ACRES Commercial Realty Corp 8-K, filed May 21, 2021
ACRES Commercial Realty Corp. (ACR)
About this 8-K
ACRES Commercial Realty Corp filed this 8-K on May 21, 2021, reporting on events of May 19, 2021.
Items reported
- Item 3.03: Change to shareholders' rights
- Item 5.03: Charter or bylaw amendment, or fiscal year change
- Item 8.01: Other events
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:
N/A
(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:
| Title of each class |
Trading |
Name of each exchange | ||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 3.03 | Material Modification to Rights of Security Holders |
On May 19, 2021, in connection with the public offering (the “Offering”) by ACRES Commercial Realty Corp. (the “Company”) of newly classified and designated 7.875% Series D Cumulative Redeemable Preferred Stock (“Series D Preferred Stock”), the Company filed with the State Department of Assessments and Taxation of Maryland Articles Supplementary (as corrected, the “Articles Supplementary”) to the Company’s charter classifying and designating 6,800,000 shares of the Series D Preferred Stock. A summary of the material terms of the Series D Preferred Stock is set forth under the caption “Description of the Series D Preferred Stock” in the Company’s prospectus supplement, dated May 14, 2021, which forms a part of the Company’s registration statement on Form S-3 (Registration No. 333-254315), and is incorporated herein by reference.
With respect to distribution rights and rights upon liquidation, the Series D Preferred Stock ranks senior to the Company’s common stock (together with any class or series of the Company’s capital stock expressly designated as ranking junior to the Series D Preferred Stock, “Junior Stock”), and ranks on a parity with the Company’s 8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock (together with any class or series of the Company’s capital stock expressly designated as ranking on parity with the Series D Preferred Stock, “Parity Stock”).
In addition to other preferential rights, each holder of shares of Series D Preferred Stock is entitled to receive a liquidation preference, which is equal to $25.00 per share of Series D Preferred Stock, plus any accrued and unpaid distributions to, but not including, the date of the payment, before the holders of shares of Junior Stock, in the event of any liquidation, dissolution or winding up, whether voluntary or involuntary, of the Company. Furthermore, the Company is restricted from declaring or paying any distributions, or setting aside any assets for the payment of distributions, on shares of Junior Stock or Parity Stock or, subject to certain exceptions, redeeming or otherwise acquiring shares of Parity Stock or Junior Stock unless full cumulative distributions on the Series D Preferred Stock for all past distribution periods have been declared and either paid or set aside for payment in full.
The foregoing description is not complete and is qualified in its entirety by the terms of the Series D Preferred Stock as set forth in the Articles Supplementary, a copy of which is filed as Exhibit 3.1 to this report and is incorporated herein by reference. A specimen certificate for the Series D Preferred Stock is filed as Exhibit 4.1 to this report and is incorporated herein by reference.
| Item 5.03 | Amendments to Articles of Incorporation or By-Laws; Change in Fiscal Year. |
The information set forth under Item 3.03 regarding the Articles Supplementary is incorporated by reference into this Item 5.03.
| Item 8.01. | Other Events. |
On May 21, 2021, the Company issued 2,400,000 shares of Series D Preferred Stock and received net proceeds (before expenses) of $58,110,000. The Company plans to use the net proceeds from the sale of the shares of the Series D Preferred Stock, after deducting commissions and offering expenses payable by the Company, to make loan originations consistent with its investment policies and for general corporate purposes.
Attached as Exhibit 5.1 to this Current Report is a copy of the opinion of McDermott Will & Emery LLP relating to the validity of the shares of Series D Preferred Stock sold in the Offering. Attached as Exhibit 8.1 to this Current Report is a copy of the opinion of Ledgewood P.C. relating to certain tax matters.
| Item 9.01 | Financial Statements and Exhibits. |
| (d) |
| Exhibit Number |
Description | |
| 3.1 | Articles Supplementary 7.875% Series D Cumulative Redeemable Preferred Stock, as corrected. | |
| 4.1 | Form of Specimen Certificate for the Company’s 7.875% Series D Cumulative Redeemable Preferred Stock. | |
| 5.1 | Opinion of McDermott Will & Emery LLP | |
| 8.1 | Opinion of Ledgewood, PC. | |
| 23.1 | Consent of McDermott Will & Emery LLP (included in Exhibit 5.1) | |
| 23.2 | Consent of Ledgewood, PC (included in Exhibit 8.1) | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |
SIGNATURE(S)
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.
| ACRES Commercial Realty Corp. | ||||||
| Date: May 21, 2021 | /s/ David J. Bryant | |||||
| David J. Bryant Chief Financial Officer | ||||||
Exhibit 3.1
ACRES COMMERCIAL REALTY CORP.
ARTICLES SUPPLEMENTARY
7.875% SERIES D CUMULATIVE REDEEMABLE PREFERRED STOCK
ACRES Commercial Realty Corp., a Maryland corporation (the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland (the “MSDAT”) that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation (the “Board”) by Article V of the Amended and Restated Articles of Incorporation of the Corporation (which, as amended and supplemented from time to time, together with these Articles Supplementary, is referred to herein as the “Charter”) and Section 2-208 of the Maryland General Corporation Law, the Board has duly classified and designated 6,800,000 authorized but unissued shares of preferred stock, $0.001 par value per share, of the Corporation (“Preferred Stock”) as “7.875% Series D Cumulative Redeemable Preferred Stock,” with such preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption as appear below, which, upon any restatement of the Charter, shall become a part of Article V of the Charter, with any appropriate renumbering or relettering of the sections or subsections thereof.
SECOND: Capitalized terms used herein and not otherwise defined shall have the meanings given to them in the Charter.
7.875% Series D Cumulative Redeemable Preferred Stock
1. Designation and Number. A series of Preferred Stock, designated the “7.875% Series D Cumulative Redeemable Preferred Stock” (the “Series D Preferred Stock”), is hereby established. The par value of the Series D Preferred Stock shall be $0.001 per share. The number of authorized shares of Series D Preferred Stock shall be 6,800,000.
2. Rank. The Series D Preferred Stock will, with respect to distribution rights and rights upon liquidation, dissolution or winding up of the Corporation, rank: (a) senior to all classes or series of Common Stock, and any class or series of capital stock of the Corporation expressly designated as ranking junior to the Series D Preferred Stock, as to distribution rights and rights upon liquidation, dissolution or winding up of the Corporation (any such class or series of capital stock, together with Common Stock, is referred to herein as “Junior Stock”); (b) on a parity with the Corporation’s 8.50% Series A Cumulative Redeemable Preferred Stock, $0.001 par value per share (the “Series A Preferred Stock”), the Corporation’s 8.25% Series B Cumulative Redeemable Preferred Stock, $0.001 par value per share (the “Series B Preferred Stock”), the Corporation’s 8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock, $0.001 par value per share (the “Series C Preferred Stock”), and any class or series of capital stock of the Corporation expressly designated as ranking on a parity with the Series D Preferred Stock as to distribution rights and rights upon liquidation, dissolution or winding up of the Corporation (any such class or series of capital stock, together with the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock, “Parity Stock”); and (c) junior to any class or series of capital stock of the Corporation expressly designated as ranking senior to the Series D Preferred Stock as to distribution rights and rights upon liquidation, dissolution or winding up of the Corporation. The term “capital stock” does not include convertible or exchangeable debt securities of the Corporation, which will rank senior to the Series D Preferred Stock prior to conversion or exchange of such debt securities. The Series D Preferred Stock will also rank junior in right of payment to the Corporation’s other existing and future indebtedness.
