or compensation plan or distribution reinvestment plan or (z) the issuance of any Partnership Units to the General Partner or any other Person in respect of a Capital Contribution to the Partnership. If the Partnership takes

 

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an action affecting the Class A Common Units other than actions specifically described above as “Adjustment Events” and in the opinion of the General Partner such action would require an adjustment to the LTIP Units to maintain the one-to-one correspondence described above, the General Partner shall have the right to make such adjustment to the LTIP Units, to the extent permitted by law and by any Equity Incentive Plan, in such manner and at such time as the General Partner, in its sole discretion, may determine to be appropriate under the circumstances. If an adjustment is made to the LTIP Units, as herein provided, the Partnership shall promptly file in the books and records of the Partnership an officer’s certificate setting forth such adjustment and a brief statement of the facts requiring such adjustment, which certificate shall be conclusive evidence of the correctness of such adjustment absent manifest error. Promptly after filing of such certificate, the Partnership shall mail a notice to each LTIP Unitholder setting forth the adjustment to his or her LTIP Units and the effective date of such adjustment; and

(ii) The LTIP Unitholders shall, when, as and if authorized and declared by the General Partner out of assets legally available for that purpose, be entitled to receive distributions in an amount per LTIP Unit equal to the distributions per Class A Common Unit (the “Class A Common Unit Distribution”), paid to holders of Class A Common Units on such Partnership Record Date established by the General Partner with respect to such distribution. So long as any LTIP Units are outstanding, no distributions (whether in cash or in kind) shall be authorized, declared or paid on Class A Common Units, unless equal distributions have been or contemporaneously are authorized, declared and paid on the LTIP Units.

B. Priority. Subject to the provisions of this Section 4.6 and the special provisions of Sections 4.7 and 5.1.E, the LTIP Units shall rank pari passu with the Class A Common Units as to the payment of regular and special periodic or other distributions and distribution of assets upon liquidation, dissolution or winding up. As to the payment of distributions and as to distribution of assets upon liquidation, dissolution or winding up, any class or series of Partnership Units which by its terms specifies that it shall rank junior to, on a parity with, or senior to the Class A Common Units shall also rank junior to, or pari passu with, or senior to, as the case may be, the LTIP Units. Subject to the terms of any Vesting Agreement, an LTIP Unitholder shall be entitled to transfer his or her LTIP Units to the same extent, and subject to the same restrictions as holders of Class A Common Units are entitled to transfer their Class A Common Units pursuant to Article XI.

C. Special Provisions. LTIP Units shall be subject to the following special provisions:

(i) Vesting Agreements. LTIP Units may, in the sole discretion of the General Partner, be issued subject to vesting, forfeiture and additional restrictions on transfer pursuant to the terms of a Vesting Agreement. The terms of any Vesting Agreement may be modified by the General Partner from time to time in its sole discretion, subject to any restrictions on amendment imposed by the relevant Vesting Agreement or by the Equity Incentive Plan, if applicable. LTIP Units that have vested under the terms of a Vesting Agreement are referred to as “Vested LTIP Units;” all other LTIP Units shall be treated as “Unvested LTIP Units.”

(ii) Forfeiture. Unless otherwise specified in the Vesting Agreement, upon the occurrence of any event specified in a Vesting Agreement as resulting in either the right of the Partnership or the General Partner to repurchase LTIP Units at a specified purchase price or some other forfeiture of any LTIP Units, then if the Partnership or the General Partner exercises such

 

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right to repurchase or forfeiture in accordance with the applicable Vesting Agreement, the relevant LTIP Units shall immediately, and without any further action, be treated as cancelled and no longer outstanding for any purpose. Unless otherwise specified in the Vesting Agreement, no consideration or other payment shall be due with respect to any LTIP Units that have been forfeited, other than any distributions declared with respect to a Partnership Record Date prior to the effective date of the forfeiture. In connection with any repurchase or forfeiture of LTIP Units, the balance of the portion of the Capital Account of the LTIP Unitholder that is attributable to all of his or her LTIP Units shall be reduced (after taking into account any reductions required as a result of distributions payable in accordance with the preceding sentence) by the amount, if any, by which it exceeds the target balance contemplated by Section 6.1.E, calculated with respect to the LTIP Unitholder’s remaining LTIP Units, if any.

(iii) Allocations. LTIP Unitholders shall be entitled to certain special allocations of gain under Section 6.1.E.

(iv) Redemption. The Redemption Right provided to the holders of Class A Common Units under Section 8.6 shall not apply with respect to LTIP Units unless and until they are converted to Class A Common Units as provided in clause (v) below and Section 4.7.

(v) Conversion to Class A Common Units. Vested LTIP Units are eligible to be converted into Class A Common Units in accordance with Section 4.7.

D. Voting. LTIP Unitholders shall (a) have the same voting rights as the Limited Partners, with the LTIP Units voting as a single class with the Class A Common Units and having one vote per LTIP Unit; and (b) have the additional voting rights that are expressly set forth below. So long as any LTIP Units remain outstanding, the Partnership shall not, without the affirmative vote of the holders of a majority of the LTIP Units outstanding at the time, given in person or by proxy, either in writing or at a meeting (voting separately as a class), amend, alter or repeal, whether by merger, consolidation or otherwise, the provisions of this Agreement applicable to LTIP Units so as to materially and adversely affect any right, privilege or voting power of the LTIP Units or the LTIP Unitholders as such, unless such amendment, alteration, or repeal affects equally, ratably and proportionately the rights, privileges and voting powers of all of Class A Common Units (including the Class A Common Units held by the General Partner); but subject, in any event, to the following provisions:

(i) With respect to any Class A Common Unit Transaction (as defined in Section 4.7.F), so long as the LTIP Units are treated in accordance with Section 4.7.F, the consummation of such Class A Common Unit Transaction shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the LTIP Units or the LTIP Unitholders as such; and

(ii) Any creation or issuance of any Partnership Units or of any class or series of Partnership Interest in accordance with the terms of this Agreement, including, without limitation, additional Class A Common Units or LTIP Units, whether ranking senior to, junior to, or on a parity with the LTIP Units with respect to distributions and the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the LTIP Units or the LTIP Unitholders as such.

 

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The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required will be effected, all outstanding LTIP Units shall have been converted into Class A Common Units.

Section 4.7 Conversion of LTIP Units.

A. Conversion Right. An LTIP Unitholder shall have the right (the “Conversion Right”), at his or her option, at any time to convert all or a portion of his or her Vested LTIP Units into Class A Common Units; provided, however, that a holder may not exercise the Conversion Right for less than one thousand (1,000) Vested LTIP Units or, if such holder holds less than one thousand Vested LTIP Units, all of the Vested LTIP Units held by such holder. LTIP Unitholders shall not have the right to convert Unvested LTIP Units into Class A Common Units until they become Vested LTIP Units; provided, however, that when an LTIP Unitholder is notified of the expected occurrence of an event that will cause his or her Unvested LTIP Units to become Vested LTIP Units, such LTIP Unitholder may give the Partnership a Conversion Notice conditioned upon and effective as of the time of vesting and such Conversion Notice, unless subsequently revoked by the LTIP Unitholder, shall be accepted by the Partnership subject to such condition. The General Partner shall have the right at any time to cause a conversion of Vested LTIP Units into Class A Common Units. In all cases, the conversion of any LTIP Units into Class A Common Units shall be subject to the conditions and procedures set forth in this Section 4.7.

B. Exercise by an LTIP Unitholder. A holder of Vested LTIP Units may convert such LTIP Units into an equal number of fully paid and non-assessable Class A Common Units, giving effect to all adjustments (if any) made pursuant to Section 4.6. Notwithstanding the foregoing, in no event may a holder of Vested LTIP Units convert a number of Vested LTIP Units that exceeds (x) the Economic Capital Account Balance of such Limited Partner, to the extent attributable to its ownership of LTIP Units, divided by (y) the Class A Common Unit Economic Balance, in each case as determined as of the effective date of conversion (the “Capital Account Limitation”). In order to exercise his or her Conversion Right, an LTIP Unitholder shall deliver a notice (a “Conversion Notice”) in the form attached as Exhibit E to this Agreement to the Partnership (with a copy to the General Partner) not less than ten nor more than 60 days prior to a date (the “Conversion Date”) specified in such Conversion Notice; provided, however, that if the General Partner has not given to the LTIP Unitholders notice of a proposed or upcoming Class A Common Unit Transaction (as defined in Section 4.7.F) at least 30 days prior to the effective date of such Class A Common Unit Transaction, then LTIP Unitholders shall have the right to deliver a Conversion Notice until the earlier of (x) the tenth day after such notice from the General Partner of a Class A Common Unit Transaction or (y) the third business day immediately preceding the effective date of such Class A Common Unit Transaction. A Conversion Notice shall be provided in the manner provided in Section 15.1. Each LTIP Unitholder covenants and agrees with the Partnership that all Vested LTIP Units to be converted pursuant to this Section 4.7.B shall be free and clear of all liens and encumbrances. Notwithstanding anything herein to the contrary, a holder of LTIP Units may deliver a Notice of Redemption pursuant to Section 8.6 relating to those Class A Common Units that will be issued to such holder upon conversion of such LTIP Units into Class A Common Units in advance of the Conversion Date; provided, however, that the redemption of such Class A Common Units by the Partnership shall in no event take place until after the Conversion Date. For clarity, it is noted that the objective of this paragraph is to put an LTIP Unitholder in a position where, if he or she so wishes, the Class A Common Units into which his

 

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or her Vested LTIP Units will be converted can be redeemed by the Partnership simultaneously with such conversion, with the further consequence that, if the General Partner elects to cause the General Partner to assume and perform the Partnership’s redemption obligation with respect to such Class A Common Units under Section 8.6 by delivering to such holder Shares rather than cash, then such holder can have such Shares issued to him or her simultaneously with the conversion of his or her Vested LTIP Units into Class A Common Units. The General Partner and LTIP Unitholder shall reasonably cooperate with each other to coordinate the timing of the events described in the foregoing sentence.

C. Forced Conversion. The Partnership, at any time at the election of the General Partner, may cause any number of Vested LTIP Units held by an LTIP Unitholder to be converted (a “Forced Conversion”) into an equal number of Class A Common Units, giving effect to all adjustments (if any) made pursuant to Section 4.6; provided, however, that the Partnership may not cause Forced Conversion of any LTIP Units that would not at the time be eligible for conversion at the option of such LTIP Unitholder pursuant to Section 4.7.B. In order to exercise its right of Forced Conversion, the Partnership shall deliver a notice (a “Forced Conversion Notice”) in the form attached as Exhibit F to this Agreement to the applicable LTIP Unitholder not less than ten nor more than 60 days prior to the Conversion Date specified in such Forced Conversion Notice. A Forced Conversion Notice shall be provided in the manner provided in Section 15.1.

D. Completion of Conversion. A conversion of Vested LTIP Units for which the holder thereof has given a Conversion Notice or the Partnership has given a Forced Conversion Notice shall occur automatically after the close of business on the applicable Conversion Date without any action on the part of such LTIP Unitholder, as of which time such LTIP Unitholder shall be credited on the books and records of the Partnership with the issuance as of the opening of business on the next day of the number of Class A Common Units issuable upon such conversion. After the conversion of LTIP Units as aforesaid, the Partnership shall deliver to such LTIP Unitholder, upon his or her written request, a certificate of the General Partner certifying the number of Class A Common Units and remaining LTIP Units, if any, held by such person immediately after such conversion. The Assignee of any Limited Partner pursuant to Article XI may exercise the rights of such Limited Partner pursuant to this Section 4.7 and such Limited Partner shall be bound by the exercise of such rights by the Assignee.

E. Impact of Conversions for Purposes of Section 6.1.E. For purposes of making future allocations under Section 6.1.E and applying the Capital Account Limitation, the portion of the Economic Capital Account Balance of the applicable LTIP Unitholder that is treated as attributable to his or her LTIP Units shall be reduced, as of the date of conversion, by the product of the number of LTIP Units converted and the Class A Common Unit Economic Balance.

F. Class A Common Unit Transactions. If the Partnership or the General Partner shall be a party to any Class A Common Unit Transaction, as defined below (including without limitation a merger, consolidation, unit exchange, self tender offer for all or substantially all Class A Common Units or other business combination or reorganization, or sale of all or substantially all of the Partnership’s assets, but excluding any Class A Common Unit Transaction which constitutes an Adjustment Event) in each case as a result of which Class A Common Units shall be exchanged for or converted into the right, or the holders of such Class A Common Units shall

 

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otherwise be entitled, to receive cash, securities or other property or any combination thereof (each of the foregoing being referred to herein as a “Class A Common Unit Transaction”), then the General Partner shall, immediately prior to the Class A Common Unit Transaction, exercise its right to cause a Forced Conversion with respect to the maximum number of LTIP Units then eligible for conversion, taking into account any allocations that occur in connection with the Class A Common Unit Transaction or that would occur in connection with the Class A Common Unit Transaction if the assets of the Partnership were sold at the Class A Common Unit Transaction price or, if applicable, at a value determined by the General Partner in good faith using the value attributed to the Partnership Units in the context of the Class A Common Unit Transaction (in which case the Conversion Date shall be the effective date of the Class A Common Unit Transaction). In anticipation of such Forced Conversion and the consummation of the Class A Common Unit Transaction, the Partnership shall use commercially reasonable efforts to cause each LTIP Unitholder to be afforded the right to receive in connection with such Class A Common Unit Transaction in consideration for the Class A Common Units into which his or her LTIP Units will be converted the same kind and amount of cash, securities and other property (or any combination thereof) receivable upon the consummation of such Class A Common Unit Transaction by a holder of the same number of Class A Common Units, assuming such holder of Class A Common Units is not a Person with which the Partnership consolidated or into which the Partnership merged or which merged into the Partnership or to which such sale or transfer was made, as the case may be (a “Constituent Person”), or an affiliate of a Constituent Person. In the event that holders of Class A Common Units have the opportunity to elect the form or type of consideration to be received upon consummation of the Class A Common Unit Transaction, prior to such Class A Common Unit Transaction the General Partner shall give prompt written notice to each LTIP Unitholder of such election, and shall use commercially reasonable efforts to afford the LTIP Unitholders the right to elect, by written notice to the General Partner, the form or type of consideration to be received upon conversion of each LTIP Unit held by such holder into Class A Common Units in connection with such Class A Common Unit Transaction. If an LTIP Unitholder fails to make such an election, such holder (and any of its transferees) shall receive upon conversion of each LTIP Unit held by him or her (or by any of his or her transferees) the same kind and amount of consideration that a holder of a Class A Common Unit would receive if such Class A Common Unit holder failed to make such an election. Subject to the rights of the Partnership and the General Partner under any Vesting Agreement and any Equity Incentive Plan, the Partnership shall use commercially reasonable effort to cause the terms of any Class A Common Unit Transaction to be consistent with the provisions of this Section 4.7.F and to enter into an agreement with the successor or purchasing entity, as the case may be, for the benefit of any LTIP Unitholders whose LTIP Units will not be converted into Class A Common Units in connection with the Class A Common Unit Transaction that will (i) contain provisions enabling the holders of LTIP Units that remain outstanding after such Class A Common Unit Transaction to convert their LTIP Units into securities as comparable as reasonably possible under the circumstances to the Class A Common Units and (ii) preserve as far as reasonably possible under the circumstances the distribution, special allocation, conversion, and other rights set forth in this Agreement for the benefit of the LTIP Unitholders.

 

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ARTICLE V

DISTRIBUTIONS

Section 5.1 Requirement and Characterization of Distributions

A. General. Except as otherwise provided herein, the General Partner shall cause the Partnership to distribute, at such times and in such amounts as the General Partner shall determine (each a “Distribution Date”), Available Cash to the Partners pro rata among the Partners in proportion to such Partners’ respective Percentage Interests in the Partnership (treating the Class A Common Units and Class A-2 Common Units as the same class of Units for this purpose). The amount and frequency of distributions of any cash other than Available Cash shall be determined by the General Partner in its sole discretion and, if distributed, such cash shall be distributed to the Partners in accordance with this Section 5.1.A. If a new or existing Partner acquires an additional Partnership Interest in exchange for a Capital Contribution on any date other than a Partnership Record Date, the cash distribution attributable to such additional Partnership Interest for the Partnership Record Date following the issuance of such additional Partnership Interest shall be reduced in the proportion that the number of days that such additional Partnership Interest is held by such Partner bears to the number of days between such Partnership Record Date and the immediately preceding Partnership Record Date.

B. Notwithstanding anything to the contrary contained herein, in no event may a Partner receive a distribution of Available Cash with respect to a Partnership Unit for a quarter or shorter period if such Partner is entitled to receive a distribution with respect to a Share for which such Partnership Unit has been redeemed or exchanged. Unless otherwise expressly provided for herein, or in the terms established for a new class or series of Partnership Interests created in accordance with Article IV hereof, no Partnership Interest shall be entitled to a distribution in preference to any other Partnership Interest. The General Partner shall make such reasonable efforts, as determined by it in its sole and absolute discretion and consistent with the qualification of the Parent as a REIT, to distribute Available Cash to the Parent in an amount sufficient to enable the Parent to make distributions to its stockholders that will enable the Parent to (1) satisfy the requirements for qualification as a REIT under the Code and the Regulations (the “REIT Requirements”), and (2) avoid any U.S. federal income or excise tax liability.

C. Method. (i) Each holder of Partnership Interests that is entitled to any preference in distribution shall be entitled to a distribution in accordance with the rights of any such class of Partnership Interests (and, within such class, pro rata in proportion to the respective Percentage Interests on such Partnership Record Date); and

(ii) To the extent there is Available Cash remaining after the payment of any preference in distribution in accordance with the foregoing clause (i), with respect to Partnership Interests that are not entitled to any preference in distribution or with respect to which distributions are not limited to any preference in distribution, such Available Cash shall be distributed pro rata to each such class in accordance with the terms of such class (and, within each such class, pro rata in proportion to the respective Percentage Interests on such Partnership Record Date).

 

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D. Distributions With Respect to LTIP Units. In accordance with Section 4.6.A, LTIP Unitholders shall be entitled to receive distributions in an amount per LTIP Unit equal to the Class A Common Unit Distribution; provided, however, that the General Partner may in its sole discretion adjust distributions made pursuant to this Article V or Section 13.2A as it deems necessary to ensure that the amount distributed to each LTIP Unit does not exceed the amount attributable to items of Partnership income or gain realized after the date such LTIP Unit was issued by the Partnership. The intent of the foregoing sentence is to ensure that all LTIP Units qualify as “profits interests” under Revenue Procedure 93-27,1993-2 C.B. 343 (June 9, 1993) and Revenue Procedure 2001-43, 2001-2 C.B. 191 (August 3, 2001), and this Section 5.1 shall be interpreted and applied consistently therewith; provided, however, that neither the General Partner nor the Partnership shall have liability to a recipient of LTIP Units under any circumstances as a result of such LTIP Unit not so qualifying. The General Partner at its discretion may amend this Section 5.1. to ensure that any LTIP Units will qualify as “profits interests” under Revenue Procedure 9327,19932 C.B. 343 (June 9, 1993) and Revenue Procedure 2001-43, 2001-2 C.B. 191 (August 3, 2001) (and any other similar rulings or regulations that may be in effect at such time).

E. Special Fees. If the Partnership directly or indirectly incurs Special Fees, (i) cash available for distribution under this Section 5.1 shall be increased by the Special Fees to the extent that cash available for distribution was previously reduced by such fees; and (ii) the amounts otherwise distributable among the Classes of OP Units shall then be reduced to reflect their appropriate shares of the Special Fees. For example, if the Partnership has Available Cash of $1,000 after taking into account a distribution and shareholder servicing fee of $200 that is required to be borne entirely by the Partners holding Class A-2 Common Units, Available Cash shall be increased to $1,200 for purposes of this Section 5.1 and the amounts otherwise distributable to the Class A-2 Common Units under this Section 5.1 shall be reduced by $200.

Section 5.2 Amounts Withheld

All amounts withheld pursuant to the Code or any provisions of any state or local tax law and Section 10.5 with respect to any allocation, payment or distribution to the General Partner, the Limited Partners or Assignees shall be treated as amounts distributed to the General Partner, Limited Partners or Assignees, as the case may be, pursuant to Section 5.1 for all purposes under this Agreement.

Section 5.3 Distributions Upon Liquidation

Proceeds from a Liquidating Event shall be distributed to the Partners in accordance with Section 13.2.

Section 5.4 Revisions to Reflect Issuance of Partnership Interests

If the Partnership issues Partnership Interests pursuant to Article IV, the General Partner shall make such revisions to this Article V and the Partner Registry in the books and records of the Partnership as it deems necessary to reflect the issuance of such additional Partnership Interests without the consent or approval of any other Partner.

 

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ARTICLE VI

ALLOCATIONS

Section 6.1 Allocations for Capital Account Purposes

For purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the Partnership’s items of income, gain, loss and deduction (computed in accordance with Exhibit B) shall be allocated among the Partners in each taxable year (or portion thereof) as provided herein below.