3. Distributions.
(a) Subject to the preferential rights of holders of any class or series of capital stock of the Corporation expressly designated as ranking senior in right of payment to the Series D Preferred Stock as to distributions, the holders of Series D Preferred Stock shall be entitled to receive, when, as and if authorized by the Board and declared by the Corporation, out of funds legally available for the payment of distributions, cumulative cash distributions, at an rate of 7.875% per annum based on the $25.00 liquidation preference per share of Series D Preferred Stock (equivalent to a fixed annual amount of $1.96875 per share of Series D Preferred Stock). Distributions on the Series D Preferred Stock shall accrue and be cumulative from, but not including, the original date of issuance of any shares of Series D Preferred Stock, or, if later, the most recent Dividend Payment Date (as defined below) to which dividends have been paid in full (or declared and the corresponding Dividend Record Date (as defined below) for determining stockholders entitled to payment thereof has passed)) and shall be payable quarterly, in arrears, on the 30th day of January, April, July and October of each year (each such day being hereinafter called a “Distribution Payment Date”), beginning on July 30, 2021; provided, however, if any Distribution Payment Date is not a Business Day, then the distribution which would otherwise have been payable on such Distribution Payment Date will be paid on the next succeeding Business Day with the same force and effect as if paid on such Distribution Payment Date, and no interest or additional distributions or other sums shall accrue on the amount so payable from such Distribution Payment Date to such next succeeding Business Day; provided, further, that no holder of any shares of Series D Preferred Stock shall be entitled to receive any dividend paid or payable on the Series D Preferred Stock with a Dividend Payment Date before the date such shares of Series D Preferred Stock are issued. The first distribution will be paid on July 30, 2021 and will be for less than a full quarter and will cover the period from, but excluding, the original date of issuance of the Series D Preferred Stock through, but excluding, July 30, 2021. Distributions payable on the Series D Preferred Stock for any partial distribution period will be prorated and computed on the basis of a 360-day year consisting of twelve 30-day months. Distributions shall be payable to holders of record as they appear in the stock records of the Corporation at the close of business on the applicable record date, which shall be such date designated by the Board for the payment of distributions that is not more than 90 nor fewer than ten days prior to such Distribution Payment Date (each, a “Distribution Record Date”).
(b) No distributions on the Series D Preferred Stock shall be authorized by the Board or declared or set apart funds for the payment of distributions or paid by the Corporation at such time as the terms and provisions of any agreement of the Corporation, including any agreement relating to its indebtedness, prohibits such authorization, declaration, setting aside funds or payment or provides that such authorization, declaration, setting aside funds or payment would constitute a breach thereof, or a default thereunder, or if such authorization, declaration or payment shall be restricted or prohibited by law.
(c) Notwithstanding anything to the contrary contained herein, distributions on the Series D Preferred Stock shall accrue whether or not the restrictions referred to in Section 3(b) exist, whether or not the Corporation has earnings, whether or not there are funds legally available for the payment of such distributions and whether or not such distributions are authorized or declared. Accrued but unpaid distributions on the Series D Preferred Stock will accumulate as of the Distribution Payment Date on which they first become payable or on the date of redemption, as the case may be. No interest, or sum of money in lieu of interest, shall be payable in respect of any distribution payment or payments on the Series D Preferred Stock which may be in arrears.
(d) Except as provided in Section 3(e) below, (i) no distributions shall be declared and paid or set apart for payment, and no other distribution of cash or other property may be declared and made, directly or indirectly, on or with respect to, shares of any class or series of Parity Stock or Junior Stock (other than a distribution paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Stock) for any period, (ii) nor shall shares of any class or series of Parity Stock or Junior Stock be redeemed, purchased or otherwise acquired for any consideration (other than a redemption, purchase or acquisition of Common Stock made for purposes of and in compliance with requirements of any incentive, benefit or stock purchase plan of the Corporation or any subsidiary thereof, or a redemption, purchase or acquisition of Parity Stock or Junior Stock as permitted under Article VI of the Charter), (iii) nor shall any funds be paid or made available for a sinking fund for the redemption of any such shares by the Corporation, directly or indirectly (except with respect to (i) and (ii) of this subsection (d) by conversion into or exchange for shares of, or options, warrants or rights to purchase or subscribe for shares of, Junior Stock, and except for purchases or exchanges pursuant to a purchase or exchange offer made on the same terms to all holders of Series D Preferred Stock and all holders of shares of Parity Stock), unless full cumulative distributions on the Series D Preferred Stock for all past distribution periods shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for such payment.
2
(e) When distributions are not paid in full (or a sum sufficient for such full payment is set apart) on the Series D Preferred Stock and any shares of Parity Stock, all distributions declared on the Series D Preferred Stock and any other shares of Parity Stock shall be declared pro rata so that the amount of distributions declared per share of Series D Preferred Stock and per share of Parity Stock shall in all cases bear to each other the same ratio that accrued distributions per share of Series D Preferred Stock and per share of Parity Stock (which shall not include any accrual in respect of unpaid distributions on any shares of Parity Stock for prior distribution periods if such Parity Stock does not have a cumulative distribution) bear to each other.
(f) If, for any taxable year, the Corporation elects to designate as “capital gain dividends” (as defined in Section 857 of the Internal Revenue Code of 1986, as amended) any portion (the “Capital Gains Amount”) of the dividends (as determined for federal income tax purposes) paid or made available for the year to holders of all classes of shares (the “Total Dividends”), then the portion of the Capital Gains Amount that shall be allocable to the holders of Series D Preferred Stock shall be the amount that the total dividends (as determined for federal income tax purposes) paid or made available to the holders of the Series D Preferred Stock for the year bears to the Total Dividends. The Corporation may elect to retain and pay income tax on its net long-term capital gains. In such a case, the holders of Series D Preferred Stock would include in income their appropriate share of the Corporation’s undistributed long-term capital gains, as designated by the Corporation.
(g) Holders of Series D Preferred Stock shall not be entitled to any distribution, whether payable in cash, property or shares of capital stock of the Corporation, in excess of full cumulative distributions on the Series D Preferred Stock as described above. Any distribution payment made on the Series D Preferred Stock shall first be credited against accrued but unpaid distributions in order of their respective Distribution Payment Dates, commencing with the earliest.
(h) For the avoidance of doubt, in determining whether a distribution (other than upon voluntary or involuntary liquidation), by distribution, redemption or other acquisition of the Corporation’s equity securities, is permitted under Maryland law, no effect shall be given to amounts that would be needed, if the Corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights on dissolution are superior to those receiving the distribution.
4. Liquidation Preference.
(a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, before any distribution or payment shall be made to the holders of shares of any Junior Stock, the holders of shares of Series D Preferred Stock then outstanding shall be entitled to be paid, or have the Corporation declare and set apart for payment, out of the assets of the Corporation legally available for distribution to its stockholders, after payment or provision for payment of all debts and other liabilities of the Corporation, a liquidation preference in cash or property at fair market value, as determined by the Board, of $25.00 per share, plus an amount equal to any accrued and unpaid distributions (whether declared or not) to, but excluding, the date of payment or the date the amount for payment is set apart (the “Liquidating Distributions”).
(b) If, upon any such voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the available assets of the Corporation are insufficient to pay the full amount of the Liquidating Distributions on all outstanding shares of Series D Preferred Stock and the corresponding amounts payable on all outstanding shares of Parity Stock, then the holders of such shares of Series D Preferred Stock and the holders of such shares of Parity Stock shall share ratably in any such distribution of assets in proportion to the full Liquidating Distributions to which they would otherwise be respectively entitled.
(c) Written notice of the effective date of any such voluntary or involuntary liquidation, dissolution or winding up of the Corporation, stating the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable, shall be given by first class mail, postage prepaid, no fewer than 30 nor more than 60 days prior to the payment date stated therein, to each record holder of shares of Series D Preferred Stock at the address of such holder as the same shall appear on the stock transfer records of the Corporation.
3
(d) After receiving payment of the full amount of the Liquidating Distributions to which they are entitled, the holders of shares of Series D Preferred Stock will have no right or claim to any of the remaining assets of the Corporation.
(e) For the avoidance of doubt, the consolidation, merger or conversion of the Corporation with or into another entity, the merger of another entity with or into the Corporation, a statutory share exchange by the Corporation or the sale, lease, transfer or conveyance of all or substantially all of the assets or business of the Corporation shall not be considered a liquidation, dissolution or winding up of the Corporation.
5. Optional Redemption
(a) The Series D Preferred Stock is not redeemable prior to May 21, 2026, except as permitted by Article VI of the Charter and as otherwise provided in this Section 5 and Section 6 below. On and after May 21, 2026, the Corporation, at its option, upon not fewer than 30 nor more than 60 days’ written notice, may redeem the Series D Preferred Stock, in whole or from time to time in part, for cash, at a redemption price of $25.00 per share, plus any accrued and unpaid distributions (whether declared or not) on such shares of Series D Preferred Stock to, but excluding, the redemption date (other than any distribution with a record date before the applicable redemption date and a payment date after the applicable redemption date, which will be paid on the payment date notwithstanding prior redemption of such shares) (the “Regular Redemption Right”). If fewer than all of the outstanding shares of Series D Preferred Stock are to be redeemed pursuant to the Regular Redemption Right, the shares to be redeemed may be selected on a pro rata basis (as nearly as practicable without creating fractional shares), by lot or by any other equitable method determined by the Board. If such redemption is to be by lot and, as a result of such redemption, any holder of shares of Series D Preferred Stock would become a holder of a number of shares of Series D Preferred Stock in excess of the Stock Ownership Limit because such holder’s shares of Series D Preferred Stock were not redeemed, or were only redeemed in part then, except as otherwise provided in Article VI of the Charter, the Corporation will redeem the requisite number of shares of Series D Preferred Stock of such holder such that no holder will hold a number of shares in excess of the Stock Ownership Limit subsequent to such redemption.