A. Net Income. After giving effect to the special allocations set forth in Section 1 of Exhibit C, Net Income shall be allocated:

(1) first, to the General Partner until the cumulative Net Income allocated under this clause (1) equals the cumulative Net Losses allocated to the General Partner under Section 6.1.B(4);

(2) second, to the holders of any Partnership Interests that are entitled to any preference upon liquidation until the cumulative Net Income allocated under this clause (3) equals the cumulative Net Losses allocated to such Partners under Section 6.1.B(3);

(3) third, to the holders of any Partnership Interests that are entitled to any preference in distribution (excluding for the avoidance of doubt any preference with respect to liquidating distributions described in the preceding clause (2)) in accordance with the rights of any such class of Partnership Interests until each such Partnership Interest has been allocated, on a cumulative basis pursuant to this clause (3), Net Income equal to the amount of distributions payable that are attributable to the preference of such class of Partnership Interests whether or not paid (and, within such class, pro rata in proportion to the respective Percentage Interests as of the last day of the period for which such allocation is being made); and

(4) finally, with respect to Partnership Interests that are not entitled to any preference in distribution or with respect to which distributions are not limited to any preference in distribution, pro rata to each such class in accordance with the terms of such class (and, within such class, pro rata in proportion to the respective Percentage Interests as of the last day of the period for which such allocation is being made).

B. Net Losses. After giving effect to the special allocations set forth in Section 1 of Exhibit C, Net Losses shall be allocated:

(1) first, to the holders of Partnership Interests, in proportion to, and to the extent that, their share of the Net Income previously allocated pursuant to Section 6.1.A(4) exceeds, on a cumulative basis, the sum of (a) distributions with respect to such Partnership Interests pursuant to clause (ii) of Section 5.1.B and (b) Net Losses allocated under this clause (1);

 

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(2) second, with respect to classes of Partnership Interests that are not entitled to any preference in distribution upon liquidation, pro rata to each such class in accordance with the terms of such class (and, within such class, pro rata in proportion to the respective Percentage Interests as of the last day of the period for which such allocation is being made); provided, however, that Net Losses shall not be allocated to any Partner pursuant to this Section 6.1.B(2) to the extent that such allocation would cause such Partner to have an Adjusted Capital Account Deficit (or increase any existing Adjusted Capital Account Deficit) (determined in each case (i) by not including in the Partners’ Adjusted Capital Accounts any amount that a Partner is obligated to contribute to the Partnership with respect to any deficit in its Capital Account pursuant to Section 13.3 and (ii) in the case of a Partner who also holds classes of Partnership Interests that are entitled to any preferences in distribution upon liquidation, by subtracting from such Partners’ Adjusted Capital Account the amount of such preferred distribution to be made upon liquidation) at the end of such taxable year (or portion thereof);

(3) third, with respect to classes of Partnership Interests that are entitled to any preference in distribution upon liquidation, in reverse order of the priorities of each such class (and within each such class, pro rata in proportion to their respective Percentage Interests as of the last day of the period for which such allocation is being made); provided, however, that Net Losses shall not be allocated to any Partner pursuant to this Section 6.1.B(3) to the extent that such allocation would cause such Partner to have an Adjusted Capital Account Deficit (or increase any existing Adjusted Capital Account Deficit) (determined in each case by not including in the Partners’ Adjusted Capital Accounts any amount that a Partner is obligated to contribute to the Partnership with respect to any deficit in its Capital Account pursuant to Section 13.3) at the end of such taxable year (or portion thereof); and

(4) thereafter, to the General Partner.

C. Allocation of Nonrecourse Debt. For purposes of Regulation Section 1.752-3(a), the Partners agree that Nonrecourse Liabilities of the Partnership in excess of the sum of (i) the amount of Partnership Minimum Gain and (ii) the total amount of Nonrecourse Built-in Gain shall be allocated among the Partners in any manner determined by the General Partner, in its sole and absolute discretion, to the extent permitted under Code Section 752 and the Regulations thereunder.

D. Recapture Income. Any gain allocated to the Partners upon the sale or other taxable disposition of any Partnership asset shall, to the extent possible after taking into account other required allocations of gain pursuant to Exhibit C, be characterized as Recapture Income in the same proportions and to the same extent as such Partners have been allocated any deductions directly or indirectly giving rise to the treatment of such gains as Recapture Income.

E. Special Allocations Regarding LTIP Units. Notwithstanding the provisions of Section 6.1.A, Liquidating Gains shall first be allocated to the LTIP Unitholders until their Economic Capital Account Balances, to the extent attributable to their ownership of LTIP Units, are equal to (i) the Class A Common Unit Economic Balance, multiplied by (ii) the number of their LTIP Units. For this purpose, “Liquidating Gains” means net gains that are or would be realized in connection with the actual or hypothetical sale of all or substantially all of the assets of the Partnership, including but not limited to net capital gain realized in connection with an adjustment to the value of Partnership assets under Section 704(b) of the Code made pursuant to Section 1.D of Exhibit B of the Partnership Agreement. The “Economic Capital Account Balances” of the LTIP Unitholders will be equal to their Capital Account balances to the extent

 

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attributable to their ownership of LTIP Units. Similarly, the “Class A Common Unit Economic Balance” shall mean (i) the Capital Account balance of the General Partner, plus the amount of the General Partner’s share of any Partner Minimum Gain or Partnership Minimum Gain, in either case to the extent attributable to the General Partner’s ownership of Class A Common Units and computed on a hypothetical basis after taking into account all allocations through the date on which any allocation is made under this Section 6.1.E, but prior to the realization of any Liquidating Gains, divided by (ii) the number of the General Partner’s Class A Common Units. Any such allocations shall be made among the LTIP Unitholders in proportion to the amounts required to be allocated to each under this Section 6.1.E. The parties agree that the intent of this Section 6.1.E is to make the Capital Account balance associated with each LTIP Unit to be economically equivalent to the Capital Account balance associated with the General Partner’s Class A Common Units (on a per-Unit basis), provided that Liquidating Gains are of a sufficient magnitude to do so upon a sale of all or substantially all of the assets of the Partnership, or upon an adjustment to the Partners’ Capital Accounts pursuant to Section 1.D of Exhibit B. The Partnership and the Partners intend that each LTIP Unit qualify as a profits interest within the meaning of Revenue Procedures 93-27 and 2001-43 and all provisions of this Agreement shall be interpreted consistently with such intent as determined by the General Partner in its sole discretion; provided, however, that neither the General Partner nor the Partnership shall have liability to a recipient of LTIP Units under any circumstances as a result of such LTIP Unit not so qualifying. In accordance with the foregoing, the General Partner may in its sole discretion adjust or limit aggregate allocations of Liquidating Gains made to LTIP Units in each taxable year of the Partnership such that they are no greater than the excess (if any) of (x) the total amount of the Partnership’s items of book income and gain (as determined for purposes of maintaining Capital Accounts) for such year, over (y) the total amount of the Partnership’s items of book loss, deduction, and expense (as determined for purposes of maintaining Capital Accounts) for such year.

F. Special Allocations in Connection with a Liquidity Event. The Partners intend that the allocation of Net Profits, Net Losses and other items of income, gain, loss, deduction and credit required to be allocated to the Capital Accounts of the Partners pursuant to this Agreement will result in final Capital Account balances that will permit the amount each Partner is entitled to receive upon “liquidation” of the Partnership (within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Treasury Regulations) to equal the amount such Partner would have received if such amount was distributable solely pursuant to the priorities set forth in Article V and Section 13.2.A(1) - (4). Accordingly, notwithstanding the provisions of Section 6.1.A, in the taxable year of the event precipitating a Liquidity Event and thereafter, appropriate adjustments to allocations of Net Profits and Net Losses to the Partners shall be made to achieve such result.

Section 6.2 Revisions to Allocations to Reflect Issuance of Partnership Interests or Future Agreements to Bear Disproportionate Losses

A. Issuances of Partnership Interests. If the Partnership issues Partnership Interests pursuant to Article IV, the General Partner shall make such revisions to this Article VI and the Partner Registry in the books and records of the Partnership as it deems necessary to reflect the terms of the issuance of such Partnership Interests, including making preferential allocations to classes of Partnership Interests that are entitled thereto. Such revisions shall not require the consent or approval of any other Partner.

 

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B. Agreement to Bear Disproportionate Losses. The General Partner may, in its sole discretion, modify (i) the allocation provisions contained herein to provide for disproportionate allocations of Loss (or items of loss or deduction) and chargebacks thereof to a Limited Partner that agrees to restore all or part of any deficit in its Capital Account, and (ii) any other provision hereof to provide for corresponding contribution obligations of such Limited Partner.

ARTICLE VII

MANAGEMENT AND OPERATIONS OF BUSINESS

Section 7.1 Management

A. Powers of General Partner. 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 with or without cause. In addition to the powers now or hereafter granted 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 Section 7.11, shall have full power and authority to do all things deemed necessary or desirable 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 are required under Section 5.1.A or will permit the Parent (so long as the Parent qualifies 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 stockholders sufficient to permit the Parent to maintain its REIT status), the assumption or guarantee of, or other contracting for, indebtedness and other liabilities including, without limitation, the assumption or guarantee of the debt of the General Partner, its Subsidiaries or the Partnership’s Subsidiaries, the issuance of evidences of indebtedness (including the securing of same by mortgage, deed of trust or other lien or encumbrance on the Partnership’s assets) and the incurring of any obligations the General Partner deems necessary for the conduct of the activities of the Partnership;

(2) the making of tax, regulatory and other filings, 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 or all of the assets of the Partnership (including acquisition of any new assets, 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 or any Subsidiary of the Partnership with or into another entity on such terms as the General Partner deems proper;

 

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(4) 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 it sees fit, including, without limitation, the financing of the conduct of the operations of the General Partner, the Partnership or any of the Partnership’s Subsidiaries, the lending of funds to other Persons (including, without limitation, the General Partner and its Subsidiaries and the Partnership’s Subsidiaries) and the repayment of obligations of the Partnership and its Subsidiaries and any other Person in which the Partnership has an equity investment and the making of Capital Contributions to its Subsidiaries;

(5) the management, operation, leasing, landscaping, repair, alteration, demolition or improvement of any real property or improvements owned by the Partnership or any Subsidiary of the Partnership or any Person in which the Partnership has made a direct or indirect equity investment;

(6) the negotiation, execution, and performance of any contracts, conveyances or other instruments that the General Partner considers useful or necessary to the conduct of the Partnership’s operations or the implementation of the General Partner’s powers under this Agreement, including contracting with contractors, developers, 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 mortgage, pledge, encumbrance or hypothecation of any assets of the Partnership;

(8) the distribution of Partnership cash or other Partnership assets in accordance with this Agreement;

(9) the holding, managing, investing and reinvesting of cash and other assets of the Partnership;

(10) the collection and receipt of revenues and income of the Partnership;

(11) the selection, designation of powers, authority and duties and the dismissal of employees of the Partnership (including, without limitation, employees having titles such as “president,” “vice president,” “secretary” and “treasurer”) 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 (including, without limitation, the General Partner) as it deems necessary or appropriate;

(13) the formation of, or acquisition of an interest (including non-voting interests in entities controlled by Affiliates of the Partnership or third parties) in, and the contribution of property to, any further limited or general partnerships, joint ventures, limited liability companies or other relationships that it deems desirable (including, without limitation, the acquisition of interests in, and the contributions of funds or property to, or making of loans to, its 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 the obligations of such Persons); provided, however, that as long as the Parent has determined to qualify or continue to qualify as a REIT, the Partnership may not engage in any such formation, acquisition or contribution that would cause the Parent to fail to qualify as a REIT;

 

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(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, the representation of the Partnership in all suits or legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, the incurring of legal expense and the indemnification of any Person against liabilities and contingencies to the extent permitted by law;

(15) 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;

(16) 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 assets or investment held by the Partnership;

(17) 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, individually or jointly with any such Subsidiary or other Person;

(18) 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 any interest pursuant to contractual or other arrangements with such Person;

(19) the making, executing and delivering of any and all deeds, leases, notes, deeds to secure debt, mortgages, deeds of trust, security agreements, conveyances, contracts, guarantees, warranties, indemnities, waivers, releases or other legal instruments or agreements in writing necessary or appropriate in the judgment of the General Partner for the accomplishment of any of the powers of the General Partner enumerated in this Agreement;

(20) the distribution of cash to acquire Partnership Units held by a Limited Partner in connection with a Limited Partner’s exercise of its Redemption Right under Section 8.6;

(21) the determination regarding whether a payment to a Partner who exercises its Redemption Right under Section 8.6 that is assumed by the Parent will be paid in the form of the Cash Amount or the Shares Amount, except as such determination may be limited by Section 8.6;

(22) the acquisition of Partnership Interests in exchange for cash, debt instruments and other property;

(23) the maintenance of the Partner Registry in the books and records of the Partnership to reflect the Capital Contributions and Percentage Interests of the Partners as the same are adjusted from time to time to the extent necessary to reflect redemptions, Capital Contributions, the issuance of Partnership Units, the admission of any Additional Limited Partner or any Substituted Limited Partner or otherwise; and

 

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(24) the registration of any class of securities of the Partnership under the Securities Act or the Exchange Act, and the listing of any debt securities of the Partnership on any exchange.

B. No Approval by Limited Partners. Except as provided in Section 7.11, 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 without any further act, approval or vote of the Partners, notwithstanding any other provision of this Agreement, the Act or any applicable law, rule or regulation, to the full extent permitted under the Act or other applicable law. The execution, delivery or performance by the General Partner or the Partnership of any agreement authorized or permitted under this Agreement shall be in the sole and absolute discretion of the General Partner without consideration of any other obligation or duty, fiduciary or otherwise, of the Partnership or the Limited Partners and 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. The Limited Partners acknowledge that the General Partner is acting for the benefit of the Partnership, the Limited Partners and the stockholders of the Parent.

C. Insurance. At all times from and after the date hereof, the General Partner may cause the Partnership to obtain and maintain (i) casualty, liability and other insurance on the properties of the Partnership and its Subsidiaries, (ii) liability insurance for the Indemnitees hereunder, and (iii) such other insurance as the General Partner, in its sole and absolute discretion, determines to be necessary.

D. Working Capital and Other Reserves. At all times from and after the date hereof, the General Partner may cause the Partnership to establish and maintain working capital reserves in such amounts as the General Partner, in its sole and absolute discretion, deems appropriate and reasonable from time to time, including upon liquidation of the Partnership under Article XIII.

Section 7.2 Certificate of Limited Partnership

To the extent that such action is determined by the General Partner to be reasonable and necessary or appropriate, the General Partner shall file amendments to and restatements of the Certificate of Limited Partnership and do all 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, the District of Columbia or other jurisdiction in which the Partnership may elect to do business or own property. Subject to the terms of Section 8.5.A(4), the General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate of Limited Partnership or any amendment thereto to any Limited Partner. 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, the District of Columbia or other jurisdiction in which the Partnership may elect to do business or own property.

 

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Section 7.3 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 Partners, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner or one or more nominees, as the General Partner may determine, in its sole and absolute discretion, including Affiliates of the General Partner. The General Partner hereby declares and warrants that any Partnership assets for which legal title is held in the name of the General Partner or any nominee or Affiliate of the General Partner shall be held by the General Partner for the use and benefit of the Partnership in accordance with the provisions of this Agreement. All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which legal title to such Partnership assets is held.

Section 7.4 Reimbursement of the General Partner

A. No Compensation. Except as provided in this Section 7.4 and elsewhere in this Agreement (including the provisions of Articles V and VI regarding distributions, payments and allocations to which it may be entitled), the General Partner (in its capacity as such) shall not receive payments from the Partnership or otherwise be compensated for its services as the general partner of the Partnership.

B. Responsibility for Partnership and General Partner and General Partner Expenses. The Partnership shall be responsible for and shall pay all expenses relating to the Partnership’s organization, the ownership of its assets and its operations. The Partnership shall also be responsible for the administrative and operating costs and expenses incurred by the General Partner, including, but not limited to, all expenses relating to the General Partner’s and the General Partner’s (i) continued existence and subsidiary operations, (ii) offerings and registration of securities, (iii) preparation and filing of any periodic or other reports and communications required under federal, state or local laws and regulations, (iv) compliance with laws, rules and regulations promulgated by any regulatory body, and (v) operating or administrative costs incurred in the ordinary course of business on behalf of the Partnership; provided, however, that such costs and expenses shall not include any administrative or operating costs of the General Partner attributable to assets owned by the General Partner directly and not through the Partnership or its subsidiaries. The General Partner, at the General Partner’s sole and absolute discretion, 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 expenses the General Partner incurs relating to or resulting from the ownership and operation of, or for the benefit of, the Partnership (including, without limitation, expenses related to the operations of the General Partner and to the management and administration of any Subsidiaries of the General Partner or the Partnership or Affiliates of the Partnership, such as auditing expenses and filing fees); provided, however, that (i) the amount of any such reimbursement shall be reduced by (x) 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 as permitted in Section 7.5.A (which interest is considered to belong to the Partnership and shall be paid over

 

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to the Partnership to the extent not applied to reimburse the General Partner for expenses hereunder); and (y) any amount derived by the General Partner from any investments permitted in Section 7.5.A; (ii) the Partnership shall not be responsible for any taxes that the Parent would not have been required to pay if the Parent qualified as a REIT for U.S. federal income tax purposes or any taxes imposed on the Parent by reason of the Parent’s failure to distribute to its stockholders an amount equal to its taxable income; (iii) the Partnership shall not be responsible for expenses or liabilities incurred by the General Partner in connection with any business or assets of the General Partner other than its ownership of Partnership Interests or operation of the business of the Partnership or ownership of interests in Qualified Assets to the extent permitted in Section 7.5.A; and (iii) the Partnership shall not be responsible for any expenses or liabilities of the General Partner that are excluded from the scope of the indemnification provisions of Section 7.7.A by reason of the provisions of clause (i) or (ii) thereof. The General Partner shall determine in good faith the amount of expenses incurred by it or the General Partner related to the ownership of Partnership Interests or operation of, or for the benefit of, the Partnership. If certain expenses are incurred that are related both to the ownership of Partnership Interests or operation of, or for the benefit of, the Partnership and to the ownership of other assets (other than Qualified Assets as permitted under Section 7.5.A) or the operation of other businesses, such expenses will be allocated to the Partnership and such other entities (including the General Partner) owning such other assets or businesses in such a manner as the General Partner in its sole and absolute discretion deems fair and reasonable. Such reimbursements shall be in addition to any reimbursement to the General Partner pursuant to Section 10.3.C and as a result of indemnification pursuant to Section 7.7. All payments and reimbursements hereunder shall be characterized for U.S. federal income tax purposes as expenses of the Partnership incurred on its behalf, and not as expenses of the General Partner.

C. Partnership Interest Issuance Expenses. The General Partner and Parent shall also be reimbursed for all expenses they incur relating to any issuance of Partnership Interests, Shares, Debt of the Partnership, Funding Debt of the General Partner or rights, options, warrants or convertible or exchangeable securities pursuant to Article IV (including, without limitation, all costs, expenses, damages and other payments resulting from or arising in connection with litigation related to any of the foregoing), all of which expenses are considered by the Partners to constitute expenses of, and for the benefit of, the Partnership. The Partnership shall be responsible for and shall pay all expenses relating to the Partnership’s organization, the ownership of its assets and its operations.

D. Purchases of Shares by the Parent. If the Parent exercises its rights under the Charter to purchase Shares or otherwise elects or is required to purchase from its stockholders Shares in connection with a share repurchase or similar program or otherwise, or for the purpose of delivering such Shares to satisfy an obligation under any dividend reinvestment or equity purchase program adopted by the Parent, any employee equity purchase plan adopted by the Parent or any similar obligation or arrangement undertaken by the Parent in the future, the purchase price paid by the Parent for those Shares and any other expenses incurred by the Parent in connection with such purchase shall be considered expenses of the Partnership and shall be reimbursable to the Parent, subject to the conditions that: (i) if those Shares subsequently are to be sold by the Parent, the Parent shall pay to the Partnership any proceeds received by the Parent for those Shares (provided, however, that a transfer of Shares for Partnership Units pursuant to Section 8.6 would not be considered a sale for such purposes); and (ii) if such Shares are required to be cancelled pursuant to applicable law or are not retransferred by the Parent within thirty (30) days after the purchase thereof, the General Partner shall cause the Partnership to cancel a number of Partnership Units (rounded to the nearest whole Partnership Unit) held by the Parent equal to the product attained by multiplying the number of those Shares by a fraction, the numerator of which is one and the denominator of which is the Conversion Factor.

 

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E. Reimbursement not a Distribution. Except as set forth in the succeeding sentence, if and to the extent any reimbursement made pursuant to this Section 7.4 is determined for U.S. federal income tax purposes not to constitute a payment of expenses of the Partnership, the amount so determined shall constitute a guaranteed payment with respect to capital within the meaning of Section 707(c) of the Code, shall be treated consistently therewith by the Partnership and all Partners and shall not be treated as a distribution for purposes of computing the Partners’ Capital Accounts. Amounts deemed paid by the Partnership to the General Partner in connection with redemption of Partnership Units pursuant to clause (ii) of subparagraph (D) above shall be treated as a distribution for purposes of computing the Partner’s Capital Accounts.