(b) To ensure that the Corporation remains qualified as a REIT for federal income tax purposes, the Series D Preferred Stock shall be subject to the provisions of Article VI of the Charter, pursuant to which shares of Series D Preferred Stock owned by a stockholder in excess of the Stock Ownership Limit shall automatically be transferred to a Charitable Trust and the Corporation shall have the right to purchase such shares, as provided in Article VI of the Charter. If the Corporation calls for redemption any shares of Series D Preferred Stock pursuant to and in accordance with Article VI of the Charter and this Section 5(b), then the redemption price will be an amount equal to $25.00 per share, plus any accrued and unpaid distributions (whether declared or not) on the Series D Preferred Stock to, but excluding, the redemption date, subject to any restrictions or limitations contained in Article VI of the Charter.
(c) Unless full cumulative distributions on all shares of Series D Preferred Stock shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for such payment for all past distribution periods, (i) no shares of Series D Preferred Stock shall be redeemed unless all outstanding shares of Series D Preferred Stock are simultaneously redeemed, and (ii) the Corporation shall not purchase or otherwise acquire directly or indirectly for any consideration, nor shall any monies be paid to or be made available for a sinking fund for the redemption of, any shares of Series D Preferred Stock (except by conversion into or exchange for shares of, or options, warrants or rights to purchase or subscribe for shares of, Junior Stock); provided, however, that the foregoing shall not prevent the redemption or purchase by the Corporation of shares of Series D Preferred Stock pursuant to Article VI of the Charter or otherwise in order to ensure that the Corporation remains qualified as a REIT for federal income tax purposes or the purchase or acquisition of shares of Series D Preferred Stock pursuant to a purchase or exchange offer made on the same terms to all holders of Series D Preferred Stock. Any redemption of Series D Preferred Stock may be made conditional on such factors as may be determined by the Board in its sole discretion.
4
(d) Immediately prior to any redemption of shares of Series D Preferred Stock pursuant to the Regular Redemption Right, the Corporation shall pay, in cash, any accrued and unpaid distributions on the Series D Preferred Stock to, but excluding, the redemption date, unless a redemption date falls after a Distribution Record Date and prior to the corresponding Distribution Payment Date, in which case each holder of record of Series D Preferred Stock at the close of business on such Distribution Record Date shall be entitled to the distribution payable on such shares on the corresponding Distribution Payment Date (including any accrued and unpaid distributions for prior distribution periods) notwithstanding the redemption of such shares before such Distribution Payment Date. Except as provided herein and in Sections 5(a), 6(a) and 6(e), the Corporation will make no payment or allowance for unpaid distributions, whether or not in arrears, on shares of Series D Preferred Stock for which a notice of redemption has been given.
(e) The following procedures apply to the redemption of the Series D Preferred Stock pursuant to the Regular Redemption Right:
(i) Notice of redemption pursuant to the Regular Redemption Right shall be mailed by the Corporation, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the respective holders of record of the Series D Preferred Stock to be redeemed at their respective addresses as they appear on the stock transfer records of the Corporation. A failure to give such notice or any defect thereto or in the mailing thereof shall not affect the validity of the proceedings for the redemption of any shares of Series D Preferred Stock except as to the holder to whom notice was defective or not given.
(ii) In addition to any information required by law or by the applicable rules of any exchange upon which the Series D Preferred Stock may be listed or admitted to trading, such notice shall state: (A) the redemption date; (B) the redemption price, including, without limitation, a statement as to whether or not accumulated but unpaid distributions will be payable as part of the redemption price, or payable on the next Distribution Payment Date, to the record holder at the close of business on the applicable Distribution Record Date; (C) any conditions with respect to the redemption permitted pursuant to Section 5(c) above; (D) the number of shares of Series D Preferred Stock to be redeemed; (E) the place or places where the certificates, if any, representing the shares of Series D Preferred Stock to be redeemed are to be surrendered for payment of the redemption price; (F) the procedures for surrendering non-certificated shares of Series D Preferred Stock for payment of the redemption price; (G) that distributions on shares of Series D Preferred Stock to be redeemed will cease to accrue on such redemption date; and (H) that the holders of shares of Series D Preferred Stock to which such notice relates will not be able to tender such shares of Series D Preferred Stock for conversion in connection with the Change of Control (as defined in Section 6(b) below) and each share of Series D Preferred Stock tendered for conversion that is selected, prior to the Change of Control Conversion Date (as defined in Section 9(a) below), for redemption will be redeemed on the related redemption date instead of converted on the Change of Control Conversion Date. If less than all of the shares of Series D Preferred Stock held by any holder are to be redeemed pursuant to the Regular Redemption Right, the notice mailed to such holder shall also specify the number of shares of Series D Preferred Stock held by such holder to be so redeemed.
(iii) If notice of redemption pursuant to the Regular Redemption Right of any shares of Series D Preferred Stock has been given and if the funds necessary for such redemption have been set apart for payment by the Corporation for the benefit of the holders of any shares of Series D Preferred Stock so called for redemption, then from and after the redemption date distributions will cease to accrue on such shares of Series D Preferred Stock, such shares of Series D Preferred Stock shall no longer be deemed outstanding and all rights of the holders of such shares of Series D Preferred Stock will terminate, except the right to receive the redemption price and any accrued and unpaid distributions to, but excluding, the redemption date; provided, however, if the redemption date falls after a Distribution Record Date and prior to the corresponding Distribution Payment Date, each holder of shares of Series D Preferred Stock so called for redemption at the close of business on such Distribution Record Date shall be entitled to the distribution payable on such shares on the corresponding Distribution Payment Date notwithstanding the redemption of such shares before such Distribution Payment Date.
(iv) Holders of shares of Series D Preferred Stock to be redeemed pursuant to the Regular Redemption Right shall surrender such shares at the place or places designated in such notice and, upon surrender of the certificates, if any, for such shares of Series D Preferred Stock (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), such shares of Series D Preferred Stock shall be redeemed
5
by the Corporation at the redemption price plus any accrued and unpaid distributions (whether declared or not) payable upon such redemption. In case less than all shares of Series D Preferred Stock represented by any such certificate are redeemed, a new certificate or certificates shall be issued representing the unredeemed shares of Series D Preferred Stock without cost to the holder thereof. Notwithstanding the foregoing, if the shares of Series D Preferred Stock to be redeemed are held in book-entry form through the facilities of The Depository Trust Company (“DTC”), holders of shares of Series D Preferred Stock to be redeemed shall comply with applicable procedures of DTC in connection with surrendering their shares for payment of the redemption price.
(f) Subject to applicable law and the limitation on purchases when distributions on the Series D Preferred Stock are in arrears, the Corporation may, at any time and from time to time, purchase any shares of Series D Preferred Stock in the open market, by tender or by private agreement.
(g) Any shares of Series D Preferred Stock that shall at any time have been redeemed pursuant to the Regular Redemption Right or otherwise acquired shall, after such redemption or acquisition, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more classified and designated as part of a particular series by the Board.
6. Special Optional Redemption.
(a) Upon the occurrence of a Change of Control (as defined below), the Corporation, at its option, upon not fewer than 30 nor more than 60 days’ written notice, may redeem the shares of Series D Preferred Stock, in whole or in part, within 120 days after the first date on which such Change of Control occurred, for cash at a redemption price equal to $25.00 per share, plus any accrued and unpaid distributions (whether or not declared) to, but excluding, the redemption date (other than any distribution with a record date before the applicable redemption date and a payment date after the applicable redemption date, which will be paid on the payment date notwithstanding prior redemption of such shares) (“Special Optional Redemption Right”). Any redemption of Series D Preferred Stock may be made conditional on such factors as may be determined by the Board in its sole discretion.