F. Funding for Certain Capital Transactions. In the event that the General Partner shall undertake to acquire (whether by merger, consolidation, purchase or otherwise) the assets or equity interests of another Person and such acquisition shall require the payment of cash by the General Partner (whether to such Person or to any other selling party or parties in such transaction or to one or more creditors, if any, of such Person or such selling party or parties), (i) the Partnership shall advance to the General Partner the cash required to consummate such acquisition if, and to the extent that, such cash is not to be obtained by the General Partner through an issuance of Shares described in Section 4.2 or pursuant to a transaction described in Section 7.5.B, (ii) the General Partner shall, upon consummation of such acquisition, transfer to the Partnership (or cause to be transferred to the Partnership), in full and complete satisfaction of such advance and as required by Section 7.5, the assets or equity interests of such Person acquired by the General Partner in such acquisition (or equity interests in Persons owning all of such assets or equity interests), and (iii) pursuant to and in accordance with Section 4.2 and Section 7.5.B, the Partnership shall issue to the General Partner, Partnership Interests and/or rights, options, warrants or convertible or exchangeable securities of the Partnership having designations, preferences and other rights that are substantially the same as those of any additional Shares, other equity securities, New Securities and/or Convertible Funding Debt, as the case may be, issued by the General Partner in connection with such acquisition (whether issued directly to participants in the acquisition transaction or to third parties in order to obtain cash to complete the acquisition). In addition to, and without limiting, the foregoing, in the event that the General Partner engages in a transaction in which (x) the General Partner (or a wholly owned direct or indirect Subsidiary of the General Partner) merges with another entity (referred to as the “General Partner Entity”) that is organized in the “UPREIT format” (i.e., where the General Partner Entity holds substantially all of its assets and conducts substantially all of its operations through a partnership, limited liability company or other entity (referred to as an “Operating Entity”)) and the General Partner survives such merger, (y) such Operating Entity merges with or is otherwise acquired by the Partnership in exchange in whole or in part for Partnership Interests, and (z) the General Partner is required or elects to pay part of the consideration in connection with such merger involving the General Partner Entity in the form of cash and part of the consideration in the form of Shares, the Partnership shall distribute to the General Partner with respect to its existing Partnership Interest an amount of cash sufficient to complete such transaction and the General Partner shall cause the Partnership to cancel a number

 

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of Partnership Units (rounded to the nearest whole number) held by the General Partner equal to the product attained by multiplying the number of additional Shares of the General Partner that the General Partner would have issued to the General Partner Entity or the owners of the General Partner Entity in such transaction if the entire consideration therefor were to have been paid in Shares by a fraction, the numerator of which is one and the denominator of which is the Conversion Factor.

Section 7.5 Outside Activities of the General Partner; Relationship of Shares to Partnership Units; Funding Debt

A. General. Without the Consent of the Outside Limited Partners, the General Partner shall not, directly or indirectly, enter into or conduct any business other than in connection with the ownership, acquisition and disposition of Partnership Interests and the management of the business of the Partnership and such activities as are incidental thereto. Without the Consent of the Outside Limited Partners, the assets of the General Partner shall be limited to Partnership Interests and permitted debt obligations of the Partnership (as contemplated by Section 7.5.F); provided, however, that the General Partner shall be permitted to hold such bank accounts or similar instruments or accounts in its name as it deems necessary to carry out its responsibilities and purposes as contemplated under this Agreement and its organizational documents (provided that accounts held on behalf of the Partnership to permit the General Partner to carry out its responsibilities under this Agreement shall be considered to belong to the Partnership and the interest earned thereon shall, subject to Section 7.4.B, be applied for the benefit of the Partnership); and, provided further that, the General Partner shall be permitted to acquire Qualified Assets.

B. Repurchase of Shares and Other Securities. If the Parent exercises its rights under the Charter to purchase Shares or otherwise elects to purchase from the holders thereof Shares, other equity securities of the Parent, New Securities or Convertible Funding Debt, then the General Partner shall cause the Partnership to purchase from the Parent (i) in the case of a purchase of Shares, that number of Partnership Units of the appropriate class equal to the product obtained by multiplying the number of Shares purchased by the Parent times a fraction, the numerator of which is one and the denominator of which is the Conversion Factor, or (ii) in the case of the purchase of any other securities on the same terms and for the same aggregate price that the Parent purchased such securities.

C. Forfeiture of Shares. If the Partnership or the Parent acquires Shares as a result of the forfeiture of such Shares under a restricted or similar share, share bonus or similar share plan, then the General Partner shall cause the Partnership to cancel, without payment of any consideration to the Parent, that number of Partnership Units of the appropriate class equal to the number of Shares so acquired, and, if the Partnership acquired such Shares, it shall transfer such Shares to the Parent for cancellation.

D. Issuances of Shares and Other Securities. The Parent shall not grant, award or issue any additional Shares (other than Shares issued pursuant to Section 8.6 or pursuant to a dividend or distribution (including any stock split) to all of its stockholders that results in an adjustment to the Conversion Factor pursuant to clause (i), (ii) or (iii) of the definition thereof), other equity securities of the Parent, New Securities or Convertible Funding Debt unless (i) the General Partner

 

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shall cause, pursuant to Section 4.2.A, the Partnership to issue to the Parent, Partnership Interests or rights, options, warrants or convertible or exchangeable securities of the Partnership having designations, preferences and other rights, all such that the economic interests are substantially the same as those of such additional Shares, other equity securities, New Securities or Convertible Funding Debt, as the case may be, and (ii) in exchange therefor, the Parent transfers or otherwise causes to be transferred to the Partnership, as an additional Capital Contribution, the proceeds (if any) from the grant, award, or issuance of such additional Shares, other equity securities, New Securities or Convertible Funding Debt, as the case may be, or from the exercise of rights contained in such additional Shares, other equity securities, New Securities or Convertible Funding Debt, as the case may be (or, in the case of an acquisition described in Section 7.4.F in which all or a portion of the cash required to consummate such acquisition is to be obtained by the Parent through an issuance of Shares described in Section 4.2, the Parent complies with such Section 7.4.F). Without limiting the foregoing, the Parent is expressly authorized to issue additional Shares, other equity securities, New Securities or Convertible Funding Debt, as the case may be, for less than fair market value, and the General Partner is expressly authorized, pursuant to Section 4.2.A, to cause the Partnership to issue to the Parent corresponding Partnership Interests, (for example, and not by way of limitation, the issuance of Shares and corresponding Partnership Units pursuant to a stock purchase plan providing for purchases of Shares, either by employees or stockholders, at a discount from fair market value or pursuant to employee stock options that have an exercise price that is less than the fair market value of the Shares, either at the time of issuance or at the time of exercise) as long as (a) the General Partner concludes in good faith that such issuance is in the interests of the General Partner, the Parent and the Partnership and (b) the Parent transfers all proceeds from any such issuance or exercise to the Partnership as an additional Capital Contribution.

E. Equity Incentive Plan. If at any time or from time to time, the Parent sells or otherwise issues Shares pursuant to any Equity Incentive Plan, the Parent shall transfer or cause to be transferred the proceeds of the sale of such Shares, if any, to the Partnership as an additional Capital Contribution in exchange for an amount of additional Partnership Units equal to the number of Shares so sold divided by the Conversion Factor.

F. Funding Debt. The General Partner or any wholly owned Subsidiary of either of them may incur a Funding Debt from a financial institution or other lender, including, without limitation, a Funding Debt that is convertible into Shares or otherwise constitutes a class of New Securities (“Convertible Funding Debt”), subject to the condition that the General Partner or such Subsidiary, as the case may be, lend to the Partnership the net proceeds of such Funding Debt; provided, however, that Convertible Funding Debt shall be issued in accordance with the provisions of Section 7.5.D above; and, provided further that the General Partner or such Subsidiary shall not be obligated to lend the net proceeds of any Funding Debt to the Partnership in a manner that would be inconsistent with the Parent’s ability to qualify or remain qualified as a REIT. If the General Partner or such Subsidiary enters into any Funding Debt, the loan to the Partnership shall be on comparable terms and conditions, including interest rate, repayment schedule, costs and expenses and other financial terms, as are applicable with respect to or incurred in connection with such Funding Debt.

 

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G. Capital Contributions of the General Partner. The Capital Contributions by the General Partner pursuant to Sections 7.5.D and 7.5.E will be deemed to equal the cash contributed by the General Partner plus (a) in the case of cash contributions funded by an offering of any equity interests in or other securities of the General Partner, the offering costs attributable to the cash contributed to the Partnership to the extent not reimbursed pursuant to Section 7.4.C and (b) in the case of Partnership Units issued pursuant to Section 7.5.E, an amount equal to the difference between the Value of the Shares sold pursuant to any Equity Incentive Plan and the net proceeds of such sale.

H. Tax Loans. The General Partner may, in its sole and absolute discretion, cause the Partnership to make an interest free loan to the General Partner, provided that the proceeds of such loans are used to satisfy any tax liabilities of the General Partner.

Section 7.6 Transactions with Affiliates

A. Transactions with Certain Affiliates. Except as expressly permitted by this Agreement, with respect to any transaction with an Affiliate not negotiated on an arm’s-length basis, the Partnership shall not, directly or indirectly, sell, transfer or convey any property to, or purchase any property from, or borrow funds from, or lend funds to, any Partner or any Affiliate of the Partnership that is not also a Subsidiary of the Partnership, except pursuant to transactions that are determined in good faith by the General Partner to be on terms that are fair and reasonable and no less favorable to the Partnership than would be obtained from an unaffiliated third party.

B. Joint Ventures. The Partnership may transfer assets to joint ventures, limited liability companies, partnerships, corporations, business trusts 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, in its sole and absolute discretion, believes to be advisable.

C. Services Agreement. The General Partner is expressly authorized to enter into, in the name and on behalf of the Partnership, any management, shared-services, development or advisory agreement with a property and/or asset manager (including an Affiliate of the Partnership, the General Partner) for the provision of property management, asset management, leasing, development and/or similar services with respect to the Partnership properties and any agreement for the provision of services of accountants, legal counsel, appraisers, insurers, brokers, transfer agents, registrars, developers, financial advisors and other professional and administrative services with an Affiliate of any of the Partnership, the General Partner, on such terms as the General Partner, in its sole and absolute discretion, believes are advisable.

D. Conflict Avoidance. The General Partner is expressly authorized to enter into, in the name and on behalf of the Partnership, a non-competition arrangement and other conflict avoidance agreements with various Affiliates of the Partnership, the General Partner and Parent on such terms as the General Partner, in its sole and absolute discretion, believes are advisable.

E. Benefit Plans Sponsored by the Partnership. The General Partner in its sole and absolute discretion and without the approval of the Limited Partners, may propose and adopt on behalf of the Partnership employee benefit plans funded by the Partnership for the benefit of employees of the General Partner, the Partnership, Subsidiaries of the Partnership or any Affiliate of any of them.

 

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Section 7.7 Indemnification

A. General. The Partnership shall indemnify each Indemnitee to the fullest extent provided by the Act 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 or in connection with any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, incurred by the Indemnitee and relating to the Partnership or the General Partner or the operation of, or the ownership of property by, the Indemnitee, Partnership or the General Partner as set forth in this Agreement in which any such Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, unless it is established by a final determination of a court of competent jurisdiction that: (i) the act or omission of the Indemnitee was material to the matter giving rise to the proceeding and either was committed in bad faith or was the result of active and deliberate dishonesty, (ii) the Indemnitee actually received an improper personal benefit in money, property or services or (iii) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful. Without limitation, the foregoing indemnity shall extend to any liability of any Indemnitee, pursuant to a loan guarantee, contractual obligation for any indebtedness or other obligation 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. The termination of any proceeding by judgment, order or settlement does not create a presumption that the Indemnitee did not meet the requisite standard of conduct set forth in this Section 7.7.A. The termination of any proceeding by conviction or upon a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, does not create a rebuttable presumption that the Indemnitee acted in a manner contrary to that specified in this Section 7.7.A with respect to the subject matter of such proceeding. Any indemnification pursuant to this Section 7.7 shall be made only out of the assets of the Partnership, and any insurance proceeds from the liability policy covering the General Partner and any Indemnitee, 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. Reimbursement of Expenses. Reasonable expenses expected to be incurred by an Indemnitee shall be paid or reimbursed by the Partnership in advance of the final disposition of any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative made or threatened against an Indemnitee upon receipt by the Partnership of (i) a written affirmation by the Indemnitee of the Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Partnership as authorized in Section 7.7.A has been met and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amount if it shall ultimately be determined that the standard of conduct has not been met.

C. No Limitation of Rights. 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 Indemnitee is indemnified.

 

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D. Insurance. The Partnership may 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 Indemnitee or Person against such liability under the provisions of this Agreement.

E. No Personal Liability for Partners. 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.

F. Interested Transactions. 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.

G. Benefit. The provisions of this Section 7.7 are for the benefit of the Indemnitees, their employees, officers, directors, trustees, 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 limitation on 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 related 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.

H. Indemnification Payments Not Distributions. If and to the extent any payments to the General Partner pursuant to this Section 7.7 constitute gross income to the General Partner (as opposed to the repayment of advances made on behalf of the Partnership), such amounts shall constitute guaranteed payments within the meaning of Section 707(c) of the Code, shall be treated consistently therewith by the Partnership and all Partners, and shall not be treated as distributions for purposes of computing the Partners’ Capital Accounts.

I. Exception to Indemnification. Notwithstanding anything to the contrary in this Agreement, the General Partner shall not be entitled to indemnification hereunder for any loss, claim, damage, liability or expense for which the General Partner is obligated to indemnify the Partnership under any other agreement between the General Partner and the Partnership.

Section 7.8 Liability of the General Partner

A. General. Notwithstanding anything to the contrary set forth in this Agreement, the General Partner (which for the purposes of this Section 7.8 shall include the directors and officers of the General Partner) shall not be liable for monetary or other damages to the Partnership, any Partners or any Assignees for losses sustained, liabilities incurred or benefits not derived as a result of errors in judgment or mistakes of fact or law or of any act or omission unless the General Partner acted in bad faith and the act or omission was material to the matter giving rise to the loss, liability or benefit not derived.

 

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B. Obligation to Consider Interests of General Partner. The Limited Partners expressly acknowledge that the General Partner, in considering whether to dispose of any of the Partnership assets, shall take into account the tax consequences to the General Partner of any such disposition and shall have no liability whatsoever to the Partnership or any Limited Partner for decisions that are based upon or influenced by such tax consequences.

C. No Obligation to Consider Separate Interests of Limited Partners. The Limited Partners expressly acknowledge that the General Partner is acting on behalf of the Partnership, the Limited Partners and the General Partner’s stockholders, and that, except as set forth herein, the General Partner is under no obligation to consider the separate interests of the Limited Partners (including, without limitation, the tax consequences to Limited Partners or Assignees) in deciding whether to cause the Partnership to take (or decline to take) any actions, and that the General Partner shall not be liable for monetary or other damages for losses sustained, liabilities incurred or benefits not derived by Limited Partners in connection with any decisions or actions made or taken or declined to be made or taken, provided that the General Partner has acted pursuant to its authority under this Agreement. Any decisions or actions not taken by the General Partner in accordance with the terms of this Agreement shall not constitute a breach of any duty owed to the Partnership or the Limited Partners by law or equity, fiduciary or otherwise. In the event of a conflict between the interests of the Limited Partners and the stockholders of the Parent shall act in the interests of the Parent’s stockholders, and the General Partner shall not be liable for monetary or other losses sustained, liabilities incurred or benefits not derived by the Limited Partners in connection therewith.

D. Actions of Agents. 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 agents. The General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by the General Partner in good faith.

E. Effect of Amendment. Notwithstanding any other provision contained herein, 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 General Partner’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.

F. Limitations of Fiduciary Duty. Sections 7.1.B, Section 7.7.E and this Section 7.8 and any other Section of this Agreement limiting the liability of the General Partner and/or the directors and officers of the General Partner shall constitute an express limitation of any duties, fiduciary or otherwise, that they would owe the Partnership or the Limited Partners if such duty would be imposed by any law, in equity or otherwise.

 

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Section 7.9 Other Matters Concerning the General Partner

A. Reliance on Documents. 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. Reliance on Advisors. The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers 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. Action Through Agents. 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 a duly appointed attorney or 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 all and every act and duty that is permitted or required to be done by the General Partner hereunder.

D. Actions to Maintain REIT Status of the Parent or Avoid Taxation of the General Partner. 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 Parent to qualify as a REIT or (ii) to allow the General Partner to avoid incurring any liability for taxes under Sections 857 or 4981 of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners.

Section 7.10 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, to encumber, sell or otherwise use in any manner any and all assets of the Partnership, to enter into any contracts on behalf of the Partnership and to 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 that may be available against such Person to contest, negate or disaffirm any action of the General Partner in connection with any such dealing, in each case except to the extent that such action imposes, or purports to impose, liability on the Limited Partner. 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

 

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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.

Section 7.11 Restrictions on General Partner’s 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 (i) all Partners adversely affected or (ii) such lower percentage of the Partnership Interests held by Limited Partners as may be specifically provided for under a provision of this Agreement or the Act. The preceding sentence shall not apply to any limitation or prohibition in this Agreement that expressly authorizes the General Partner to take action (either in its discretion or in specified circumstances) so long as the General Partner acts within the scope of such authority.

Section 7.12 Loans by Third Parties

The Partnership may incur Debt, or enter into similar credit, guarantee, financing or refinancing arrangements for any purpose (including, without limitation, in connection with any acquisition of property and any borrowings from, or guarantees of Debt of the General Partner or any of its Affiliates) with any Person upon such terms as the General Partner determines appropriate.

ARTICLE VIII

RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS

Section 8.1 Limitation of Liability

The Limited Partners shall have no liability under this Agreement except as expressly provided in this Agreement, including Section 10.5, 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, director, employee, partner, agent or trustee 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, director, employee, partner, agent or trustee 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.

 

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Section 8.3 Outside Activities of Limited Partners

Subject to Section 7.5, and subject to any agreements entered into pursuant to Section 7.6.B and to any other agreements entered into by a Limited Partner or its Affiliates with the General Partner, the Partnership, the General Partner or a Subsidiary, any Limited Partner (other than the General Partner) and any officer, director, employee, agent, trustee, Affiliate or stockholder of any 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 in direct or indirect competition with 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 General Partner) or 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 (other than the General Partner to the extent expressly provided herein), and no Person (other than the General Partner) shall have any obligation pursuant to this Agreement to offer any interest in any such business venture 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. No Limited Partner or Assignee shall have priority over any other Limited Partner or Assignee either as to the return of Capital Contributions (except as permitted by Section 4.2.A) or, except to the extent provided by Exhibit C or as permitted by Sections 4.2.A, 5.1.B(i), 6.1.A and 6.1.B, or otherwise expressly provided in this Agreement, as to profits, losses, distributions or credits.

Section 8.5 Rights of Limited Partners Relating to the Partnership

A. General. In addition to other rights provided by this Agreement or by the Act, and except as limited by Section 8.5.D, 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:

(1) to obtain a copy of the most recent annual and quarterly reports filed with the Securities and Exchange Commission by either the Parent or the Partnership, if any, pursuant to the Exchange Act;

(2) to obtain a copy of the Partnership’s U.S. federal, state and local income tax returns for each Fiscal Year;

(3) to obtain a current list of the name and last known business, residence or mailing address of each Partner;

 

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(4) to obtain a copy of this Agreement and the Certificate of Limited Partnership and all amendments thereto, together with executed copies of all powers of attorney pursuant to which this Agreement, the Certificate of Limited Partnership and all amendments thereto have been executed;

(5) to obtain true and full information regarding the amount of cash and a description and statement of the Agreed Value 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 Partner became a Partner; and

(6) other information regarding the affairs of the Partnership as is just and reasonable.

B. Notice of Conversion Factor. The Partnership shall notify each Limited Partner upon request (i) of the then current Conversion Factor and (ii) of any changes to the Conversion Factor.

C. Confidentiality. 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, 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 or the General Partner is required by law or by agreements with unaffiliated third parties to keep confidential.

Section 8.6 Redemption Right

A. General. (i) Subject to Section 8.6.C and Section 11.6.E, (x) at any time on or after one (1) year following the date of the initial issuance thereof (which, in the event of the transfer of a Class A Common Unit, shall be deemed to be the date that the Class A Common Unit was issued to the original recipient thereof for purposes of this Section 8.6), the holder of a Class A Common Unit (if other than the General Partner or any Subsidiary of the General Partner), including any LTIP Units that are converted into Class A Common Units, shall have the right (the “Class A Redemption Right”) to require the Partnership to redeem such Class A Common Unit at a redemption price equal to and in the form of the Cash Amount to be paid by the Partnership, with such redemption to occur on the Specified Redemption Date (a “Class A Common Units Redemption”), and (y) at any time on or after the earlier of: (i) April 21, 2025, (ii) the date of the initial Offering or (iii) the receipt of a notice of dissolution pursuant to Section 13.5, a Limited Partner holding Class A-2 Common Units shall have the right (subject to the terms and conditions set forth herein and in any other such agreement, as applicable) (the “Class A-2 Redemption Right” and, together with the Class A Redemption Right, the “Redemption Right”) to require the Partnership to redeem, or the General Partner to acquire, as applicable, all of the Class A-2 Common Units held by such Limited Partner at a redemption price equal to and in the form of, at the election of the Redeeming Partner, (x) the Cash Amount or (y) the Shares Amount, with such redemption to occur on the Specified Redemption Date (a “Class A-2 Common Units Redemption” and, together with a Class A Common Units Redemption, a “Redemption”). Any such Redemption Right shall be exercised pursuant to a Notice of Redemption delivered to the

 

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Partnership (with a copy to the General Partner) by the holder of the Partnership Units who is exercising the Redemption Right (the “Redeeming Partner”). A Limited Partner may exercise the Redemption Right from time to time, without limitation as to frequency, with respect to part or all of the Partnership Units that it owns, as selected by the Limited Partner, provided, however, that a Limited Partner may not exercise the Redemption Right for fewer than one thousand (1,000) Partnership Units of a particular class unless such Redeeming Partner then holds fewer than one thousand (1,000) Partnership Units of that class, in which event the Redeeming Partner must exercise the Redemption Right for all of the Partnership Units in that class held by such Redeeming Partner, and provided further that, with respect to a Limited Partner which is an entity, such Limited Partner may exercise the Redemption Right for fewer than one thousand (1,000) Partnership Units without regard to whether or not such Limited Partner is exercising the Redemption Right for all of the Partnership Units in that class held by such Limited Partner as long as such Limited Partner is exercising the Redemption Right on behalf of one or more of its equity owners in respect of one hundred percent (100%) of such equity owners’ interests in such Limited Partner.

(ii) The Redeeming Partner shall have no right with respect to any Partnership Units so redeemed to receive any distributions paid in respect of a Partnership Record Date for distributions in respect of Partnership Units after the Specified Redemption Date with respect to such Partnership Units.

(iii) The Assignee of any Limited Partner may exercise the rights of such Limited Partner pursuant to this Section 8.6, 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 Limited Partner’s Assignee. In connection with any exercise of such rights by such Assignee on behalf of such Limited Partner, the Cash Amount shall be paid by the Partnership directly to such Assignee and not to such Limited Partner.

(iv) In the event of a Termination Transaction on which the holders of Shares shall have the right to vote, the Redemption Right shall be exercisable, without regard to whether the Partnership Units have been outstanding for any specified period, during the period commencing on the date on which the General Partner enters into a definitive agreement with respect to such Termination Transaction and ending on the record date to determine stockholders eligible to receive such distribution or to vote upon the approval of such merger, sale or other extraordinary transaction (or, if no such record date is applicable, at least twenty (20) Business Days before the consummation of such merger, sale or other extraordinary transaction). If this subparagraph (iv) applies, the Specified Redemption Date is the date on which the Partnership and the General Partner receive notice of exercise of the Redemption Right, rather than ten (10) Business Days after receipt of the Notice of Redemption.

(v) Notwithstanding the foregoing, the General Partner may place restrictions on the ability of any Limited Partner to exercise its Redemption Right pursuant to this Section 8.6.A to the extent the General Partner determines, in its discretion, such restrictions are advisable to ensure the Partnership does not constitute a “publicly traded partnership” under Section 7704 of the Code.

 

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B. Parent Assumption of Redemption Right. (i) If a Limited Partner has delivered a Notice of Redemption, the General Partner may, in its sole and absolute discretion (subject to any limitations on ownership and transfer of Shares set forth in the Charter), elect to cause the Parent to assume directly and satisfy a Redemption Right. If such election is made by the General Partner, the Partnership shall determine whether the Parent shall pay the Redemption Amount in the form of the Cash Amount or the Shares Amount. The Partnership’s decision regarding whether such payment shall be made in the form of the Cash Amount or the Shares Amount shall be made by the General Partner, in its capacity as the general partner of the Partnership and in its sole and absolute discretion. Upon such payment by the Parent, the Parent 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. Unless the General Partner, in its sole and absolute discretion, shall exercise its right to cause the Parent to assume directly and satisfy the Redemption Right, the Parent shall not have any obligation to the Redeeming Partner or to the Partnership with respect to the Redeeming Partner’s exercise of the Redemption Right. If the General Partner shall exercise its right to cause the Parent to assume directly and satisfy the Redemption Right in the manner described in the first sentence of this Section 8.6.B and the Parent shall fully perform its obligations in connection therewith, the Partnership shall have no right or obligation to pay any amount to the Redeeming Partner with respect to such Redeeming Partner’s exercise of the Redemption Right, and each of the Redeeming Partner, the Partnership and the Parent shall, for U.S. federal income tax purposes, treat the transaction between the Parent and the Redeeming Partner as a sale of the Redeeming Partner’s Partnership Units to the Parent. Nothing contained in this Section 8.6.B shall imply any right of the General Partner to require any Limited Partner to exercise the Redemption Right afforded to such Limited Partner pursuant to Section 8.6.A.

(ii) If the General Partner determines that the Parent shall pay the Redeeming Partner the Redemption Amount in the form of Shares, the total number of Shares to be paid to the Redeeming Partner in exchange for the Redeeming Partner’s Partnership Units shall be the applicable Shares Amount. If this amount is not a whole number of Shares, the Redeeming Partner shall be paid (i) that number of Shares which equals the nearest whole number less than such amount plus (ii) an amount of cash which the General Partner determines, in its reasonable discretion, to represent the fair value of the remaining fractional Share which would otherwise be payable to the Redeeming Partner.

(iii) Each Redeeming Partner agrees to execute such documents or provide such information or materials as the General Partner may reasonably require in connection with the issuance of Shares upon exercise of the Redemption Right.

C. Exceptions to Exercise of Redemption Right. Notwithstanding the provisions of Sections 8.6.A and 8.6.B, a Partner shall not be entitled to exercise the Redemption Right pursuant to Section 8.6.A if (but only as long as) the delivery of Shares to such Partner on the Specified Redemption Date would (i) be prohibited under the restrictions on the ownership or transfer of Shares in the Charter, (ii) be prohibited under applicable federal or state securities laws or regulations (in each case regardless of whether the Parent would in fact assume and satisfy the Redemption Right), (iii) without limiting the foregoing, result in the Shares being owned by fewer than 100 persons (determined without reference to rules of attribution), (iv) without limiting the foregoing, result in the Parent being “closely held” within the meaning of Section 856(h) of the

 

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Code or cause the Parent to own, actually or constructively, ten percent (10%) or more of the ownership interests in a tenant of the Parent, the Partnership or a Subsidiary of the Partnership’s real property within the meaning of Section 856(d)(2)(B) of the Code, (v) without limiting the foregoing, cause a material risk, as determined by the General Partner in its discretion, that the Partnership would constitute a “publicly traded partnership” under Section 7704 of the Code, and (vi) without limiting the foregoing, cause the acquisition of the Shares by the Redeeming Partner to be “integrated” with any other distribution of Shares for purposes of complying with the registration provision of the Securities Act, as amended. Notwithstanding the foregoing, the Parent may, in its sole and absolute discretion, waive such prohibition set forth in this Section 8.6.C.

D. No Liens on Partnership Units Delivered for Redemption. Each Limited Partner covenants and agrees that all Partnership Units delivered for redemption shall be delivered to the Partnership or the Parent, as the case may be, free and clear of all liens; and, notwithstanding anything contained herein to the contrary, neither the Parent nor the Partnership shall be under any obligation to acquire Partnership Units which are or may be subject to any liens. Each Limited 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 or the Parent, such Limited Partner shall assume and pay such transfer tax.

E. Additional Partnership Interests; Modification of Holding Period. If the Partnership issues Partnership Interests to any Additional Limited Partner pursuant to Article IV, the General Partner shall make such revisions to this Section 8.6 as it determines are necessary to reflect the issuance of such Partnership Interests (including setting forth any restrictions on the exercise of the Redemption Right with respect to such Partnership Interests which differ from those set forth in this Agreement), provided, however, that no such revisions shall materially adversely affect the rights of any other Limited Partner to exercise its Redemption Right without that Limited Partner’s prior written consent. In addition, the General Partner may, with respect to any holder or holders of Partnership Units, at any time and from time to time, as it shall determine in its sole and absolute discretion, (i) reduce or waive the length of the period prior to which such holder or holders may not exercise the Redemption Right or (ii) reduce or waive the length of the period between the exercise of the Redemption Right and the Specified Redemption Date.

F. Payment of Cash Amount; Delivery of Shares Amount. The Cash Amount, if applicable, shall be payable to the Redeeming Partner within 30 days of the Specified Redemption Date in accordance with the instructions set forth in the Notice of Redemption. The Shares Amount, if applicable, shall be delivered within 10 days of the Specified Redemption Date as duly authorized, validly issued, fully paid and nonassessable Shares and, if applicable, free of any pledge, lien, encumbrance or restriction, other than those provided in the Charter, the Bylaws, the Securities Act, relevant state securities or blue sky laws and any applicable registration rights agreement with respect to such Shares entered into by the Redeeming Partner. Notwithstanding any delay in such delivery (but subject to Section 8.6.C), the Redeeming Partner shall be deemed the owner of such Shares for all purposes, including without limitation, rights to vote or consent, and receive dividends, as of the Specified Redemption Date.

 

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G. Class A-2 Common Units Partnership Redemption Right.

(i) At any time on or after April 21, 2025, the Partnership shall have the right, at its option, at any time or from time to time, upon not less than 30 days’ written notice, to redeem the Class A-2 Common Units, in whole or in part, in exchange for an amount of cash equal to the product obtained by multiplying the number of Class A-2 Common Units subject to the Partnership’s notice by the Cash Amount (the “Partnership Redemption Price”).

(ii) The Partnership may exercise its option pursuant to Section 8.6.G(i) by delivering notice of such exercise to each holder of Class A-2 Common Units in accordance with Section 15.1, which notice shall state: (i) the date of redemption, which shall be a Business Day that is no earlier than thirty (30) days and no later than sixty (60) days from the date such notice is sent; (ii) the Partnership Redemption Price; (iii) the number of Class A-2 Common Units to be redeemed and, if fewer than all of the Class A-2 Common Units held by such holder are to be redeemed, the number or percentage of such Class A-2 Common Units to be redeemed from such holder; (iv) the place or places where the certificates (if any) evidencing the Class A-2 Common Units are to be surrendered for payment of the Partnership Redemption Price and any other documents required in connection with the redemption; and (v) that the distributions on such Class A-2 Common Units to be redeemed will cease to accrue on the date of redemption except as otherwise provided herein. A failure to give such notice or any defect in the notice or in its mailing shall not affect the validity of the proceedings for the redemption of any Class A-2 Common Units except as to the holder to whom notice was defective or not given. If fewer than all of the outstanding Class A-2 Common Units are to be redeemed, the Class A-2 Common Units to be redeemed shall be selected by lot or pro rata (as nearly as practicable without creating fractional units). From and after the date of redemption, any Class A-2 Common Units redeemed pursuant to this Section 8.6.G shall no longer be outstanding and all rights hereunder with respect to such Class A-2 Common Units shall cease.

ARTICLE IX

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 appropriate books and records 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. Any records maintained by or on behalf of the Partnership in the regular course of its business may be kept on, or be in the form of, punch cards, magnetic tape, photographs, micrographics or any other information storage device, provided, however, that the records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Partnership shall be maintained, for financial and tax reporting purposes, on an accrual basis in accordance with generally accepted accounting principles.

 

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Section 9.2 Fiscal Year

The fiscal year of the Partnership shall be the calendar year.

Section 9.3 Reports

A. Annual Reports. As soon as practicable, but in no event later than the date on which the Parent mails its annual report to its stockholders, the General Partner shall cause to be mailed to each Limited Partner an annual report, as of the close of the most recently ended Fiscal Year, containing financial statements of the Partnership, or of the Parent if such statements are prepared on a consolidated basis with the Partnership, for such Fiscal Year, presented in accordance with generally accepted accounting principles, such statements to be audited by a nationally recognized firm of independent public accountants selected by the Parent.

B. Quarterly Reports. If and to the extent that the Parent mails quarterly reports to its stockholders, as soon as practicable, but in no event later than the date on which such reports are mailed, the General Partner shall cause to be mailed to each Limited Partner a report containing unaudited financial statements, as of the last day of such fiscal quarter, of the Partnership, or of the Parent if such statements are prepared on a consolidated basis with the Partnership, and such other information as may be required by applicable law or regulation, or as the General Partner determines to be appropriate.

C. The General Partner shall have satisfied its obligations under Section 9.3.A and Section 9.3.B by posting or making available the reports required by this Section 9.3 on the website maintained from time to time by the Partnership or the Parent, provided that such reports are able to be printed or downloaded from such website.

ARTICLE X

TAX MATTERS

Section 10.1 Preparation of Tax Returns

A. 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 U.S. federal and state income tax purposes and shall use all reasonable efforts to furnish, within ninety (90) days of the close of each taxable year, the tax information reasonably required by Limited Partners for U.S. federal and state income tax reporting purposes.

Section 10.2 Tax Elections

A. 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 (including the election under Section 754 of the Code). The General Partner shall have the right to seek to revoke any such election upon the General Partner’s determination in its sole and absolute discretion that such revocation is in the best interests of the Partners.

 

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B. Without limiting the foregoing, the Partners, intending to be legally bound, hereby authorize the General Partner, on behalf of the Partnership, to make an election (the “LV Safe Harbor Election”) to have the “liquidation value” safe harbor provided in Proposed Treasury Regulation § 1.83-3(l) and the Proposed Revenue Procedure set forth in Internal Revenue Service Notice 2005-43, as such safe harbor may be modified when such proposed guidance is issued in final form or as amended by subsequently issued guidance (the “LV Safe Harbor”), apply to any interest in the Partnership transferred to a service provider while the LV Safe Harbor Election remains effective, to the extent such interest meets the LV Safe Harbor requirements (collectively, such interests are referred to as “LV Safe Harbor Interests”). The General Partner is authorized and directed to execute and file the LV Safe Harbor Election on behalf of the Partnership and the Partners. The Partnership and the Partners (including any person to whom an interest in the Partnership is transferred in connection with the performance of services) hereby agree to comply with all requirements of the LV Safe Harbor (including forfeiture allocations) with respect to all LV Safe Harbor Interests and to prepare and file all U.S. federal income tax returns reporting the tax consequences of the issuance and vesting of LV Safe Harbor Interests consistent with such final LV Safe Harbor guidance. The Partnership is also authorized to take such actions as are necessary to achieve, under the LV Safe Harbor, the effect that the election and compliance with all requirements of the LV Safe Harbor referred to above would be intended to achieve under Proposed Treasury Regulation § 1.83-3, including amending this Agreement.

Section 10.3 Partnership Representative

A. General.

(i) The General Partner shall be the “tax matters partner” of the Partnership for U.S. federal income tax purposes for tax years prior to the first tax year that is subject to the BBA Rules. Pursuant to Section 6223(c)(3) of the Code, as in effect before the effective date of the BBA Rules, upon receipt of notice from the IRS of the beginning of an administrative proceeding with respect to the Partnership, the tax matters partner shall furnish the IRS with the name, address, taxpayer identification number and profit interest of each of the Limited Partners and any Assignees; provided, however, that such information is provided to the Partnership by the Limited Partners.

(ii) The General Partner shall be the “partnership representative” of the Partnership for U.S. federal income tax purposes for all tax years beginning with the first taxable year that is subject to the BBA Rules; provided that the General Partner may resign as, remove and replace the Partnership’s partnership representative, in each case in its sole discretion. The partnership representative shall be entitled to, and shall, designate, a “designated individual” within the meaning of and in accordance with applicable Regulations; provided that any such designated individual may resign, and the partnership representative may remove, revoke and replace any such designated individual, in each case in accordance with such Regulations. The Partnership and each Partner shall take such actions as are necessary to effect the designations made in accordance with this Section 10.3, and the following provisions of this Section 10.3 shall apply with respect to each partnership representative and designated individual for the taxable year(s) with respect to which such persons are so designated.

 

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B. Powers.

(i) For all tax years prior to the first tax year that is subject to the BBA Rules, the tax matters partner is authorized, but not required (unless required by applicable law):

(1) to enter into any settlement with the IRS with respect to any administrative or judicial proceedings for the adjustment of Partnership items required to be taken into account by a Partner for income tax purposes (such administrative proceedings being referred to as a “tax audit” and such judicial proceedings being referred to as “judicial review”), and in the settlement agreement the tax matters partner may expressly state that such agreement shall bind all Partners, except that such settlement agreement shall not bind any Partner (x) who (within the time prescribed pursuant to the Code and Regulations) files a statement with the IRS providing that the tax matters partner shall not have the authority to enter into a settlement agreement on behalf of such Partner or (y) who is a “notice partner” (as defined in Section 6231(a)(8) of the Code, as in effect before the BBA Rules) or a member of a “notice group” (as defined in Section 6223(b)(2) of the Code, as in effect before the BBA Rules);

(2) if a notice of a final administrative adjustment at the Partnership level of any item required to be taken into account by a Partner for tax purposes (a “final adjustment”) is mailed to the tax matters partner, to seek judicial review of such final adjustment, including the filing of a petition for readjustment with the Tax Court or the filing of a complaint for refund with the United States Claims Court or the District Court of the United States for the district in which the Partnership’s principal place of business is located;

(3) to intervene in any action brought by any other Partner for judicial review of a final adjustment;

(4) to file a request for an administrative adjustment with the IRS at any time and, if any part of such request is not allowed by the IRS, to file an appropriate pleading (petition or complaint) for judicial review with respect to such request;

(5) to enter into an agreement with the IRS to extend the period for assessing any tax which is attributable to any item required to be taken into account by a Partner for tax purposes, or an item affected by such item;

(6) to take any other action on behalf of the Partners of the Partnership in connection with any tax audit or judicial review proceeding, to the extent permitted by applicable law or regulations; and

(7) to take any other action required by the Code and Regulations in connection with its role as tax matters partner.

The taking of any action and the incurring of any expense by the tax matters partner in connection with any such audit or proceeding referred to in clause (6) above, except to the extent required by law, is a matter in the sole and absolute discretion of the tax matters partner and the provisions relating to indemnification of the General Partner set forth in Section 7.7 shall be fully applicable to the tax matters partner in its capacity as such. References to Code Sections in this paragraph are to such provisions prior to amendment by the BBA Rules.

 

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(ii) For all tax years beginning with the first tax year that is subject to the BBA Rules, the partnership representative (and, to the extent applicable, designated individual on behalf of the partnership representative) is authorized, but not required (unless required by applicable law):

(1) to enter into any settlement with the IRS with respect to any administrative or judicial proceedings for the adjustment of Partnership items required to be taken into account by a Partner for income tax purposes (such administrative proceedings being referred to as a “tax audit” and such judicial proceedings being referred to as “judicial review”), and in the settlement agreement the partnership representative may expressly state that such agreement shall bind all Partners;

(2) if a notice of a final administrative adjustment at the Partnership level (a “final adjustment”) is mailed to the partnership representative, to seek judicial review of such final adjustment, including the filing of a petition for readjustment with the Tax Court or the filing of a complaint for refund with the United States Claims Court or the District Court of the United States for the district in which the Partnership’s principal place of business is located;

(3) to intervene in any action brought by any other Partner for judicial review of a final adjustment;

(4) to file a request for an administrative adjustment with the IRS at any time and, if any part of such request is not allowed by the IRS, to file an appropriate pleading (petition or complaint) for judicial review with respect to such request;

(5) to enter into an agreement with the IRS to extend the period for assessing any tax which is attributable to any item required to be taken into account by a Partner for tax purposes, or an item affected by such item;

(6) to take any other action on behalf of the Partnership and its Partners in connection with any tax audit or judicial review proceeding, to the extent permitted by applicable law or Regulations, including making an election under Section 6226 of the Code; and

(7) to take any other action required or permitted by the Code and Regulations in connection with its role as partnership representative.

The taking of any action and the incurring of any expense by the partnership representative (and designated individual on behalf of the partnership representative) in connection with any such audit or proceeding, except to the extent required by law, is a matter in the sole and absolute discretion of the partnership representative and the provisions relating to indemnification of the General Partner set forth in Section 7.7 shall be fully applicable to the partnership representative and designated individual in their capacities as such. Each Partner shall take all actions that the partnership representative informs it are reasonably necessary to effect a decision of the partnership representative in its capacity as such. References to Code Sections in this paragraph are to such provisions as amended by the BBA Rules.

 

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C. Reimbursement. The Partnership Representative shall receive no compensation for its services. All third party costs and expenses incurred by the Partnership Representative in performing its duties as such (including legal and accounting fees and expenses) shall be borne by the Partnership. Nothing herein shall be construed to restrict the Partnership from engaging an accounting firm and/or law firm to assist the Partnership Representative in discharging its duties hereunder, so long as the compensation paid by the Partnership for such services is reasonable.

D. Indemnification. The provisions relating to indemnification of the General Partner set forth in Section 7.7 shall be fully applicable to the Partnership Representative in its capacity as such.

Section 10.4 Organizational Expenses

The Partnership shall elect to deduct expenses as provided in Section 709 of the Code.