(b) A “Change of Control” is when, after the original issuance of the Series D Preferred Stock, the following have occurred and are continuing:
(i) the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or a series of purchases, mergers or other acquisition transactions of capital stock of the Corporation entitling that person to exercise more than 50% of the total voting power of all capital stock of the Corporation entitled to vote generally in elections of directors (except that such person will be deemed to have beneficial ownership of all capital stock of the Corporation that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and
(ii) following the closing of any transaction referred to in (i) above, neither the Corporation nor the acquiring or surviving entity has a class of common securities (or American Depositary Receipts representing such securities) listed on the New York Stock Exchange (the “NYSE”), the NYSE American LLC (the “NYSE AMER”), or the NASDAQ Stock Market (the “NASDAQ”), or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE AMER or the NASDAQ (an “Exchange”).
(c) If fewer than all of the outstanding shares of Series D Preferred Stock are to be redeemed pursuant to the Special Optional Redemption Right, the shares to be redeemed may be selected on a pro rata basis (as nearly as practicable without creating fractional shares), by lot or by any other equitable method determined by the Board. If such redemption is to be by lot and, as a result of such redemption, any holder of shares of Series D Preferred Stock would become a holder of a number of shares of Series D Preferred Stock in excess of the Stock Ownership Limit because such holder’s shares of Series D Preferred Stock were not redeemed, or were only redeemed in part then, except as otherwise provided in Article VI of the Charter, the Corporation will redeem the requisite number of shares of Series D Preferred Stock of such holder such that no holder will hold a number of shares in excess of the Stock Ownership Limit subsequent to such redemption.
6
(d) Unless full cumulative distributions on all shares of Series D Preferred Stock shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for such payment for all past distribution periods, (i) no shares of Series D Preferred Stock shall be redeemed pursuant to the Special Optional Redemption Right unless all outstanding shares of Series D Preferred Stock are simultaneously redeemed, and (ii) the Corporation shall not purchase or otherwise acquire directly or indirectly for any consideration, nor shall any monies be paid to or be made available for a sinking fund for the redemption of, any shares of Series D Preferred Stock (except by conversion into or exchange for shares of, or options, warrants or rights to purchase or subscribe for shares of, Junior Stock); provided, however, that the foregoing shall not prevent the redemption or purchase by the Corporation of shares of Series D Preferred Stock pursuant to Article VI of the Charter or otherwise in order to ensure that the Corporation remains qualified as a REIT for federal income tax purposes or the purchase or acquisition of shares of Series D Preferred Stock pursuant to a purchase or exchange offer made on the same terms to all holders of Series D Preferred Stock.
(e) Immediately prior to any redemption of shares of Series D Preferred Stock pursuant to the Special Optional Redemption Right, the Corporation shall pay, in cash, any accrued and unpaid distributions on the Series D Preferred Stock to, but excluding, the redemption date, unless a redemption date falls after a Distribution Record Date and prior to the corresponding Distribution Payment Date, in which case each holder of Series D Preferred Stock at the close of business on such Distribution Record Date shall be entitled to the distribution payable on such shares on the corresponding Distribution Payment Date (including any accrued and unpaid distributions for prior distribution periods) notwithstanding the redemption of such shares before such Distribution Payment Date. Except as provided herein and in Section 5(a), 5(d) and 6(a), the Corporation will make no payment or allowance for unpaid distributions, whether or not in arrears, on shares of Series D Preferred Stock for which a notice of redemption has been given.
(f) The following procedures apply to the redemption of the Series D Preferred Stock pursuant to the Special Optional Redemption Right:
(i) Notice of redemption pursuant to the Special Optional Redemption Right will be mailed by the Corporation, postage prepaid, not fewer than 30 nor more than 60 days prior to the redemption date, addressed to the respective holders of record of the Series D Preferred Stock to be redeemed at their respective addresses as they appear on the stock transfer records of the Corporation. A failure to give such notice or any defect thereto or in the mailing thereof shall not affect the validity of the proceedings for the redemption of any shares of Series D Preferred Stock except as to the holder to whom notice was defective or not given.
(ii) In addition to any information required by law or by the applicable rules of any exchange upon which the Series D Preferred Stock may be listed or admitted to trading, such notice shall state: (A) the redemption date; (B) the redemption price, including, without limitation, a statement as to whether or not accumulated but unpaid distributions will be payable as part of the redemption price, or payable on the next Distribution Payment Date, to the record holder at the close of business on the applicable Distribution Record Date; (C) any conditions with respect to the redemption permitted pursuant to Section 6(a) above; (D) the number of shares of Series D Preferred Stock to be redeemed; (E) the place or places where the certificates, if any, representing the shares of Series D Preferred Stock to be redeemed are to be surrendered for payment of the redemption price; (F) the procedures for surrendering non-certificated shares of Series D Preferred Stock for payment of the redemption price; (G) that the shares of Series D Preferred Stock are being redeemed pursuant to the Special Optional Redemption Right in connection with the occurrence of a Change of Control and a brief description of the transaction or transactions constituting such Change of Control; (H) that the holders of shares of Series D Preferred Stock to which such notice relates will not be able to tender such shares of Series D Preferred Stock for conversion in connection with the Change of Control and each share of Series D Preferred Stock tendered for conversion that is selected, prior to the Change of Control Conversion Date (as defined in Section 9(a) below), for redemption will be redeemed on the related redemption date instead of converted on the Change of Control Conversion Date; and (I) that distributions on shares of Series D Preferred Stock to be redeemed will cease to accrue on such redemption date. If less than all of the shares of Series D Preferred Stock held by any holder are to be redeemed pursuant to the Special Optional Redemption Right, the notice mailed to such holder shall also specify the number of shares of Series D Preferred Stock held by such holder to be redeemed.
7
(iii) If notice of redemption pursuant to the Special Optional Redemption Right of any shares of Series D Preferred Stock has been given and if the funds necessary for such redemption have been set apart by the Corporation for the benefit of the holders of any shares of Series D Preferred Stock so called for redemption, then from and after the redemption date distributions will cease to accrue on such shares of Series D Preferred Stock, such shares of Series D Preferred Stock shall no longer be deemed outstanding and all rights of the holders of such shares of Series D Preferred Stock will terminate, except the right to receive the redemption price and any accrued and unpaid distributions to, but excluding, the redemption date; provided, however, if the redemption date falls after a Distribution Record Date and prior to the corresponding Distribution Payment Date, each holder of shares of Series D Preferred Stock so called for redemption at the close of business on such Distribution Record Date shall be entitled to the distribution payable on such shares on the corresponding Distribution Payment Date notwithstanding the redemption of such shares before such Distribution Payment Date.
(iv) Holders of shares of Series D Preferred Stock to be redeemed pursuant to the Special Optional Redemption Right shall surrender such shares at the place or places designated in such notice and, upon surrender of the certificates, if any, for such shares of Series D Preferred Stock (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), such shares of Series D Preferred Stock shall be redeemed by the Corporation at the redemption price plus any accrued and unpaid distributions payable upon such redemption. In case less than all shares of Series D Preferred Stock represented by any such certificate are redeemed, a new certificate or certificates shall be issued representing the unredeemed shares of Series D Preferred Stock without cost to the holder thereof. Notwithstanding the foregoing, if the shares of Series D Preferred Stock to be redeemed are held in book-entry form through the facilities of DTC, holders of shares of Series D Preferred Stock to be redeemed shall comply with applicable procedures of DTC in connection with surrendering their shares for payment of the redemption price.
(g) Any shares of Series D Preferred Stock that shall at any time have been redeemed pursuant to the Special Optional Redemption Right or otherwise acquired shall, after such redemption or acquisition, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more classified and designated as part of a particular series by the Board.
(h) If, prior to the Change of Control Conversion Date, the Corporation has provided or provides notice of redemption with respect to the Special Optional Redemption Right or the Regular Redemption Right, the holders of Series D Preferred Stock will not have the conversion right described in Section 9 below.
7. Voting Rights.
(a) Holders of Series D Preferred Stock will not have any voting rights, except as set forth below.