Section 10.5 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 U.S. 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, allocable or otherwise transferred to such Limited Partner pursuant to this Agreement, including, without limitation, any taxes required to be withheld or paid by the Partnership pursuant to Sections 1441, 1442, 1445, 1446 or 1471-1474, inclusive, of the Code and the Regulations thereunder. Any amount paid on behalf of or with respect to a Limited Partner (other than amounts actually withheld from payments 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 fifteen (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 clauses (i) or (ii) shall be treated as having been distributed or otherwise paid to such Limited Partner. Each Limited Partner hereby unconditionally and irrevocably grants to the Partnership a security interest in such Limited Partner’s Partnership Interest to secure such Limited Partner’s obligation to pay to the Partnership any amounts required to be paid pursuant to this Section 10.5. If a Limited Partner fails to pay any amounts owed to the Partnership pursuant to this Section 10.5 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 (including, without limitation, the right to receive distributions). Any amounts payable by a Limited Partner hereunder shall bear interest at 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 (4) percentage points (but not higher than the maximum rate that may be charged under law) from the date such amount is due (i.e., fifteen (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 to perfect or enforce the security interest created hereunder.

 

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ARTICLE XI

TRANSFERS AND WITHDRAWALS

Section 11.1 Transfer

A. Definition. The term “transfer,” when used in this Article XI with respect to a Partnership Interest or 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 XI does not include any redemption or repurchase of Partnership Units by the Partnership from a Partner or acquisition of Partnership Units from a Limited Partner by the Parent pursuant to Section 8.6 or otherwise. No part of the interest of a Limited Partner shall be subject to the claims of any creditor, any spouse for alimony or support, or to legal process, and may not be voluntarily or involuntarily alienated or encumbered except as may be specifically provided for in this Agreement.

B. General. No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article XI. Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article XI shall be null and void.

Section 11.2 Transfers of Partnership Interests of General Partner

A. General. Other than to an Affiliate of the General Partner, the General Partner may not transfer any of its Partnership Interests except in connection with (i) a transaction permitted under Section 11.2.B, (ii) a Transfer to any wholly owned Subsidiary of the General Partner or the owner of all of the ownership interests of the General Partner, or (iii) as otherwise expressly permitted under this Agreement, nor shall the General Partner withdraw as General Partner except in connection with a transaction permitted under Section 11.2.B or any Transfer, merger, consolidation, or other combination permitted under clause (ii) of this Section 11.2.A.

B. Termination Transactions. Neither the General Partner nor the General Partner shall engage in any merger (including, without limitation, a triangular merger), consolidation or other combination with or into another Person (other than any transaction permitted by Section 11.2.A(ii) or Section 11.2.A(iii)), any sale of all or substantially all of its assets or any reclassification, recapitalization or change of outstanding Shares (other than a change in par value, or from par value to no par value, or as a result of a subdivision or combination as described in the definition of “Conversion Factor”) (a “Termination Transaction”), unless:

(i) the Consent of the Outside Limited Partners is obtained;

(ii) following such Termination Transaction, substantially all of the assets directly or indirectly owned by the surviving entity are owned directly or indirectly by the Partnership or another limited partnership or limited liability company which is the survivor of a merger, consolidation or combination of assets with the Partnership; or

 

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(iii) in connection with such Termination Transaction all Partners either will receive, or will have the right to receive, for each Partnership Unit an amount of cash, securities, or other property equal to the product of the Conversion Factor and the greatest amount of cash, securities or other property paid to a holder of Shares, if any, corresponding to such Unit in consideration of one such Share at any time during the period from and after the date on which the Termination Transaction is consummated; provided, however, that, if in connection with the Termination Transaction, a purchase, tender or exchange offer shall have been made to and accepted by the holders of the percentage required for the approval of mergers under the organizational documents of the General Partner, each holder of Partnership Units shall receive, or shall have the right to receive without any right of Consent set forth above in this Section 11.2.B, the greatest amount of cash, securities, or other property which such holder would have received had it exercised the Redemption Right and received Shares in exchange for its Partnership Units immediately prior to the expiration of such purchase, tender or exchange offer and had thereupon accepted such purchase, tender or exchange offer.

C. Creation of New General Partner. The General Partner shall not enter into an agreement or other arrangement providing for or facilitating the creation of a General Partner other than the General Partner, unless the successor General Partner executes and delivers a counterpart to this Agreement in which such General Partner agrees to be fully bound by all of the terms and conditions contained herein that are applicable to a General Partner.

Section 11.3 Limited Partners’ Rights to Transfer

A. General. Except to the extent expressly permitted in Sections 11.3.B and 11.3.C or in connection with the exercise of a Redemption Right pursuant to Section 8.6, a Limited Partner may not transfer all or portion of its Partnership Interest, or any of such Limited Partner’s rights as a Limited Partner, without the prior written consent of the General Partner, which consent may be withheld in the General Partner’s sole and absolute discretion. Any transfer otherwise permitted under Sections 11.3.B and 11.3.C shall be subject to the conditions set forth in Section 11.3.D and 11.3.E, and all permitted transfers shall be subject to Section 11.5 and Section 11.6.

B. Incapacitated Limited Partner. 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 the rights of a Limited Partner, but not more rights than those enjoyed by other Limited Partner, 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 its interest in the Partnership. The Incapacity of a Limited Partner, in and of itself, shall not dissolve or terminate the Partnership.

C. Permitted Transfers. A Limited Partner may transfer, with or without the consent of the General Partner, all or a portion of its Partnership Interest (i) in the case of a Limited Partner who is an individual, to a member of his or her Immediate Family, any trust formed for the benefit of himself or herself and/or members of his or her Immediate Family, or any partnership, limited liability company, joint venture, corporation or other business entity comprised only of himself or herself and/or members of his or her Immediate Family and entities the ownership interests in which are owned by or for the benefit of himself or herself and/or members of his or her Immediate Family, (ii) in the case of a Limited Partner which is a trust, to the beneficiaries of such trust, (iii) in the case of a Limited Partner which is a partnership, limited liability company, joint venture,

 

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corporation or other business entity to which Units were transferred pursuant to clause (i) above, to its partners, owners or stockholders, as the case may be, who are members of the Immediate Family of or are actually the Person(s) who transferred Partnership Units to it pursuant to clause (i) above, (iv) in the case of a Limited Partner which acquired Partnership Units as of the date hereof and which is a partnership, limited liability company, joint venture, corporation or other business entity, to its partners, owners, stockholders or Affiliates thereof, as the case may be, or the Persons owning the beneficial interests in any of its partners, owners or stockholders or Affiliates thereof (it being understood that this clause (iv) will apply to all of each Person’s Interests whether the Partnership Units relating thereto were acquired on the date hereof or hereafter), (v) in the case of a Limited Partner which is a partnership, limited liability company, joint venture, corporation or other business entity other than any of the foregoing described in clause (iii) or (iv), in accordance with the terms of any agreement between such Limited Partner and the Partnership pursuant to which such Partnership Interest was issued, (vi) pursuant to a gift or other transfer without consideration, (vii) pursuant to applicable laws of descent or distribution, (viii) to another Limited Partner and (ix) pursuant to a grant of security interest or other encumbrance effectuated in a bona fide transaction or as a result of the exercise of remedies related thereto, subject to the provisions of Section 11.3.E hereof. A trust or other entity will be considered formed “for the benefit” of a Partner’s Immediate Family even though some other Person has a remainder interest under or with respect to such trust or other entity.

D. No Transfers Violating Securities Laws. The General Partner may prohibit any transfer of Partnership Units by a Limited Partner unless it receives a written opinion of legal counsel (which opinion and counsel shall be reasonably satisfactory to the Partnership) to such Limited Partner to the effect that such transfer would not require filing of a registration statement under the Securities Act or would not otherwise violate any federal or state securities laws or regulations applicable to the Partnership or the Partnership Unit or, at the option of the Partnership, an opinion of legal counsel to the Partnership to the same effect.

E. No Transfers to Holders of Nonrecourse Liabilities. No pledge or transfer of any Partnership Units may be made to a lender to the Partnership or any Person who is related (within the meaning of Section 1.752-4(b) of the Regulations) to any lender to the Partnership whose loan otherwise constitutes a Nonrecourse Liability unless (i) the General Partner is provided prior written notice thereof and (ii) the lender enters into an arrangement with the Partnership and the General Partner to exchange or redeem for the Redemption Amount any Partnership Units in which a security interest is held simultaneously with the time at which such lender would be deemed to be a partner in the Partnership for purposes of allocating liabilities to such lender under Section 752 of the Code.

Section 11.4 Substituted Limited Partners

A. Consent of General Partner. No Limited Partner shall have the right to substitute a transferee as a Limited Partner in its place. The General Partner shall, however, have the right to consent to the admission of a transferee of the interest of a Limited Partner pursuant to this Section 11.4 as a Substituted Limited Partner, which consent may be given or withheld by the General Partner in its sole and absolute discretion. 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, the General Partner or any Partner. The General Partner hereby grants its consent to the admission as a Substituted Limited Partner to any bona fide financial institution that loans money or otherwise extends credit to a holder of Partnership Units and thereafter becomes the owner of such Partnership Units pursuant to the exercise by such financial institution of its rights under a pledge of such Partnership Units granted in connection with such loan or extension of credit.

 

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B. Rights of Substituted Partner. A transferee who has been admitted as a Substituted Limited Partner in accordance with this Article XI shall have all the rights and powers and be subject to all the restrictions and liabilities of a Limited Partner under this Agreement. The admission of any transferee as a Substituted Limited Partner shall be conditioned upon the transferee executing and delivering to the Partnership an acceptance of all the terms and conditions of this Agreement (including, without limitation, the provisions of Section 15.11) and such other documents or instruments as may be required to effect the admission.

C. Partner Registry. Upon the admission of a Substituted Limited Partner, the General Partner shall update the Partner Registry in the books and records of the Partnership as it deems necessary to reflect such admission in the Partner Registry.

Section 11.5 Assignees

If the General Partner, in its sole and absolute discretion, does not consent to the admission of any permitted transferee under Section 11.3 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 entitled to all the rights of an assignee of a limited partnership interest under the Act, including the right to receive distributions from the Partnership and the share of Net Income, Net Losses, gain, loss and Recapture Income attributable to the Partnership Units assigned to such transferee, and shall have the rights granted to the Limited Partners under Section 8.6, but shall not be deemed to be a holder of Partnership Units for any other purpose under this Agreement, and shall not be entitled to vote such Partnership Units in any matter presented to the Limited Partners for a vote (such Partnership Units being deemed to have been voted on such matter in the same proportion as all other Partnership Units held by Limited Partners are voted). If any such transferee desires to make a further assignment of any such Partnership Units, such transferee shall be subject to all the provisions of this Article XI to the same extent and in the same manner as any Limited Partner desiring to make an assignment of Partnership Units.

Section 11.6 General Provisions

A. Withdrawal of Limited Partner. 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 Units in accordance with this Article XI or pursuant to redemption of all of its Partnership Units under Section 8.6.

B. Termination of Status as Limited Partner. Any Limited Partner who shall transfer all of its Partnership Units in a transfer permitted pursuant to this Article XI or pursuant to redemption of all of its Partnership Units under Section 8.6 shall cease to be a Limited Partner.

 

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C. Timing of Transfers. Transfers pursuant to this Article XI may only be made upon three (3) Business Days prior notice to the General Partner, unless the General Partner otherwise agrees.

D. Allocations. If any Partnership Interest is transferred during any quarterly segment of the Partnership’s fiscal year in compliance with the provisions of this Article XI or redeemed or transferred pursuant to Section 8.6, Net Income, Net Losses, each item thereof and all other items attributable to such interest for such fiscal year shall be divided and allocated between the transferor Partner and the transferee Partner by taking into account their varying interests during the fiscal year in accordance with Section 706(d) of the Code and corresponding Regulations, using the interim closing of the books method (unless the General Partner, in its sole and absolute discretion, elects to adopt a daily, weekly, or a monthly proration period, in which event Net Income, Net Losses, each item thereof and all other items attributable to such interest for such fiscal year shall be prorated based upon the applicable method selected by the General Partner). Solely for purposes of making such allocations, each of such items for the calendar month in which the transfer or redemption occurs shall be allocated to the Person who is a Partner as of midnight on the last day of said month. All distributions of Available Cash attributable to any Partnership Unit 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 Unit shall be made to the transferee Partner.

E. Additional Restrictions. Notwithstanding anything to the contrary herein, and in addition to any other restrictions on transfer herein contained, including, without limitation, the provisions of Article VII and this Article XI, in no event may any transfer or assignment of a Partnership Interest by any Partner (including pursuant to Section 8.6) be made without the express consent of the General Partner, in its sole and absolute discretion, (i) to any person or entity who lacks the legal right, power or capacity to own a Partnership Interest; (ii) in violation of applicable law; (iii) of any component portion of a Partnership Interest, such as the Capital Account, or rights to distributions, separate and apart from all other components of a Partnership Interest; (iv) if in the opinion of legal counsel to the Partnership there is a significant risk that such transfer would cause a termination of the Partnership for U.S. federal or state income tax purposes (except as a result of the redemption or exchange for Shares of all Partnership Units held by all Limited Partners other than the General Partner, or any Subsidiary of either, or pursuant to a transaction expressly permitted under Section 11.2); (v) if in the opinion of counsel to the Partnership, there is a significant risk that such transfer would cause the Partnership to be treated as an association taxable as a corporation for U.S. federal income tax purposes; (vi) if such transfer requires the registration of such Partnership Interest pursuant to any applicable federal or state securities laws; (vii) if such transfer is effectuated through an “established securities market” or a “secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704 of the Code and the Regulations thereunder or such transfer causes the Partnership to become a “publicly traded partnership,” as such term is defined in Sections 469(k)(2) or 7704(b) of the Code; (viii) if such transfer subjects the Partnership or the activities of the Partnership to regulation under the Investment Company Act of 1940, the Investment Advisors Act of 1940 or ERISA, each as amended; or (ix) if in the opinion of legal counsel for the Partnership, there is a risk that such transfer would adversely affect the ability of the Parent to qualify or continue to qualify as a REIT or subject the General Partner to any additional taxes under Sections 857 or 4981 of the Code.

 

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F. Avoidance of “Publicly Traded Partnership” Status. The General Partner shall monitor the transfers of interests in the Partnership to determine (i) if such interests are being traded on an “established securities market” or a “secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704 of the Code and (ii) whether additional transfers of interests would result in the Partnership being unable to qualify for at least one of the “safe harbors” set forth in Regulations Section 1.7704-1 (or such other guidance subsequently published by the IRS setting forth safe harbors under which interests will not be treated as “readily tradable on a secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704 of the Code) (the “Safe Harbors”). The General Partner shall be entitled to take all steps reasonably necessary or appropriate, as determined in its discretion, to prevent any trading of interests or any recognition by the Partnership of transfers made on such markets and, except as otherwise provided herein, to ensure that at least one of the Safe Harbors is met.

ARTICLE XII

ADMISSION OF PARTNERS

Section 12.1 Admission of a Successor General Partner

A successor to all of the General Partner’s 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 upon such transfer. Any such successor shall carry on the business of the Partnership without dissolution. In such case, the admission shall be subject to such 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.

Section 12.2 Admission of Additional Limited Partners

A. General. No Person shall be admitted as an Additional Limited Partner without the consent of the General Partner, which consent shall be given or withheld in the General Partner’s sole and absolute discretion. A Person who makes a Capital Contribution to the Partnership in accordance with this Agreement or who exercises an option to receive Partnership Units shall be admitted to the Partnership as an Additional Limited Partner only with the consent of the General Partner and 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 15.11 and (ii) such other documents or instruments as may be required in the discretion of the General Partner to effect such Person’s admission as an Additional Limited Partner. 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.

 

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B. Allocations to Additional Limited Partners. If any Additional Limited Partner is admitted to the Partnership on any day other than the first day of a Fiscal Year, then Net Income, Net Losses, each item thereof and all other items allocable among Partners and Assignees for such Fiscal Year shall be allocated among such Additional Limited Partner and all other Partners and Assignees by taking into account their varying interests during the Fiscal Year in accordance with Section 706(d) of the Code, using the interim closing of the books method (unless the General Partner, in its sole and absolute discretion, elects to adopt a daily, weekly or monthly proration method, in which event Net Income, Net Losses, and each item thereof would be prorated based upon the applicable period selected by the General Partner). Solely for purposes of making such allocations, each of such items for the calendar month in which an admission of any Additional Limited Partner occurs shall be allocated among all the Partners and Assignees including such Additional Limited Partner. 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 the Additional Limited Partner, and all distributions of Available Cash thereafter shall be made to all 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 (including an amendment to the Partner Registry) and, if required by law, shall prepare and file an amendment to the Certificate of Limited Partnership and may for this purpose exercise the power of attorney granted pursuant to Section 15.11.

Section 12.4 Limit on Number of Partners

Unless otherwise permitted by the General Partner in its sole and absolute discretion, no Person shall be admitted to the Partnership as an Additional Limited Partner if the effect of such admission would be to cause the Partnership to have a number of Partners that would cause the Partnership to become a reporting company under the Exchange Act.

ARTICLE XIII

DISSOLUTION AND LIQUIDATION

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. The Partnership shall dissolve, and its affairs shall be wound up, upon the first to occur of any of the following: (“Liquidating Events”):

(i) an event of withdrawal of the General Partner (other than an event of bankruptcy) unless within ninety (90) days after the withdrawal, the written Consent of the Outside Limited Partners to continue the business of the Partnership and to the appointment, effective as of the date of withdrawal, of a substitute General Partner is obtained;

 

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(ii) an election to dissolve the Partnership made by the General Partner, in its sole and absolute discretion;

(iii) entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of the Act;

(iv) ninety (90) days after the sale of all or substantially all of the assets and properties of the Partnership for cash or for marketable securities;

(v) the redemption of all Partnership Units other than those held by the General Partner; or

(vi) a final and non-appealable judgment is entered by a court of competent jurisdiction ruling that the General Partner is bankrupt or insolvent, or a final and non-appealable order for relief is entered by a court with appropriate jurisdiction against the General Partner, in each case under any federal or state bankruptcy or insolvency laws as now or hereafter in effect, unless prior to or at the time of the entry of such order or judgment, the written Consent of the Outside Limited Partners is obtained to continue the business of the Partnership and to the appointment, effective as of a date prior to the date of such order or judgment, of a substitute General Partner.

Section 13.2 Winding Up

A. General. 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, if there is no remaining General Partner, any Person elected by a majority in interest of the Limited Partners (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 General Partner, include equity or other securities of the General Partner or any other entity) shall be applied and distributed in the following order:

(1) First, to the payment and discharge of all of the Partnership’s debts and liabilities to creditors other than the Partners;

(2) Second, to the payment and discharge of all of the Partnership’s debts and liabilities to the General Partner;

(3) Third, to the payment and discharge of all of the Partnership’s debts and liabilities to the Limited Partners;

 

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(4) Fourth, to the holders of Partnership Interests that are entitled to any preference in distribution upon liquidation in accordance with the rights of any such class or series of Partnership Interests (and, within each such class or series, to each holder thereof pro rata based on its Percentage Interest in such class); and

(5) The balance, if any, to the Partners in accordance with their positive Capital Accounts, after giving effect to all contributions, distributions, and allocations for all periods.

The General Partner shall not receive any additional compensation for any services performed pursuant to this Article XIII.

B. Deferred Liquidation. 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) 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.

Section 13.3 Compliance with Timing Requirements of Regulations; Restoration of Deficit Capital Accounts

A. Timing of Distributions. If the Partnership is “liquidated” within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made under this Article XIII to the General Partner and Limited Partners who have positive Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2). In the discretion of the General Partner, a pro rata portion of the distributions that would otherwise be made to the General Partner and Limited Partners pursuant to this Article XIII may be: (A) 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 of the General Partner arising out of or in connection with the Partnership (in which case 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 General Partner, 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 (B) withheld 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, however, that such withheld amounts shall be distributed to the General Partner and Limited Partners as soon as practicable.

 

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B. Restoration of Deficit Capital Accounts upon Liquidation of the Partnership. If any Partner has a deficit balance in its Capital Account (after giving effect to all contributions, distributions and allocations for all taxable years, including the year during which such liquidation occurs), such Partner shall have no obligation to make any contribution to the capital of the Partnership with respect to such deficit, and such deficit shall not be considered a debt owed to the Partnership or to any other Person for any purpose whatsoever, except as otherwise set forth in this Section 13.3.B, or as otherwise expressly agreed in writing by the affected Partner and the Partnership after the date hereof.

Section 13.4 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 expressly provided in this Agreement, no Limited Partner shall have priority over any other Limited Partner as to the return of its Capital Contributions, distributions, or allocations.

Section 13.5 Notice of Dissolution

If a Liquidating Event occurs or an event occurs that would, but for provisions of an election or objection by one or more Partners pursuant to Section 13.1, result in a dissolution of the Partnership, the General Partner shall, within thirty (30) days thereafter, provide written notice thereof to each of the Partners and to all other parties with whom the Partnership regularly conducts business (as determined in the discretion of the General Partner).

Section 13.6 Cancellation of Certificate of Limited Partnership

Upon the completion of the liquidation of the Partnership cash and property as provided in Section 13.2, the Partnership shall be terminated and the Certificate of Limited Partnership and all qualifications of the Partnership as a foreign limited partnership in jurisdictions other than the State of Delaware shall be canceled and such other actions as may be necessary to terminate the Partnership shall be taken.

Section 13.7 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, 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 13.8 Waiver of Partition

Each Partner hereby waives any right to partition of the Partnership property.

 

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Section 13.9 Liability of Liquidator

The Liquidator shall be indemnified and held harmless by the Partnership in the same manner and to the same degree as an Indemnitee may be indemnified pursuant to Section 7.7.