(b) Whenever distributions on any Series D Preferred Stock shall be in arrears for six quarterly periods, whether or not consecutive (a “Preferred Distribution Default”), the number of directors then constituting the Board shall be increased by two, if not already increased by reason of similar types of provisions with respect to other classes or series of Voting Parity Stock (as defined below), and the holders of Series D Preferred Stock (voting as a single class together with the holders of any other class or series of Preferred Stock upon which like voting rights have been conferred, including the outstanding shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, and are exercisable (“Voting Parity Stock”)) shall be entitled to vote for the election of a total of two additional directors of the Corporation (each, a “Preferred Stock Director”), if not already elected by the holders of Voting Party Stock by reason of similar types of provisions with respect to Preferred Stock Directors, at a special meeting of stockholders called by the holders of at least 33% of the outstanding shares of Series D Preferred Stock (or the holders of at least 33% of the outstanding shares of Voting Parity Stock and Series D Preferred Stock, voting as a single class, if Voting Parity Stock is outstanding) if such request is received 90 or more days before the date fixed for the next annual meeting of stockholders, or, if the request is received less than 90 days before the next annual meeting of stockholders, at the next annual meeting of stockholders, or at the Corporation’s sole discretion, a separate special meeting of stockholders to be held no later than 90 days after the Corporation’s receipt of such request, and thereafter at each subsequent annual meeting of stockholders until, with respect to a Preferred Distribution Default, all accumulated distributions on the shares of Series D Preferred Stock for the past distribution periods and the then-current distribution period shall have been fully paid. The Preferred Stock Directors shall be elected by a plurality of the votes cast by the holders of the outstanding shares of Series D Preferred Stock when
8
they have the voting rights set forth in this Section 7(b) (or a plurality of the outstanding shares of Voting Parity Stock and Series D Preferred Stock, voting together as a single class, if Voting Parity Stock is outstanding) in the election to serve until the next annual meeting of stockholders and until their successors are duly elected and qualified or until such directors’ right to hold the office terminates as described below, whichever occurs earlier.
(c) If and when all accrued distributions for past distribution periods and the distribution for the then-current distribution period on the Series D Preferred Stock shall have been paid in full, the holders of Series D Preferred Stock shall immediately be divested of the voting rights set forth in Section 7(b) (subject to revesting in the event of each and every Preferred Distribution Default) and, if all accumulated distributions in arrears and the distributions for the then-current distribution period have been paid in full on all other classes or series of our Parity Stock upon which like voting rights have been conferred and are exercisable, the term of office of each Preferred Stock Director so elected shall immediately terminate and the number of directors shall be reduced accordingly. Any Preferred Stock Director may be removed at any time, but only for Cause, by the vote of, and shall not be removed otherwise than by the vote of, the holders of at least two-thirds of the outstanding shares of Series D Preferred Stock when they have the voting rights set forth in Section 7(b) and the holders of any outstanding shares of Voting Parity Stock (voting together as a single class). So long as a Preferred Distribution Default shall continue, any vacancy in the office of a Preferred Stock Director may be filled by written consent of the Preferred Stock Director remaining in office, or if none remains in office, by a vote of the holders of the outstanding shares of Series D Preferred Stock when they have the voting rights set forth in Section 7(b) and the holders of any outstanding shares of Voting Parity Stock (voting together as a single class). The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(d) So long as any shares of Series D Preferred Stock remain outstanding, the Corporation shall not:
(i) authorize or create, or increase the authorized or issued amount of, any class or series of shares of capital stock of the Corporation expressly designated as ranking senior to the Series D Preferred Stock with respect to payment of distributions or the distribution of assets upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation, or reclassify any authorized shares of capital stock of the Corporation into any such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such equity securities, without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series D Preferred Stock (voting as a separate class); or
(ii) amend, alter or repeal the provisions of the Charter (including these Articles Supplementary), whether by merger, consolidation, conversion or otherwise, so as to materially and adversely affect any right, preference, privilege or voting powers of the Series D Preferred Stock or the holders thereof, without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series D Preferred Stock (voting as a separate class); provided, however, that with respect to the occurrence of any merger, consolidation, conversion or a sale or lease of all of the Corporation’s assets as an entity (in either case, an “Event”), so long as shares of Series D Preferred Stock remain outstanding with the terms thereof materially unchanged or the holders of shares of Series D Preferred Stock receive shares of, or options, warrants or rights to purchase or subscribe for shares of, capital stock with rights, preferences, privileges and voting powers substantially similar, taken as a whole, to the rights, preferences, privileges and voting powers of the Series D Preferred Stock, the occurrence of any such Event shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the Series D Preferred Stock or the holders thereof; and provided further that any increase in the amount of the authorized shares of Series D Preferred Stock or the creation or issuance, or increase in the amounts authorized, of any other class or series of Parity Stock or Junior Stock shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers.
(e) In any matter in which the holders of Series D Preferred Stock are entitled to vote separately as a single class, each such holder shall have the right to one vote for each share of Series D Preferred Stock held by such holder. If the holders of shares of Series D Preferred Stock and the holders of shares of any other class or series of Voting Parity Stock are entitled to vote together as a single class on any matter, such holders shall each have one vote for each $25.00 of liquidation preference.
(f) The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of Series D Preferred Stock shall have been redeemed or called for redemption upon proper notice and sufficient funds shall have been deposited in trust to effect such redemption.
9
8. Information Rights. During any period in which the Corporation is not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and any shares of Series D Preferred Stock are outstanding, the Corporation will (a) transmit by mail or other permissible means under the Exchange Act to all holders of Series D Preferred Stock, as their names and addresses appear in the Corporation’s record books and without cost to such holders, copies of the annual reports on Form 10-K and quarterly reports on Form 10-Q that the Corporation would have been required to file with the Securities and Exchange Commission (the “SEC”), pursuant to Section 13 or Section 15(d) of the Exchange Act if the Corporation were subject thereto (other than any exhibits that would have been required); and (b) within 15 days following written request, supply copies of such reports to any prospective holder of Series D Preferred Stock. The Corporation will mail (or otherwise provide) the reports to the holders of Series D Preferred Stock within 15 days after the respective dates by which the Corporation would have been required to file such reports with the SEC if it were subject to Section 13 or 15(d) of the Exchange Act.
9. Conversion. Shares of Series D Preferred Stock are not convertible into or exchangeable for any other property or securities of the Corporation, except as provided in this Section 9.
(a) Upon the occurrence of a Change of Control, each holder of Series D Preferred Stock shall have the right, unless, prior to the Change of Control Conversion Date (as defined below), the Corporation has provided or provides notice of its election to redeem the shares of Series D Preferred Stock pursuant to the Regular Redemption Right or Special Optional Redemption Right, to convert some or all of the shares of Series D Preferred Stock held by such holder (the “Change of Control Conversion Right”) on the Change of Control Conversion Date into a number shares of Common Stock per share of Series D Preferred Stock to be converted (the “Common Stock Conversion Consideration”) equal to the lesser of: (A) the quotient obtained by dividing (i) the sum of (x) the $25.00 liquidation preference plus (y) the amount of any accrued and unpaid distributions to, but excluding, the Change of Control Conversion Date (unless the Change of Control Conversion Date is after a Distribution Record Date and prior to the corresponding Distribution Payment Date, in which case no additional amount for such accrued and unpaid distribution will be included in such sum), by (ii) the Common Stock Price (as defined below); and (B) 3.4698 (the “Share Cap”), subject to the immediately succeeding paragraph.
The Share Cap is subject to pro rata adjustments for any stock splits (including those effected pursuant to a Common Stock distribution), subdivisions or combinations (in each case, a “Stock Split”) with respect to shares of Common Stock. The adjusted Share Cap as the result of a Stock Split shall be the number of shares of Common Stock that is equivalent to the product obtained by multiplying (i) the Share Cap in effect immediately prior to such Stock Split by (ii) a fraction, the numerator of which is the number of shares of Common Stock outstanding after giving effect to such Stock Split and the denominator of which is the number of shares of Common Stock outstanding immediately prior to such Stock Split.
In the case of a Change of Control pursuant to which shares of Common Stock shall be converted into cash, securities or other property or assets (including any combination thereof) (the “Alternative Form Consideration”), a holder of shares of Series D Preferred Stock shall receive upon conversion of such shares of Series D Preferred Stock the kind and amount of Alternative Form Consideration which such holder of shares of Series D Preferred Stock would have owned or been entitled to receive upon the Change of Control had such holder of shares of Series D Preferred Stock held a number of shares of Common Stock equal to the Common Stock Conversion Consideration immediately prior to the effective time of the Change of Control (the “Alternative Conversion Consideration”; and the Common Stock Conversion Consideration or the Alternative Conversion Consideration, as may be applicable to a Change of Control, shall be referred to herein as the “Conversion Consideration”).