ARTICLE XIV

AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS

Section 14.1 Amendments

A. General. Amendments to this Agreement may be proposed by the General Partner or by any Limited Partner holding Partnership Interests representing twenty-five percent (25%) or more of the Percentage Interest of the Class A Common Units. Following such proposal (except an amendment governed by Section 14.1.B), the General Partner shall submit any proposed amendment to the Limited Partners. The General Partner shall seek the written Consent of the Partners as set forth in this Section 14.1 on the proposed amendment or shall call a meeting to vote thereon and to transact any other business that it may deem appropriate. For purposes of obtaining a written Consent, the General Partner may require a response within a reasonable specified time, but not less than fifteen (15) calendar days, any failure to respond in such time period shall constitute a vote in favor of the recommendation of the General Partner. A proposed amendment shall be adopted and be effective as an amendment hereto if it is approved by the General Partner and, except as provided in Section 14.1.B, 14.1.C or 14.1.D, it receives the Consent of the Partners holding Partnership Interests representing more than fifty percent (50%) of the Percentage Interest of the Class A Common Units (including Class A Common Units held by the General Partner).

B. Amendments Not Requiring Limited Partner Approval. Notwithstanding Section 14.1.A but subject to Section 14.1.C, the General Partner shall have the power, without the Consent of the Limited Partners, to amend this Agreement as may be required to facilitate or implement any of the following purposes:

(1) to add to the obligations of the General Partner or surrender any right or power granted to the General Partner or any Affiliate of the General Partner for the benefit of the Limited Partners;

(2) to reflect the admission, substitution, termination, or withdrawal of Partners in accordance with this Agreement (which may be effected through the replacement of the Partner Registry with an amended Partner Registry);

(3) to set forth the designations, rights, powers, duties, and preferences of the holders of any additional Partnership Interests issued pursuant to Article IV;

(4) to reflect a change that does not adversely affect the Limited Partners in any material respect, or to cure any ambiguity, correct or supplement any provision in this Agreement not inconsistent with law or with other provisions of this Agreement, or make other changes with respect to matters arising under this Agreement that will not be inconsistent with law or with the provisions of this Agreement;

 

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(5) to satisfy any requirements, conditions, or guidelines contained in any order, directive, opinion, ruling or regulation of a federal, state or local agency or contained in federal, state or local law;

(6) to modify the method by which Partners’ Capital Accounts, or any debits or credits thereto, are computed, under this Agreement;

(7) to include provisions in the Agreement that may be referenced in any rulings, regulations, notices, announcements, or other guidance regarding the U.S. federal income tax treatment of compensatory partnership interests issued and made effective after the date hereof or in connection with any elections that the General Partner determines to be necessary or advisable in respect of any such guidance. Any such amendment may include, without limitation, (a) a provision authorizing or directing the General Partner to make any election under such guidance, (b) a covenant by the Partnership that all of the Partners must (I) comply with the such guidance and (II) take all actions (or, as the case may be, not take any action) necessary, including providing the Partnership with any required information, to permit the Partnership to comply with the requirements set forth or referred to in the Regulations for such election or other related guidance from the IRS, and (c) an amendment to the Capital Account maintenance provisions and the allocation provisions contained in Exhibit B or Exhibit C of this Agreement so that such provisions comply with (I) the provisions of the Code and the Regulations as they apply to the issuance of compensatory partnership interests and (II) the requirements of such guidance and any election made by the General Partner with respect thereto, including, a provision requiring “forfeiture allocations” as appropriate.

(8) to take into account any Regulations or other guidance issued under or with respect to the BBA Rules in such manner as the General Partner in its sole discretions determines to be necessary or appropriate; and

(9) to give effect to any amendments adopted in accordance with Section 11.6E.

The General Partner shall notify the Limited Partners in writing when any action under this Section 14.1.B is taken in the next regular communication to the Limited Partners or within ninety (90) days of the date thereof, whichever is earlier.

C. Amendments Requiring Limited Partner Approval (Excluding the General Partner). Notwithstanding Sections 14.1.A and 14.1.B, without the Consent of the Outside Limited Partners, the General Partner shall not amend Section 4.2.A, Section 7.1.A (second sentence only), Section 7.5, Section 7.6, Section 7.8, Section 7.11, Section 11.2, Section 13.1, the last sentence of Section 11.4.A (provided, however, that no such amendment shall in any event adversely affect the rights of any lender who made a loan or who extended credit and received in connection therewith a pledge of Partnership Units prior to the date such amendment is adopted unless, and only to the extent such lender consents thereto), this Section 14.1.C or Section 14.2.

 

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D. Other Amendments Requiring Certain Limited Partner Approval. Notwithstanding anything in this Section 14.1 to the contrary, this Agreement shall not be amended with respect to any Partner adversely affected without the Consent of such Partner adversely affected or to any Assignee who is a bona fide financial institution that loans money or otherwise extends credit to a holder of Partnership Units that is adversely affected, but in either case only if such amendment would (i) convert such Limited Partner’s interest in the Partnership into a general partner’s interest, (ii) modify the limited liability of such Limited Partner, (iii) amend Section 7.11, (iv) amend Article V or Article VI (except as permitted pursuant to Sections 4.2, 5.4, 6.2 and 14.1.B(3)), (v) amend Section 8.6 or any defined terms set forth in Article I that relate to the Redemption Right (except as permitted in Section 8.6.E), or (vi) amend Sections 11.3 or 11.5, or add any additional restrictions to Section 11.6.E or amend Section 14.1.B(4) or this Section 14.1.D.

E. Amendment and Restatement of Partner Registry Not an Amendment. Notwithstanding anything in this Article XIV or elsewhere in this Agreement to the contrary, any amendment and restatement of the Partner Registry by the General Partner to reflect events or changes otherwise authorized or permitted by this Agreement shall not be deemed an amendment of this Agreement and may be done at any time and from time to time, as determined by the General Partner without the Consent of the Limited Partners and without any notice requirement.

Section 14.2 Meetings of the Partners

A. General. 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 Limited Partners holding Partnership Interests representing twenty-five percent (25%) or more of the Percentage Interest of the Class A Common Units (including Class A Common Units held by the General Partner). The call 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 (7) days nor more than thirty (30) days prior to the date of such meeting. Partners entitled to vote may vote in person or by proxy at such meeting. Whenever the vote or Consent of Partners is permitted or required under this Agreement, such vote or Consent may be given at a meeting of Partners or may be given in accordance with the procedure prescribed in Section 14.1.A. Except as otherwise expressly provided in this Agreement, the Consent of holders of Partnership Interests representing a majority of the Percentage Interests of the Class A Common Units shall control (including Class A Common Units held by the General Partner) (treating the Class A-2 Common Units as Class A Common Units for this purpose).

B. Actions Without a Meeting. Except as otherwise expressly provided by this Agreement, 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 Partners holding Partnership Interests representing more than fifty percent (50%) (or such other percentage as is expressly required by this Agreement) of the Percentage Interest of the Class A Common Units (including Class A Common Units held by the General Partner). Such consent may be in one instrument or in several instruments, and shall have the same force and effect as a vote of Partners. 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 date on which written consents from the Partners holding the required Percentage Interest of the Class A Common Units have been filed with the General Partner.

C. Proxy. 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 its attorney-in-fact. No proxy shall be valid after the expiration of eleven (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 thereof.

 

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D. Conduct of Meeting. Each meeting of 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.

ARTICLE XV

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, when sent by first class United States mail or by other means of written communication (including, but not limited to, via e-mail) to the Partner or Assignee at the address set forth in the Partner Registry or such other address as the Partners 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” “Sections” and “Exhibits” are to Articles, Sections and Exhibits 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 neuter 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.

 

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Section 15.6 Creditors

Other than as expressly set forth herein with regard to any Indemnitee, none of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Partnership.

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 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 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 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 conflicts of law.

Section 15.10 Invalidity of Provisions

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.

Section 15.11 Power of Attorney

A. General. Each Limited Partner and each Assignee who accepts Partnership Units (or any rights, benefits or privileges associated therewith) is deemed to irrevocably constitute and appoint 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:

(1) 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 of Limited Partnership and all amendments or restatements thereof) that the General Partner or any 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 conduct business or own property, (b) all instruments that the General Partner or any Liquidator deem appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with its

 

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terms, (c) all conveyances and other instruments or documents that the General Partner or any Liquidator deems appropriate or necessary to reflect the dissolution and liquidation 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, or other events described in, Article XI, XII or XIII or the Capital Contribution of any Partner and (e) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of Partnership Interests; and

(2) execute, swear to, acknowledge and file all ballots, consents, approvals, waivers, certificates and other instruments appropriate or necessary, in the sole and absolute discretion of the General Partner or any Liquidator, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action which is made or given by the Partners hereunder or is consistent with the terms of this Agreement or appropriate or necessary, in the sole and absolute discretion of the General Partner or any Liquidator, to effectuate the terms or intent of this Agreement.

Nothing contained in this Section 15.11 shall be construed as authorizing the General Partner or any Liquidator to amend this Agreement except in accordance with Article XIV or as may be otherwise expressly provided for in this Agreement.

B. Irrevocable Nature. 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 or 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 fifteen (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 15.12 Entire Agreement

This Agreement contains the entire understanding and agreement among the Partners with respect to the subject matter hereof and supersedes any prior written oral understandings or agreements among them with respect thereto.

 

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Section 15.13 No Rights as Stockholders

Nothing contained in this Agreement shall be construed as conferring upon the holders of the Partnership Units any rights whatsoever as stockholders of the Parent, including, without limitation, any right to receive dividends or other distributions made to stockholders of the Parent, or to vote or to consent or receive notice as stockholders in respect to any meeting of stockholders for the election of directors of the Parent or any other matter.

Section 15.14 Limitation to Preserve REIT Status

To the extent that any amount paid or credited to the Parent or any of its officers, directors, employees or agents pursuant to Sections 7.4 or 7.7 would constitute gross income to the Parent for purposes of Sections 856(c)(2) or 856(c)(3) of the Code (a “Parent Payment”) then, notwithstanding any other provision of this Agreement, the amount of such Parent Payment for any Fiscal Year shall not exceed the lesser of:

(i) an amount equal to the excess, if any, of (a) 4% of the Parent’s total gross income (within the meaning of Section 856(c)(3) of the Code but not including the amount of any Parent Payments) for the Fiscal Year which is described in subsections (A) though (H) of Section 856(c)(2) of the Code over (b) the amount of gross income (within the meaning of Section 856(c)(2) of the Code) derived by the Parent from sources other than those described in subsections (A) through (H) of Section 856(c)(2) of the Code (but not including the amount of any Parent Payments); or

(ii) an amount equal to the excess, if any of (a) 24% of the Parent’s total gross income (but not including the amount of any Parent Payments) for the Fiscal Year which is described in subsections (A) through (I) of Section 856(c)(3) of the Code over (b) the amount of gross income (within the meaning of Section 856(c)(3) of the Code but not including the amount of any Parent Payments) derived by the Parent from sources other than those described in subsections (A) through (I) of Section 856(c)(3) of the Code;

provided, however, that Parent Payments in excess of the amounts set forth in subparagraphs (i) and (ii) above may be made if the Parent, as a condition precedent, obtains an opinion of tax counsel that the receipt of such excess amounts would not adversely affect the Parent’s ability to qualify as a REIT. To the extent Parent Payments may not be made in a given Fiscal Year due to the foregoing limitations, such Parent Payments shall carry over and be treated as arising in the following year; provided, however, that such amounts shall not carry over for more than five (5) Fiscal Years, and if not paid within such five (5) Fiscal Year period, shall expire; and provided further that (i) as Parent Payments are made, such payments shall be applied first to carry over amounts outstanding, if any, and (ii) with respect to carry over amounts for more than one Fiscal Year, such payments shall be applied to the earliest Fiscal Year first.

[Remainder of page intentionally left blank, signature page follows]

 

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

 

GENERAL PARTNER AND PARENT:
Steadfast Apartment REIT, Inc.
  By:  

/s/ Ella S. Neyland

  Name: Ella S. Neyland
  Title: Chief Financial Officer
INITIAL LIMITED PARTNER:
By:   Steadfast Income Advisor, LLC
  By:  

/s/ Ana Marie del Rio

  Name: Ana Marie del Rio
  Title: Secretary
SPECIAL LIMITED PARTNER:
By:   Steadfast Apartment Advisor III, LLC
  By:  

/s/ Ana Marie del Rio

  Name: Ana Marie del Rio
  Title: Secretary
LIMITED PARTNER:
By:   Copans V V M, LLC
  By:  

/s/ Jeffrey S. Petcher

  Name: Jeffrey S. Pechter
  Title: Managing Member
LIMITED PARTNER:
By:   Wellington V V M, LLC
  By:  

/s/ Jeffrey S. Petcher

  Name: Jeffrey S. Pechter
  Title: Managing Member

Signature Page to Second Amended and Restated Agreement of Limited Partnership of

Steadfast Apartment REIT Operating Partnership, L.P.


EXHIBIT A

FORM OF PARTNER REGISTRY

 

Names and Addresses:

   Capital
Contribution
     Class A
Common
Units
     Class A-2
Common
Units
     Percentage
Interest
 

General Partner

           

Steadfast Apartment REIT, Inc.

18100 Von Karman Avenue, Suite 200

Irvine, CA 92612

   $ 1,687,787,361.00        109,580,843        —          99.1401

Limited Partners

           

Copans V V M, LLC

280 NE 2nd Ave.

Delray Beach, FL 33444

   $ 4,479,500.00        —          294,123        0.2661

Steadfast Apartment Advisor III, LLC

18100 Von Karman Avenue

Suite 500

Irvine, California 92612

     —          —             .0011

Steadfast Income Advisor, LLC

18100 Von Karman Avenue, Suite 500

Irvine, CA 92612

     —          —             .0004

Wellington V V M, LLC

280 NE 2nd Ave.

Delray Beach, FL 33444

   $ 9,970,500.00        —          654,662        0.5923


EXHIBIT B

CAPITAL ACCOUNT MAINTENANCE

1. Capital Accounts of the Partners

A. The Partnership shall maintain for each Partner a separate Capital Account in accordance with the rules of Regulations Section l.704-l(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of all Capital Contributions and any other deemed contributions made by such Partner to the Partnership pursuant to this Agreement and (ii) all items of Partnership income and gain (including income and gain exempt from tax) computed in accordance with Section 1.B and allocated to such Partner pursuant to Section 6.1 of the Agreement and Exhibit C thereof, and decreased by (x) the amount of cash or Agreed Value of property actually distributed or deemed to be distributed to such Partner pursuant to this Agreement and (y) all items of Partnership deduction and loss computed in accordance with Section 1.B and allocated to such Partner pursuant to Section 6.1 of the Agreement and Exhibit C thereof.

B. For purposes of computing the amount of any item of income, gain, deduction or loss to be reflected in the Partners’ Capital Accounts, unless otherwise specified in this Agreement, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for U.S. federal income tax purposes determined in accordance with Section 703(a) of the Code (for this purpose all items of income, gain, loss or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss), with the following adjustments:

(1) Except as otherwise provided in Regulations Section 1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and deduction shall be made without regard to any adjustments to the adjusted bases of the assets of the Partnership pursuant to Sections 734(b) and 743(b) of the Code, provided, however, that the amounts of any adjustments to the adjusted bases of the assets of the Partnership made pursuant to Section 734 of the Code as a result of the distribution of property by the Partnership to a Partner (to the extent that such adjustments have not previously been reflected in the Partners’ Capital Accounts) shall be reflected in the Capital Accounts of the Partners in the manner and subject to the limitations prescribed in Regulations Section l.704-1(b)(2)(iv)(m)(4).

(2) The computation of all items of income, gain, and deduction shall be made without regard to the fact that items described in Sections 705(a)(l)(B) or 705(a)(2)(B) of the Code are not includible in gross income or are neither currently deductible nor capitalized for U.S. federal income tax purposes.

(3) Any income, gain or loss attributable to the taxable disposition of any Partnership property shall be determined as if the adjusted basis of such property as of such date of disposition were equal in amount to the Partnership’s Carrying Value with respect to such property as of such date.

 

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(4) In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Fiscal Year.

(5) In the event the Carrying Value of any Partnership asset is adjusted pursuant to Section 1.D, the amount of any such adjustment shall be taken into account as gain or loss from the disposition of such asset.

(6) Any items specially allocated under Section 2 of Exhibit C to the Agreement hereof shall not be taken into account.

C. A transferee (including any Assignee) of a Partnership Unit shall succeed to a pro rata portion of the Capital Account of the transferor in accordance with Regulations Section 1.704-1(b)(2)(iv)(l).

D. (1) Consistent with the provisions of Regulations Section 1.704-1(b)(2)(iv)(f), and as provided in Section 1.D(2), the Carrying Values of all Partnership assets shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as of the times of the adjustments provided in Section 1.D(2), as if such Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property and allocated pursuant to Section 6.1 of the Agreement.

(2) Such adjustments shall be made as of the following times: (a) immediately prior to the acquisition of an additional interest in the Partnership by any new or existing Partner in exchange for more than a de minimis Capital Contribution; (b) immediately prior to the distribution by the Partnership to a Partner of more than a de minimis amount of property as consideration for an interest in the Partnership; (c) immediately prior to the liquidation of the Partnership within the meaning of Regulations Section 1.704-l(b)(2)(ii)(g); (d) immediately prior to the grant of an interest in the Partnership (other than a de minimis interest) as consideration for the provision of services to or for the benefit of the Partnership; (e) immediately prior to the issuance by the Partnership of a noncompensatory option to acquire an interest in the Partnership (other than an option for a de minimis interest); and (f) at such other times as are permitted by applicable Regulations and as determined in the discretion of the General Partner; provided, however, that adjustments pursuant to clauses (a), (b), (d), (e) and (f) above shall be made only if the General Partner determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership or to comply with applicable Regulations; provided further, however, that the issuance of any LTIP Unit shall be deemed to require a revaluation pursuant to this Section 1.D.

(3) In accordance with Regulations Section 1.704- l(b)(2)(iv)(e), the Carrying Value of Partnership assets distributed in kind shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as of the time any such asset is distributed.

 

B-3


(4) In determining Unrealized Gain or Unrealized Loss for purposes of this Exhibit B, the aggregate cash amount and fair market value of all Partnership assets (including cash or cash equivalents) shall be determined by the General Partner using such reasonable method of valuation as it may adopt, or in the case of a liquidating distribution pursuant to Article XIII of the Agreement, shall be determined and allocated by the Liquidator using such reasonable methods of valuation as it may adopt. The General Partner, or the Liquidator, as the case may be, shall allocate such aggregate fair market value among the assets of the Partnership in such manner as it determines in its sole and absolute discretion to arrive at a fair market value for individual properties.

E. The provisions of the Agreement (including this Exhibit B and the other Exhibits to the Agreement) relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Regulations. In the event the General Partner shall determine that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities which are secured by contributed or distributed property or which are assumed by the Partnership, the General Partner, or the Limited Partners) are computed in order to comply with such Regulations, the General Partner may make such modification without regard to Article XIV of the Agreement, provided that it is not likely to have a material effect on the amounts distributable to any Person pursuant to Article XIII of the Agreement upon the dissolution of the Partnership. The General Partner also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Partners and the amount of Partnership capital reflected on the Partnership’s balance sheet, as computed for book purposes, in accordance with Regulations Section l.704-l(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Regulations Section l.704-1(b).

2. No Interest

No interest shall be paid by the Partnership on Capital Contributions or on balances in Partners’ Capital Accounts.

3. No Withdrawal

No Partner shall be entitled to withdraw any part of its Capital Contribution or Capital Account or to receive any distribution from the Partnership, except as provided in Articles IV, V, VII and XIII of the Agreement.

 

B-4


EXHIBIT C

SPECIAL ALLOCATION RULES

1. Special Allocation Rules.

Notwithstanding any other provision of the Agreement or this Exhibit C, the following special allocations shall be made in the following order:

A. Minimum Gain Chargeback. Notwithstanding the provisions of Section 6.1 of the Agreement or any other provisions of this Exhibit C, if there is a net decrease in Partnership Minimum Gain during any Fiscal Year, each Partner shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Partner’s share of the net decrease in Partnership Minimum Gain, as determined under Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Section 1.704-2(f)(6). This Section 1.A is intended to comply with the minimum gain chargeback requirements in Regulations Section 1.704-2(f) and for purposes of this Section 1.A only, each Partner’s Adjusted Capital Account Deficit shall be determined prior to any other allocations pursuant to Section 6.1 of the Agreement or this Exhibit C with respect to such Fiscal Year and without regard to any decrease in Partner Minimum Gain during such Fiscal Year.

B. Partner Minimum Gain Chargeback. Notwithstanding any other provision of Section 6.1 of this Agreement or any other provisions of this Exhibit C (except Section 1.A), if there is a net decrease in Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any Fiscal Year, each Partner who has a share of the Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5), shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Partner’s share of the net decrease in Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each General Partner and Limited Partner pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Section 1.704-2(i)(4). This Section 1.B is intended to comply with the minimum gain chargeback requirement in such Section of the Regulations and shall be interpreted consistently therewith. Solely for purposes of this Section 1.B, each Partner’s Adjusted Capital Account Deficit shall be determined prior to any other allocations pursuant to Section 6.1 of the Agreement or this Exhibit C with respect to such Fiscal Year, other than allocations pursuant to Section 1.A.