In the event that holders of Common Stock have the opportunity to elect the form of consideration to be received in the Change of Control, the consideration that the holders of Series D Preferred Stock shall receive shall be the form of consideration elected by the holders of Common Stock who participate in the determination (based on the weighted average of elections) and shall be subject to any limitations to which all holders of Common Stock are subject, including, without limitation, pro rata reductions applicable to any portion of the consideration payable in the Change of Control.
10
The “Change of Control Conversion Date” shall be a Business Day set forth in the notice of Change of Control provided in accordance with Section 9(c) below that is no less than 20 days nor more than 35 days after the date on which the Corporation provides such notice pursuant to Section 9(c).
The “Common Stock Price” shall be (i) if the consideration to be received in the Change of Control by holders of the Common Stock is solely cash, the amount of cash consideration per share of Common Stock, and (ii) if the consideration to be received in the Change of Control by holders of the Common Stock is other than solely cash, (x) the average of the closing sale prices per share of Common Stock (or, if no closing sale price is reported, the average of the closing bid and ask prices or, if more than one in either case, the average of the average closing bid and the average closing ask prices) for the ten consecutive trading days immediately preceding, but not including, the effective date of the Change of Control as reported on the principal U.S. securities exchange on which the Common Stock is then traded, or (y) the average of the last quoted bid prices of the Common Stock in the over-the-counter market as reported by OTC Markets Group Inc. or similar organization for the ten consecutive trading days immediately preceding, but not including, the effective date of the Change of Control, if the Common Stock is not then listed for trading on a U.S. securities exchange.
(b) No fractional shares of Common Stock shall be issued upon the conversion of shares of Series D Preferred Stock. In lieu of fractional shares, holders shall be entitled to receive the cash value of such fractional shares based on the Common Stock Price used in determining the Common Stock Conversion Consideration for such Change of Control.
(c) Within 15 days following the occurrence of a Change of Control, provided that the Corporation has not then exercised its right to redeem all shares of Series A Preferred Stock pursuant to Sections 5 or 6 hereof, a notice of occurrence of the Change of Control, describing the resulting Change of Control Conversion Right, shall be delivered to the holders of record of Series D Preferred Stock at their addresses as they appear on the Corporation’s stock transfer records and notice shall be provided to the Corporation’s transfer agent. No failure to give such notice or any defect thereto or in the mailing thereof shall affect the validity of the proceedings for the conversion of any shares of Series D Preferred Stock except as to the holder to whom notice was defective or not given. Each notice shall state: (i) the events constituting the Change of Control; (ii) the date of the Change of Control; (iii) the last date on which the holders of shares of Series D Preferred Stock may exercise their Change of Control Conversion Right; (iv) the method and period for calculating the Common Stock Price; (v) the Change of Control Conversion Date; (vi) that if, prior to the Change of Control Conversion Date, the Corporation has provided or provides notice of its election to redeem all or any portion of the shares of Series D Preferred Stock pursuant to the Regular Redemption Right or Special Optional Redemption Right, the holder will not be able to convert shares of Series D Preferred Stock into Shares of Common Stock and such shares of Series D Preferred Stock shall be redeemed on the related redemption date, even if they have already been tendered for conversion pursuant to the Change of Control Conversion Right; (vii) if applicable, the type and amount of Alternative Conversion Consideration entitled to be received per share of Series D Preferred Stock; (viii) the name and address of the paying agent and the conversion agent; and (ix) the procedures that the holders of Series D Preferred Stock must follow to exercise the Change of Control Conversion Right.
(d) The Corporation shall issue a press release for publication on the Wall Street Journal, Business Wire, PR Newswire or Bloomberg Business News (or, if such organizations are not in existence at the time of issuance of such press release, such other news or press organization as is reasonably calculated to broadly disseminate the relevant information to the public), or post notice on the Corporation’s website, in any event prior to the opening of business on the first Business Day following any date on which the Corporation provides notice pursuant to Section 9(c) above to the holders of Series D Preferred Stock.
(e) In order to exercise the Change of Control Conversion Right, a holder of Series D Preferred Stock shall be required to deliver, on or before the close of business on the Change of Control Conversion Date, the certificates evidencing the shares of Series D Preferred Stock, to the extent such shares are certificated, to be converted, duly endorsed for transfer, together with a written conversion notice completed, to the Corporation’s transfer agent. Such notice shall state: (i) the relevant Change of Control Conversion Date; (ii) the number of shares of Series D Preferred Stock to be converted; and (iii) that the shares of Series D Preferred Stock are to be converted pursuant to the applicable terms of the shares of Series D Preferred Stock. Notwithstanding the foregoing, if the shares of Series D Preferred Stock are held in book-entry form through the facilities of DTC, such notice shall comply with applicable procedures of DTC.
11
(f) Holders of Series D Preferred Stock may withdraw any notice of exercise of a Change of Control Conversion Right (in whole or in part) by a written notice of withdrawal delivered to the Corporation’s transfer agent prior to the close of business on the Business Day prior to the Change of Control Conversion Date. The notice of withdrawal must state: (i) the number of withdrawn shares of Series D Preferred Stock; (ii) if certificated shares of Series D Preferred Stock have been issued, the certificate numbers of the withdrawn shares of Series D Preferred Stock; and (iii) the number of shares of Series D Preferred Stock, if any, which remain subject to the conversion notice. Notwithstanding the foregoing, if the shares of Series D Preferred Stock are held in book-entry form through the facilities of DTC, the notice of withdrawal shall comply with applicable procedures of DTC.
(g) Shares of Series D Preferred Stock as to which the Change of Control Conversion Right has been properly exercised and for which the conversion notice has not been properly withdrawn shall be converted into the applicable Conversion Consideration in accordance with the Change of Control Conversion Right on the Change of Control Conversion Date, unless, prior to the Change of Control Conversion Date, the Corporation has provided or provides notice of its election to redeem such shares of Series D Preferred Stock, whether pursuant to its Regular Redemption Right or Special Optional Redemption Right. Holders of Series D Preferred Stock shall not have the right to convert any shares that the Corporation has elected to redeem prior to the Change of Control Conversion Date. Accordingly, if the Corporation has provided a redemption notice with respect to some or all of the Series D Preferred Stock, holders of any Series D Preferred Stock that the Corporation has called for redemption shall not be permitted to exercise their Change of Control Conversion Right in respect of any of the shares that have been called for redemption, and such shares of Series D Preferred Stock shall not be so converted and the holders of such shares shall be entitled to receive on the applicable redemption date $25.00 per share, plus any accrued and unpaid distributions (whether or not declared) thereon to, but excluding, the redemption date.
(h) The Corporation shall deliver the applicable Conversion Consideration no later than the third Business Day following the Change of Control Conversion Date.
(i) Notwithstanding anything to the contrary contained herein, no holder of shares of Series D Preferred Stock will be entitled to convert such shares of Series D Preferred Stock into shares of Common Stock to the extent that receipt of such shares of Common Stock would cause the holder of such shares of Common Stock (or any other person) to Beneficially Own or Constructively Own shares of Common Stock of the Corporation in excess of the Stock Ownership Limit, as such term is defined in the Charter, as applicable.
10. Application of Article VI. The Series D Preferred Stock is subject to the provisions of Article VI of the Charter.
THIRD: The Series D Preferred Stock has been classified and designated by the Board under the authority contained in the Charter.
FOURTH: These Articles Supplementary have been approved by the Board in the manner and by the vote required by law.
FIFTH: These Articles Supplementary shall be effective at the time the MSDAT accepts these Articles Supplementary for record.
SIXTH: The undersigned Chief Financial Officer of the Corporation acknowledges these Articles Supplementary to be the act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned Chief Financial Officer acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.
[Signature page follows.]
12
IN WITNESS WHEREOF, ACRES Commercial Realty Corp. has caused these Articles Supplementary to be signed in its name and on its behalf by its President and Chief Executive Officer and witnessed by its Chief Financial Officer on May 19, 2021.
| WITNESS: | ACRES COMMERCIAL REALTY CORP. | |||||||
| By: | /s/ David J. Bryant |
By: | /s/ Mark Fogel | |||||
| Name: | David J. Bryant | Name: | Mark Fogel | |||||
| Title: | Chief Financial Officer | Title: | President and Chief Executive Officer | |||||
13
ACRES COMMERCIAL REALTY CORP.
CERTIFICATE OF CORRECTION
7.875% SERIES D CUMULATIVE REDEEMABLE PREFERRED STOCK
ACRES Commercial Realty Corp., a Maryland corporation (the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: The Corporation filed Articles Supplementary establishing and fixing the rights and preferences of the Corporation’s 7.875% Series D Cumulative Redeemable Preferred Stock, as accepted for record by the State Department of Assessments and Taxation of Maryland on May 19, 2021 (the “Articles Supplementary”), which require correction as permitted by Section 1-207 of the Maryland General Corporation Law. In connection with the calculation of the first distribution, the Articles Supplementary inadvertently stated “and including” instead of “but excluding” from the calculation methodology.
SECOND: Section 3(a) of the Articles Supplementary as corrected hereby is as follows:
(a) Subject to the preferential rights of holders of any class or series of capital stock of the Corporation expressly designated as ranking senior in right of payment to the Series D Preferred Stock as to distributions, the holders of Series D Preferred Stock shall be entitled to receive, when, as and if authorized by the Board and declared by the Corporation, out of funds legally available for the payment of distributions, cumulative cash distributions, at an rate of 7.875% per annum based on the $25.00 liquidation preference per share of Series D Preferred Stock (equivalent to a fixed annual amount of $1.96875 per share of Series D Preferred Stock). Distributions on the Series D Preferred Stock shall accrue and be cumulative from, but not including, the original date of issuance of any shares of Series D Preferred Stock, or, if later, the most recent Dividend Payment Date (as defined below) to which dividends have been paid in full (or declared and the corresponding Dividend Record Date (as defined below) for determining stockholders entitled to payment thereof has passed)) and shall be payable quarterly, in arrears, on the 30th day of January, April, July and October of each year (each such day being hereinafter called a “Distribution Payment Date”), beginning on July 30, 2021; provided, however, if any Distribution Payment Date is not a Business Day, then the distribution which would otherwise have been payable on such Distribution Payment Date will be paid on the next succeeding Business Day with the same force and effect as if paid on such Distribution Payment Date, and no interest or additional distributions or other sums shall accrue on the amount so payable from such Distribution Payment Date to such next succeeding Business Day; provided, further, that no holder of any shares of Series D Preferred Stock shall be entitled to receive any dividend paid or payable on the Series D Preferred Stock with a Dividend Payment Date before the date such shares of Series D Preferred Stock are issued. The first
distribution will be paid on July 30, 2021 and will be for less than a full quarter and will cover the period from, but excluding, the original date of issuance of the Series D Preferred Stock through, but excluding, July 30, 2021. Distributions payable on the Series D Preferred Stock for any partial distribution period will be prorated and computed on the basis of a 360-day year consisting of twelve 30-day months. Distributions shall be payable to holders of record as they appear in the stock records of the Corporation at the close of business on the applicable record date, which shall be such date designated by the Board for the payment of distributions that is not more than 90 nor fewer than ten days prior to such Distribution Payment Date (each, a “Distribution Record Date”).
THIRD: The undersigned President and Chief Executive Officer of the Corporation acknowledges this Certificate of Correction to be the act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned President and Chief Executive Officer acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.
[Signature page follows.]
IN WITNESS WHEREOF, ACRES Commercial Realty Corp. has caused this Certificate of Correction to be signed in its name and on its behalf by its President and Chief Executive Officer and witnessed by its Chief Financial Officer on May 20, 2021.
| WITNESS: | ACRES COMMERCIAL REALTY CORP. | |||||||
| By: | /s/ David J. Bryant |
By: | /s/ Mark Fogel | |||||
| Name: | David J. Bryant | Name: | Mark Fogel | |||||
| Title: | Chief Financial Officer | Title: | President and Chief Executive Officer | |||||
Exhibit 4.1
STOCK CERTIFICATE
7.875% SERIES D CUMULATIVE REDEEMABLE PREFERRED STOCK, PAR VALUE $0.001 PER SHARE
OF
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
| Certificate Number: | Shares | |
| CUSIP: 00489Q 300 | ||
ACRES Commercial Realty Corp., a Maryland corporation (the “Company”), hereby certifies that (together with any assignee of this Certificate, the “Holder”) is the registered owner of ( ) shares of the Company’s 7.875% Series D Cumulative Redeemable Preferred Stock, transferable only on the books of the Company by the Holder in person or by Attorney upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Company’s Charter and Bylaws, and any amendments thereto. This certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar.
IN WITNESS WHEREOF, the Company has caused this certificate to be executed under seal as of the date set forth below.
| Dated: , 20 | ||||
|
|
(SEAL) |
| ||
| Secretary | Chairman of the Board |
Countersigned and Registered:
American Stock Transfer & Trust Company, LLC
Transfer Agent and Registrar
| By: |
| |
| Authorized Signature |
(REVERSE SIDE OF SHARE CERTIFICATE)
The Company will furnish to any stockholder, on request and without charge, a full statement of the information required by Section 2-211(b) of the Maryland General Corporation Law with respect to the designations and preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of the stock of each class which the Company has authority to issue and (i) the differences in the relative rights and preferences between the shares of each series to the extent they have been set, and (ii) the authority of the Board of Directors to set the relative rights and preferences of subsequent series. All capitalized terms used herein and not otherwise defined shall have meaning assigned to such terms in the charter of the Company. Such request must be made to the Secretary of the Company at its principal office.
The Charter contains restrictions on transfer and ownership of shares of Capital Stock, including the shares represented by this certificate. The Corporation will furnish a full statement about its restrictions on transferability and ownership, without charge, to each stockholder who so requests. Such request must be made to the Secretary of the Company at its principal office.
Keep this certificate in a safe place. If it is lost, stolen or destroyed, the Company will require a bond of indemnity as a condition to the issuance of a replacement certificate.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto (print or typewrite name of transferee), (insert Social Security or other taxpayer identification number of transferee), the following shares of 7.875% Series D Cumulative Preferred Stock of the Company and irrevocably constitutes and appoints and its authorized officers, as Attorney to transfer the same on the books and records of the Company, with full power of substitution in the premises.
| By: |
| |||||
| Dated: , 20 | Name: | |||||
| Title: |
Exhibit 5.1
|
mwe.com | |
| Tracy A. Bacigalupo Attorney at Law tbacigalupo@mwe.com +1 212 547 5656 |
May 21, 2021
ACRES COMMERCIAL CAPITAL CORP.
865 Merrick Avenue, Suite 200 S
Westbury, New York 11590
| Re: | Registration Statement on Form S-3 |
Ladies and Gentlemen:
We serve as special Maryland counsel to ACRES Commercial Capital Corp., a Maryland corporation (the “Company”), in connection with the sale and issuance by the Company of up to 2,760,000 shares (the “Shares”) of 7.875% Series D Cumulative Redeemable Preferred Stock, $0.001 par value per share, of the Company (“Series D Preferred Stock”), pursuant to the Underwriting Agreement, dated May 14, 2021 (the “Underwriting Agreement”), by and among the Company, ACRES Capital, LLC, a New York limited liability company, and Raymond James & Associates, Inc., for itself and as Representative of the several Underwriters named in Exhibit A thereto. This opinion is being provided at your request in connection with the filing of the Prospectus Supplement (as defined below).
In connection with our representation of the Company, and as a basis for the opinion hereinafter set forth, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the following documents (collectively, the “Documents”):
1. The Registration Statement on Form S-3 (the “Registration Statement”) relating to the Shares (File Number 333-254315), in the form in which it was filed with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “1933 Act”);
2. The Prospectus dated April 20, 2021, which forms part of the Registration Statement, as supplemented by the Prospectus Supplement dated May 14, 2021 relating to the Shares (the “Prospectus Supplement”), in the forms in which they were filed with the Commission under the 1933 Act;
3. The charter of the Company (the “Charter”), certified as of a recent date by the State Department of Assessments and Taxation of Maryland;
4. The Bylaws of the Company (the “Bylaws”), certified as of the date hereof by the Secretary of the Company;
5. Resolutions adopted by the Board of Directors of the Company (the “Board”) relating to (a) the registration, sale and issuance of the Shares; and (b) the creation and delegation of authority to a Pricing Committee of the Board in connection with the sale and issuance of the Shares (the “Pricing Committee”), certified as of the date hereof by the Secretary of the Company;
|
340 Madison Avenue New York NY 10173-1922 Tel +1 212 547 5400 Fax +1 212 547 5444
US practice conducted through McDermott Will & Emery LLP. |
ACRES COMMERCIAL CAPITAL CORP.