C. Qualified Income Offset. In the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Regulations Sections 1.704-l(b)(2)(ii)(d)(4), l.704-1(b)(2)(ii)(d)(5), or 1.704-l(b)(2)(ii)(d)(6), and after giving effect to the allocations required under Sections 1.A and 1.B with respect to such Fiscal Year, such Partner has an Adjusted Capital Account Deficit, items of Partnership income and gain (consisting of a pro rata portion of each item of Partnership income, including gross income and gain for the Fiscal Year) shall be specifically allocated to such Partner in an amount and manner sufficient to eliminate, to the extent required by the Regulations, its Adjusted Capital Account Deficit created by such adjustments, allocations or distributions as quickly as possible. This Section 1.C is intended to constitute a “qualified income offset” under Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.


D. Gross Income Allocation. In the event that any Partner has an Adjusted Capital Account Deficit at the end of any Fiscal Year (after taking into account allocations to be made under the preceding paragraphs hereof with respect to such Fiscal Year), each such Partner shall be specially allocated items of Partnership income and gain (consisting of a pro rata portion of each item of Partnership income, including gross income and gain for the Fiscal Year) in an amount and manner sufficient to eliminate, to the extent required by the Regulations, its Adjusted Capital Account Deficit.

E. Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year shall be allocated in such manner as the General Partner determines in its discretion.

F. Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the Partner who bears the economic risk of loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Regulations Sections 1.704-2(b)(4) and 1.704-2(i).

G. Adjustments Pursuant to Code Section 734 and Section 743. To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to Regulations Section 1.704-l(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such item of gain or loss shall be specially allocated to the Partners in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such Section of the Regulations.

2. Allocations for Tax Purposes

A. Except as otherwise provided in this Section 2, for U.S. federal income tax purposes, each item of income, gain, loss and deduction shall be allocated among the Partners in the same manner as its correlative item of “book” income, gain, loss or deduction is allocated pursuant to Section 6.1 of the Agreement and Section 1 of this Exhibit C.

B. In an attempt to eliminate Book-Tax Disparities attributable to a Contributed Property or Adjusted Property, items of income, gain, loss, and deduction shall be allocated for U.S. federal income tax purposes among the Partners as follows:

(1) (a) In the case of a Contributed Property, such items attributable thereto shall be allocated among the Partners consistent with the principles of Section 704(c) of the Code to take into account the variation between the Section 704(c) Value of such property and its adjusted basis at the time of contribution (taking into account Section 2.C of this Exhibit C); and

(b) any item of Residual Gain or Residual Loss attributable to a Contributed Property shall be allocated among the Partners in the same manner as its correlative item of “book” gain or loss is allocated pursuant to Section 6.1 of the Agreement and Section 1 of this Exhibit C.

 

C-2


(2) (a) In the case of an Adjusted Property, such items shall

(i) first, be allocated among the Partners in a manner consistent with the principles of Section 704(c) of the Code to take into account the Unrealized Gain or Unrealized Loss attributable to such property and the allocations thereof pursuant to Exhibit B;

(ii) second, in the event such property was originally a Contributed Property, be allocated among the Partners in a manner consistent with Section 2.B(1) of this Exhibit C; and

(b) any item of Residual Gain or Residual Loss attributable to an Adjusted Property shall be allocated among the Partners in the same manner its correlative item of “book” gain or loss is allocated pursuant to Section 6.1 of the Agreement and Section 1 of this Exhibit C.

(3) all other items of income, gain, loss and deduction shall be allocated among the Partners in the same manner as their correlative item of “book” gain or loss is allocated pursuant to Section 6.1 of the Agreement and Section 1 of this Exhibit C.

C. To the extent Regulations promulgated pursuant to Section 704(c) of the Code permit a Partnership to utilize alternative methods to eliminate the disparities between the Carrying Value of property and its adjusted basis, the General Partner shall have the authority and sole discretion to elect the method to be used by the Partnership and such election shall be binding on all Partners.

 

C-3


EXHIBIT D

NOTICE OF REDEMPTION

The undersigned hereby irrevocably (i) redeems                Partnership Units in Steadfast Apartment REIT Operating Partnership, L.P. (the “Partnership”) in accordance with the terms of the Agreement of Limited Partnership of the Partnership, as amended, and the Redemption Right referred to therein, (ii) surrenders such Partnership Units and all right, title and interest therein and (iii) directs that the Cash Amount or Shares Amount (as determined by the General Partner) deliverable upon exercise of the Redemption Right be delivered to the address specified below, and if Shares are to be delivered, such 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 of or interests of any other person or entity, (b) has the full right, power and authority to redeem 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 consult or approve such redemption and surrender. Capitalized terms used but not defined herein shall have the meanings assigned to them in the Agreement of Limited Partnership of the Partnership.

 

Dated: __________________________       Name of Limited Partner:
     

                                  

               (Signature of Limited Partner)
     

             

      (Street Address)
     

             

      (City)        (State)        (Zip Code)
      Signature Guaranteed by:
     

                 

IF SHARES ARE TO BE ISSUED, ISSUE TO:

Name: __________________________

Social Security or tax identifying number: __________________________


EXHIBIT E

NOTICE OF ELECTION BY PARTNER TO CONVERT

LTIP UNITS INTO CLASS A COMMON UNITS

The undersigned holder of LTIP Units hereby irrevocably (i) elects to convert                LTIP Units in Steadfast Apartment REIT Operating Partnership, L.P. (the “Partnership”) into Class A Common Units in accordance with the terms of the Agreement of Limited Partnership of the Partnership, as amended; and (ii) directs that any cash in lieu of Class A Common Units that may be deliverable upon such conversion be delivered to the address specified below. The undersigned hereby represents, warrants, and certifies that the undersigned (a) has title to such LTIP Units, free and clear of the rights or interests of any other person or entity other than the Partnership; (b) has the full right, power, and authority to cause the conversion of such LTIP Units as provided herein; and (c) has obtained the consent to or approval of all persons or entities, if any, having the right to consent or approve such conversion. Capitalized terms used but not defined herein shall have the meanings assigned to them in the Agreement of Limited Partnership of the Partnership.

 

Dated: __________________________       Name of Limited Partner:
     

                                  

               (Signature of Limited Partner)
     

             

      (Street Address)
     

             

      (City)        (State)        (Zip Code)
      Signature Guaranteed by:
     

                 


EXHIBIT F

NOTICE OF ELECTION BY PARTNERSHIP TO FORCE CONVERSION OF

LTIP UNITS INTO CLASS A COMMON UNITS

Steadfast Apartment REIT Operating Partnership, L.P. (the “Partnership”) hereby irrevocably elects to cause the number of LTIP Units held by the holder of LTIP Units set forth below to be converted into Class A Common Units in accordance with the terms of the Agreement of Limited Partnership of the Partnership, (the “Agreement”). Capitalized terms used but not defined herein shall have the meanings assigned to them in the Agreement.

Name of Holder:

Date of this Notice:

Number of LTIP Units to be Converted:

Please Print: Exact Name as Registered with Partnership

(Back To Top)

Section 6: EX-10.2 (EX-10.2)

EX-10.2

Exhibit 10.2

JOINDER AGREEMENT

This Joinder Agreement is made and entered into as of August 31, 2020, by and among Steadfast Apartment Advisor, LLC, a Delaware limited liability company (the “Advisor”), Steadfast Apartment REIT, Inc., a Maryland corporation (the “Company”) and Steadfast Apartment REIT Operating Partnership, L.P. f/k/a Steadfast Income REIT Operating Partnership, L.P., a Delaware limited partnership that is the operating partnership of the Company (the “OP”).

WHEREAS, the Advisor and the Company are parties to that certain Amended and Restated Advisory Agreement dated as of March 5, 2020 (as amended, the “Advisory Agreement”) which provides for, among other matters, the management of the Company’s day-to-day activities by the Advisor;

WHEREAS, the Advisor, the Company and the OP desire that the OP execute and deliver this Joinder Agreement and thereby become a party to, bound by and have the rights and benefits of the Advisory Agreement in the capacity as the Company’s operating partnership;

NOW, THEREFORE, in consideration of the mutual covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

1. Joinder to the Advisory Agreement. By executing and delivering this Joinder Agreement, the parties hereto hereby agree that the OP shall, and hereby does, become a party to the Advisory Agreement, shall be entitled to receive the services from Advisor as contemplated in the Advisory Agreement and shall be bound by and comply with all of the terms, conditions and obligations of the Advisory Agreement applicable to the Company. The signature page of this Joinder Agreement shall also constitute the OP’s counterpart signature page to the Advisory Agreement.

2. Complete Agreement. This Joinder Agreement and the Advisory Agreement contain the complete agreement between the parties with respect to the subject matter hereof and thereof and supersede any prior understandings, agreements or representations by or between the parties, written or oral, which may have related to the subject matter hereof and thereof in any way.

3. Counterparts. This Joinder Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Joinder Agreement or the terms of this Joinder Agreement to produce or account for more than one of such counterparts. The exchange of copies of this Joinder Agreement and of signature pages by facsimile transmission, PDF or other electronic file shall constitute effective execution and delivery of this Joinder Agreement as to the parties and may be used in lieu of the original Joinder Agreement for all purposes. Signatures of the parties transmitted by facsimile, PDF or other electronic file shall be deemed to be their original signatures for all purposes.

4. Governing Law and Jurisdiction. This Joinder Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware.

[Signature page follows]

Confidential


IN WITNESS WHEREOF, the parties hereto have executed this Joinder Agreement on the date first written above.

 

OP:              STEADFAST APARTMENT REIT OPERATING PARTNERSHIP, L.P.  
    By: Steadfast Apartment REIT, Inc.  
    Its: General Partner  
    By:  

/s/ Ella S. Neyland

 
      Name: Ella S. Neyland  
      Title: Chief Financial Officer  
COMPANY:     STEADFAST APARTMENT REIT, INC.  
    By:  

/s/ Ella S. Neyland

 
      Name: Ella S. Neyland  
      Title: Chief Financial Officer  
ADVISOR:     STEADFAST APARTMENT ADVISOR, LLC  
    By:  

/s/ Ana Marie de Rio

 
      Name: Ana Marie del Rio  
      Title: Secretary  

[Signature Page to STAR Advisory Joinder Agreement]

(Back To Top)

Section 7: EX-10.3 (EX-10.3)

EX-10.3

Exhibit 10.3

AMENDMENT NO. 1

TO THE

AMENDED AND RESTATED

ADVISORY AGREEMENT

This Amendment No. 1 to the Amended and Restated Advisory Agreement (this “Amendment”) is made and entered into as of August 31, 2020, by and among Steadfast Apartment REIT, Inc., a Maryland corporation (the “Company”), Steadfast Apartment Advisor, LLC, a Delaware limited liability company (the “Advisor”), and Steadfast Apartment REIT Operating Partnership, L.P. (f/k/a Steadfast Income REIT Operating Partnership, L.P.), a Delaware limited partnership (the “OP”). The Company, the Advisor and the OP are collectively referred to herein as the “Parties”. Capitalized terms used but not defined herein shall have the meaning set forth in the Advisory Agreement (as defined below).

W I T N E S S E T H

WHEREAS, the Company and the Advisor previously entered into that certain Amended and Restated Advisory Agreement, dated as of March 5, 2020 (as amended, the “Advisory Agreement”), which provided for, among other matters, the management of the Company’s day-to-day activities by the Advisor;

WHEREAS, the OP became a party to the Advisory Agreement pursuant to a Joinder Agreement made and entered into on August 31, 2020, by and among the OP, the Advisor and the Company;

WHEREAS, the current term of the Advisory Agreement expires March 6, 2021, which may be renewed for an unlimited number of successive one-year terms; and

WHEREAS, pursuant to Section 28 (Modification), the Parties desire to amend the Advisory Agreement pursuant to this Amendment in order to (i) remove certain restrictions on the Company to internalize the management functions performed by the Advisor, (ii) clarify certain obligations of the Parties and (iii) amend the form of payment of the Investment Management Fees and Loan Coordination Fee (each as defined in the Advisory Agreement).

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the Parties, intending to be legally bound, hereby agree as follows:

ARTICLE I

AMENDMENT

Section 1.1 Amendment to Section 14 (Business Combinations). Section 14 of the Advisory Agreement is hereby deleted in its entirety and is replaced with “14. [RESERVED]”.

Section 1.2 Amendment to Payment Obligations. The Company shall pay to the Advisor all accrued and outstanding amounts owed to the Advisor pursuant to the Advisory Agreement as of August 31, 2020 (the “Accrued Amounts”), within thirty (30) days of the date of this Amendment, which shall be payable in the form of cash and stock as set forth in the Advisory Agreement without regard to any amendment herein. The Parties agree that the OP shall be responsible for the payment of any amounts due and payable by the OP pursuant to the Advisory Agreement, as amended hereby, that accrue on or after September 1, 2020.

Section 1.3. Amendment to Section 9 (Fees). Subject to Section 1.2 above, Section 9 of the Advisory Agreement is hereby amended and replaced as follows:

9. FEES. The OP shall pay the Advisor the following fees subject to the conditions set forth below.

(a) Acquisition Fees. The OP shall pay to the Advisor or an Affiliate an Acquisition Fee payable by the OP, in cash, as compensation for services rendered in connection with the investigation, selection, acquisition (by purchase, investment or exchange), origination, development, construction or improvement of Investments as set forth in Section 3(b) hereof. The total Acquisition Fees payable to the Advisor or its Affiliates shall equal 0.5% of (1) the Cost of Investment or (2) the Company’s allocable portion of the purchase price in connection with the acquisition or origination


of any Investment acquired through a Joint Venture. Notwithstanding anything herein to the contrary, the payment of Acquisition Fees by the OP shall be subject to the limitations on acquisition fees contained in (and defined in) the Articles of Incorporation. The Advisor shall submit an invoice to the OP following the closing of each Investment, accompanied by a computation of the Acquisition Fee. Generally the Acquisition Fee shall be paid to the Advisor at the closing of the transaction upon receipt of the invoice by the OP; provided, however, that such Acquisition Fee shall be paid to an Affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable laws or regulations prohibit such payment to be made to a Person that is not a FINRA member broker-dealer. In addition, payment of the Acquisition Fee may be deferred, in whole or in part, as to any transaction in the sole discretion of the Advisor. Any such deferred Acquisition Fees shall be paid to the Advisor without interest at such subsequent date as the Advisor shall request.

(b) Limitation on Total Acquisition Fees, Origination Fees and Acquisition Expenses. In no event will the total of all Acquisition Fees and Acquisition Expenses (including any Loan Coordination Fee) payable with respect to a particular Investment exceed 4.5% of the “Contract Price for the Property,” as defined in the NASAA REIT Guidelines, unless a majority of the Independent Directors approves the Acquisition Fees and Acquisition Expenses and determines the transaction to be commercially competitive, fair and reasonable to the OP.

(c) Disposition Fee. In connection with a Sale of an Investment in which the Advisor or any Affiliate of the Advisor provides a substantial amount of services as determined by a majority of the Independent Directors, the OP shall pay to the Advisor or its Affiliate, in cash, a Disposition Fee up to one-half of the Competitive Real Estate Commission paid, but in no event to exceed 0.5% of the Sales Price of the Investment sold. Any Disposition Fee payable under this Section 9(c) may be paid in addition to real estate commissions paid to non-Affiliates, provided that the total real estate commissions (including such Disposition Fee) paid to all Persons by the OP for the Sale of each Real Estate Asset shall not exceed the lesser of the Competitive Real Estate Commission or an amount equal to 6.0% of the Contract Sales Price. Substantial assistance in connection with a Sale may include the preparation of an investment package (for example, a package including a new investment analysis, rent rolls, Argus projections, tenant information regarding credit, a property title report, an environmental report, a structural report and exhibits) or other such substantial services performed in connection with a Sale. The Advisor shall submit an invoice to the OP following the closing or closings of each disposition, accompanied by a computation of the Disposition Fee. Generally, the Disposition Fee shall be paid to the Advisor at the closing of the transaction upon receipt of the invoice by the OP; provided, however, that such Disposition Fee shall be paid to an Affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable laws or regulations prohibit such payment to be made to a Person that is not a FINRA member broker-dealer. In addition, payment of the Disposition Fee may be deferred, in whole or in part, as to any transaction in the sole discretion of the Advisor. Any such deferred Disposition Fees shall be paid to the Advisor without interest at such subsequent date as the Advisor shall request.

(d) Investment Management Fee. The Advisor shall receive the Investment Management Fee as compensation for services rendered in connection with the management of the Company’s assets as set forth in Section 3(c) hereof. The Investment Management Fee shall be payable to the Advisor in cash monthly in an amount equal to one-twelfth of 1.0% of the Cost of Investments. The Advisor shall submit a monthly invoice to the OP, accompanied by a computation of the Investment Management Fee for the applicable period. Generally, the Investment Management Fee payable to the Advisor shall be paid in cash on the last day of such month, or the first business day following the last day of such month. In addition, payments of the Investment Management Fee may be deferred, in whole or in part, as to any transaction in the sole discretion of the Advisor. Any such deferred Investment Management Fee shall be paid to the Advisor without interest at such subsequent date as the Advisor shall request.

(e) Loan Coordination Fee. The OP will pay the Advisor or one of its Affiliates, in cash, the Loan Coordination Fee equal to 0.5% of (1) the initial amount of new debt financed or outstanding debt assumed in connection with the acquisition, development, construction, improvement or origination of any type of Real Estate Asset or Real Estate-Related Asset acquired directly or (2) the Company’s allocable portion of the purchase price and therefore the related debt in connection with the acquisition or origination of any type of Real Estate Asset or Real Estate-Related Asset acquired through a Joint Venture.

As compensation for services rendered in connection with any financing or the refinancing of any debt (in each case, other than at the time of the acquisition of a property), the OP will also pay the Advisor or one of its Affiliates a Loan Coordination Fee equal to 0.50% of the amount refinanced or the Company’s proportionate share of the amount refinanced in the case of Investments made through a Joint Venture.

(f) [Reserved.]


(g) Changes to Fee Structure. In the event of Listing, the Company and the Advisor shall negotiate in good faith to establish a fee structure appropriate for a perpetual-life entity.

ARTICLE II

MISCELLANEOUS

Section 2.1 Continued Effect. Except as specifically set forth herein, all other terms and conditions of the Advisory Agreement shall remain unmodified and in full force and effect, the same being confirmed and republished hereby. In the event of any conflict between the terms of the Advisory Agreement and the terms of this Amendment, the terms of this Amendment shall control.

Section 2.2 Counterparts. The Parties may sign any number of copies of this Amendment. Each signed copy shall be an original, but all of them together represent the same agreement. Delivery of an executed counterpart of a signature page of this Amendment or any document or instrument delivered in connection herewith by telecopy or other electronic method shall be effective as delivery of a manually executed counterpart of this Amendment or such other document or instrument, as applicable.

Section 2.3 Governing Law. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of Delaware.

[Signatures on following page]


IN WITNESS WHEREOF, the Parties have caused this Amendment to be duly executed as of the date first written above.

 

STEADFAST APARTMENT REIT, INC.
By:  

/s/ Ella S. Neyland

Name: Ella S. Neyland
Title: Chief Financial Officer
STEADFAST APARTMENT ADVISOR, LLC
By:  

/s/ Ana Marie de Rio

Name: Ana Marie del Rio
Title: Secretary
STEADFAST APARTMENT REIT OPERATING PARTNERSHIP, L.P.
By: STEADFAST APARTMENT REIT, INC., its General Partner
By:  

/s/ Ella S. Neyland

Name: Ella Shaw Neyland
Title: Chief Financial Officer
(Back To Top)

Section 8: EX-10.4 (EX-10.4)

EX-10.4

Exhibit 10.4

TRANSITION SERVICES AGREEMENT

by and between

Steadfast Apartment REIT, Inc.

and

Steadfast Investment Properties, Inc.

Dated as of August 31, 2020

 


TRANSITION SERVICES AGREEMENT

This TRANSITION SERVICES AGREEMENT (this “Agreement”), dated as of August 31, 2020 (the “Effective Date”), is by and between Steadfast Investment Properties, Inc., a California corporation (the “Sponsor”), on the one hand, and Steadfast Apartment REIT, Inc., a Maryland corporation (“STAR”), on the other hand. STAR and the Sponsor shall be together be referred to herein as the “Parties,” and each individually a “Party”. Capitalized terms used but not otherwise defined herein shall have the meaning ascribed thereto in the Contribution Agreement (as hereinafter defined).

WHEREAS, Steadfast REIT Investments, LLC, a Delaware limited liability company (“SRI”), STAR and Steadfast Apartment REIT Operating Partnership, LP entered into that certain Contribution and Purchase Agreement, dated as of August 31, 2020 (the “Contribution Agreement”);

WHEREAS, following the closing of the transactions contemplated by the Contribution Agreement, the Sponsor desires to provide, directly or through its affiliates, certain services to STAR as set forth on Schedule A (the “Sponsor-Provided Services”) and STAR desires to provide, directly or through its affiliates, certain services to the Sponsor as set forth on Schedule B (the “STAR-Provided Services” and, together with the Sponsor-Provided Services, the “Services”) for the purpose of enabling each Party to manage its operations and retain the benefit of operational efficiencies created by access to such Services and to assure a smooth transition following the closing of the transactions contemplated by the Contribution Agreement by availing each Party time to develop such services in-house or to hire other third-party service providers for such Services; and

WHEREAS, for purposes of this Agreement, the Party providing any Service, or on whose behalf such Service is being provided, shall be deemed the “Service Provider” with respect to such Service, and the Party receiving the Service, or on whose behalf such Service is being received, shall be deemed the “Recipient” with respect to such Service.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1. Definitions. Capitalized terms used in this Agreement but not otherwise defined herein shall have the meanings ascribed thereto in the Contribution Agreement.