May 21, 2021
Page 2
6. Resolutions adopted by the Pricing Committee relating to the sale and issuance of the Shares, certified as of the date hereof by the Secretary of the Company;
7. The form of specimen certificate representing the Shares, certified as of the date hereof by the Secretary of the Company;
8. The Underwriting Agreement, certified as of the date hereof by the Secretary of the Company;
9. A certificate of the SDAT as to the good standing of the Company, dated as of the date hereof; and
10. A certificate executed by Jaclyn A. Jesberger, Senior Vice President, Chief Legal Officer and Secretary of the Company, dated as of the date hereof.
In expressing the opinion set forth below, we have assumed the following:
1. Each individual executing any of the Documents, whether on behalf of such individual or another person, is legally competent to do so.
2. Each individual executing any of the Documents on behalf of a party (other than the Company) is duly authorized to do so.
3. Each of the parties executing any of the Documents (other than the Company) has duly and validly executed and delivered each of the Documents to which such party is a signatory, and such party’s obligations (including the Company’s) set forth therein are legal, valid and binding.
4. All Documents submitted to us as originals are authentic. All Documents submitted to us as certified or photostatic copies conform to the original documents. All signatures on all such Documents are genuine. All public records reviewed or relied upon by us or on our behalf are true and complete. All statements and information contained in the Documents are true and complete. There has been no oral or written modification or amendment to the Documents, or waiver of any provision of the Documents, by action or omission of the parties or otherwise.
5. The Shares will not be issued or transferred in violation of any restriction or limitation on transfer or ownership of Capital Stock (as defined in the Charter) contained in Article VI of the Charter.
6. The Company will issue the Shares in accordance with the resolutions of the Board and the Pricing Committee and, prior to the issuance of any Shares, the Company will have available for issuance, under the Charter, the requisite number of authorized but unissued shares of Series D Preferred Stock.
ACRES COMMERCIAL CAPITAL CORP.
May 21, 2021
Page 3
7. The Underwriting Agreement is a valid and legally binding contract that conforms to the description thereof set forth in the Registration Statement.
Based upon the foregoing, and subject to the assumptions, limitations and qualifications stated herein, it is our opinion that, upon issuance and delivery of the Shares as contemplated by the resolutions of the Board and the Pricing Committee and upon payment therefor, the Shares will be duly authorized, validly issued, fully paid and non-assessable.
The foregoing opinion is limited to the substantive laws of the State of Maryland and we do not express any opinion herein concerning any other law. We express no opinion as to compliance with the securities (or “blue sky”) laws of the State of Maryland. The opinion expressed herein is subject to the effect of judicial decisions which may permit the introduction of parol evidence to modify the terms or the interpretation of agreements.
We assume no obligation to supplement this opinion if any applicable law changes after the date hereof or if we become aware of any fact that might change the opinion expressed herein after the date hereof.
This opinion is being furnished to you for submission to the Commission as an exhibit to the Registration Statement.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of the name of our firm therein under the heading “Legal Matters”. In giving this consent, we do not admit that we are within the category of persons whose consent is required by Section 7 of the 1933 Act.
| Very truly yours, |
| /s/ McDermott Will & Emery LLP |
| MCDERMOTT WILL & EMERY LLP |
Exhibit 8.1
LEDGEWOOD
A PROFESSIONAL CORPORATION
Two Commerce Square | Suite 3400
2001 Market Street | Philadelphia, PA 19103
TEL 215.731.9450 FAX 215.735.2513
May 21, 2021
ACRES Commercial Realty Corp.
865 Merrick Avenue, Suite 200 S
Westbury, New York 11590
Ladies and Gentlemen:
We have acted as counsel to ACRES Commercial Realty Corp. (the “Company”) in connection with its offer and sale of up to 2,760,000 shares of the Company’s 7.875% Series D Cumulative Redeemable Preferred Stock (“Series D Preferred Stock”), to be issued pursuant to the Company’s prospectus supplement dated May 14, 2021 (the “Prospectus Supplement”) and the base prospectus dated April 20, 2021 (collectively, the “Prospectus”), forming part of the Registration Statement on Form S-3 (Registration No. 333-254315) (collectively, the “Registration Statement”). You have requested our opinion regarding certain U.S. federal income tax matters. Capitalized terms not otherwise defined herein shall have the meaning set forth in that certain Underwriting Agreement dated May 14, 2021 by and among you and Raymond James & Associates, Inc.
In connection with the opinions hereinafter expressed, we have examined each of the following documents: (i) the Registration Statement; (ii) the Fourth Amended and Restated Management Agreement dated as of July 31, 2020, as amended from time to time; (iii) the Articles of Incorporation of the Company, as amended to the date hereof; (iv) the organizational documents of the Company’s subsidiaries; (v) the bylaws of the Company and its subsidiaries; (vi) an officer’s certificate, dated as of the date hereof, provided to us by the Company (the “Certificate”); and (vii) other documents we have deemed necessary for purposes of rendering the opinions below.
In connection with the opinions rendered below, we have assumed generally that:
1. Each of the documents referred to above has been duly authorized, executed and delivered; is authentic, if an original, or is accurate, if a copy; and has not been amended.
2. During the taxable years ended December 31, 2005 through December 31, 2020 and subsequent taxable years, the Company has operated and will continue to operate in such a manner that makes and will continue to make the representations contained in the Certificate true for such years.
3. The Company will not make any amendments to its organizational documents after the date of this opinion that would affect the Company’s qualification as a real estate investment trust (a “REIT”) for any taxable year.
4. No action will be taken by the Company or its subsidiaries after the date hereof that would have the effect of altering the facts upon which the opinions set forth below are based.
In connection with the opinions rendered below, we also have relied as to factual matters only upon the correctness of the representations contained in the Certificate. We are not aware of any facts inconsistent with the statements in the Certificate. Where such factual representations contained in the Certificate involve the terms defined in the Internal Revenue Code of 1986, as amended (the “Code”), the Treasury regulations thereunder (the “Regulations”), published rulings of the Internal Revenue Service (the “Service”), or other relevant authority, we have explained such terms to the Company’s representatives and are satisfied that such representatives understand the terms and are capable of making such factual representations.
Based solely on the documents and assumptions set forth above, the representations set forth in the Certificate, and without further investigation, we are of the opinion that:
| (a) | Commencing with the Company’s taxable year ended December 31, 2005, the Company has been organized and operated in conformity with the requirements for qualification and taxation as a REIT pursuant to sections 856 through 860 of the Code, and the Company’s current and proposed method of operation will enable it to continue to meet the requirements for qualification and taxation as a REIT under the Code for its taxable year ending December 31, 2021 and thereafter; |
| (b) | the description of the law and the legal conclusions contained in exhibit 99.1 of the Registration Statement, captioned “Federal Income Tax Consequences of our Qualification as a REIT” are correct in all material respects, and the discussion thereunder fairly summarizes the federal income tax considerations that are likely to be material to a holder of the shares of Series D Preferred Stock. |
The opinions set forth above represent our conclusion based upon the documents, facts and representations referred to above. Any material amendments to such documents, changes in any significant facts or inaccuracy of such representations could affect the opinions referred to herein. We will not review on a continuing basis the Company’s compliance with the documents or assumptions set forth above, or the representations set forth in the Certificate. Accordingly, no assurance can be given that the actual results of the Company’s operations for its 2021 and subsequent taxable years will satisfy the requirements for qualification and taxation as a REIT. Although we have made such inquiries and performed such investigations as we have deemed necessary for purposes of rendering this opinion, we have not undertaken an independent investigation of all of the facts referred to in this letter and the Certificate.
The foregoing opinions are based on current provisions of the Code and the Regulations, published administrative interpretations thereof, and published court decisions. The Service has not issued Regulations or administrative interpretations with respect to various provisions of the Code relating to REIT qualification. No assurance can be given that the law will not change in a way that will prevent the Company from qualifying as a REIT. Our opinions do not foreclose the possibility of a contrary determination by the Service or by a court of competent jurisdiction, or of a contrary position being adopted or taken by the IRS or Treasury Department in regulations or rulings issued in the future.
The foregoing opinions are limited to the U.S. federal income tax matters addressed herein, and no other opinions are rendered with respect to other federal tax matters or to any issues arising under the tax laws of any other country, or any state or locality. We undertake no obligation to update the opinions expressed herein after the date of this letter.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name as it appears under the caption “Legal Matters.” In giving this consent, we do not admit that we are in the category of persons whose consent is required by Section 7 of the Securities Act, or the rules and regulations promulgated thereunder by the SEC.
| Very truly yours, |
| /s/ LEDGEWOOD |
| LEDGEWOOD, a professional corporation |