 

1


ARTICLE II

SERVICES

Section 2.1. Scheduled Services.

(a) Upon the terms and subject to the conditions set forth in this Agreement, each Party agrees to provide (including through its affiliates), or to cause one or more permitted third parties to provide, to the other Party the Services as set forth on Schedule A or Schedule B, as applicable.

(b) Anything to the contrary notwithstanding, none of the obligations of the Parties under the Contribution Agreement shall constitute Services under this Agreement.

Section 2.2. Additional Services. Each Party agrees that, if the other Party identifies during the Term services that such second Party believes are necessary for the continued operation of its business (as conducted immediately prior to the closing of the transactions contemplated by the Contribution Agreement) that are not identified on the applicable Schedule hereto, then, upon the reasonable request of such second Party, the Parties shall negotiate in good faith to modify the applicable Schedule with respect to such additional services, upon terms (including cost and duration) and subject to conditions upon which the Parties may agree. No Party shall be obligated to perform or cause to be performed any such additional services unless and until the Parties agree in writing as to the cost, duration, specifications and other terms and conditions under which the applicable Party shall provide (or cause to be provided) such other services; provided, that upon the agreement of the Parties with respect to any such additional services, such additional services shall thereafter be deemed “Services” within the meaning of this Agreement and the provision of such services will be subject to the terms of this Agreement.

Section 2.3. Service Standards; Level of Service. The Service Provider (including its affiliates, as applicable) shall provide the Services to the Recipient at a level of quality, responsiveness and diligence consistent with the levels provided by the Service Provider immediately prior to the closing of the transactions contemplated by the Contribution Agreement, if applicable, but in any event at a level of quality consistent with that then provided by the Service Provider to its own business (the “Service Standards”). In no event shall Service Provider have an obligation to perform any Service in any other manner, amount or quality unless expressly so specified in Schedule A or Schedule B, as applicable, with respect to a particular Service. The Service Provider shall promptly notify the Recipient of any event or circumstance of which the Service Provider has knowledge that causes, or would be reasonably likely to cause, a material disruption in the Services.

Section 2.4. Disclaimer of Warranties. EXCEPT AS OTHERWISE PROVIDED HEREIN, EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL REPRESENTATIONS OR WARRANTIES, AT LAW OR IN EQUITY, WITH RESPECT TO THE SERVICES TO BE PROVIDED UNDER THIS AGREEMENT, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE, TITLE, NON-INFRINGEMENT AND QUIET ENJOYMENT. NO ORAL OR WRITTEN INFORMATION OR ADVICE GIVEN BY ANY PARTY OR ITS AUTHORIZED REPRESENTATIVES SHALL CREATE A WARRANTY OR IN ANY WAY INCREASE THE SCOPE OF THE OTHER PARTIES’ OBLIGATIONS UNDER THIS AGREEMENT.

 

2


Section 2.5. Subcontracting. The Service Provider may, with the written consent of the Recipient (which shall not be unreasonably withheld, conditioned or delayed), engage one or more parties (including third parties and/or affiliates of such Service Provider) to provide some or all of the applicable Services to be provided by such Service Provider. In the event the Service Provider so engages any such parties, such Service Provider shall remain responsible for ensuring adherence to the Service Standards in the performance of the applicable Services, compliance by such parties with the applicable terms of this Agreement and for the indemnification obligations set forth in Article VIII. The Parties hereby agree that the delivery of any written consent pursuant to this Section 2.5 shall not be subject to the notice requirements set forth in Section 11.2 and any such written consent may be delivered via electronic mail.

Section 2.6. Employee Compensation. Service Provider shall be solely responsible for the payment of all employee benefits and any other direct and indirect compensation for the employees of the Service Provider (or its permitted subcontractors pursuant to Section 2.5) assigned to perform the Services for the Recipient, as well as such employees’ worker’s compensation insurance, employment taxes, and other applicable employer liabilities relating to such employees as required by law. For the avoidance of doubt, the Service Provider’s only compensation in this regard shall be the “Compensation Due” as set forth in the applicable Schedule hereto.

Section 2.7. Cybersecurity.

(a) Each Party will maintain or cause to be maintained reasonable cybersecurity measures with respect to any interfaces required between the Parties in connection with the Services in a manner generally consistent with the historical provision of the Services and with the same standard of care as historically provided. At all times during the Term, neither Party will intentionally or knowingly introduce, and each will take commercially reasonable measures to prevent the introduction of, into the Parties’ computer systems, databases, or software any viruses or any other contaminants (including, but not limited to, codes, commands, instructions, devices, techniques, bugs, web bugs, or design flaws) that may be used to access (without authorization), alter, delete, threaten, infect, assault, vandalize, defraud, disrupt, damage, disable, inhibit, or shut down another Party’s computer systems, databases, software, or other information or property. Neither Party will intentionally or knowingly tamper with, compromise, or attempt to circumvent any physical or electronic security or audit measures employed by the other in the course of its business operations, and/or intentionally or knowingly compromise the security of the other’s computer systems and/or networks.

 

3


(b) Each Party shall reasonably cooperate with the other and shall cause their respective affiliates (if applicable) to reasonably cooperate (i) in notifying the other of any Security Breach affecting a Party and (ii) in any investigation and mitigation efforts relating to such Security Breaches, in the case of clause (ii), in a commercially reasonable manner, and in both cases subject to applicable Law. As used herein, “Security Breach” means unauthorized access to or disclosure of computerized data that compromises the security, confidentiality or integrity of any Confidential Information (as defined below) maintained by a Party.

Section 2.8. Cooperation.

(a) Each Party will share information and will cooperate in a commercially reasonable manner to facilitate the provision of Services as described herein and to make available to the other Party properly authorized personnel for the purpose of consultation and decisions relating to those Services.

(b) Service Provider shall follow the policies, procedures and practices of the Recipient applicable to the Services that are in effect as of the Effective Date, as may be modified from time to time in compliance with Section 2.9 hereof.

(c) A failure of any Party to act in accordance with this Section 2.8 that prevents either Service Provider or its permitted third parties, as applicable, from providing a Service hereunder shall relieve such Service Provider of its obligation to provide such Service until such time as the failure has been cured; provided, that such Recipient has been notified promptly in writing of such failure.

Section 2.9. Certain Changes. Either Party may change (a) its policies and procedures, (b) any affiliates and/or third parties that provide any Services (but subject to compliance with Section 2.5 hereof, if applicable) or (c) the location from which any Service is provided at any time with respect to its provision thereof; provided that each Party shall remain responsible for the performance of the applicable Services in accordance with this Agreement; provided further that such changes may not burden the Service Provider (in respect of cost, required efforts or otherwise) in respect of its provision of the Services. The Service Provider shall provide the Recipient with prompt written notice of any changes described in the prior sentence. Any such notice shall be provided to the applicable Recipient as soon as reasonably practicable prior to the effectiveness of such change or, if prior notice of such change is not practicable, as soon as reasonably practicable after the effectiveness of such change.

ARTICLE III

LIMITATIONS

Section 3.1. General Limitations.

(a) In no event shall either Party be obligated to procure or maintain (i) the employment of any specific employee or (ii) any specific equipment or software in its performance or receipt of the Services; provided that each Party shall remain responsible for the performance and receipt of the applicable Services in accordance with this Agreement; provided further that in respect of equipment and software only, if the other Party agrees to bear all associated costs, expenses and liabilities with the procurement or maintenance of any specific equipment or software, then the first Party agrees (if directed by the other Party) to so procure or maintain that equipment or software for purposes of performing or receiving the Services hereunder.

 

4


(b) Neither Party shall be obligated to provide, or cause to be provided, any Service to the extent that the provision of such Service would require such Party, any of its affiliates or any of their respective officers, directors, managers, members, employees, agents or representatives to violate any applicable Laws.

Section 3.2. Third Party Consents and Limitations.

(a) The Service Provider has obtained (or prior to providing the applicable Services, will obtain) any and all third party consents necessary for provision of its applicable Services during the Term. The costs associated with obtaining any third-party consents shall be borne by the Recipient receiving the applicable Service.

(b) The Recipient acknowledges and agrees that any Services provided through third parties or using third party Intellectual Property are subject to the terms and conditions of any applicable agreements between the applicable Service Provider and such third parties, copies of which have been, or will be, as applicable, made available to the applicable Recipient (subject to any confidentiality restrictions that such third party and/or the Service Provider have imposed thereon).

Section 3.3. Force Majeure. In the event that either Party is wholly or partially prevented from, or delayed in, providing or receiving one or more Services, or one or more Services are interrupted or suspended, by reason of events beyond its reasonable control (including acts of God, acts, orders, restrictions or interventions of any civil, military or government authority, fire, explosion, accident, floods, earthquakes, embargoes, epidemics, war (declared or undeclared), acts of terrorism, hostilities, invasions, revolutions, rebellions, insurrections, sabotages, nuclear disaster, labor strikes, civil unrest, riots, power or other utility failures, disruptions or other failures in internet or other telecommunications lines, networks and backbones, delay in transportation, loss or destruction of property and/or changes in Laws) (each, a “Force Majeure Event”), provided that such Party is taking commercially reasonable steps to minimize the impact and duration of such Force Majeure Event, such Party shall not be obligated to deliver or receive the affected Services during such period, and the applicable Recipient shall not be obligated to pay for any Services not delivered.

ARTICLE IV

PAYMENT AND SALES TAXES

Section 4.1. Billing and Payment Terms. The Service Provider shall invoice the Recipient for the amounts as indicated in the “Compensation Due” column (as set forth on the Schedules hereto) on the last day of each month during the Term (as defined below), in arrears, and the applicable Recipient shall remit full payment, in immediately available funds, within thirty (30) days after receipt of such invoice.

 

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Section 4.2. Sales Taxes. All consideration under this Agreement is exclusive of any sales, transfer, value-added, goods or services tax or similar gross receipts based tax (excluding all other taxes including taxes based upon or calculated by reference to income, receipts or capital) imposed against or on the Services (“Sales Taxes”). The Recipient shall be responsible for, and shall indemnify and hold the applicable Service Provider harmless from and against, any such Sales Taxes.

ARTICLE V

CONFIDENTIALITY

Section 5.1. Confidentiality.

(a) Each Party may receive (or otherwise have access to) Confidential Information of the other Parties (both orally and in writing) in connection with the provision or receipt of the Services. “Confidential Information” means any information (oral and written), whether or not designated or containing any marking such as “Confidential,” “Proprietary,” or some similar designation, related to any Party and its services, properties, business, assets, liabilities and financial condition relating to the business, finances, technology or operations of such Party or its affiliates. Such information may include financial, technical, legal, marketing, network, and/or other business information, reports, records, or data (including, but not limited to, computer programs, code, systems, applications, analyses, passwords, procedures, output, information regarding software, sales data, vendor lists, customer lists, and employee- or customer-related information, personally identifiable information, business strategies, advertising and promotional plans, creative concepts, specifications, designs, and/or other material). Each Party agrees to treat all Confidential Information provided by the other Parties, or which such Party otherwise has access to, pursuant to this Agreement as proprietary and confidential to the other Parties, as applicable, and to hold such Confidential Information in confidence subject to the terms hereof. No Party shall (without the prior written consent of the applicable other Party) disclose or permit disclosure of such Confidential Information to any third party; provided, that any Party may disclose such Confidential Information to any permitted third party subcontractors and its and its affiliates’ current employees, officers, or directors, or legal or financial representatives, in each case, who have a legitimate need to know such Confidential Information for the purpose of facilitating the provision or receipt of the Services and who have previously agreed in writing (including as a condition of their employment, contract or agency) to be bound by terms respecting the protection of such Confidential Information which are no less protective as the terms of this Agreement. Each Party agrees to safeguard all Confidential Information of the other Parties with at least the same degree of care as such Party uses to protect its own Confidential Information, but in no event shall such degree of care be less than a reasonable degree of care. Each Party shall only use the other Party’s Confidential Information solely for the purpose of fulfilling its obligations under this Agreement and facilitating the provision or receipt of the Services. Such Party shall not, and shall cause permitted recipients of Confidential Information not to, at any time, collect, use, sell, license, transfer, make available or disclose any other Party’s Confidential Information for its own benefit, the benefit of its affiliates (or agents, subcontractors or representatives) or for the benefit of others. Each Party will be responsible for any violation of the

 

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confidentiality provisions of this Section 5.1(a) by any person or entity to whom it has disclosed Confidential Information, its subcontractors and its affiliates’ employees, officers and directors, and legal or financial representatives. Notwithstanding the foregoing, this Section 5.1(a) shall not apply to any information that a Party can demonstrate (a) was, at the time of disclosure to it, in the public domain through no fault of such Party, (b) was received after disclosure to it from a third party who had a lawful right to disclose such information to it, or (c) was independently developed by the receiving Party.

(b) All Confidential Information transmitted or disclosed hereunder will be and remain the property of the Party to which such Confidential Information applies, and each Party shall promptly (at the applicable Party’s sole election) destroy or return to such Party all copies thereof upon termination or expiration of this Agreement, or upon the written request of such Party; provided, that no Party shall be required to destroy any Confidential Information that is stored solely as a result of a backup created in the ordinary course of business and is not readily destroyable or that is stored on the computers of the personnel of such Party and/or its affiliates and subject to deletion in accordance with such Party’s and/or its affiliates’ electronic information management practices (subject to extended retention by such Party’s or its affiliates’ compliance and legal department personnel in accordance with any applicable existing document retention/destruction policy). Upon the request of the applicable Party, the other Parties shall provide notice of any such applicable destruction in writing.

ARTICLE VI

INTELLECTUAL PROPERTY

Section 6.1. Ownership of Intellectual Property.

(a) Each Party acknowledges and agrees no license or other right, express or implied, is granted hereunder by any Party to its Intellectual Property by virtue of a Party’s provision or receipt of Services hereunder.

(b) As between the Parties, each of the Parties shall exclusively own all right, title and interest throughout the world in and to all business processes and other Intellectual Property rights created by it in connection with its provision of Services hereunder (“Service Provider Intellectual Property”), and each Recipient hereby assigns any and all right, title or interest it may have in any such Service Provider Intellectual Property to the applicable Service Provider. The Recipient shall execute any documents and take any other actions reasonably requested by the Service Provider to effectuate the purposes of the preceding sentence. The Service Provider hereby grants to the Recipient a royalty-free, fully paid-up, non-exclusive and non-transferable (except as expressly permitted herein) license to use the Service Provider Intellectual Property during the Term solely to the extent necessary for the Recipient to receive the benefit of the Services.

 

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ARTICLE VII

LIMITATION OF LIABILITY

Section 7.1. Limitation of Liability. In no event shall any Party be liable under or in connection with this Agreement for consequential, incidental, special, indirect, treble or punitive Losses, Losses based on either the reduced current or future profitability or earnings or Losses based on a multiple of such profitability, earnings or other factor, or reduction therein, except in the case of Losses paid by the other Party to a third-party claimant. In addition, other than in the case of Losses resulting from fraud or willful misconduct by a Party, the liability of such Party to the other Party hereunder shall not exceed (a) the aggregate amount paid hereunder during the entire Term pursuant to Article IV hereof plus (b) if the liable Party is the Service Provider, recoveries (if any) by the Service Provider under any insurance coverage maintained under Section 11.1 hereof.

ARTICLE VIII

INDEMNIFICATION

Section 8.1. STAR’s Indemnification of Sponsor. Subject to the terms of this Article VIII, STAR agrees from and after the Effective Date to indemnify, defend and hold harmless the Sponsor from and against any and all Losses arising out of, resulting from or relating to third-party claims arising out of a material breach by STAR of any provision of this Agreement.

Section 8.2. Sponsor’s Indemnification of STAR. Subject to the terms of this Article VIII, the Sponsor agrees from and after the Effective Date to indemnify, defend and hold harmless STAR from and against any and all Losses arising out of, resulting from or relating to third-party claims arising out of a material breach by the Sponsor of any provision of this Agreement.

Section 8.3. Indemnification Procedures. In the event either Party shall have a claim for indemnity against the other Party, the Parties shall follow the procedures set forth in Section 7.3 of the Contribution Agreement.

ARTICLE IX

TERM AND TERMINATION

Section 9.1. Term of Agreement. This Agreement shall become effective on the Effective Date and shall continue in operation until March 31, 2021 (the “Initial Term”), unless (a) terminated as provided in Section 9.2 hereof or (b) the parties mutually agree to extend this Agreement or any Service hereunder for a longer period (if applicable, a “Renewal Term”; the Initial Term and any Renewal Term are sometimes referred to as the “Term”), as applicable. The Parties acknowledge and agree however that in respect of any particular Service the Service Provider need only provide such Service until the “Service End Date” as indicated on the applicable Schedule hereto, notwithstanding that the Term of this Agreement may not expire until a later date. For the avoidance of doubt, the Service Provider need not provide any Services hereunder after the expiration of the Term.

 

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Section 9.2. Termination.

(a) Early Termination. Notwithstanding Section 9.1 hereof, either Party may, on written notice to the other Party, terminate for convenience its provision or receipt of any or all Services hereunder or this entire Agreement (in which case of a termination of this entire Agreement all Services hereunder shall also co-terminate) on at least sixty (60) days’ prior written notice to the other Party, and thereafter such terminated Service(s) shall be deemed deleted from Schedule A or Schedule B, as applicable. Any termination notice delivered by a Party shall identify the specific Service or Services to be terminated, and the effective date of such termination. For any terminated Services which required the software or other services of a third party (i) if the Service Provider paid for such software or services in advance, such Service Provider may invoice the applicable Recipient any portion of such advance payments allocable on a reasonable basis to the Recipient, and (ii) if, as a result of such termination, the Service Provider terminates all or part of its agreement with the third party, such Service Provider may invoice the Recipient for any applicable termination fees allocable on a reasonable basis to such Recipient. Neither Party shall enter into any new agreements with third parties for software or services that include any termination fees that would be charged to a Party without such Party’s prior written consent, which consent shall not be unreasonably withheld.

(b) Automatic Termination. This Agreement shall automatically terminate at such time as both Parties are no longer providing or receiving any Services hereunder.

(c) Termination for Change of Control. Either Party may terminate this Agreement upon the occurrence of a “Change of Control Event” by providing the other Party no less than one hundred twenty (120) days prior written notice of its intention to terminate this Agreement. As used herein, a “Change of Control Event” means (i) the sale of all or substantially all of the assets of either Party, or (ii) a merger, consolidation, recapitalization or reorganization of either Party, unless securities representing more than fifty percent (50%) of the total voting power after such merger, consolidation, recapitalization or reorganization are beneficially owned, directly or indirectly, by the Persons who beneficially owned the applicable Party’s outstanding voting securities immediately prior to such transaction.

(d) Termination for Default. In the event: (i) any Party shall fail to pay for any or all Services in accordance with the terms of this Agreement; (ii) of any default by either Party, in any material respect, in the due performance or observance by it of any of the other terms, covenants or agreements contained in this Agreement; or (iii) any Party shall become or be adjudicated insolvent and/or bankrupt, or a receiver or trustee shall be appointed for any Party or its property or a petition for reorganization or arrangement under any bankruptcy or insolvency Law shall be approved, or any Party shall file a voluntary petition in bankruptcy or shall consent to the appointment of a receiver or trustee (in each such case, the “Defaulting Party”); then the non-Defaulting Party shall have the right, at its sole discretion, (A) in the case of a default under clause (iii), to terminate immediately any or all Service(s) and/or this Agreement; and (B) in the case of a default under clause (i) or (ii), to terminate any or all Service(s) and/or this Agreement if the Defaulting Party has failed to cure the default within ten (10) days after receiving written notice of such default.

 

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Section 9.3. Effect of Termination. In the event that this Agreement or a Service is terminated:

(a) Each Party agrees and acknowledges that the obligation of the other Party to provide the terminated Services, or to cause the terminated Services to be provided, hereunder shall immediately cease. Upon cessation of a Party’s obligation to provide any Service, the Recipient, as applicable, shall stop using, directly or indirectly, such Service.

(b) Upon request, each Recipient shall return to the applicable Service Provider all tangible personal property and books, records or files owned by the Service Provider and used in connection with the provision of Services that are in its possession as of the termination date.

(c) In the event that this Agreement is terminated, the following matters shall survive the termination of this Agreement: (i) the rights and obligations of each Party under Articles V, VI, VII, VIII, this Section 9.3, Article X and Article XI and (ii) the obligations under Article IV of the Recipient to pay the applicable compensation due for Services furnished prior to the effective date of termination.

ARTICLE X

DISPUTE RESOLUTION

Section 10.1. Party Representatives. Each Party will appoint a representative (a “Service Representative”) responsible for co